<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
EVEREST HEALTHCARE SERVICES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8099 36-4045521
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 8099 75-2600337
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
CON-MED SUPPLY COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 8099 36-3147024
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
CONTINENTAL HEALTH CARE, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 8099 36-3084746
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
DIALYSIS SPECIALISTS OF CORPUS CHRISTI, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 8099 74-2749663
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
<PAGE>
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 8099 74-2749689
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
DUPAGE DIALYSIS LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8099 36-3029873
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
EVEREST MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8099 APPLIED FOR
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
HEMO DIALYSIS OF AMARILLO L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 8099 75-2592110
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
HOME DIALYSIS OF AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARIZONA 8099 86-0711476
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
HOME DIALYSIS OF DAYTON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 8099 31-1423002
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
LAKE AVENUE DIALYSIS CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 8099 36-3490713
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
<PAGE>
MERCY DIALYSIS CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WISCONSIN 8099 39-1589773
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
NEW YORK DIALYSIS MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 8099 36-3702390
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
NORTH BUCKNER DIALYSIS CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8099 APPLIED FOR
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
NORTHWEST INDIANA DIALYSIS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 8099 36-3372131
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
OHIO VALLEY DIALYSIS CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 8099 36-3575844
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
WSKC DIALYSIS SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 8099 36-2668594
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
EVEREST NEW YORK HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 8099 APPLIED FOR
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
---------------
EVEREST ONE IPA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 8099 13-3988854
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION INDUSTRIALCLASSIFICATION EMPLOYERIDENTIFICATION
OFINCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)
<PAGE>
101 NORTH SCOVILLE, OAK PARK, ILLINOIS 60302, (708) 386-2511
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CRAIG W. MOORE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
EVEREST HEALTHCARE SERVICES CORPORATION
101 NORTH SCOVILLE
OAK PARK, ILLINOIS 60302
(708) 386-2511
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MARGUERITE M. ELIAS, ESQ.
KEVIN L. BARNEY, ESQ.
KATTEN MUCHIN & ZAVIS
525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60661
(312) 902-5200
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT INITIAL AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE INITIAL OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
9 3/4% Senior Subordinated Notes Due 2008,
Series B.................................. $100,000,000 100% $100,000,000 $29,500
- --------------------------------------------------------------------------------------------------------
Guarantees(2).............................. (3) (3) (3) (3)
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 of Regulation C under the Securities Act of 1933, as amended.
(2) The wholly-owned domestic subsidiaries of Everest Healthcare Services
Corporation, as described above (collectively, the "Subsidiary
Guarantors"), have guaranteed on a senior unsecured basis, jointly and
severally, the payment of the principal of, premium, if any, and interest
on the 9 3/4% Senior Subordinated Notes due 2008, Series B, being
registered hereby (the "Guarantees"). The Subsidiary Guarantors are
registering the Guarantees. Pursuant to Rule 457(n) under the Securities
Act of 1933, as amended, no registration fee is required with respect to
the Guarantees.
(3) Not applicable.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS DATED JUNE 18, 1998
OFFER FOR ANY AND ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR 9 3/4% SENIOR SUBORDINATED
NOTES DUE 2008, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED.
Everest Healthcare Services Corporation, a Delaware corporation (the
"Company"), is hereby offering, upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying Letter of Transmittal (the
"Letter of Transmittal," which together with this Prospectus constitutes the
"Exchange Offer"), to issue $100,000,000 aggregate principal amount of its 9
3/4% Senior Subordinated Notes due 2008 (the "Exchange Notes"), in exchange for
a like principal amount of the issued and outstanding 9 3/4% Senior
Subordinated Notes due 2008 of the Company (the "Private Notes," and together
with the Exchange Notes, the "Notes").
The Private Notes were initially sold by the Company to BT Alex. Brown
Incorporated (the "Initial Purchaser") in a transaction not registered under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon
an exemption under the Securities Act (the "Initial Offering"). The Initial
Purchaser subsequently placed the Private Notes (i) with Qualified
Institutional Buyers, within the United States, in reliance upon Rule 144A
under the Securities Act and (ii) to a limited number of institutional
"accredited investors," within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act, that agreed in writing to comply with certain
transfer restrictions and other conditions. Accordingly, the Private Notes may
not be reoffered or otherwise transferred in the United States or to U.S.
Persons (as defined in Regulation S under the Securities Act) unless registered
under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Private Notes
are designated for trading in the Private Offering, Resales and Trading through
Automated Linkages ("PORTAL") Market of the National Association of Securities
Dealers, Inc. and are eligible for resale pursuant to Rule 144A under the
Securities Act. After the Exchange Offer, the Private Notes that remain
outstanding will continue to be subject to the restrictions on transfer
contained in the legend thereon and may not be offered or sold except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
There is no established trading market for the Exchange Notes. The Initial
Purchaser has advised the Company that it presently intends to make a market in
the Exchange Notes as permitted by applicable laws and regulations. The Initial
Purchaser is not obligated, however, to make a market in the Exchange Notes and
any market-making may be discontinued at any time in the sole discretion of the
Initial Purchaser. The Company does not presently intend to list the Exchange
Notes on any securities exchange or to seek approval for quotation through any
automated quotation system. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Exchange Notes or that a market for
the Exchange Notes will develop. See "Risk Factors -- Absence of Established
Trading Market." To the extent that a market for the Exchange Notes does
develop, the market value of the Exchange Notes will depend on market
conditions (such as yields on alternative investments, general economic
conditions, the Company's financial condition and other conditions). Such
conditions might cause the Exchange Notes, to the extent that they are actively
traded, to trade at a significant discount from face value.
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR PRIVATE NOTES.
-----------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
(cover continued on next page)
The date of this Prospectus is , 1998
<PAGE>
(continued from cover)
The terms of the Exchange Notes are identical in all material respects to
the Private Notes, except that (i) the Exchange Notes will bear a different
CUSIP Number from the Private Notes, (ii) the issuance of the Exchange Notes
will have been registered under the Securities Act and, therefore, the
Exchange Notes will not bear legends restricting the transfer thereof, and
(iii) holders of the Exchange Notes will not be entitled to certain rights of
holders of Private Notes under the Registration Rights Agreement (as defined).
The Exchange Notes will evidence the same debt as the Private Notes (which
they replace) and will be issued under and be entitled to the benefits of the
Indenture, dated as of May 5, 1998 (the "Indenture"), by and among the
Company, the Subsidiary Guarantors named therein and American National Bank
and Trust Company of Chicago, as Trustee (the "Trustee" or the "Exchange
Agent"). See "The Exchange Offer" and "Description of Exchange Notes."
Interest on the Exchange Notes will accrue from the date of original
issuance, May 5, 1998 (the "Issue Date"), payable semi-annually on May 1 and
November 1 of each year, commencing November 1, 1998, at the rate of 9 3/4%
per annum. Holders whose Private Notes are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on the Private
Notes.
The Exchange Notes will be redeemable, in whole or in part, at the option of
the Company, on or after May 1, 2003, at the redemption prices set forth
herein plus accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time, or from time to time, on or prior to May 1, 2001, the
Company, at its option, may redeem up to 35% of the aggregate principal amount
of the Notes issued in the Initial Offering, with the cash proceeds received
from one or more Public Equity Offerings (as defined) by the Company at a
redemption price equal to 109.75% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption; provided that at least
65% of the original aggregate principal amount of the Notes originally issued
remains outstanding after any such redemption. Upon a Change of Control (as
defined), each holder of the Exchange Notes will have the right to require the
Company to repurchase such holder's Exchange Notes at a price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase. In addition, the Company will be obligated to offer to
repurchase the Exchange Notes at 100% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase in the event of certain
Asset Sales (as defined). See "Description of Exchange Notes."
The Exchange Notes will be, and the Private Notes are, (i) general unsecured
obligations of Company, (ii) subordinated in right of payment to all existing
and future Senior Indebtedness (as defined) and (iii) structurally
subordinated to all existing and future indebtedness of the Company's
subsidiaries that are not Subsidiary Guarantors (as defined). The Exchange
Notes will, and the Private Notes do, rank pari passu in right of payment with
any future senior subordinated indebtedness of the Company and rank senior in
right of payment to all other subordinated obligations of the Company. The
Exchange Notes will be, and the Private Notes are, unconditionally guaranteed
(the "Guarantees") on a senior subordinated basis by certain of the Company's
subsidiaries (the "Subsidiary Guarantors"). The Guarantees are now and will be
general unsecured obligations of the Subsidiary Guarantors subordinated in
right of payment to all existing and future Guarantor Senior Indebtedness (as
defined). The Guarantees will and do rank pari passu in right of payment with
all future senior subordinated indebtedness of the Subsidiary Guarantors and
will and do rank senior in right of payment to all other subordinated
obligations of the Subsidiary Guarantors. As of March 31, 1998, as adjusted to
give effect to the Initial Offering and the application of the net proceeds
therefrom, the Company and its subsidiaries would have had an aggregate of
approximately $1.6 million of Senior Indebtedness outstanding (excluding
unused commitments of $65.0 million available under the Prior Credit Facility
(as defined)) which would have ranked senior to the Notes, and subsidiaries of
the Company that are not Subsidiary Guarantors would have had approximately
$12.0 million of other outstanding liabilities to which the Notes would have
been effectively subordinated. The Company has obtained a New Credit Facility
(as defined) which has replaced the Prior Credit Facility and provides for
borrowings of up to $100.0 million. Indebtedness under the New Credit Facility
will constitute Senior Indebtedness.
The current offer and sale of the Exchange Notes are being registered under
the Registration Statement of which this Prospectus forms a part in order to
satisfy certain obligations of the Company contained in the Registration
Rights Agreement, dated as of May 5, 1998 (the "Registration Rights
Agreement"), among the
i
<PAGE>
Company, the Subsidiary Guarantors and the Initial Purchaser, on behalf of the
Initial Purchaser and subsequent transferees of the Private Notes. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") set forth in certain "no-action" letters issued to third parties
and unrelated to the Company and the Exchange Offer, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Private
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder which is an "affiliate" of the Company or
any Subsidiary Guarantor within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders
have no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes in violation of the provisions of the
Securities Act. See "The Exchange Offer--Resale of the Exchange Notes."
Holders of Private Notes wishing to accept the Exchange Offer must represent
to the Company, as required by the Registration Rights Agreement, that such
conditions have been met. A broker-dealer holding Private Notes may
participate in the Exchange Offer provided that it acquired the Private Notes
for its own account as a result of market-making or other trading activities.
Each broker-dealer (a "Participating Broker-Dealer") that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Private Notes where such Private
Notes were acquired by such Participating Broker-Dealer as a result of market
making or other trading activities. The Company and the Subsidiary Guarantors
have agreed to make available, during the period required by the Securities
Act, a prospectus meeting the requirements of the Securities Act for use by
any Participating Broker-Dealer and other persons, if any, with similar
prospectus delivery requirements for use in connection with any such resale of
the Exchange Notes. See "The Exchange Offer--Purpose and Effect of the
Exchange Offer" and "Plan of Distribution."
The Company will accept for exchange Private Notes validly tendered prior to
5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is
extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Private Notes may be withdrawn at any time prior to the Expiration
Date. The Exchange Offer is subject to certain customary conditions, but is
not conditioned upon any minimum aggregate principal amount of Private Notes
being tendered for exchange. See "The Exchange Offer--Certain Conditions to
Exchange Offer."
The Company will not receive any proceeds from the Exchange Offer. Pursuant
to the Registration Rights Agreement, the Company will pay all the expenses
incident to the Exchange Offer (other than any underwriting discounts or
commissions). In the event the Company terminates the Exchange Offer and does
not accept for exchange any Private Notes, the Company will promptly return
the Private Notes to the holders thereof. No underwriter is being used in
connection with the Exchange Offer. See "The Exchange Offer."
----------------
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SUBSIDIARY GUARANTORS. NEITHER THE DELIVERY
OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS TO ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
ii
<PAGE>
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK ENTRY; DELIVERY AND FORM," THE COMPANY EXPECTS
THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTE (AS DEFINED HEREIN), WHICH WILL BE DEPOSITED
WITH, OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN
ITS NAME OR IN THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTEREST IN THE
GLOBAL NOTE REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFER
THEREOF WILL BE EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS
PARTICIPANTS. AFTER THE INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN
CERTIFICATED FORM WILL BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER
LIMITED CIRCUMSTANCES AS SET FORTH IN THE INDENTURE. SEE "BOOK ENTRY; DELIVERY
AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE CONTENTS
OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD
CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. NEITHER THE
COMPANY NOR ANY OF THE SUBSIDIARY GUARANTORS IS MAKING ANY REPRESENTATION TO
ANY PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN
INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR
SIMILAR LAWS.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE UNIFORM
SECURITIES ACT WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH
FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY
OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON
THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY
PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE,
TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to results
of operations and businesses of the Company. All statements other than
statements of historical facts included in this Prospectus, including those
regarding market trends, the Company's financial position, business strategy,
projected costs, and plans and objectives of management for future operations,
are forward-looking statements. In general, such statements are identified by
the use of forward-looking words or
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phrases including, but not limited to, "intended," "will," "should," "may,"
"expects," "expected," "anticipates," and "anticipated" or the negative
thereof or variations thereon or similar terminology. These forward-looking
statements are based on the Company's current expectations. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, there can be no assurance that such expectations
will prove to be correct. Because forward-looking statements involve risks and
uncertainties, the Company's actual results could differ materially. Important
factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed under "Risk
Factors," and elsewhere in this Prospectus including, without limitation, in
conjunction with the forward-looking statements included in this Prospectus.
These forward-looking statements represent the Company's judgment as of the
date of this Prospectus. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on behalf of the
Company are expressly qualified in their entirety by the Cautionary
Statements. The Company disclaims, however, any intent or obligation to update
its forward-looking statements.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data including
the consolidated financial statements of the Company, its predecessors, Peak
Healthcare, L.L.C. ("Peak"), and West Suburban Kidney Center, S.C. ("WSKC"),
and the notes thereto, appearing elsewhere in this Prospectus. As used in this
Prospectus, unless the context otherwise requires, all references to "Everest"
or the "Company" include Everest Healthcare Services Corporation and its
subsidiaries and predecessors. Certain statements in this Prospectus constitute
forward-looking statements. See "Cautionary Notice Regarding Forward-Looking
Statements." As used herein, the term "Credit Facility" shall at any time refer
to whichever of the Prior Credit Facility or the New Credit Facility was in
effect at the time indicated.
THE COMPANY
Everest Healthcare Services Corporation is a leading provider of dialysis and
other blood treatment services. Founded in 1968 and principally owned by
nephrologists, the Company has a long-standing focus on developing strong
relationships with physicians to provide high-quality patient care. Everest is
the nation's sixth-largest provider of chronic dialysis outpatient services and
serves approximately 5,300 patients through 63 facilities in 12 states. Everest
also contracts with 102 hospitals in 11 states to provide a broad range of
other extracorporeal (outside-the-body) blood treatment services, including
inpatient acute dialysis, perfusion, apheresis and auto-transfusion (together,
"Contract Services"). In addition, Everest provides physician practice
management services to 26 nephrologists, primarily in the Chicago and northwest
Indiana areas. The Company derived 84.1% of its net revenues for the 12 months
ended March 31, 1998 from chronic dialysis services and 15.9% from Contract
Services. Net revenues and EBITDA (as defined) for the 12 months ended March
31, 1998 were $128.1 million and $19.0 million, respectively.
Everest's dialysis operations were founded in 1968 as a single dialysis
center and grew over the next three decades through a combination of de novo
facility development, acquisitions and internal growth. Everest has completed
eight acquisitions encompassing 27 facilities and developed 36 de novo centers
since its inception. Through geographic clustering of its outpatient dialysis
centers, the Company has created strong regional market positions, particularly
in the Midwest. The Company focuses on accelerating its growth within each
market by: (i) capitalizing on its strong physician and hospital relationships;
(ii) expanding capacity; and (iii) providing high-quality service which leads
to new patient referrals. Everest operates 49 full-service outpatient dialysis
centers which provide on-site dialysis services as well as training for home
dialysis patients. Everest also operates 14 home dialysis training and support
centers which provide services and equipment to home dialysis patients.
Everest's chronic dialysis services are provided to patients who suffer from
end-stage renal disease ("ESRD"), a medical condition characterized by the
irreversible loss of kidney function. ESRD patients require dialysis or kidney
transplantation to sustain life. According to the United States Renal Data
Service (the "USRDS"), the number of ESRD patients requiring chronic dialysis
in the United States increased from approximately 88,000 in 1986 to
approximately 209,000 in 1996, a compound annual growth rate of approximately
9%. The Company expects the number of ESRD patients to continue to grow at
approximately the historical rate for the foreseeable future. According to the
USRDS, the number of new patients diagnosed each year with ESRD among Medicare-
eligible patients increased from 136 patients per million in 1986 to 253
patients per million in 1995. The Company attributes this increase in the
number of ESRD patients and in the incidence of ESRD to: (i) the aging of the
population; (ii) better treatment and longer survival rates of patients with
diabetes, hypertension and other diseases that lead to ESRD; and (iii) improved
technology which has enabled older patients and patients who could not
previously tolerate dialysis due to other illnesses to benefit from this life-
prolonging treatment.
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According to the Health Care Financing Administration ("HCFA"), the total
estimated direct payments for ESRD in 1995 were $13.1 billion, of which
Medicare paid approximately $9.7 billion. As a result of legislation enacted in
1972, the federal government provides Medicare funding, subject to specified
waiting periods and co-payment obligations, for substantially all patients who
are diagnosed with ESRD, regardless of their age or financial circumstances.
The Company believes that the outpatient dialysis industry is fragmented and
consolidating due to the need for operating efficiencies, high-quality patient
care and the growing need for providers to compete in a managed care
environment.
Capitalizing on its strong hospital and physician relationships and its core
competencies in blood processing, Everest significantly expanded its Contract
Services business with the completion of three acquisitions in 1996. The
Company believes it is uniquely positioned as the only company capable of
offering hospitals an outsourcing solution to all of their extracorporeal blood
treatment needs. The Company has contracts with 102 hospitals, and Everest acts
as the exclusive provider of extracorporeal blood treatment services for most
of these hospitals. By leveraging its strengths in blood processing, its
significant market presence in outpatient dialysis services and its strong
physician and hospital relationships, Everest believes it is well positioned to
continue to implement successfully its growth strategy.
Based on industry data and the Company's market research, the non-dialysis
extracorporeal services industry represents approximately $1.4 billion in
annual revenues and is growing at a rate of approximately 7% per annum. The
Company attributes this growth to: (i) an aging population; (ii) the
applicability of existing and developing technologies to a larger number of
diseases; and (iii) continued heightened public concern over the safety of the
nation's blood supply. The Company believes that hospitals, which have
historically provided most of these services, are increasingly seeking to
outsource these services to companies such as Everest that provide both trained
personnel and equipment. The Company believes that the market is consolidating
due to increasing business complexity, the expansion of managed care and the
demand by hospitals for a single provider capable of delivering a broad
portfolio of extracorporeal services.
COMPETITIVE STRENGTHS
The Company attributes its market leadership and its opportunities for
continued growth and profitability to the following strengths:
Strong Physician and Hospital Relationships. Everest believes that the
strength of its relationships with physicians and hospitals is an important
factor in its success. Everest was founded and remains principally owned by
nephrologists, and the Company believes that its sensitivity to the concerns
and objectives of health care professionals, coupled with its reputation for
high-quality service, makes it attractive to physicians and hospitals. Everest
intends to capitalize on its strong relationships in order to increase same-
market growth, successfully complete acquisitions and de novo developments and
market its broad range of extracorporeal services.
Acquisition and Development Expertise. The Company has a successful history
of effecting acquisitions and building de novo dialysis facilities in existing
and new markets. Since January 1, 1996, Everest has completed six acquisitions
encompassing 22 facilities and has developed 18 de novo dialysis centers.
During this period, the number of patients treated by the Company has increased
from approximately 2,700 to approximately 5,300. Everest believes that its
significant acquisition and development experience positions it well to
continue to pursue growth opportunities.
Focus on Attractive Industry Sectors. The Company focuses on two large and
growing industry sectors: chronic dialysis services and Contract Services.
According to the USRDS, the number of ESRD patients requiring chronic dialysis
in the United States increased from approximately 88,000 in 1986 to
approximately 209,000 in 1996, a compound annual growth rate of approximately
9%. The Company expects this growth to continue at approximately the historical
rate for the foreseeable future as a result of the aging of the population,
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better treatment and survival rates of patients with diseases that lead to ESRD
and improved technology. The Company estimates that the non-dialysis Contract
Services market represents approximately $1.4 billion in annual revenues and is
growing at an annual rate of approximately 7%. The Company attributes this
growth to the aging population, applicability of existing and developing
technologies to more diseases and public concern over the safety of the U.S.
blood supply.
Comprehensive Portfolio of Extracorporeal Services. The Company believes that
it is the only outsourcing provider capable of offering hospitals a full
portfolio of extracorporeal blood treatment services including inpatient acute
dialysis, perfusion, apheresis and auto-transfusion. Everest believes that
hospitals are increasingly outsourcing these services and demanding a single,
high-quality provider to handle all of their extracorporeal blood treatment
needs. Everest currently has contracts with 102 hospitals, and Everest acts as
the exclusive provider of extracorporeal blood treatment services for most of
these hospitals.
Leading Market Positions. The Company seeks to be a leader in each chronic
dialysis and Contract Services market in which it operates. Everest is
currently the sixth-largest provider of chronic dialysis services in the United
States. In addition, through geographic clustering of its outpatient dialysis
centers, the Company has created strong regional market positions, particularly
in the Midwest. Everest seeks to augment its position in existing outpatient
dialysis markets by accelerating same-market growth through such methods as
adding new dialysis stations and extending facility hours.
Proven Management Team. The Company's senior management team has an average
of over 18 years of health care industry experience and an average of over 12
years of experience with Everest. In addition, the seven regional directors of
the Company's chronic dialysis business have an average of over 11 years of
experience with the Company. Under this team's management, the Company has
achieved significant growth in recent years. The Company's net revenues
increased from $76.0 million in fiscal 1995 to $128.1 million for the 12 months
ended March 31, 1998, a compound annual growth rate of 23.0%. During this same
period, EBITDA (as defined) increased from $3.5 million to $19.0 million, a
compound annual growth rate of 92.6%, and EBITDA margin (as defined) expanded
from 4.7% to 14.9%. Everest's management has created a strong corporate and
regional infrastructure which the Company believes can support future increased
patient volumes with limited incremental expenditures.
STRATEGY
The Company's objective is to be a leading provider of high-quality dialysis
and Contract Services in each of its markets. The Company's strategy for
achieving this objective is to:
Acquire and Develop Additional Outpatient Chronic Dialysis Facilities.
Everest intends to continue to leverage its strong physician and hospital
relationships to identify and consummate acquisitions. Everest has completed
eight acquisitions to date and will continue to pursue acquisitions to increase
its presence in existing markets and to enter new markets. When considering
acquisitions, the Company evaluates such factors as historical and projected
profitability, local market share, facility utilization, relationships with
physicians and hospitals, market demographics, growth potential and the
availability of qualified clinical personnel. The Company regularly engages in
discussions with potential acquisition candidates. In addition, Everest
currently has a less than 50.1% ownership interest in 15 outpatient dialysis
facilities. The Company believes that it has an opportunity to continue to
increase its ownership of many of these facilities. Since September 30, 1997,
the Company has acquired majority ownership of five facilities, with
approximately 440 patients, in which it previously had a minority-ownership
position.
Of the Company's 63 outpatient dialysis facilities, 36 were de novo
developments. The Company believes that its strong physician and hospital
relationships and its significant development experience afford it a
competitive advantage in developing new dialysis facilities. The Company
intends to continue to pursue de novo
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development opportunities, particularly in areas where Everest has existing
facilities and can take advantage of geographic clustering.
Increase Same-Market Growth. Everest believes that its strong relationships
with nephrologists and hospitals are instrumental to its ability to accelerate
same-market growth. In addition, Everest believes that its high-quality service
leads to patient satisfaction, which in turn increases patient referrals. The
Company also seeks to increase same-market growth through such methods as
adding new dialysis stations and extending dialysis center hours. Everest will
also continue to add appropriate ancillary services at each of its facilities,
including Erythropoietin ("EPO") dosing and home dialysis training. As Everest
identifies new needs, it will work with its regional directors and facility
managers to implement these services in all of its facilities. In fiscal 1997,
the Company's same-market growth in net revenues was approximately 10.5%.
Expand its Contract Services Business. Everest began its Contract Services
business to provide a broader range of extracorporeal services to hospitals and
managed care organizations and to develop a source of revenue that is not
directly dependent on government reimbursement. Everest believes that it has a
strong competitive position as the only outsourcing company capable of
providing a full portfolio of extracorporeal services, including acute
inpatient dialysis, perfusion, apheresis and auto-transfusion. The Company
believes it can sell its broad service portfolio to its existing customers.
Everest intends to expand this business by leveraging its existing
relationships and establishing new relationships in each of its markets. In
addition, the Company intends to continue to acquire extracorporeal service
providers in existing and new markets.
Leverage its Infrastructure and Systems to Increase Margins and Improve
Quality of Service. Everest has built a strong corporate and regional operating
structure, led by senior management and seven regional directors who are
responsible for all financial, quality and teamwork goals. The Company believes
that this infrastructure can support increased patient volumes with limited
incremental expenditures. In addition, Everest's management information system
enables corporate and regional managers to monitor the quality and outcomes of
the services provided at both its outpatient dialysis facilities and at the
hospitals where Contract Services are performed. The Company intends to
continue to leverage its experienced management team and increase operating
efficiencies through standardization of systems and integration of new centers.
Continue to Foster a Workplace that will Enable the Company to Recruit, Train
and Retain Well-Qualified Employees. Highly qualified employees are
instrumental to Everest's continued delivery of high-quality patient care, and
Everest invests considerable resources in the screening, hiring and training of
its employees. Everest's training programs cover topics such as clinical
skills, leadership development, systems utilization and quality programs. In
addition, the Company has developed and is implementing a recertification
program for all of its patient care employees. Everest provides all regional
directors and key facility managers with an incentive compensation plan linked
to its financial, quality and teamwork objectives.
RECENT DEVELOPMENTS
In May 1998, the Company developed and opened one outpatient dialysis
facility located in Bronx, New York.
THE INITIAL OFFERING
Private Notes............. The Private Notes were sold by the Company on April
30, 1998 to BT Alex. Brown Incorporated (the
"Initial Purchaser") pursuant to a Purchase
Agreement dated April 30, 1998 (the "Purchase
Agreement"). The Initial Purchaser subsequently
resold the Private Notes (i) within the United
States to qualified institutional buyers, in
reliance upon Rule 144A under the Securities Act,
and (ii) to a limited
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number of institutional "accredited investors" that
agreed in writing to comply with certain transfer
restrictions and other conditions.
Registration Rights Pursuant to the Purchase Agreement, the Company,
Agreement................. the Subsidiary Guarantors and the Initial Purchaser
entered into the Registration Rights Agreement,
which grants the holders of the Private Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
rights which will terminate upon the consummation
of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered........ $100,000,000 aggregate principal amount of 9 3/4%
Senior Subordinated Notes due 2008.
The Exchange Offer........ $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Private Notes. As of the date hereof, $100,000,000
aggregate principal amount of Private Notes are
outstanding. The Company will issue the Exchange
Notes to holders on or promptly after the
Expiration Date.
Based on interpretations by the staff of the
Commission set forth in certain "no action" letters
issued to third parties and unrelated to the
Company and the Exchange Offer, the Company
believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business
and such holders have no arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes in violation of
the provisions of the Securities Act. Holders of
Private Notes wishing to accept the Exchange Offer
must represent to the Company, as required by the
Registration Rights Agreement, that such conditions
have been met.
A Participating Broker-Dealer holding Private Notes
may participate in the Exchange Offer provided that
it acquired the Private Notes for its own account
as a result of market-making or other trading
activities. Each Participating Broker-Dealer that
receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating Broker-
Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with the
resales of Exchange Notes received in exchange for
Private Notes where such Private Notes were
acquired by such Participating Broker-Dealer as a
result of
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<PAGE>
market-making or other trading activities. The
Company and the Subsidiary Guarantors have agreed
to make available, during the period required by
the Securities Act, a prospectus meeting the
requirements of the Securities Act for use by any
Participating Broker-Dealer and other persons, if
any, with similar prospectus delivery requirements
for use in connection with any such resale of
Exchange Notes. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in "no-action" letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date........... 5:00 p.m., New York City time, on , 1998
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Accrued Interest on the
Exchange Notes and the
Private Notes............
Interest on each Exchange Note will accrue from the
Issue Date, i.e., May 5, 1998. Holders whose
Private Notes are accepted for exchange will be
deemed to have waived the right to receive any
interest accrued on the Private Notes.
Conditions to the The Exchange Offer is subject to certain customary
Exchange Offer............ conditions, which may be waived by the Company, but
it is not conditioned upon any minimum aggregate
principal amount of Private Notes being tendered
for exchange. See "The Exchange Offer--Conditions."
Procedures for Tendering
Private Notes............
Each holder of Private Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Private Notes and any
other required documents, to the Exchange Agent,
prior to 5:00 p.m., New York City time, on the
Expiration Date at the address set forth herein. By
executing the Letter of Transmittal, each holder
will represent to the Company, among other things,
(i) that any Exchange Notes to be received by it
will be acquired in the ordinary course of its
business; (ii) that at the time of the commencement
of the Exchange Offer it has no arrangement or
understanding with any person to participate in the
distribution (within the meaning of Securities Act)
of the Exchange Notes in violation of the
Securities Act; (iii) that it is not an "affiliate"
(as defined in Rule 405 promulgated under the
Securities Act) of the Company; (iv) if such holder
is not a Participating Broker-Dealer, that it is
not engaged in, and does not intend to engage in,
the
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<PAGE>
distribution of Exchange Notes; and (v) if such
holder is a Participating Broker-Dealer that will
receive Exchange Notes for its own account in
exchange for Private Notes that were acquired as a
result of market-making or other trading
activities, that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
See "The Exchange Offer--Purpose and Effect of the
Exchange Offer" and "--Procedures for Tendering."
Untendered Private Notes.. Upon consummation of the Exchange Offer the
provisions of the Registration Rights Agreement
shall continue to apply (i) in the case of any
holders that, in certain circumstances, become
holders of unregistered Exchange Notes with respect
to Private Notes; (ii) in the case of any holder
that participates in the Exchange Offer and does
not receive Exchange Notes on the date of the
exchange that may be sold without restriction under
state and federal securities laws (other than due
solely to the status of such holder as an
"affiliate" of the Company or any Subsidiary
Guarantor within the meaning of the Securities
Act); and (iii) to Exchange Notes held by
Participating Broker-Dealers.
Consequences of Failure
to Exchange...............
The Private Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Private Notes may be
resold only (i) to the Company; (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act; (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act; or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
Shelf Registration If, (i) because of any change in law or in
Statement................. currently prevailing interpretations of the staff
of the Commission, the Company and the Subsidiary
Guarantors are not permitted to effect an Exchange
Offer, (ii) the Exchange Offer is not consummated
within 120 days of the Issue Date, (iii) in certain
circumstances, certain holders of unregistered
Exchange Notes so request, or (iv) in the case of
any Holder that participates in the Exchange Offer,
such Holder does not receive Exchange Notes on the
date of the exchange that may be sold without
restriction under state and federal securities laws
(other than due solely to the status of such Holder
as an affiliate of the Company or any Subsidiary
Guarantor within the meaning of the Securities
Act), then in each case, the Company and the
Subsidiary Guarantors have agreed to (x) promptly
deliver to the holders and the Trustee written
notice thereof and (y) at their sole expense, (a)
as promptly as practicable, file
a shelf registration statement covering resales of
the Notes (the "Shelf Registration Statement"), (b)
use their best efforts to cause the Shelf
Registration Statement to be declared effective
under the Securities Act and (c) use their best
efforts to keep effective the Shelf Registration
Statement until the earlier of two years after the
Issue Date or such time as all of the applicable
Notes have been sold thereunder. The Company will,
in the event that a Shelf Registration Statement is
filed, provide to
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<PAGE>
each holder copies of the prospectus that is a part
of the Shelf Registration Statement, notify each
such holder when the Shelf Registration Statement
for the Notes has become effective and take certain
other actions as are required to permit
unrestricted resales of the Notes. A Holder that
sells Notes pursuant to the Shelf Registration
Statement will be required to be named as a selling
security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject
to certain of the civil liability provisions under
the Securities Act in connection with such sales
and will be bound by the provisions of the
Registration Rights Agreement that are applicable
to such holder (including certain indemnification
rights and obligations).
Special Procedures for
Beneficial Owners........
Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering its Private Notes, either make
appropriate arrangements to register ownership of
the Private Notes in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time. The Company will keep the
Exchange Offer open for not less than thirty days
after the date that notice of the Exchange Offer is
mailed in order to provide for the transfer of
registered ownership.
Guaranteed Delivery Holders of Private Notes who wish to tender their
Procedures................ Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with
the procedures for book-entry transfer) prior to
the Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Private
Notes and Delivery of
Exchange Notes........... The Company will accept for exchange any and all
Private Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered promptly following
the Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Certain Federal Income
Tax Consideration........
It is anticipated that the exchange of Private
Notes for Exchange Notes pursuant to the Exchange
Offer will not be a taxable event for United States
federal income tax purposes, because under existing
Treasury
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<PAGE>
regulations, the Exchange Notes will not differ
materially in kind or extent from the Private
Notes. See "Certain Federal Income Tax
Considerations."
Accounting Treatment...... The Exchange Notes will be recorded at the same
carrying value as the Private Notes, which is face
value, as reflected in the Company's accounting
records on the date of exchange. Accordingly, no
gain or loss for accounting purposes will be
recognized by the Company. The expenses of the
Exchange Offer will be amortized over the term of
the Exchange Notes.
Use of Proceeds........... There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Exchange Agent............ American National Bank and Trust Company of
Chicago.
THE EXCHANGE NOTES
General................... The form and terms of the Exchange Notes are the
same as the form and terms of the Private Notes
(which they replace) except that (i) the Exchange
Notes bear a different CUSIP Number from the
Private Notes; (ii) the Exchange Notes have been
registered under the Securities Act and, therefore,
will not bear legends restricting the transfer
thereof; and (iii) the holders of Exchange Notes
will not be entitled to certain rights under the
Registration Rights Agreement, including the
provisions providing for an increase in the
interest rate on the Private Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. See "The
Exchange Offer--Purpose and Effect of Exchange
Offer." The Exchange Notes will evidence the same
debt as the Private Notes and will be entitled to
the benefits of the Indenture. See "Description of
Exchange Notes."
Exchange Notes Offered.... $100,000,000 aggregate principal amount 9 3/4%
Senior Subordinated Notes due 2008.
Maturity Date............. May 1, 2008.
Interest Payment Dates.... Interest on the Exchange Notes will accrue from the
Issue Date, May 5, 1998, and will be payable semi-
annually on May 1 and November 1 of each year,
commencing November 1, 1998. Holders whose Private
Notes are accepted for exchange will be deemed to
have waived the right to receive any interest
accrued on the Private Notes.
Optional Redemption....... The Exchange Notes will be redeemable, in whole or
in part, at the option of the Company on or after
May 1, 2003, at the redemption prices set forth
herein plus accrued and unpaid interest to the date
of redemption. In addition, at any time on or
before May 1, 2001, the Company, at its option, may
redeem up to 35% of the aggregate principal amount
of the Notes issued in the Initial Offering with
the net proceeds of one or more Public Equity
Offerings (as defined) at the redemption prices set
forth herein plus accrued and unpaid interest to
the date of redemption; provided that at least 65%
of the aggregate
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<PAGE>
principal amount of the Notes originally issued
remains outstanding immediately after any such
redemption. See "Description of Exchange Notes--
Optional Redemption."
Change of Control......... Upon a Change of Control, each holder of the
Exchange Notes will have the right to require the
Company to repurchase such holder's Exchange Notes
at a price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any,
to the date of repurchase. See "Description of
Exchange Notes--Change of Control."
Ranking................... The Exchange Notes will be general unsecured
obligations of the Company and will be subordinated
in right of payment to all existing and future
Senior Indebtedness and will be structurally
subordinated to all existing and future liabilities
(including trade payables) of the Company's
subsidiaries that are not Subsidiary Guarantors.
The Exchange Notes will rank pari passu in right of
payment with all other senior subordinated
obligations of the Company and will rank senior in
right of payment to all other subordinated
obligations of the Company. As of March 31, 1998,
as adjusted to give effect to the Initial Offering
and the application of the net proceeds therefrom,
the Company and its subsidiaries would have had an
aggregate of approximately $1.6 million of Senior
Indebtedness outstanding (excluding unused
commitments of $65.0 million available under the
Prior Credit Facility), which would have ranked
senior to the Notes and subsidiaries of the Company
that are not Subsidiary Guarantors would have had
approximately $12.0 million of other outstanding
liabilities to which the Notes would have been
effectively subordinated. The Company has obtained
a New Credit Facility which has replaced the Prior
Credit Facility and provides for borrowings of up
to $100.0 million. Indebtedness under the New
Credit Facility constitutes Senior Indebtedness.
See "Risk Factors--Subordination of Exchange Notes;
Structural Subordination; Asset Encumbrance" and
"Description of Credit Facility."
Guarantees................ The Notes are unconditionally guaranteed on a
senior subordinated basis by certain of the
Company's subsidiaries (the "Subsidiary
Guarantors"). The Guarantees are general unsecured
obligations of the Subsidiary Guarantors and are
subordinated in right of payment to all existing
and future Guarantor Senior Indebtedness (as
defined). The Guarantees rank pari passu in right
of payment with all future senior subordinated
indebtedness of the Subsidiary Guarantors and will
rank senior in right of payment to all other
subordinated obligations of the Subsidiary
Guarantors. As of March 31, 1998, as adjusted to
give effect to the Initial Offering and the
application of the net proceeds therefrom, the
Subsidiary Guarantors had an aggregate of $1.6
million of Guarantor Senior Indebtedness (excluding
unused commitments under the Prior Credit Facility)
which would have ranked senior to the Guarantees.
See "Risk Factors--Subordination of Exchange Notes;
Structural Subordination; Asset Encumbrance," "--
Suretyship Defenses" and "--Fraudulent Conveyance
Risks."
10
<PAGE>
Certain Covenants......... The indenture governing the Notes (the "Indenture")
contains certain covenants with respect to the
Company and its subsidiaries that restrict, among
other things: (i) the incurrence of additional
indebtedness; (ii) the payment of dividends and
other restricted payments; (iii) the creation of
certain liens; (iv) the use of proceeds from sales
of assets and subsidiary stock; (v) sale and
leaseback transactions; and (vi) transactions with
affiliates. The Indenture also restricts the
Company's ability to consolidate or merge with or
into, or to transfer all or substantially all of
its assets to, another person. In addition, under
certain circumstances, the Company will be required
to offer to purchase the Notes, in whole or in
part, at a purchase price equal to 100% of the
principal amount thereof plus accrued interest to
the date of repurchase, with the proceeds of
certain Asset Sales. These restrictions and
requirements are subject to a number of important
qualifications and exceptions. See "Description of
Exchange Notes--Certain Covenants."
For additional information regarding the Notes, see "Description of Exchange
Notes."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Private Notes in like
principal amount, the form and terms of which are the same as the form and
terms of the Exchange Notes (which replace the Private Notes), except as
otherwise described herein. The Private Notes surrendered in exchange for the
Exchange Notes will be canceled and cannot be reissued.
Net proceeds from the Initial Offering totalled approximately $95.2 million.
Of such amount, approximately $55.6 million has been used to repay certain bank
indebtedness and loans made to the Company by certain of its shareholders. The
remainder of the net proceeds will be used to finance acquisitions of dialysis
facilities and extracorporeal service providers and for working capital and
general corporate purposes. Pending such uses, such proceeds have been invested
in short-term interest-bearing securities. See "Use of Proceeds."
RISK FACTORS
Holders of Private Notes should carefully consider the specific factors set
forth under "Risk Factors" as well as the other information and data included
in this Prospectus.
11
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
---------------------------- ------------------
1995(1) 1996(2) 1997(2) 1997(2) 1998(3)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues................ $ 76,011 $ 83,171 $113,808 $ 53,245 $ 67,531
Income from operations...... 1,505 5,115 11,721 5,177 6,480
Interest expense, net....... (972) (276) (2,149) (973) (1,483)
Minority interests in
earnings................... -- (810) (1,601) (764) 118
Gain on curtailment of
pension benefits........... -- 3,044 -- -- --
Other income, net........... -- 39 279 -- --
-------- -------- -------- -------- --------
Income before income taxes.. 533 7,112 8,250 3,440 5,115
Net income.................. 334 4,312 4,561 1,717 2,497
OUTPATIENT DIALYSIS OPERATING
DATA:
Patients(4)................. 2,618 3,779 4,702 4,177 5,070
Treatments(5)............... 358,360 482,887 586,509 272,220 333,465
Outpatient facilities(6).... 22 48 59 54 61
Same-market net revenue
growth(7).................. 10.9% 9.1% 10.5% 10.3% 14.0%
CONTRACT SERVICES OPERATING
DATA:
Contract Services
hospitals(8)............... -- -- 95 84 99
BALANCE SHEET DATA:
Working capital............. $ 7,117 $ 8,514 $ 20,695 $ 16,758 $ 19,818
Total assets................ 32,931 64,926 102,757 84,096 146,199
Long-term liabilities....... 8,693 23,366 51,632 32,691 59,010
Stockholders' equity........ 8,389 29,089 33,548 39,697 65,405
OTHER FINANCIAL DATA:
Historical EBITDA(9)........ $ 8,266 $ 15,817 $ 6,932 $ 10,151
Historical EBITDA
margin(10)................. 9.9% 13.9% 13.0% 15.0%
Pro forma EBITDA(11)........ $ 9,076 $ 17,418 $ 7,696 $ 10,466
Pro forma EBITDA margin(12). 10.9% 15.3% 14.5% 15.5%
Capital expenditures........ $ 1,442 $ 7,757 3,843 3,253
Ratio of earnings to fixed
charges(13)................ 3.2x 1.7x 2.7x 2.7x
Pro forma ratio of earnings
to fixed charges(14)....... -- 1.4x -- 1.3x
Cash flow from operating
activities................. 6,195 1,751 4,260 5,841
Cash flow from investing
activities................. (12,912) (17,570) (16,581) (16,732)
Cash flow from financing
activities................. 6,717 18,276 12,321 11,575
PRO FORMA FINANCIAL AND OTHER
DATA(15):
Pro forma LTM EBITDA(16)........................................ $ 20,187
Pro forma total debt(17)........................................ 108,596
Pro forma LTM interest expense(18).............................. 10,413
Pro forma ratio of LTM EBITDA to LTM interest expense........... 1.9x
Pro forma ratio of total debt to LTM EBITDA..................... 5.4x
Pro forma ratio of net debt to LTM EBITDA(19)................... 3.0x
</TABLE>
- --------
(footnotes on next page)
12
<PAGE>
- --------
(1) Reflects the combined operations of the companies included in the 1995
formation of Peak, a predecessor to the Company, as if such formation had
occurred on October 1, 1994. See Note 1 to the consolidated financial
statements of Peak included elsewhere herein.
(2) Reflects the operations of Peak for such period.
(3) Reflects the operations of the Company for such period. See Note 1 to the
Company's unaudited condensed consolidated financial statements for the
six months ended March 31, 1997 and 1998 included elsewhere herein.
(4) Reflects the number of ESRD patients receiving treatments at the Company's
wholly-owned, majority-owned, minority-owned and managed outpatient
chronic dialysis facilities, as well as ESRD patients performing home
dialysis treatments who are monitored by such facilities.
(5) Includes all hemodialysis treatments at the Company's wholly-owned,
majority-owned, minority-owned and managed outpatient chronic dialysis
facilities and all home dialysis treatments of patients monitored by such
facilities.
(6) Reflects the Company's wholly-owned, majority-owned, minority-owned and
managed outpatient chronic dialysis facilities at period end.
(7) Reflects the growth in the Company's net revenues from chronic dialysis
markets that have been served by the Company for at least two consecutive
periods.
(8) Reflects the number of hospitals at which the Company provided Contract
Services at period end.
(9) Represents income before income taxes, interest expense, depreciation and
amortization and gain on curtailment of pension benefits. EBITDA is not a
measure of performance or financial condition under generally accepted
accounting principles. EBITDA is not intended to represent cash flow from
operations and should not be considered as an alternative to income from
operations or net income computed in accordance with generally accepted
accounting principles, as an indicator of the Company's operating
performance, as an alternative to cash flow from operating activities or
as a measure of liquidity. The Company believes that EBITDA is a standard
measure of liquidity commonly reported and widely used by analysts,
investors and other interested parties in the financial markets. However,
not all companies calculate EBITDA using the same method and the EBITDA
numbers set forth above may not be comparable to EBITDA reported by other
companies.
(10) Represents the ratio of historical EBITDA to net revenues.
(11) Reflects the elimination from historical EBITDA of minority interests that
resulted from the November 30, 1997 reorganization of the Company as if
such reorganization had occurred as of the beginning of the period
presented.
(12) Represents the ratio of pro forma EBITDA to net revenues.
(13) For purposes of computing this ratio, earnings consist of income before
income taxes and fixed charges. Fixed charges consist of interest expense
and the portion of operating lease rental expense that is representative
of interest.
(14) Represents the historical ratio described in Note 13 as adjusted for the
consummation of the Initial Offering and the application of the net
proceeds therefrom as described in Note 15.
(15) Except as set forth in note 17 below, pro forma financial and other data
are presented as if consummation of the Initial Offering occurred on April
1, 1997. Pro forma financial and other data assume repayment of $42.7
million of indebtedness under the Prior Credit Facility bearing interest
at a weighted average rate of 8.65% and repayment of $7.2 million of other
indebtedness bearing interest at a weighted average rate of 9.5% and do
not assume any investment return on the remaining net proceeds of the
Initial Offering. Pro forma financial and other data are provided for
comparative purposes only and are not necessarily indicative of the actual
results that would have been achieved had the Initial Offering occurred on
the date indicated or that may be achieved in the future.
(16) Represents pro forma EBITDA for the 12 months ended March 31, 1998. See
Note 11.
(17) Assumes that the consummation of the Initial Offering and the application
of the net proceeds therefrom occurred on March 31, 1998.
(18) Represents pro forma interest expense for the 12 months ended March 31,
1998.
(19) Represents pro forma total debt less pro forma cash and Cash Equivalents
divided by pro forma LTM EBITDA. See Note 16.
13
<PAGE>
RISK FACTORS
Holders of Private Notes should consider carefully the following factors, in
addition to the other information contained in this Prospectus, before
tendering their Private Notes for Exchange Notes.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT
For the fiscal year ended September 30, 1997, Everest derived approximately
57.5% of its net revenues from Medicare, approximately 8.5% from Medicaid (or
comparable state benefits) and approximately 34.0% from other third-party
payors. Everest is reimbursed for dialysis services primarily at fixed rates
established in advance under the Medicare End-Stage Renal Disease Program.
Under this program, once a patient becomes eligible for Medicare
reimbursement, Medicare is responsible for payment of 80% of the composite
rates determined by HCFA for dialysis treatments. All of the states in which
the Company currently operates dialysis centers provide Medicaid or comparable
benefits to qualified recipients to supplement their Medicare entitlement. The
Medicare and Medicaid programs are subject to statutory and regulatory
changes, administrative rulings, interpretations of policy and governmental
funding restrictions, all of which may have the effect of decreasing program
payments, increasing costs or modifying the way Everest operates its dialysis
business. Everest is unable to predict whether certain services, as to which
Everest is currently separately reimbursed, may in the future be included in
the Medicare composite rate for dialysis. Any future action by the federal
government, or by state governments, limiting or reducing the total amount of
funds available for such programs could lower the amount of reimbursement
available to Everest. Congress considers action in almost every legislative
session to modify the Medicare program's reimbursement to health care
providers. Changes in the reimbursement under such programs could mean either
or both of reduced reimbursement rates or the inclusion of certain ancillary
services, for which Everest currently is separately reimbursed, in Everest's
Medicare composite rate, either of which could have a material adverse effect
on the Company. Increases in operating costs that are subject to inflation,
such as labor and supply costs, without a compensating increase in prescribed
rates, could adversely affect Everest's operating results and financial
condition. Everest believes that if Medicare reimbursement for dialysis
treatment is reduced in the future, private payors may be required to assume a
greater percentage of the costs of dialysis care and, as a result, may focus
on reducing dialysis payments as their overall costs increase. Everest's
private payors include traditional indemnity insurers, managed care companies,
hospitals and other non-government payors which currently pay at rates that
generally exceed the Medicare and Medicaid rates. Everest believes that third-
party payors have a strong incentive to reduce further the costs of specialty
care and may seek to reduce amounts paid for dialysis treatments. Everest
believes that the historically higher rates of reimbursement paid by non-
governmental payors may not be maintained at such levels. Any reduction in the
rates paid by private insurers, managed care companies, hospitals and other
non-governmental payors could have a material adverse effect on Everest's
operating results and financial condition.
RISKS INHERENT IN GROWTH STRATEGY
Everest's future growth will depend, in large part, on the acquisition of
dialysis and extracorporeal service providers and the development of new
dialysis facilities. The success of Everest's acquisition program will be
determined by a number of factors including Everest's ability to identify
suitable acquisitions, consummate such acquisitions on acceptable terms,
operate such acquisitions profitably and successfully integrate such
acquisitions without substantial costs, delays or other problems. There can be
no assurance that Everest will be successful in effecting acquisitions or, if
effected, that Everest can successfully integrate such acquisitions into the
Company's business or operate such acquisitions profitably. The ability of
Everest to develop new dialysis facilities is influenced by a number of
factors including the identification of suitable markets, the hiring and
training of key personnel, including medical directors, for each facility, and
the ability of Everest to operate such facilities profitably. De novo
facilities typically incur initial operating losses, and there can be no
assurance that such facilities will become profitable. In addition, the
development of dialysis facilities requires a substantial investment in
working capital which may adversely affect the financial condition and results
of operations of Everest. See "Business--Strategy." The Company may be
required to obtain licenses, certificates or approvals, or to comply with
other regulatory requirements, in order to consummate certain acquisitions or
develop de novo
14
<PAGE>
facilities. Everest may experience delays or difficulties in obtaining
required licenses, certificates or approvals, which could have a material
adverse effect on the Company. See "--Extensive Government Regulation."
Any future growth can be expected to place significant additional demands on
the Company's management, operations, employees, systems and resources.
Although Everest's subsidiaries and predecessors have been operating since as
early as 1968, Everest has a limited operating history as a parent company
responsible for the strategic management of a number of subsidiaries. There
can be no assurance that Everest will be successful in managing its current
facilities or integrating and operating new facilities. Further, Everest will
continue to implement certain information and operating systems in order to
better manage the operations of its various facilities. Everest may experience
delays, complications and expenses in implementing, integrating and operating
these systems, any of which could have a material adverse effect on Everest's
operating and financial results. While the Company believes that the systems
it will implement will be adequate for its current needs, further expansion or
technological development could require subsequent modifications, improvements
or replacements to such systems. Such modifications, improvements or
replacements could require substantial expenditures and could interrupt
operations during periods of implementation, which could have a material
adverse effect on Everest's operating and financial results.
EXTENSIVE GOVERNMENT REGULATION
The Company is subject to extensive federal, state and local regulation
regarding, among other things, fraud and abuse; self-referral; licensure and
other regulatory restrictions and approvals; the rate of, and accurate billing
and reporting for, governmental and other third-party reimbursement; health
and safety; and environmental compliance and hazardous waste disposal. Much of
this regulation, particularly in the areas of fraud and abuse and self-
referral, is complex and open to differing interpretations. There are two
general frameworks under which patient referrals are regulated. First, the
illegal remuneration provisions of the Social Security Act make it illegal for
any person to, among other things, solicit, offer, receive or pay any
remuneration in exchange for referring, recommending or inducing the referral
of, a patient for treatment which may be paid for by Medicare, Medicaid or
other federal health benefit programs. Second, certain provisions contained in
the Omnibus Budget Reconciliation Act of 1989 and the Omnibus Budget
Reconciliation Act of 1993 ("Stark I" and "Stark II," respectively) prohibit
physician referrals for "designated health services" (which do not include
dialysis, but may include items or services provided by the Company that are
components of, or ancillary to, dialysis) to entities with which a physician
or an immediate family member has a "financial relationship." These laws
contain certain statutory exceptions, and federal agencies have promulgated
regulations clarifying certain of these provisions and exceptions and creating
certain additional exceptions, or "safe harbors," from such prohibitions. Many
states have enacted similar provisions of law, which may not have identical
prohibitions or exceptions, and which may apply regardless of whether Medicare
or Medicaid funds are involved. Due to the breadth of the statutory provisions
and the absence in many instances of adopted regulations or court decisions
addressing the specific arrangements by which the Company conducts its
business, it is possible that some of the Company's practices might be
challenged under these laws. Violations of the federal laws are punishable by
civil sanctions, which can include civil monetary penalties and
disqualification from participation in Medicare, Medicaid or other federal
health benefit programs, and, in the case of the federal illegal remuneration
provisions, criminal sanctions. In recent years, the federal government's
enforcement powers have been strengthened by legislation and there has been a
significant increase in the number of health care fraud and abuse
investigations and prosecutions. Some of these new investigations and
prosecutions scrutinize practices that have been widely utilized by health
care providers in the past. There can be no assurance that the Company's
practices will not be challenged by governmental authorities, or that the
Company will not be subject to sanctions under applicable laws or be required
to alter or discontinue certain of its practices. In addition, there can be no
assurance that if the Company is required to alter its practices, it will be
able to do so successfully. The occurrence of any of these events may result
in a material adverse effect on the Company's business, results of operation
and financial condition. See "Business--Regulatory Matters."
In recent years, numerous legislative proposals have been introduced or
proposed in the U.S. Congress and in some state legislatures that would effect
major changes in the U.S. health care system at both the state and
15
<PAGE>
federal levels. There can be no assurance that currently proposed or future
health care programs will not have a material adverse effect on Everest's
business, results of operation and financial condition. Concern about the
potential effects of the proposed reform measures has contributed to the
volatility of prices of securities of companies in the health care and related
industries and may similarly affect the price of the Notes in the future.
The ownership and operation of dialysis centers in many states may require a
"Certificate of Need" by state health planning boards in order to establish or
acquire a dialysis facility. If such Certificates of Need are required, there
is no assurance that the Company will be able to obtain and/or maintain such
Certificates of Need for any period of time. Any inability to obtain such
Certificates of Need or other material required licenses, certifications or
other approvals, or significant delays in obtaining such items, loss of any
significant licenses and certifications required to operate, or termination of
the Company's authorization to participate in the Medicare or Medicaid
programs could have a material adverse effect on the Company's business,
results of operations or financial condition. See "Business--Regulatory
Matters."
DEPENDENCE ON PHYSICIAN REFERRALS AND OTHER RELATIONSHIPS
Everest's dialysis facilities are dependent upon patient referrals by
nephrologists and other physicians practicing in the communities served by
Everest's facilities. At most facilities, one or a few physicians account for
all or a significant portion of the patient referral base. Loss of one or more
key referring physicians at a particular facility could have a material
adverse effect on the operations of that facility and could adversely affect
Everest's operations and financial results. Financial relationships with
physicians and other referral sources are highly regulated, and provisions of
the Social Security Act and similar state laws prohibit contracts or payments
for referrals. See "--Extensive Government Regulation" and "Business--
Regulatory Matters." Everest's Contract Services business is heavily dependent
upon the Company's relationships with perfusionists, physicians and the
hospitals with which Everest contracts. Competition for perfusionists is high
and there is no assurance that Everest's perfusionists will remain in the
employment of Everest or that, upon termination of their employment, qualified
replacements will be found. Additionally, Everest's contracts to provide
perfusion or other services are typically terminable on relatively short
notice, and there is no assurance that any such contract will not be
terminated, or that the termination of any such contract would not have a
material adverse effect on the Company's business, results of operations or
financial condition.
COMPETITION
The health care industry, in general, and the dialysis industry, in
particular, are highly competitive. The dialysis industry is especially
competitive in the acquisition of existing dialysis facilities and development
of relationships with referring physicians, and competition for acquisitions
has increased the cost of acquiring existing dialysis facilities. The Contract
Services industry is also highly competitive, especially in the competition
for hospital contracts and the acquisition of Contract Services providers.
Many of Everest's competitors have substantially greater financial resources
and more established operations and infrastructure than Everest. Several
dialysis competitors are vertically integrated in that they sell dialyzers and
own laboratories, and such competitors may have a cost advantage over the
Company. In addition, Everest may face competition from referring physicians
who open their own facilities, national and regional providers of physician
practice management services and hospitals and hospital-sponsored management
service organizations. Everest believes that its future success in both the
dialysis and Contract Services businesses will be significantly dependent on
its ability to attract and retain skilled employees, including qualified
medical directors, nurses, dietitians, social workers and perfusionists, for
whom competition is intense. There can be no assurance that Everest will be
able to compete effectively with its competitors for business, acquisitions or
employees or that such competition will not have a material adverse effect on
the Company's business, results of operations or financial condition.
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL
The Company is dependent upon the services of certain key executive
officers. The Company's growth and future success will significantly depend
upon its ability to attract and retain skilled employees, for whom
16
<PAGE>
competition is intense. See "--Competition." The Company believes that its
future success will also depend on its ability to attract and retain qualified
physicians to serve as medical directors of its dialysis centers. The loss by
the Company of any of its executive officers or the inability to attract and
retain qualified personnel could have a material adverse effect on the
Company's business, results of operations or financial condition. See
"Management."
CONCENTRATION OF OWNERSHIP; POTENTIAL CONFLICTS OF INTEREST
Everest's officers and directors beneficially own approximately 80% of the
common stock of Everest. These stockholders have agreed to act together on
certain matters, and thus are able to control the election of the Board of
Directors and the outcome of other corporate actions requiring stockholder
approval. See "Certain Relationships and Related Transactions--Shareholders
Agreements." In addition, physician members of the Company's Board of
Directors and of management collectively own a medical corporation, which has
entered into a management and administrative services agreement (the
"Administrative Services Agreement") with Everest. Under the terms of the
Administrative Services Agreement, the medical corporation provides medical
director and other services to the Company in exchange for a specified annual
fee plus incentive compensation. The outside interests of these directors and
officers may give rise to certain conflicts of interest concerning the
fulfillment of their responsibilities to the Company. See "Certain
Relationships and Related Transactions--NANI-IL and NANI-IN."
EPO REIMBURSEMENT AND SUPPLY
Since June 1, 1989, the Medicare ESRD program has provided reimbursement for
the administration to dialysis patients of EPO. EPO is beneficial in the
treatment of anemia, a medical complication frequently experienced by dialysis
patients. Any reduction in EPO reimbursement could materially adversely affect
Everest's business, results of operations or financial condition. Medicare
reimbursement for EPO was reduced from $11.00 to $10.00 per 1,000 units for
services rendered after December 31, 1993. President Clinton's proposed fiscal
year 1999 budget contains a further reduction in reimbursement for EPO from
$10.00 to $9.00 per 1,000 units administered. EPO is produced by a single
manufacturer, and any interruption of supply or increase in product cost could
materially adversely affect Everest's business, results of operations or
financial condition. See "Business--Sources of Revenue Reimbursement--Medicare
Reimbursement."
LIABILITY EXPOSURE
Everest is involved in the delivery of health care services and,
consequently, is exposed to the risk of professional liability claims. Everest
may also become subject to claims, suits, or complaints relating to services
and products. Although Everest maintains insurance with such coverage as it
deems adequate, there can be no assurance that any claims asserted against
Everest will be covered by insurance, or if covered, will not exceed the
limits of insurance coverage maintained by Everest, or that such coverage will
continue to be available at an acceptable cost, if at all. A successful claim
in excess of the limits of the Company's insurance coverage could have a
material adverse effect on the Company's business, results of operations or
financial condition. See "Business--Legal Proceedings."
YEAR 2000 COMPLIANCE BY THE COMPANY AND OTHERS
Year 2000 compliance concerns the ability of certain computerized
information systems to properly recognize date-sensitive information, such as
invoices for the Company's services, as the year 2000 approaches. Systems that
do not recognize such information could generate erroneous data or cause
systems to fail; this problem may occur as early as calendar year 1999. The
Company is at risk both for its own Year 2000 compliance and for the Year 2000
compliance of those with whom it does business, primarily third-party payors.
Although the Company plans to replace or upgrade its existing systems with
Year 2000 compliant software, there can be no assurance that such replacement
and upgrading will be successful or can be achieved without the Company
incurring material expense. Moreover, there can be no assurance that the
third-party payors upon
17
<PAGE>
whom the Company relies for substantially all of its net revenues, such as
Medicare and Medicaid, will not experience system difficulties as a result of
the Year 2000 problem, which difficulties could delay payment to the Company.
Any such difficulties or delays could have a material adverse effect on the
Company's business, results of operations or financial condition.
LEVERAGED FINANCIAL POSITION
Upon consummation of the Initial Offering, the Company became highly
leveraged. As of March 31, 1998, as adjusted to give effect to the Initial
Offering and the application of the net proceeds therefrom, the Company's
consolidated indebtedness would have been $108.6 million (exclusive of
commitments of $65.0 million available for borrowing under the Prior Credit
Facility), which would have represented approximately 62.4% of its total
capitalization. See "Capitalization." The Company has obtained the New Credit
Facility, which replaced the Prior Credit Facility and provides for borrowings
of up to $100.0 million. Indebtedness under the New Credit Facility
constitutes Senior Indebtedness. The Company may incur additional indebtedness
in the future, including Senior Indebtedness, subject to limitations imposed
by the Indenture and the Credit Facility. The level of the Company's
indebtedness could have important consequences to the holders of the Notes,
including: (i) a substantial portion of the Company's cash flow from
operations must be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional debt financing
in the future for working capital, capital expenditures or acquisitions may be
limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in the industry and economic conditions
generally. Certain of the Company's competitors may currently operate on a
less leveraged basis and therefore could have significantly greater operating
and financing flexibility than the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Credit Facility."
ABILITY TO SERVICE THE NOTES AND OTHER DEBT
Upon the issuance of the Private Notes, the Company's interest expense
increased compared to prior years. The Company believes, based on current
circumstances, that the Company's cash flow, together with available
borrowings under the Credit Facility, will be sufficient to permit the Company
to meet its operating expenses and to service its debt requirements as they
become due for the foreseeable future. This belief assumes, among other
things, that the Company will succeed in implementing its business strategy
and that there will be no material adverse developments in the business,
liquidity or capital requirements of the Company. However, if the Company is
unable to generate sufficient cash flow from operations to service its
indebtedness, it will be forced to adopt an alternate strategy that may
include actions such as reducing or delaying acquisitions and capital
expenditures, selling assets, restructuring or refinancing its indebtedness,
or seeking equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all. If the Company
were unable to repay its debt as it becomes due, the holders of the Notes
could lose some or all of their investment. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture imposes certain limitations on the ability of the Company to,
among other things, incur additional indebtedness, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, incur liens, merge or consolidate or
sell all or substantially all of its assets. If the Company fails to comply
with these covenants, it would be in default under the Indenture and the
principal and accrued interest on the Notes would become due and payable. In
addition, the Credit Facility contains other and more restrictive covenants,
and prohibits the Company from prepaying certain indebtedness, including the
Notes. The Credit Facility also requires the Company to maintain specified
financial ratios and satisfy certain financial condition and operating tests.
The Company's ability to meet those financial ratios and tests may be affected
by events beyond its control and there can be no assurance that the Company
will meet those tests. A breach of any of these covenants could result in a
default under the Credit Facility. If an event of
18
<PAGE>
default were to occur under the Credit Facility, the lenders could declare all
principal and interest immediately payable thereunder and, if the Company were
unable to repay such amounts, the lenders could proceed against their
collateral. If the Credit Facility indebtedness were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to
repay in full that indebtedness and the other indebtedness of the Company,
including the Notes. Substantially all of the assets of the Company and its
majority-owned subsidiaries are pledged as security under the Credit Facility.
In addition, a default under the Credit Facility or the instruments governing
the Company's or its subsidiaries' other indebtedness could constitute a
cross-default under the Indenture and any instruments governing the Company's
or its subsidiaries' other indebtedness, and default under the Indenture could
constitute a cross-default under the Credit Facility or the instruments
governing the Company's or its subsidiaries' other indebtedness. See
"Description of Credit Facility" and "Description of Exchange Notes--Certain
Covenants" and "--Events of Default."
SUBORDINATION OF EXCHANGE NOTES; STRUCTURAL SUBORDINATION; ASSET ENCUMBRANCE
The Exchange Notes will be subordinated in right of payment to all Senior
Indebtedness, including Senior Indebtedness incurred after the date of the
Indenture. At March 31, 1998, as adjusted to give effect to the Initial
Offering and the application of the net proceeds therefrom, the Company and
its Subsidiaries would have had an aggregate of approximately $1.6 million of
Senior Indebtedness outstanding, and the Company would have had available
$65.0 million for borrowings under the Prior Credit Facility, which would have
ranked senior to the Notes. The Company has obtained a New Credit Facility,
which replaces the Prior Credit Facility and provides for borrowings of up to
$100.0 million. Indebtedness under the New Credit Facility constitutes Senior
Indebtedness. The Indenture permits the Company to incur Senior Indebtedness
under the Credit Facility as well as additional Senior Indebtedness (provided
certain financial or other conditions are met). Certain of the Company's
subsidiaries have guaranteed the obligations of the Company under the
Indenture and the Notes, but such guarantees will be subordinated to all
Senior Indebtedness of such Subsidiary Guarantors, which will include the
guarantees of the Company's indebtedness under the Credit Facility. See "--
Reliance on Payments from Subsidiaries" and "--Suretyship Defenses."
The Exchange Notes will also be effectively subordinated to the obligations
(including trade payables) of the Company's subsidiaries that are not
Subsidiary Guarantors. All of the Company's existing wholly-owned subsidiaries
are Subsidiary Guarantors; these entities collectively own and operate 33 of
the Company's dialysis centers. However, none of the less than wholly-owned
subsidiaries of the Company (including the subsidiaries which conduct the
Contract Services business) are Subsidiary Guarantors. At March 31, 1998, as
adjusted to give effect to the Initial Offering and the application of the net
proceeds therefrom, the liabilities of the Company's subsidiaries that are not
Subsidiary Guarantors would have totaled approximately $12.0 million
(excluding subsidiary guarantees under the Prior Credit Facility). As of March
31, 1998, the Company's subsidiaries that are not Subsidiary Guarantors had
total assets of $23.1 million and stockholders' equity of $6.8 million. For
the year ended September 30, 1997 and the six months ended March 31, 1998,
such subsidiaries had combined net revenues of $17.6 million and $13.0
million, respectively, combined net income of $227,000 and $210,000,
respectively, and combined EBITDA of $2.4 million and $1.2 million,
respectively. Except to the extent that the Company may itself be a creditor
with recognized claims against such subsidiaries, claims of creditors of such
subsidiaries will have priority with respect to the assets and earnings of
such subsidiaries over the claim of creditors of the Company, including claims
under the Exchange Notes.
The Company may not pay principal of, premium (if any) on, or interest on,
the Notes, or repurchase, redeem, defease or otherwise retire any Notes (i) if
any Senior Indebtedness is not paid when due or (ii) if any other default on
Designated Senior Indebtedness occurs that permits the holders of such
Designated Senior Indebtedness to accelerate maturity of such Designated
Senior Indebtedness, in accordance with its terms, and the Trustee receives a
notice of default unless, in either case, the default has been cured or
waived, any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full or, in the case of any default other than a
payment default, 179 days have passed since the default notice was given. See
"Description of Exchange Notes--Subordination." Upon any payment or
distribution of the assets of the Company or any Subsidiary Guarantor in
connection with a total or partial liquidation or dissolution or
19
<PAGE>
reorganization of or similar proceeding relating to the Company or such
Subsidiary Guarantor, the holders of Senior Indebtedness will be entitled to
receive payment in full before the holders of the Notes are entitled to
receive any payment. See "Description of Exchange Notes--Subordination." The
Notes are also unsecured and thus, in effect, will rank junior to any secured
indebtedness of the Company or the Subsidiary Guarantors. The indebtedness and
guarantees outstanding under the Credit Facility are secured by liens upon
substantially all assets, including all receivables, inventory and general
intangibles and equipment of the Company and its majority-owned subsidiaries.
See "Description of Credit Facility."
RELIANCE ON PAYMENTS FROM SUBSIDIARIES
The Company conducts all of the operations of its businesses through its
subsidiaries. Therefore, the Company relies primarily upon payment from its
subsidiaries for the funds necessary to meet its obligations, including the
payment of interest on the Notes. The ability of the subsidiaries to make such
payments will be subject to, among other things, applicable laws. The
Company's subsidiaries are separate and distinct legal entities and, except
for those subsidiaries that are Subsidiary Guarantors, have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Notes or to
make funds available therefor, whether in the form of loans, dividends or
otherwise. Moreover, the payment of dividends and the making of loan advances
to the Company by its subsidiaries are subject to restrictive covenants in
agreements entered into by certain of such subsidiaries and may be restricted
upon an event of default thereunder. The Company's subsidiaries are obligors
with respect to substantial indebtedness, including in their capacity as
guarantors under the Credit Facility, and the capital stock of such
subsidiaries is pledged to secure amounts borrowed under the Credit Facility.
Moreover, although the Credit Facility generally permits subsidiaries to pay
dividends in amounts sufficient to pay interest on the Notes, the payment of
dividends to the Company by its subsidiaries is contingent upon the earnings
of those subsidiaries and approval of those subsidiaries. Claims of creditors
of the Company's subsidiaries generally have priority as to the assets of such
subsidiaries over the claims of the Company.
SURETYSHIP DEFENSES
Although the Guarantees provide the holders of the Notes with a direct claim
against the assets of the Subsidiary Guarantors, enforcement of the Guarantees
against any Subsidiary Guarantor would be subject to certain "suretyship"
defenses available to guarantors generally, and such enforcement would also be
subject to certain defenses available to the Subsidiary Guarantors in certain
circumstances. See "--Fraudulent Conveyance Risks." Although the Indenture
contains waivers of most "suretyship" defenses, there can be no assurance that
those waivers would be enforced by a court in a particular case. To the extent
that the Guarantees are not enforceable, the Notes and Guarantees would be
effectively subordinated to all liabilities of the Subsidiary Guarantors,
including trade payables of such Subsidiary Guarantors, whether or not such
liabilities otherwise constitute Guarantor Senior Indebtedness under the
Indenture. In addition, certain of the Company's subsidiaries are not
Subsidiary Guarantors, and the Notes will be effectively subordinated to all
liabilities of such subsidiaries, including trade payables.
FRAUDULENT CONVEYANCE RISKS
If the court in a lawsuit brought by an unpaid creditor or representatives
of creditors, such as a trustee in bankruptcy or the Company or any Subsidiary
Guarantor as a debtor-in-possession, were to find under relevant federal and
state fraudulent conveyance statutes that the Company or any Subsidiary
Guarantor did not receive fair consideration or reasonably equivalent value
for incurring the indebtedness represented by the Notes or its Guarantee and
that, at the time of such incurrence, the Company or such Subsidiary
Guarantor: (i) was insolvent; (ii) was rendered insolvent by reason of such
incurrence; (iii) was engaged in a business or transaction for which the
assets remaining with the Company or such Subsidiary Guarantor constituted
unreasonably small capital; or (iv) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they matured; such
court, subject to applicable statutes of limitation, could avoid the Company's
obligations under the Notes, or the Subsidiary Guarantor's obligations under
the Guarantee, subordinate the Notes or the Guarantee to the other
indebtedness of the Company or such Subsidiary Guarantor, or take other action
detrimental to the holders
20
<PAGE>
of the Notes. The measure of insolvency used by a court will vary depending
upon the law of the jurisdiction being applied. Generally, however, a company
will be considered insolvent for these purposes if, at the time it incurs the
indebtedness constituting the Notes, either (i) the fair market value (or fair
salable value) of its assets is less than the amount required to pay its total
existing debts and liabilities (including the probable liability on contingent
liabilities) as they become absolute and matured or (ii) it is incurring debts
beyond its ability to pay such debts as they mature.
The Company believes that it will receive fair consideration and reasonably
equivalent value for the Notes and that at the time of, and after giving
effect to, the incurrence of the indebtedness and obligations evidenced by the
Notes, the Company and the Subsidiary Guarantors (i) will (A) neither be
insolvent nor rendered insolvent thereby, (B) have sufficient capital to
operate their business effectively and (C) be incurring debts within their
ability to pay as the same mature or become due and (ii) will have sufficient
resources to satisfy any probable money judgment against them in any pending
action. In reaching the foregoing conclusions, the Company has relied upon its
analysis of internal cash flow projections and estimated values of assets and
liabilities of the Company. There can be no assurance, however, that such
analysis will prove to be correct or that a court passing on such questions
would reach the same conclusions.
Additionally, under federal bankruptcy or applicable state insolvency law,
if certain bankruptcy or insolvency proceedings are initiated by or against
the Company or any Subsidiary Guarantor within 90 days (or a longer period if
the holder of the Notes was deemed to be an "insider") after any payment by
the Company or any Subsidiary Guarantor with respect to the Notes or the
Guarantees or if the Company or any Subsidiary Guarantor anticipated becoming
insolvent at the time of such payment, all or a portion of such payment could
be avoided as a preferential transfer and the recipient of such payment could
be required to return such payment.
ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase its Notes at 101% of the
principal amount thereof plus accrued and unpaid interest outstanding, if any,
to the date of repurchase. A Change of Control will likely trigger an event of
default under the Credit Facility which would permit the lenders thereto to
accelerate the debt under the Credit Facility. However, there can be no
assurance that sufficient funds will be available at the time of any Change of
Control to make any required repurchases of Notes tendered and to repay debt
under the Credit Facility. In addition, the terms of the Credit Facility
restrict the Company from repurchasing any Notes and also identify certain
events that would constitute a change of control, as well as certain other
events with respect to the Company or certain of its subsidiaries, that would
constitute an event of default under the Credit Facility. See "Description of
Credit Facility." Any future credit agreements or other agreements relating to
other indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from purchasing Notes, the Company could seek
the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does
not obtain such consent or repay such borrowing, the Company would remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture, which would, in turn, constitute a further default under certain of
the Company's existing debt agreements and may constitute a default under the
terms of other indebtedness that the Company may enter into from time to time.
In addition, the provisions of the Indenture may not afford holders of Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect holders of Notes, if such transaction does not result in a
Change of Control. See "Description of Credit Facility" and "Description of
Exchange Notes--Change of Control."
CONSEQUENCES OF FAILURE TO EXCHANGE PRIVATE NOTES
Holders of Private Notes who do not exchange their Private Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of
21
<PAGE>
the Private Notes and the restrictions on transfer of such Private Notes set
forth in the legend thereon as a consequence of the issuance of the Private
Notes pursuant to an exemption from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Private Notes may not be offered or sold
unless registered under the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register Private
Notes under the Securities Act. See "The Exchange Offer."
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Private Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Private Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the
Private Notes desiring to tender such Private Notes in exchange for Exchange
Notes should allow sufficient time to ensure timely delivery. The Company is
under no duty to give notification of defects or irregularities with respect
to the tenders of Private Notes for exchange. Private Notes that are not
tendered or are tendered but not accepted will, following the consummation of
the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof, and, upon consummation of the Exchange Offer certain
registration rights under the Registration Rights Agreement will terminate. In
addition, any holder of Private Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the Exchange Notes may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Private Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Private Notes could
be adversely affected. See "The Exchange Offer."
ABSENCE OF ESTABLISHED TRADING MARKET
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to: (i) the
liquidity of any such market that may develop; (ii) the ability of holders of
Exchange Notes to sell their Exchanges Notes; or (iii) the price at which the
holders of Exchange Notes would be able to sell their Exchange Notes. If such
a market were to exist, the Exchange Notes could trade at prices that may be
higher or lower than their principal amount or purchase price, depending on
many factors, including prevailing interest rates, the market for similar
notes and the financial performance of the Company and its subsidiaries. The
Company has been advised by the Initial Purchaser that it presently intends to
make a market in the Exchange Notes, when issued. However, the Initial
Purchaser is not obligated to do so, and any market-making activity with
respect to the Exchange Notes may be discontinued at any time without notice.
In addition, such market-making activity will be subject to the limits imposed
by the Securities Act and the Exchange Act. See "The Exchange Offer." There
can be no assurance that even following registration of the Exchange Notes an
active trading market will exist for the Exchange Notes, or that such trading
market will be liquid.
22
<PAGE>
THE COMPANY
The Company was founded in 1968 as a single dialysis facility, West Suburban
Kidney Center, S.C. ("WSKC"), which together with its affiliates grew over the
next 27 years to 21 outpatient dialysis centers in the Midwest and New York
City. In 1995, these affiliated entities were combined to create Everest
Healthcare Services Corporation, a majority of the stock of which was owned by
Peak Healthcare, L.L.C. ("Peak"), which in turn was principally owned by the
original physician owners of WSKC and such affiliated entities (the "Founding
Directors"). In June 1996, the Company acquired Home Dialysis of America, Inc.
("HDA"), which owned or operated 18 outpatient dialysis facilities. In
connection with the acquisition, HDA's former shareholders acquired
approximately 19% of the equity in the Company. In 1996, the Company also
effectively acquired an 80% interest in the combined businesses of three
perfusion companies, which collectively operated perfusion businesses in seven
states. In November 1997, in order to simplify its ownership structure and
better position the Company for future growth, the shareholders of the Company
entered into a series of related transactions. Following these transactions,
the Founding Directors now directly hold approximately 55% of the equity in
the Company, and collectively own all of the membership interests in Peak
Liquidating, L.L.C., a new limited liability company ("Peak Liquidating"),
which in turn owns approximately 15% of the equity in the Company. See
"Certain Relationships and Related Transactions" and "Security Ownership of
Certain Beneficial Owners and Management."
The address of the Company is Everest Healthcare Services Corporation, 101
North Scoville, Oak Park, Illinois 60302, and its phone number is (708) 386-
2511.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes offered
hereby. In consideration for issuing the Exchange Notes contemplated in this
Prospectus, the Company will receive Private Notes in like principal amount,
the form and terms of which are the same as the forms and terms of the
Exchange Notes (which replace the Private Notes), except as otherwise
described herein. The Private Notes surrendered in the exchange for Exchange
Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any increase or decrease in
the indebtedness of the Company. As such, no effect has been given to the
Exchange Offer under the heading "Capitalization" herein.
The net proceeds to the Company from the Initial Offering were approximately
$95.2 million, after deducting the Initial Purchaser's discount and estimated
offering expenses. The Company has used approximately $48.4 million of the net
proceeds to repay indebtedness under the Prior Credit Facility that bore
interest at a weighted average rate of 8.65% per annum as of March 31, 1998
and was to mature in May 2000. Approximately $7.2 million of the net proceeds
have been used to repay loans made to the Company by certain of its
shareholders. Approximately $5.1 million of these loans bore interest at the
prime rate plus 1% per annum and matured at various times throughout 1998.
Approximately $2.1 million of these loans bore interest at the prime rate plus
1% per annum and matured on November 29, 2000. The remaining $39.6 million of
net proceeds will be used to finance future acquisitions of dialysis
facilities and Contract Services providers and for working capital and general
corporate purposes. Pending such uses, the net proceeds have been and will be
invested in cash and Cash Equivalents (as defined in the Indenture). See "Risk
Factors--Discretionary Use of Proceeds," "Business--Strategy," "Certain
Relationships and Related Transactions" and "Description of Exchange Notes."
23
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998, on an actual basis and as adjusted to reflect the Initial Offering
and the application of the estimated net proceeds therefrom. This table should
be read in conjunction with "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31,
1998
------------------
AS
ACTUAL ADJUSTED
-------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash and Cash Equivalents.................................... $ 3,140 $ 48,398
======== ========
Debt(1):
Credit Facility............................................. $ 42,733 $ --
Capital lease obligations................................... 1,596 1,596
Notes....................................................... -- 100,000
Other debt.................................................. 14,209 7,000
-------- --------
Total debt................................................... 58,538 108,596
Total stockholders' equity................................... 65,405 65,405
-------- --------
Total capitalization....................................... $123,943 $174,001
======== ========
</TABLE>
- --------
(1) Includes current maturities.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
The following Unaudited Pro Forma Consolidated Statements of Operations (the
"Pro Forma Statements") of the Company are based upon the historical audited
and unaudited financial statements of the Company appearing elsewhere in this
Prospectus, as adjusted to illustrate the estimated effects of the purchase of
the minority interests that occurred on November 30, 1997. See "The Company."
The Pro Forma Statements have been prepared to give effect to the purchase of
the minority interests in Everest as if the purchase had been consummated as
of the beginning of the periods being presented. The Pro Forma Statements and
accompanying notes should be read in conjunction with the historical financial
statements of the Company and other information pertaining to the Company and
the purchase of the minority interests appearing elsewhere in this Prospectus.
The Pro Forma Statements do not purport to be indicative of the Company's
results of operations had the acquisition of minority interests been
consummated as of the beginning of the periods indicated or to project the
Company's result of operations for any future date.
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
COMPANY ADJUSTMENTS PRO FORMA
------------ ----------- ------------
<S> <C> <C> <C>
Net revenues........................ $113,808,296 $113,808,296
Operating expenses:
Patient care costs................ 72,057,929 72,057,929
General and administrative........ 24,710,169 24,710,169
Provision for bad debts........... 714,166 714,166
Depreciation and amortization..... 4,605,410 $ 864,000 (1) 5,469,410
------------ ---------- ------------
Total operating expenses........ 102,087,674 864,000 102,951,674
------------ ---------- ------------
Income from operations.............. 11,720,622 (864,000) 10,856,622
Interest expense.................... (2,961,528) (2,961,528)
Interest income..................... 813,006 813,006
Minority interests in earnings...... (1,600,784) 1,600,784 (2) --
Other income, net................... 278,849 278,849
------------ ---------- ------------
Income before income taxes.......... 8,250,165 736,784 8,986,949
Income taxes........................ 3,689,000 3,689,000
------------ ---------- ------------
Net income.......................... $ 4,561,165 $ 736,784 $ 5,297,949
============ ========== ============
</TABLE>
See notes to unaudited pro forma consolidated statements of operations.
26
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
COMPANY ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues.............................. $67,531,294 $67,531,294
Operating expenses:
Patient care costs...................... 43,872,007 43,872,007
General and administrative.............. 12,423,698 12,423,698
Provision for bad debts................. 1,920,741 1,920,741
Depreciation and amortization........... 2,834,886 $ 144,000 2,978,886
----------- --------- -----------
Total operating expenses.............. 61,051,332 144,000 61,195,332
----------- --------- -----------
Income from operations.................... 6,479,962 (144,000) 6,335,962
Interest expense.......................... (2,201,391) (2,201,391)
Interest income........................... 718,372 718,372
Minority interests in earnings............ 118,186 315,000 433,186
----------- --------- -----------
Income before income taxes................ 5,115,129 171,000 5,286,129
Income taxes.............................. 2,618,593 2,618,593
----------- --------- -----------
Net income................................ $ 2,496,536 $ 171,000 $ 2,667,536
=========== ========= ===========
</TABLE>
See notes to unaudited pro forma consolidated statements of operations.
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
(1) Gives effect to the increase in goodwill amortization as a result of the
purchase of the minority interests. The resultant goodwill of $21.6
million from the purchase is being amortized over a period of 25 years.
(2) Gives effect to the elimination of minority interests in earnings of the
Company as a result of the purchase of minority interests that occurred on
November 30, 1997 as if such purchase had occurred at the beginning of the
period presented. See "The Company."
(3) Historical EBITDA represents income before income taxes, interest expense,
depreciation and amortization. See Note 9 to "Summary Financial and
Operating Data." Pro forma EBITDA reflects the elimination from historical
EBITDA of minority interests that occurred upon the November 30, 1997
reorganization of the Company as if such reorganization had occurred as of
the beginning of the period presented.
28
<PAGE>
SELECTED FINANCIAL DATA
The selected statement of operations data of the Predecessor for the fiscal
year ended September 30, 1995 have been derived from audited financial
statements of the Predecessor included elsewhere herein. The selected
statement of operations data of the Predecessor for the fiscal years ended
September 30, 1993 and 1994 and the selected balance sheet data of the
Predecessor as of September 30, 1993, 1994 and 1995 and March 31, 1997 have
been derived from the unaudited financial statements of the Predecessor not
included herein. The selected statement of operations data of the Company for
the fiscal years ended September 30, 1996 and 1997 and the selected balance
sheet data of the Company as of September 30, 1996 and 1997 have been derived
from audited financial statements of the Company included elsewhere herein.
The selected statement of operations data for the six months ended March 31,
1997 and 1998 and the selected balance sheet data as of March 31, 1998 have
been derived from the unaudited financial statements of the Company included
elsewhere herein. In the opinion of management of the Company, the unaudited
financial statements have been prepared on the same basis as the Company's
audited financial statements and include all adjustments, consisting only of
normal recurring items, necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results
for the six months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire fiscal year. These financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------------------- ----------------------------------------
SIX MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
-------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $41,314 $44,313 $47,276 $83,171 $113,808 $53,245 $67,531
Patient care costs..... 25,635 29,363 31,340 54,885 72,058 37,047 43,872
General and
administrative
expenses.............. 16,279 10,845 12,691 17,463 24,710 8,377 12,423
Provision for bad debts
...................... 1,449 1,409 754 2,523 714 562 1,921
Depreciation and
amortization.......... 854 1,103 1,271 3,185 4,605 2,082 2,835
------- ------- ------- ------- -------- ------- -------
Income (loss) from
operations............ (2,903) 1,593 1,220 5,115 11,721 5,177 6,480
Interest expense, net.. (81) (380) (368) (276) (2,149) (973) (1,483)
Minority interests in
earnings.............. -- -- -- (810) (1,601) (764) 118
Gain on curtailment of
pension benefits...... -- -- -- 3,044 -- -- --
Other income, net...... -- -- -- 39 279 -- --
------- ------- ------- ------- -------- ------- -------
Income (loss) before
income taxes.......... (2,984) 1,213 852 7,112 8,250 3,440 5,115
Income taxes........... 1,184 (480) (325) (2,800) (3,689) 1,723 2,618
------- ------- ------- ------- -------- ------- -------
Net income (loss)...... $(1,800) $ 733 $ 527 $ 4,312 $ 4,561 $ 1,717 $ 2,497
======= ======= ======= ======= ======== ======= =======
BALANCE SHEET DATA:
Working capital........ $ 5,192 $ 7,462 $ 6,911 $ 8,514 $ 20,695 $16,758 $19,818
Total assets........... 20,507 20,863 20,937 64,926 102,757 84,096 146,199
Long-term liabilities.. 3,435 5,231 5,146 23,366 51,632 32,691 59,010
Stockholders' equity... 4,690 6,286 7,434 29,089 33,548 39,697 65,405
</TABLE>
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations of the Company should be read in conjunction with the more
detailed information contained in the Consolidated Financial Statements and
notes thereto appearing elsewhere in this Prospectus.
OVERVIEW
Everest is a leading provider of dialysis and other blood treatment
services. Founded in 1968 and principally owned by nephrologists, the Company
has a long-standing focus on developing strong relationships with physicians
to provide high-quality patient care. The Company is the nation's sixth-
largest provider of chronic dialysis outpatient services and serves
approximately 5,300 patients through 63 facilities in 12 states. Everest also
contracts with 102 hospitals in 11 states to provide a broad range of other
extracorporeal blood treatment services, including inpatient acute dialysis,
perfusion, apheresis and auto-transfusion (together, "Contract Services"). In
addition, Everest provides physician practice management services to 26
nephrologists, primarily in the Chicago and northwest Indiana areas. For the
12 months ended March 31, 1998, the Company derived 84.1% of its net revenues
from chronic dialysis services and 15.9% from Contract Services.
COMPANY GROWTH
Everest's dialysis operations have grown through de novo facility
development, acquisitions and internal growth. Everest has completed eight
acquisitions encompassing 27 centers and developed 36 de novo centers since
its inception in 1968. A significant portion of the Company's growth has
occurred in recent years. Since January 1, 1996, Everest has completed six
acquisitions encompassing 22 facilities and developed 18 de novo dialysis
centers. In order of priority, the Company's growth in its outpatient dialysis
services business has been accomplished through: (i) the opening of start-up
dialysis centers; (ii) the acquisition of single dialysis centers or multi-
facility operators; and (iii) internal growth.
The following table depicts the number of outpatient dialysis centers
operated by the Company at the beginning and end of each period indicated:
<TABLE>
<CAPTION>
SIX
FISCAL YEAR MONTHS
ENDED ENDED
SEPTEMBER 30, MARCH 31,
----------------- ---------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Centers at beginning of period....................... 21(1) 22 48 48 59
Acquisitions......................................... -- 20 1 1 1
De novo developments................................. 1 6 10 5 1
Centers at end of period............................. 22 48 59 54 61
</TABLE>
- --------
(1) Reflects the combined operations of the companies included in the 1995
formation of Peak.
The Company seeks to increase its growth within each market through a number
of methods, including: (i) increasing patient referrals by providing high-
quality service; (ii) capitalizing on its strong physician and hospital
relationships; (iii) increasing capacity where possible by adding treatment
stations or expanding hours of operation; and (iv) adding appropriate
ancillary services such as EPO dosing and home dialysis training. The Company
quantifies "same-market net revenue growth" by comparing its net revenues from
chronic dialysis markets that have been served by it for at least two
consecutive periods. The following table sets forth the Company's same-market
net revenue growth for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR SIX MONTHS
ENDED ENDED
SEPTEMBER 30, MARCH 31,
---------------- -----------
1995 1996 1997 1997 1998
----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Same-market net revenue growth..................... 10.9% 9.1% 10.5% 10.3% 14.0%
</TABLE>
30
<PAGE>
Everest significantly expanded its Contract Services business with the
acquisition of three Contract Services providers in November 1996. See "--
Acquisitions." Following these acquisitions, Everest has focused on
integrating the acquired companies, developing treatment protocols and quality
programs and identifying suitable acquisition targets. The Company regularly
engages in discussions with Contract Services businesses concerning possible
acquisitions. Everest believes that it has a strong competitive position as
the only outsourcing company capable of providing a full portfolio of
extracorporeal blood treatment services, and that it can sell its broad
service portfolio to its existing customers.
SOURCES OF REVENUES
The Company's net revenues from chronic dialysis services are derived from:
(i) in-center dialysis and home dialysis services including drugs and
supplies; and (ii) management contracts with hospital-based and other
outpatient dialysis programs. The majority of the Company's in-center and home
dialysis services are paid for under the Medicare ESRD program in accordance
with rates established by HCFA. Additional payments are provided by other
third-party payors (particularly by employer group health plans during the
first thirty months of treatment), generally at rates higher than those
reimbursed by Medicare. Everest is currently seeking to expand the portion of
its revenues attributable to non-government payors by entering into contracts
with managed care companies and other private payors. Because dialysis is an
ongoing, life-sustaining therapy used to treat a chronic condition,
utilization of the Company's chronic dialysis services is generally
predictable and not subject to seasonal or economic fluctuations. ESRD
patients may receive up to 156 dialysis treatments per year; however, due to
hospitalization and no shows the Company's average number of treatments per
patient per year is 136. Unless the patient moves to another dialysis
facility, receives a kidney transplant or dies, the revenues generated per
patient per year can be estimated with reasonable accuracy. See "Business--
Sources of Revenue Reimbursement."
The Company's Contract Services revenues are derived from acute dialysis,
perfusion, apheresis and auto-transfusion services provided to hospitalized
patients pursuant to contracts with hospitals. Rates paid for such services
are negotiated with individual hospitals. Because extracorporeal blood
treatment services are required for patients undergoing major surgical
procedures, utilization of the Company's Contract Services is not subject to
seasonal or economic fluctuations.
The Company's revenues also include fees paid under management services
contracts between the Company and certain physician practices.
ACQUISITIONS
Acquisitions of dialysis and Contract Services providers have been recorded
under purchase accounting with the purchase price being principally allocated
to fixed assets and inventory based on respective estimated fair market values
at the date of acquisition. Any excess of the purchase price over the fair
market value of identifiable assets is allocated to goodwill, which is
amortized over periods ranging from 25 to 40 years. The results of these
acquisitions have been included in the results of operations from their
respective acquisition dates. The Company regularly evaluates the potential
acquisition of, and holds discussions with, various potential acquisition
candidates; as a general rule, the Company does not intend to publicly
announce such acquisitions until a definitive agreement has been reached.
In June 1996, the Company acquired Home Dialysis of America, Inc. ("HDA"),
which became a wholly-owned subsidiary of the Company. At the time of
acquisition, HDA: (i) managed six outpatient and home dialysis centers; (ii)
owned 100% of two subsidiaries providing management and acute dialysis
services; (iii) owned a majority interest in two outpatient and home dialysis
centers; and (iv) owned a minority interest in ten outpatient and home
dialysis centers.
In July 1996, the Company purchased a dialysis facility in Crown Point,
Indiana, and in August 1996, the Company purchased an 80% interest in a
dialysis facility in Hammond, Indiana.
31
<PAGE>
In November 1996, the Company effectively purchased an 80% interest in the
combined businesses of Bay Extracorporeal Technologies, Inc., Great Lakes
Medical Services, Inc. and Great Lakes Perfusion, Inc., which collectively
operated perfusion businesses in seven states. Effective September 1997, the
Company's 80%-owned subsidiary purchased a 51% interest in Tri-State
Perfusion, LLC, an extracorporeal services company.
Between December 31, 1997 and March 31, 1998, the Company acquired
additional equity in three entities in which it previously held a minority
interest: (i) Hemo Dialysis of Amarillo, L.L.C., which owns one outpatient and
home dialysis facility located in Amarillo, Texas (the Company's interest was
increased from 30.0% to 100.0%); (ii) Home Dialysis of Mount Auburn, Inc.,
which owns one home dialysis facility located in Cincinnati, Ohio (the
Company's interest was increased from 50.0% to 80.5%); and (iii) Dialysis
Specialists of South Texas, L.L.C., which owns three outpatient and home
dialysis facilities in Corpus Christi, Texas (the Company's interest was
increased from 33.3% to 100.0%). These entities in the aggregate had
approximately $10.5 million in net revenues for the 12 months ended December
31, 1997. In addition the Company acquired 100.0% of North Buckner Dialysis
Center, Inc., which owns one outpatient dialysis facility in Dallas, Texas and
which had net revenues of approximately $4.4 million for the 12 months ended
December 31, 1997. These acquisitions represented approximately 550 patients
in the aggregate. Effective March 1, 1998, the Company acquired 70% of
Perfusion Resource Association, L.L.C., a Contract Services business with two
hospitals under contract. In May 1998, the Company developed and opened one
outpatient dialysis facility located in Bronx, New York.
REORGANIZATION
In November 1997, in order to simplify its ownership structure and better
position the Company for future growth, the shareholders of the Company
entered into a series of related transactions. Prior to such transactions, the
Founding Directors, who collectively owned approximately 70% of the equity in
the Company, held their equity interest through a limited liability company.
Following these transactions, the Founding Directors now directly hold
approximately 55% of the equity in the Company, and collectively own all of
the membership interests in Peak Liquidating, which in turn owns approximately
15% of the equity in the Company. See "The Company," "Certain Relationships
and Related Transactions" and "Security Ownership of Certain Beneficial Owners
and Management."
32
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth: (i) unaudited combined statement of
operations data for the fiscal year ended September 30, 1995 for the companies
included in the 1995 formation of Peak as if such formation had occurred on
October 1, 1994; (ii) statement of operations data for the fiscal years ended
September 30, 1996 and 1997 which have been derived from the audited financial
statements of the Company included elsewhere herein; and (iii) statement of
operations data for the six months ended March 31, 1997 and 1998 which have
been derived from the unaudited financial statements of the Company included
elsewhere herein. In the discussion presented below under the heading "Fiscal
Year Ended September 30, 1996 Compared to Fiscal Year Ended September 30,
1995," the Company has compared its results of operations for fiscal 1996 to
the unaudited results of operations for fiscal 1995 of the companies included
in the 1995 formation of Peak as if such formation had occurred on October 1,
1994 because the Company believes that such comparison is more useful to
understanding its historical statements of operations than a comparison to the
Predecessor's 1995 results of operations.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
-------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues.................... $76,011 $83,171 $113,808 $53,245 $67,531
Patient care costs.............. 53,181 54,885 72,058 37,047 43,872
General and administrative
expenses....................... 17,678 17,463 24,710 8,377 12,423
Provision for bad debts......... 1,603 2,523 714 562 1,921
Depreciation and amortization... 2,044 3,185 4,605 2,082 2,835
------- ------- -------- ------- -------
Income from operations.......... 1,505 5,115 11,721 5,177 6,480
Interest expense, net........... (972) (276) (2,149) (973) (1,483)
Minority interests in earnings.. -- (810) (1,601) (764) 118
Gain on curtailment of pension
benefits....................... -- 3,044 -- -- --
Other income, net............... -- 39 279 -- --
------- ------- -------- ------- -------
Income before income taxes...... 533 7,112 8,250 3,440 5,115
Income taxes.................... (199) (2,800) (3,689) 1,723 2,619
------- ------- -------- ------- -------
Net income...................... $ 334 $ 4,312 $ 4,561 $ 1,717 $ 2,497
======= ======= ======== ======= =======
</TABLE>
The following table sets forth for the periods indicated certain statement
of operations items expressed as a percentage of net revenues for such
periods:
<TABLE>
<CAPTION>
FISCAL YEARS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, MARCH 31,
------------------- ------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Patient care costs........................... 70.0 66.0 63.3 69.6 65.0
General and administrative expenses.......... 23.3 21.0 21.7 15.7 18.4
Provision for bad debts...................... 2.2 3.0 0.7 1.1 2.8
Depreciation and amortization................ 2.7 3.8 4.0 3.9 4.2
----- ----- ----- ----- -----
Income from operations....................... 2.0 6.2 10.3 9.7 9.6
Interest expense, net........................ (1.3) (0.3) (1.9) (1.8) (2.2)
Minority interests in earnings............... -- (1.0) (1.4) (1.4) 0.2
Gain on curtailment of pension benefits...... -- 3.7 -- -- --
Other income, net............................ -- 0.0 0.2 -- --
----- ----- ----- ----- -----
Income before income taxes................... 0.7 8.6 7.2 6.5 7.6
Income taxes................................. (0.3) (3.4) (3.2) (3.3) (3.9)
----- ----- ----- ----- -----
Net income................................... 0.4% 5.2% 4.0% 3.2% 3.7%
===== ===== ===== ===== =====
</TABLE>
33
<PAGE>
SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO SIX MONTHS ENDED MARCH 31, 1997
Net Revenues. Net revenues increased $14.3 million or 26.8% to $67.5 million
for the six months ended March 31, 1998 from $53.2 million for the six months
ended March 31, 1997. Approximately $7.9 million of the increase was
attributable to an increase in the number of treatments at existing dialysis
facilities, a shift in payor mix and an increase in the average net revenue
per treatment to approximately $220 for the six months ended March 31, 1998
from $207 for the six months ended March 31, 1997. Of the remaining $6.4
million of the increase, $2.8 million resulted from the acquisition of
Contract Services businesses in 1997 and $3.6 million was attributable to the
opening of de novo facilities in fiscal 1997 and the acquisition of six
facilities in fiscal 1998.
Patient Care Costs. Patient care costs consist of costs directly related to
the care of patients, including direct and indirect labor, drugs and other
medical supplies and operational costs of the facilities. Patient care costs
increased $6.8 million or 18.4% to $43.9 million for the six months ended
March 31, 1998 from $37.0 million for the six months ended March 31, 1997.
Approximately $2.9 million of the increase was attributable to the
acquisitions of facilities and the opening of de novo facilities and $2.6
million was attributable to the acquisition of Contract Services businesses in
1997. The balance of the increase resulted primarily from an increase in the
number of treatment at existing facilities.
General and Administrative Expenses. General and administrative expenses
increased $4.0 million or 48.3% to $12.4 million for the six months ended
March 31, 1998 from $8.4 million for the six months ended March 31, 1997. The
increase was attributable to the growth of the corporate infrastructure,
including the expansion of information systems, increased professional fees
and increased administrative labor costs.
Provision for Bad Debts. Provision for bad debts increased $1.4 million or
241.6% to $1.9 million for the six months ended March 31, 1998 from $562,000
for the six months ended March 31, 1997. The increase was due to provisions
established for specific receivables as a result of price increases which may
not be collectible from uninsured patients.
Depreciation and Amortization. Depreciation and amortization increased
approximately $700,000 or 36.2% to $2.8 million for the six months ended March
31, 1998 from $2.1 million for the six months ended March 31, 1997. The
increase was due to increased amortization of goodwill as a result of business
acquisitions (including the purchase of minority interests) and to increased
depreciation expense as a result of fixed asset purchases.
Income from Operations. Income from operations increased $1.3 million or
25.2% to $6.5 million for the six months ended March 31, 1998 from $5.2
million for the six months ended March 31, 1997. Income from operations as a
percentage of net revenues decreased to 9.6% for the six months ended March
31, 1998 from 9.7% for the three months ended March 31, 1997.
Interest Expense, Net. Interest expense, net increased $510,000 or 52.4% to
$1.5 million for the six months ended March 31, 1998 from $973,000 for the six
months ended March 31, 1997. The increase was primarily attributable to
additional borrowings under the Prior Credit Facility.
Minority Interests in Earnings. In November 1997, the minority interests
were purchased on behalf of Everest, and therefore minority interest expense
related to those minority interests has only been included for two of the six
months ended March 31, 1998. Accordingly, minority interest expense decreased
$883,000 or 115.5% to $118,000 of minority interest income for the six months
ended March 31, 1998 from $764,000 of minority interest expense for the six
months ended March 31, 1997.
Income Taxes. Income taxes increased $900,000 or 52.0% to $2.6 million for
the six months ended March 31, 1998 from $1.7 million for the six months ended
March 31, 1997. This increase was due in part to a higher pretax income of
$5.1 million for the six months ended March 31, 1998 as compared to $3.4
million for the six months ended March 31, 1997 as a result of the factors
discussed above. In addition, the effective tax rate increased to 51.2% for
the six months ended March 31, 1998 as compared to 50.0% for the six months
ended March 31, 1997 due to an increase in non-deductible goodwill
amortization expense associated with acquisitions.
34
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1996
Net Revenues. Net revenues increased $30.6 million or 36.8% to $113.8
million for fiscal 1997 from $83.2 million for fiscal 1996. Approximately
$23.8 million of this increase was attributable to acquisitions of dialysis
and Contract Services businesses and the opening of de novo facilities. The
remaining $6.8 million increase was attributable primarily to an increase in
the number of treatments at existing facilities and an increase in the average
net revenue per treatment to $213 for fiscal 1997 from $202 for fiscal 1996.
Patient Care Costs. Patient care costs increased $17.2 million or 31.3% to
$72.1 million for fiscal 1997 from $54.9 million for fiscal 1996.
Approximately $14.9 million of this increase was attributable to acquisitions
of dialysis and Contract Services businesses and the opening of de novo
facilities. The remaining $2.3 million resulted primarily from an increase in
the number of treatments at existing facilities.
General and Administrative Expenses. General and administrative expenses
increased $7.2 million or 41.5% to $24.7 million for fiscal 1997 from $17.5
million for fiscal 1996. Approximately $4.9 million of this increase was
attributable to acquisitions of dialysis and Contract Services businesses and
to the opening of de novo facilities. The remaining $2.3 million of this
increase was attributable primarily to growth of the corporate infrastructure,
including increased corporate staff and expanded information systems, to
support a larger organization.
Provision for Bad Debts. Provision for bad debts decreased $1.8 million or
71.7% to $714,000 for fiscal 1997 from $2.5 million for fiscal 1996. This
decrease resulted primarily from the reversal of a provision of $1.0 million
established in 1996 for specific state agency receivables which were
subsequently collected, offset by an increase in provision for bad debts as a
result of higher net revenues.
Depreciation and Amortization. Depreciation and amortization increased $1.4
million or 44.6% to $4.6 million for fiscal 1997 from $3.2 million for fiscal
1996. The increase was due to increased goodwill amortization expense as a
result of acquisitions and an increase in depreciation expense related to
fixed asset purchases.
Income from Operations. Income from operations increased $6.6 million or
129.1% to $11.7 million for fiscal 1997 from $5.1 million for fiscal 1996.
Income from operations as a percentage of net revenues increased to 10.3% for
fiscal 1997 from 6.2% for fiscal 1996.
Interest Expense, Net. Interest expense, net increased $1.9 million or
678.7% to $2.1 million for fiscal 1997 from $276,000 for fiscal 1996. The
increase was primarily attributable to additional borrowings under the Prior
Credit Facility related to acquisitions and working capital.
Minority Interests in Earnings. Minority interests in earnings increased
$791,000 or 97.6% to $1.6 million for fiscal 1997 from $810,000 for fiscal
1996, as a result of increased profitability.
Gain on Curtailment of Pension Benefits. In fiscal 1996, the Company ceased
funding its defined-benefit pension plan and no additional years of benefit
service were accrued by plan participants. The Company recognized a
curtailment gain of approximately $3.0 million.
Income Taxes. Income taxes increased $889,000 or 31.8% to $3.7 million in
fiscal 1997 from $2.8 million in fiscal 1996. This increase was due to in part
higher pretax income of $8.3 million in fiscal 1997 as compared to $7.1
million in fiscal 1996 as a result of the factors discussed above. In
addition, the effective tax rate was 44.7% in fiscal 1997 as compared to 39.4%
in fiscal 1996 primarily due to an increase in non-deductible goodwill
amortization expense associated with acquisitions.
35
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1995
Net Revenues. Net revenues increased $7.2 million or 9.4% to $83.2 million
for fiscal 1996 from $76.0 million for fiscal 1995. Approximately $6.7 million
of the increase was attributable to an increase in the number of treatments at
existing facilities and approximately $2.3 million resulted from acquisitions
of dialysis centers. These increases were offset by a decrease of $1.8 million
in net revenues as a result of the December 1995 sale of contracts and certain
other assets of the Company's acute dialysis business to an affiliated
company. This sale was effected to accommodate regulatory concerns. The
Company reentered the acute dialysis business, using a different ownership
structure, through the acquisition of HDA in June 1996.
Patient Care Costs. Patient care costs increased $1.7 million or 3.2% to
$54.9 million for fiscal 1996 from $53.2 million for fiscal 1995. The increase
was primarily attributable to an increase in the number of treatments and an
increase in the cost of EPO, offset by decreased patient care costs as a
result of the sale of the acute dialysis business as discussed above.
General and Administrative Expenses. General and administrative expenses
decreased $213,000 or 1.2% to $17.5 million for fiscal 1996 from $17.7 million
for fiscal 1995. The increase was mainly attributable to an increase in
professional fees.
Provision for Bad Debts. Provision for bad debts increased $920,000 or 57.4%
to $2.5 million for fiscal 1996 from $1.6 million for fiscal 1995. The
increase was attributable to a provision established in fiscal 1996 on
specific state agency receivables, which were subsequently collected in fiscal
1997.
Depreciation and Amortization. Depreciation and amortization increased $1.2
million or 55.8% to $3.2 million for fiscal 1996 from $2.0 million for fiscal
1995. The increase was due to increased amortization of goodwill as a result
of acquisitions and an increase in depreciation expense related to fixed asset
purchases.
Income from Operations. Income from operations increased to $5.1 million for
fiscal 1996 from $1.5 million for fiscal 1995. Income from operations as a
percentage of net revenues increased to 6.2% for fiscal 1996 from 2.0% for
fiscal 1995.
Interest Expense, Net. Interest expense, net decreased $696,000 or 71.6% to
$276,000 for fiscal 1996 from $1.0 million for fiscal 1995. The decrease was
mainly attributable to interest paid to an affiliate which was eliminated in
the reorganization transaction in which Everest was formed.
Minority Interests in Earnings. Minority interests in earnings of $810,000
for fiscal 1996 were attributable to the reorganization transaction that
occurred on October 1, 1995. Accordingly, there were no minority interests in
earnings recognized in fiscal 1995.
Income Taxes. Income taxes increased $2.1 million or 276.9% to $2.8 million
in fiscal 1996 from $743,000 in fiscal 1995 due to higher pretax income of
$7.1 million in fiscal 1996 as compared to $532,000 in fiscal 1995 as a result
of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily for the acquisition and development
of dialysis centers and Contract Services businesses, the purchase of property
and equipment for existing centers and to finance working capital
requirements. At March 31, 1998, the Company's working capital was $19.8
million as compared to $20.7 million at September 30, 1997.
The Company's net cash provided by operating activities was $5.8 million for
the six months ended March 31, 1998 as compared to net cash provided by
operating activities of $1.8 million for fiscal 1997. Cash provided by
operating activities consists of net income increased by non-cash expenses
such as depreciation, amortization and the provision for bad debts and
adjusted by the changes in components of working capital, primarily
36
<PAGE>
receivables and payables. The Company's net cash used in investing activities
was $16.7 million for the six months ended March 31, 1998 and $17.6 million
for fiscal 1997. The Company's principal uses of cash consist of investing
activities related to acquisitions, purchases of new equipment and leasehold
improvements for existing dialysis centers, the development of de novo
dialysis centers and net advances due from affiliated entities. Net cash
provided by financing activities was $11.6 million for the six months ended
March 31, 1998 and net cash provided by financing activities was $18.3 million
for fiscal 1997. The primary sources and uses of cash from financing
activities were net borrowings or repayments under the Prior Credit Facility.
On May 18, 1998, the Company refinanced the Prior Credit Facility with the
same commercial bank that provided the Prior Credit Facility. The new credit
facility (the "New Credit Facility") consists of a new revolving line of
credit, acquisition line of credit and supplemental revolver totaling $100.0
million. The New Credit Facility contains substantially the same provisions as
the Prior Credit Facility, including affirmative and negative covenants,
financial ratios and events of default. See "Description of Credit Facility."
A significant component of the Company's growth strategy is the acquisition
and development of dialysis centers and the acquisition of Contract Services
businesses. The Company believes that the remaining net proceeds from the
Initial Offering, existing cash and funds from operations, together with funds
available under the New Credit Facility, will be sufficient to meet the
Company's acquisition, development, expansion, capital expenditure and working
capital needs for the foreseeable future. In order to finance certain
strategic acquisition opportunities, the Company may from time to time incur
additional short and long-term bank indebtedness and may issue equity or debt
securities, the availability and terms of which will depend on market and
other conditions. There can be no assurance that the Company will be
successful in implementing its growth strategy or that adequate sources of
capital will be available on terms acceptable to the Company to pursue its
growth strategy in the future. See "Risk Factors--Risks Inherent in Growth
Strategy," "--Leveraged Financial Position" and "--Ability to Service the
Notes and Other Debt."
IMPACT OF INFLATION
A substantial portion of the Company's net revenues is subject to
reimbursement rates that are regulated by the federal government and do not
automatically adjust for inflation. The Company is unable to increase the
amount it receives for the services provided by its dialysis businesses that
are reimbursed under the Medicare composite rate. Increased operating costs
due to inflation, such as labor and supply costs, without a corresponding
increase in reimbursement rates, may adversely affect the Company's earnings
in the future. However, part of the Company's growth strategy is to acquire
additional Contract Services businesses which are not directly dependent on
reimbursement from government agencies. In addition, the Company believes that
the effect of inflation is further mitigated by a recent change in current
governmental health care laws that extends the coordination of benefits period
for ESRD patients who are covered by an employer group health plan from 18 to
21 months to 30 to 33 months before Medicare becomes the primary payor.
YEAR 2000 COMPLIANCE BY THE COMPANY AND OTHERS
Year 2000 compliance concerns the ability of certain computerized
information systems to properly recognize date-sensitive information, such as
invoices for the Company's services, as the year 2000 approaches. Systems that
do not recognize such information could generate erroneous data or cause
systems to fail; this problem may occur as early as calendar year 1999. The
Company is at risk both for its own Year 2000 compliance and for the Year 2000
compliance of those with whom it does business, primarily third party payors.
Although the Company plans to replace or upgrade its existing systems with
Year 2000 compliant software, there can be no assurance that such replacement
and upgrading will be successful or can be achieved without the Company
incurring material expense. Moreover, there can be no assurance that the third
party payors upon whom the Company relies for substantially all of its net
revenues, such as Medicare and Medicaid, will not experience system
difficulties as a result of the Year 2000 problem, which difficulties could
delay payment to the Company. Any such difficulties or delays could have a
material adverse effect on the Company's business, results of operations or
financial condition.
37
<PAGE>
BUSINESS
OVERVIEW
Everest Healthcare Services Corporation is a leading provider of dialysis
and other blood treatment services. Founded in 1968 and principally owned by
nephrologists, the Company has a long-standing focus on developing strong
relationships with physicians to provide high-quality patient care. Everest is
the nation's sixth-largest provider of chronic dialysis outpatient services
and serves over 5,300 patients through 63 facilities in 12 states. Everest
also contracts with 102 hospitals in 11 states to provide a broad range of
other extracorporeal (outside-the-body) blood treatment services, including
inpatient acute dialysis, perfusion, apheresis and auto-transfusion (together,
"Contract Services"). In addition, Everest provides physician practice
management services to 26 nephrologists, primarily in the Chicago and
northwest Indiana areas. The Company derived 84.1% of its net revenues for the
12 months ended March 31, 1998 from chronic dialysis services and 15.9% from
Contract Services. Net revenues and EBITDA for the 12 months ended March 31,
1998 were $128.1 million and $19.0 million, respectively.
Everest's dialysis operations were founded in 1968 as a single dialysis
center and grew over the next three decades through a combination of de novo
facility development, acquisitions and internal growth. Everest has completed
eight acquisitions encompassing 27 facilities and developed 36 de novo centers
since its inception. Through geographic clustering of its outpatient dialysis
centers, the Company has created strong regional market positions,
particularly in the Midwest. The Company focuses on accelerating its growth
within each market by: (i) capitalizing on its strong physician and hospital
relationships; (ii) expanding capacity; and (iii) providing high-quality
service which leads to new patient referrals. Everest operates 49 full-service
outpatient dialysis centers which provide on-site dialysis services as well as
training for home dialysis patients. Everest also operates 14 home dialysis
training and support centers which provide services and equipment to home
dialysis patients.
Capitalizing on its strong hospital and physician relationships and its core
competencies in blood processing, Everest significantly expanded its Contract
Services business with the completion of three acquisitions in 1996. The
Company believes it is uniquely positioned as the only company capable of
offering hospitals an outsourcing solution to all of their extracorporeal
blood treatment needs. The Company has contracts with 102 hospitals, and
Everest acts as the exclusive provider of extracorporeal blood treatment
services for most of these hospitals. By leveraging its strengths in blood
processing, its significant market presence in outpatient dialysis services
and its strong physician and hospital relationships, Everest believes it is
well positioned to continue to implement successfully its growth strategy.
DIALYSIS INDUSTRY OVERVIEW
End-Stage Renal Disease. ESRD is a chronic medical condition characterized
by the irreversible loss of kidney function which prevents the removal of
waste products and excess water from the blood. ESRD most commonly results
from complications associated with diabetes, hypertension, certain renal and
hereditary diseases, old age and other factors. In order to survive, ESRD
patients must receive dialysis treatments for the rest of their lives or
undergo kidney transplantation. The number of kidney transplants has been
limited due to a shortage of suitable donors along with growth in the number
of ESRD patients, the incidence of rejection of transplanted organs and the
unsuitability of many ESRD patients for transplantation based on age or
health.
According to the USRDS, the number of patients requiring chronic dialysis in
the United States has increased from approximately 88,000 patients in 1986 to
approximately 209,000 as of December 31, 1996, a compound annual growth rate
of approximately 9%. The Company expects the number of ESRD patients to
continue to grow at approximately the historical rate for the foreseeable
future. According to the USRDS, the number of new patients diagnosed each year
with ESRD among Medicare-eligible patients for all age groups has increased
from 136 patients per million in 1986 to 253 patients per million in 1995. The
Company attributes this increase in the number of ESRD patients and in the
incidence of ESRD to: (i) the aging of the population; (ii) better treatment
and longer survival rates of patients with diabetes, hypertension and other
diseases which lead
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to ESRD; and (iii) improved technology that has enabled older patients and
patients who could not previously tolerate dialysis due to other illnesses to
benefit from this life-prolonging treatment.
According to HCFA, the total estimated direct payments for ESRD in 1995 were
$13.1 billion, of which Medicare paid approximately $9.7 billion. Relative to
other diseases, ESRD has a unique reimbursement program. Substantially all
ESRD patients are eventually covered under Medicare. As a result of
legislation enacted in 1972, the federal government provides Medicare funding,
subject to specified waiting periods and co-payment obligations, for patients
who are diagnosed with ESRD, regardless of their age or financial
circumstances. The federal government recently increased the period during
which employer group health plans are required to reimburse dialysis providers
for patients who are otherwise below the Medicare age threshold, from 18
months to 30 months. This change could benefit dialysis providers because
commercial insurers currently pay rates which generally are above those paid
by Medicare.
Therapeutic Approaches for End-Stage Renal Disease. Currently, three
treatment options exist for patients with ESRD: (i) hemodialysis, which is
performed either in an outpatient dialysis facility, a hospital or a patient's
home; (ii) peritoneal dialysis, which is generally performed in the patient's
home; and (iii) kidney transplant surgery. According to HCFA, as of December
31, 1995, approximately 85% of ESRD patients in the U.S. received outpatient
treatments, which were virtually all hemodialysis. Of the remaining 15% of
ESRD patients treated at home, more than 97% received peritoneal dialysis.
Hemodialysis uses a dialyzer, or artificial kidney, to remove certain
toxins, fluids and chemicals from the patient's blood. The dialysis machine
controls external blood flow and monitors certain vital signs of the patient.
The screening process involves a semipermeable membrane that divides the
dialyzer into two chambers; while the blood is circulated through one chamber,
a premixed dialysis fluid is circulated through the adjacent chamber. The
toxins and excess fluid contained in the blood cross the membrane into the
dialysis fluid. Hemodialysis treatment is usually performed three times per
week for three to five hours.
Peritoneal dialysis is generally performed by the patient at home and uses
the patient's peritoneal, or abdominal, cavity to eliminate fluids and toxins
in the patient's blood. There are several variations of peritoneal dialysis,
the most common of which are continuous ambulatory peritoneal dialysis
("CAPD") and continuous cycling peritoneal dialysis ("CCPD"). CAPD utilizes a
sterile dialysis solution which is introduced through a surgically implanted
catheter into the patient's peritoneal cavity. Toxins in the blood
continuously cross the peritoneal membrane into the dialysis solution. After
several hours, the patient drains the used solution and replaces it with fresh
solution. CCPD is performed in a manner similar to CAPD, but utilizes a
mechanical device to cycle dialysis solution while the patient is sleeping or
at rest. Patients treated at home are monitored monthly at a designated full-
service outpatient facility or by a nurse from a home dialysis training and
support facility.
Kidney transplantation, when successful, is the most desirable treatment for
patients with ESRD. However, the shortage of suitable donors severely limits
the availability of this surgical procedure as a viable alternative for many
ESRD patients. In 1995, approximately 12,000 patients, or 6% of the total ESRD
patient population, underwent kidney transplants. The number of kidney
transplants--the alternative to dialysis--has grown much more slowly than has
the number of dialysis treatments, particularly since 1986, with annual growth
averaging 4%.
New medical therapies that cure or mitigate the primary causative diseases
linked to kidney failure could potentially reduce the ESRD patient population
growth rate. Such new medical therapies include diet control, intensive
diabetes therapy, improved control of hypertension, improved treatment of
causative primary infections and techniques for widening blocked renal
arteries. The Company believes, however, that most of these therapies will
only provide benefits over an extended time horizon and will not, therefore,
significantly reduce the growth of the ESRD patient population in the near
term.
Outpatient Dialysis Industry. The Company believes that the outpatient
dialysis industry is fragmented and consolidating due to the need for
operating efficiencies, high-quality patient care, and the growing need for
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providers to compete in a managed care environment. According to HCFA, as of
December 31, 1995, there were approximately 2,900 Medicare-certified ESRD
treatment centers in the U.S. The Company estimates that at that time, the ten
largest multi-facility providers, including the Company, accounted for
approximately 1,200 facilities (41% of facilities) and 86,000 patients (45% of
patients). Other freestanding facilities (many privately owned by physicians)
and hospital-affiliated facilities were the sites of treatment for the
remaining 55% of patients. At May 31, 1997, industry sources estimated that
the top ten multi-center providers, including the Company, accounted for
approximately 118,000 patients, or 51% of the estimated market.
NON-DIALYSIS EXTRACORPOREAL SERVICES INDUSTRY OVERVIEW
Non-dialysis extracorporeal services include perfusion, apheresis and auto-
transfusion. Based on industry data and the Company's market research, the
non-dialysis extracorporeal services industry represents approximately $1.4
billion in annual revenues and is growing at the rate of approximately 7% per
annum. The Company attributes this growth to: (i) an aging population; (ii)
the applicability of existing and developing technologies to a larger number
of diseases; and (iii) continued heightened public concern over the safety of
the nation's blood supply. The Company believes that hospitals, which have
historically provided most of these services, are seeking increasingly to
outsource these services to companies such as Everest that provide both
trained personnel and equipment.
Perfusion Services. Cardiovascular perfusion is required during open-heart
surgery to replace the function of the heart and lungs using mechanical
devices. This technique maintains relatively normal physiologic equilibrium
during cardiovascular surgery by providing adequate circulation and
oxygenation. The patient's blood is routed through a system of disposable
extracorporeal circuits that oxygenate, filter, adjust temperature and then
return the blood to the patient.
According to industry sources, in 1995 approximately 900 U.S. hospitals
provided cardiac surgical services to approximately 400,000 patients.
Approximately 40% of all open-heart procedures are supported by contract
perfusion providers like Everest, 50% are serviced by hospital employees and
the balance are serviced by physician-employed perfusionists. The Company
believes that there are approximately 90 independent contract perfusion
providers that operate primarily on a local or regional basis. The Company
believes that the market is consolidating due to increasing business
complexity, the expansion of managed care and the demand by hospitals for a
single provider capable of delivering a broad portfolio of extracorporeal
services.
Apheresis Services. Apheresis is the selective removal of a specific
component (plasma, platelets, or white or red blood cells) of a person's
blood. The two general categories of apheresis include: (i) donor apheresis,
which is the removal of a healthy component of the blood from a patient or
third-party donor for subsequent transfusion to a patient; and (ii)
therapeutic apheresis, which is the removal of a diseased or disease-producing
component of a patient's blood in order to arrest a disease process.
The types of donor apheresis include Autologous Peripheral Blood Stem Cell
("PBSC") and Single Donor Platelets ("SDP"). PBSC is a procedure performed on
cancer patients, including those suffering from leukemia, Hodgkins disease and
breast cancer. These patients undergo intensive chemotherapy and/or radiation
to eliminate the patient's bone marrow. Bone marrow regeneration is
accomplished by the reinfusion of stem cells previously collected from the
patient. SDP is a procedure in which platelets are collected from a single
third-party donor and reinfused into a patient whose platelets have been
depleted through blood loss, cancer, or cancer treatment. Therapeutic
apheresis selectively removes unwanted substances from the blood. These
substances include toxins, metabolic residues and plasma components implicated
in disease.
The Company believes that apheresis procedure growth is being driven by the
increasing acceptance of PBSC in the treatment of an expanding list of cancers
and its significant cost advantages compared to traditional therapies such as
bone marrow transplantation. Additionally, the Company expects the number of
SDP procedures to grow because such procedures reduce transfusion-transmitted
diseases and transfusion reactions, thereby reducing the total number of
platelet transfusions required by the individual patient.
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Providers of therapeutic apheresis services include hospitals, independent
contractors and blood banks. According to Company research, hospitals perform
approximately 50% of the treatments, independent contractors perform
approximately 35% and blood banks perform approximately 15%. Hospitals, the
primary purchasers of blood products, obtain approximately 80% of their
platelet requirements from local blood banks and, to a lesser extent, regional
blood banks. The Company believes that hospitals have been increasingly
dissatisfied with local blood suppliers due to perceptions of high prices,
lack of flexibility and poor service. In response, hospitals are expanding or
starting their own blood banks and increasingly seeking to outsource apheresis
services.
Auto-Transfusion Services. Auto-transfusion is performed during surgery to
collect, filter, clean and reinfuse the patient's own blood as an alternative
to using donor blood. An auto-transfusion device may be utilized in a variety
of surgical procedures, such as open-heart, vascular or orthopedic surgery,
which typically entail blood loss of more than two units. Auto-transfusion
reduces the risks of transfusion error and infection associated with outside
donor blood. The market for auto-transfusion has grown due to a shortage of
banked blood, increased recognition of the risks of transfusion error and
increased concern with respect to possible infections, such as hepatitis and
AIDS. Of the approximately 300,000 non-open-heart, intra-operative auto-
transfusions performed in 1995, approximately 40% were outsourced.
COMPETITIVE STRENGTHS
The Company attributes its market leadership and its opportunities for
continued growth and profitability to the following strengths:
Strong Physician and Hospital Relationships. Everest believes that the
strength of its relationships with physicians and hospitals is an important
factor in its success. Everest was founded and remains principally owned by
nephrologists, and the Company believes that its sensitivity to the concerns
and objectives of health care professionals, coupled with its reputation for
high-quality service, makes it attractive to physicians and hospitals. Everest
intends to capitalize on its strong relationships in order to increase same-
market growth, successfully complete acquisitions and de novo developments and
market its broad range of extracorporeal services.
Acquisition and Development Expertise. The Company has a successful history
of effecting acquisitions and building de novo dialysis facilities in existing
and new markets. Since January 1, 1996, Everest has completed six acquisitions
encompassing 22 facilities and has developed 18 de novo dialysis centers.
During this period, the number of patients treated by the Company has
increased from approximately 2,700 to approximately 5,300. Everest believes
that its significant acquisition and development experience position it well
to continue to pursue growth opportunities.
Focus on Attractive Industry Sectors. The Company focuses on two large and
growing industry sectors: chronic dialysis services and Contract Services.
According to the USRDS, the number of ESRD patients requiring chronic dialysis
in the United States increased from approximately 88,000 in 1986 to
approximately 209,000 in 1996, a compound annual growth rate of approximately
9%. The Company expects this growth to continue at approximately the
historical rate for the foreseeable future as a result of the aging of the
population, better treatment and survival rates of patients with diseases that
lead to ESRD and improved technology. The Company estimates that the non-
dialysis Contract Services market represents approximately $1.4 billion in
annual revenues and is growing at an annual rate of approximately 7%. The
Company attributes this growth to the aging population, applicability of
existing and developing technologies to more diseases and public concern over
the safety of the U.S. blood supply.
Comprehensive Portfolio of Extracorporeal Services. The Company believes
that it is the only outsourcing provider capable of offering hospitals a full
portfolio of extracorporeal blood treatment services including inpatient acute
dialysis, perfusion, apheresis and auto-transfusion. Everest believes that
hospitals are increasingly outsourcing these services and demanding a single,
high-quality provider to handle all of their extracorporeal
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blood treatment needs. Everest currently has contracts with 102 hospitals, and
Everest acts as the exclusive provider of extracorporeal blood treatment
services for most of these hospitals.
Leading Market Positions. The Company seeks to be a leader in each chronic
dialysis and Contract Services market in which it operates. Everest is
currently the sixth-largest provider of chronic dialysis services in the
United States. In addition, through geographic clustering of its outpatient
dialysis centers, the Company has created strong regional market positions,
particularly in the Midwest. Everest seeks to augment its position in existing
outpatient dialysis markets by accelerating same-market growth through such
methods as adding new dialysis stations and extending facility hours.
Proven Management Team. The Company's senior management team has an average
of over 18 years of health care industry experience and an average of over 12
years of experience with Everest. In addition, the seven regional directors of
the Company's chronic dialysis business have an average of over 11 years of
experience with the Company. Under this team's management, the Company has
achieved significant growth in recent years. The Company's net revenues
increased from $76.0 million in fiscal 1995 to $128.1 million for the 12
months ended March 31, 1998, a compound annual growth rate of 23.0%. During
this same period, EBITDA increased from $3.5 million to $19.0 million, a
compound annual growth rate of 92.6%, and EBITDA margin expanded from 4.7% to
14.9%. Everest's management has created a strong corporate and regional
infrastructure which the Company believes can support future increased patient
volumes with limited incremental expenditures.
STRATEGY
The Company's objective is to be a leading provider of high-quality dialysis
and Contract Services in each of its markets. The Company's strategy for
achieving this objective is to:
Acquire and Develop Additional Outpatient Chronic Dialysis Facilities.
Everest intends to continue to leverage its strong physician and hospital
relationships to identify and consummate acquisitions. Everest has completed
eight acquisitions to date and will continue to pursue acquisitions to
increase its presence in existing markets and to enter new markets. When
considering acquisitions, the Company evaluates such factors as historical and
projected profitability, local market share, facility utilization,
relationships with physicians and hospitals, market demographics, growth
potential and the availability of qualified clinical personnel. The Company
regularly engages in discussions with potential acquisition candidates. In
addition, Everest currently has a less than 50.1% ownership interest in 15
outpatient dialysis facilities. The Company believes that it has an
opportunity to continue to increase its ownership of many of these facilities.
Since September 30, 1997, the Company has acquired majority ownership of five
facilities, with approximately 440 patients, in which it previously had a
minority-ownership position.
Of the Company's 63 outpatient dialysis facilities, 36 were de novo
developments. The Company believes that its strong physician and hospital
relationships and its significant development experience afford it a
competitive advantage in developing new dialysis facilities. The Company
intends to continue to pursue de novo development opportunities, particularly
in areas where Everest has existing facilities and can take advantage of
geographic clustering.
Increase Same-Market Growth. Everest believes that its strong relationships
with nephrologists and hospitals are instrumental to its ability to accelerate
same-market growth. In addition, Everest believes that its high-quality
service leads to patient satisfaction, which in turn increases patient
referrals. The Company also seeks to increase same-market growth through such
methods as adding new dialysis stations and extending dialysis center hours.
Everest will also continue to add appropriate ancillary services at each of
its facilities, including EPO dosing and home dialysis training. As Everest
identifies new needs, it will work with its regional directors and facility
managers to implement these services in all of its facilities. In fiscal 1997,
the Company's same-market growth in net revenues was approximately 10.5%.
Expand its Contract Services Business. Everest began its Contract Services
business to provide a broader range of extracorporeal services to hospitals
and managed care organizations and to develop a source of revenue
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that is not directly dependent on government reimbursement. Everest believes
that it has a strong competitive position as the only outsourcing company
capable of providing a full portfolio of extracorporeal blood treatment
services, including acute inpatient dialysis, perfusion, apheresis and auto-
transfusion. The Company believes it can sell its broad service portfolio to
its existing customers. Everest intends to expand this business by leveraging
its existing relationships and establishing new relationships in each of its
markets. In addition, the Company intends to continue to acquire
extracorporeal service providers in existing and new markets.
Leverage its Infrastructure and Systems to Increase Margins and Improve
Quality of Service. Everest has built a strong corporate and regional
operating structure, led by senior management and seven regional directors who
are responsible for all financial, quality and teamwork goals. The Company
believes that this infrastructure can support increased patient volumes with
limited incremental expenditures. In addition, Everest's management
information system enables corporate and regional managers to monitor the
quality and outcomes of the services provided at both its outpatient dialysis
facilities and at the hospitals where Contract Services are performed. The
Company intends to continue to leverage its experienced management team and
increase operating efficiencies through standardization of systems and
integration of new centers.
Continue to Foster a Workplace that will Enable the Company to Recruit,
Train and Retain Well-Qualified Employees. Highly qualified employees are
instrumental to Everest's continued delivery of high-quality patient care.
Everest invests considerable resources in the screening, hiring and training
of its employees. Everest's training programs cover such topics as clinical
skills, leadership development, systems utilization and quality programs. In
addition, the Company has developed and is implementing a recertification
program for all of its patient care employees. Everest provides regional
directors and key facility managers with an incentive compensation plan linked
to its financial, quality and teamwork objectives.
CHRONIC DIALYSIS OPERATIONS
Facility Information. The Company operates 63 outpatient dialysis
facilities, including 49 full-service dialysis facilities and 14 centers
exclusively providing home dialysis training and support. The facilities are
located in Illinois (14), Indiana (9), Kansas (1), Kentucky (2), New Jersey
(2), New York (6), Ohio (17), Oklahoma (2), Pennsylvania (1), South Dakota
(2), Texas (6) and Wisconsin (1).
Everest's 49 full-service facilities offer on-site dialysis treatments as
well as home dialysis training and support services. The Company operates a
total of 820 dialysis stations, most of which are available 16 hours a day,
six days a week. As of March 31, 1998, the Company's utilization rate for its
then-existing stations was 74%. Each full-service facility has patient
examination rooms, staff areas and offices, water treatment areas and
amenities such as color televisions for the patients. Everest also operates 14
facilities that exclusively provide the necessary equipment, supplies,
training and support services to those patients who prefer and are able to
receive their treatments at home.
Organizational Structure. Of the Company's 63 facilities, 33 are operated as
wholly-owned subsidiaries, seven are majority-owned, 15 are minority-owned,
and eight are operated pursuant to management contracts in New York, South
Dakota, Texas, Ohio and New Jersey. Everest often enters into joint ventures
with physicians to facilitate the development of outpatient facilities in new
and existing markets.
Everest's dialysis facilities are managed by the Company's Executive Vice
President and General Manager, who oversees seven regional directors. The
regional directors manage the operations of the facilities in their respective
regions and are responsible for staffing, quality outcomes and regional
profitability. Each facility has a facility manager who reports to the
regional director. Facility managers are responsible for facility staffing,
quality outcomes, patient satisfaction results, facility profitability and
promoting and maintaining a strong teamwork environment. Generally, key
managers are eligible to receive incentives based upon the achievement of
certain quality measurements, patient satisfaction results, financial
performance goals and teamwork objectives. See "--Human Resources," "--
Training and Development" and "Risk Factors--Dependence on Management and
Other Key Personnel."
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The Company has an expert team of dialysis specialists assigned to assist
each patient in designing a program to fit the patient's lifestyle and to help
patients and families adjust to the changes in their lives. Each team
generally consists of: (i) a nephrologist who oversees the medical care; (ii)
a nurse who assesses the medical condition and coordinates and implements the
program; (iii) a nutritionist who customizes the diet; (iv) a social worker
who helps the family with lifestyle changes and financial planning; and (v)
technicians who provide much of the routine patient care.
Everest's medical directors and local and regional management teams market
the Company's outpatient dialysis services to hospitals, physicians, patients,
health plans and the community at large. In marketing its services, the
Company emphasizes its excellent reputation and tradition of providing high-
quality, consistent patient care, as well as its patient outcomes and the cost
savings that these outcomes can provide.
Physician Relationships. The Company believes that its physician
relationships are a key factor in the success of its dialysis facilities. As
required by the Medicare ESRD program, each of the Company's dialysis
facilities is supervised by a qualified medical director who is a physician.
The medical director at each facility is responsible for patient care and
relationships with referring physicians. Generally, medical directors must be
board certified or board eligible in internal medicine and have at least
twelve months of training or experience in the care of patients at ESRD
centers. In all cases, the Company's medical directors refer patients to the
Company's centers. In most cases, the medical director is the sole or
substantial source of referrals to the centers served. See "Risk Factors--
Extensive Government Regulation" and "--Dependence on Physician Referrals and
Other Relationships."
Ancillary Services. In addition to dialysis services, ESRD patients require
a significant amount of ancillary services. The Company has developed a number
of ancillary services to complement its dialysis services to boost patient
satisfaction and to improve quality, facility growth and profitability. The
most significant of the Company's ancillary services is the administration of
EPO upon a physician's prescription. As the kidney deteriorates, it loses the
ability to regulate the red blood cell count, causing anemia. EPO is a bio-
engineered protein that stimulates the production of red blood cells and is
used in connection with all forms of dialysis to treat anemia. A majority of
the ESRD population requires EPO. See "Risk Factors--EPO Reimbursement and
Supply." Additionally, the Company interacts with kidney centers nationwide to
arrange treatments for patients traveling in other areas and for non-Everest
patients visiting areas where Everest has facilities.
CONTRACT SERVICES OPERATIONS
Everest significantly expanded its Contract Services business in 1996 with
the acquisition of three Contract Services providers. Everest believes that it
can build on its core competencies in blood processing to market
extracorporeal blood services through its existing relationships and that it
can use relationships developed in its Contract Services business to market
dialysis services. The Contract Services business also provides the Company
with a business that is not directly dependent on government reimbursement.
As of May 31, 1998, the Company had contracts with 102 hospitals in 11
states. Everest acts as the exclusive provider of extracorporeal blood
services for most of these hospitals. Contracts with customer hospitals
generally provide for a portfolio of services including professional staffing,
disposable supplies, inventory management services, clinical quality
management services, and capital equipment. The professional staffing required
by the contracts may include a perfusionist, a registered nurse, or a
technician, who are on-call 24 hours a day. See "Risk Factors--Dependence on
Management and Other Key Personnel." The Company typically owns or leases the
equipment used in providing these services, such as heart-lung machines,
transfusion machines, dialyzers and apheresis machines and supplies the
necessary disposable accessories for these machines and related equipment.
This equipment is usually stored at the hospital, but is operated and
maintained by the Company. Everest operates five regional offices in Florida,
Illinois, Indiana, Michigan and Texas, where the Company provides centralized
support services for Contract Services.
The Company markets its extracorporeal services to hospital administrators,
physicians, operating room directors and blood banks. Sales contacts result
from referrals from physicians, vendors, current customers and
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employees. The Company also solicits direct sales, works closely with
pharmaceutical and equipment companies and cooperates with such companies in
regional workshops.
DIALYSIS QUALITY PROGRAMS
The Company believes that it enjoys a reputation of providing high-quality
care to dialysis patients and that it achieves superior patient outcomes
compared to other providers due to its strong training program and focus on
quality assurance standards.
Continuous Quality Improvement. Everest seeks to deliver high-quality
dialysis services to its patients and engages in systematic efforts to
measure, maintain and improve the quality of the services that it delivers.
Quality assurance and patient data are regularly collected, analyzed and
reviewed by management. An important part of Everest's quality assurance
program is its Continuous Quality Improvement ("CQI") program. The CQI program
is overseen by the Company's Corporate Quality Improvement Committee, whose
purpose is to evaluate quality of care data, set policy and procedures
affecting quality, encourage sharing of techniques and procedures and develop
practice guidelines. This Committee meets quarterly. The CQI Program monitors
quality of care indicators as well as patient satisfaction. The philosophy of
CQI encourages continual and consistent improvement in the quality of care.
The Company sets quality and patient satisfaction objectives, and progress
toward such objectives is routinely measured. The CQI committee at each
facility meets monthly to manage the CQI process for the various indicators.
Outcomes Measurement. Everest's clinical patient data are entered into a
computerized medical record maintained at each local dialysis facility, and
patient chemistry data are downloaded directly from laboratories. Outcomes
data are transmitted to and maintained at Everest's corporate headquarters.
The Company tracks such data by patient, by facility and for the entire
corporation and distributes such data monthly to each facility. Adequacy in
hemodialysis is measured by the Urea Reduction Ratio (URR) and Kt/V and in
peritoneal dialysis by either the Kt/V or creatinine clearance. The Company
monitors these data as well as many other indicators of quality including
nutrition, anemia, infection rates, access patency, patient compliance,
hospitalization rates and mortality rates.
CONTRACT SERVICES QUALITY PROGRAMS
The Company has applied its experience in developing quality assurance
programs for its dialysis services business to its Contract Services business,
and has developed software in furtherance of its commitment to provide high-
quality extracorporeal services. This software, which is currently being
implemented throughout the Company's perfusion operations, records
approximately 15 clinical indicators similar to those tracked by the Company's
CQI Committee with respect to the Company's dialysis services. The Company
believes that this software is a factor in its ability to achieve favorable
outcomes for its Contract Services patients. The Company's outcome projections
help predict the anticipated length of patients' stays and probable patient
outcomes, and the Company tracks actual patient outcomes to verify the
accuracy of such predictions. The Company's Contract Services quality
assurance personnel meet monthly to review outcomes data and analyze the
Company's performance. These data are also shared with physicians and
hospitals on a regular basis. The Company believes that the indicators tracked
by its software provide value assessments that can help reduce lengths of stay
and improve the utilization of blood products. The Company believes this
software is the most advanced system of its kind and that the Company's use of
the system is a substantial value-added service for its customers. The Company
has similar programs for its hemodialysis and peritoneal dialysis operations,
and is in the process of writing similar programs for use in its inpatient
acute dialysis operations.
MANAGEMENT INFORMATION SYSTEMS
The Company maintains comprehensive management information systems for
financial systems and for patient care, quality assurance and outcome tracking
purposes, and is continually developing and upgrading such systems. The
Company's Client Tracking System, which keeps a record of each of the
Company's patients, is
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currently available in almost all facilities and is being implemented at the
remainder of the facilities. The Company's chronic dialysis units have systems
that track clinical, administrative and financial activities for a dialysis
patient. These systems provide the patient's medical record and the database
for quality programs and performance indicators. See "Risk Factors--Risks
Inherent in Growth Strategy" and "--Year 2000 Compliance."
SOURCES OF REVENUE REIMBURSEMENT
The following table provides information regarding the percentage of the
Company's net revenues provided: (i) with respect to chronic dialysis
services, by Medicare, Medicaid and other third-party payors such as indemnity
insurers, managed care companies, hospitals and others; and (ii) with respect
to Contract Services, by hospitals and, to a much lesser extent, other payors:
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED ENDED MARCH
SEPTEMBER 30, 31,
-------------------- -------------
PAYOR 1995 1996 1997 1997 1998
----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CHRONIC DIALYSIS:
Medicare................................... 66.0% 66.1% 57.5% 59.7% 49.7%
Medicaid................................... 11.8% 11.6% 8.5% 8.7% 9.2%
Other payors............................... 22.2% 22.3% 22.9% 18.1% 25.2%
CONTRACT SERVICES:
Hospitals and other payors................. -- -- 11.1% 13.5% 15.9%
------ ------ ------ ------ ------
100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
Under the Medicare ESRD program, Medicare reimburses dialysis providers for
the treatment of individuals who are diagnosed with ESRD and are eligible for
participation in the Medicare program, regardless of age or financial
circumstances. As described in more detail below, for each treatment, Medicare
pays 80% of the amount set by the Medicare prospective reimbursement system. A
secondary payor, usually a Medicare supplemental insurer, a state Medicaid
program or, to a lesser extent, the patient or the patient's private insurer,
is responsible for paying any co-payment (typically 20%), other approved
services not paid by Medicare and the annual deductible. All of the states in
which the Company operates dialysis facilities provide Medicaid benefits to
qualified recipients to supplement their Medicare entitlement. The Medicare
and Medicaid programs are subject to statutory and regulatory changes,
administrative rulings, interpretations of policy and governmental funding
restrictions, some of which may have the effect of decreasing program
payments, increasing costs or modifying how the Company operates its dialysis
business. See "--Regulatory Matters" and "Risk Factors--Dependence on Third
Party Reimbursement."
Assuming an ESRD patient is eligible for participation in the Medicare
program, the commencement date of Medicare benefits for ESRD patients electing
in-center hemodialysis (and not entering into a self-care training program) is
dependent on several factors. For ESRD patients 65 years of age or older and
already enrolled in the Medicare program due to age entitlement, Medicare
coverage for ESRD services begins immediately. ESRD patients under 65 years of
age who are not covered by an employer group health plan (for example, the
uninsured, those covered by Medicaid and those covered by an individual health
insurance policy) must wait until the first day of the third month after the
month in which a renal dialysis treatment program begins. During this three
month period, the patient, Medicaid or private insurers are responsible for
payment. In the case of the individual covered by private insurance, such
responsibility is limited to the terms of the policy with the patient being
responsible for the balance. ESRD patients under 65 years of age who are
covered by an employer group health plan must wait 30 or 33 months after
commencing dialysis treatments (depending on whether the patient has entered
into a self-care training program) before Medicare becomes the primary payor.
During the 30 to 33-month period, the employer group health plan is
responsible for payment at its negotiated rate or, in the absence of such a
rate, at the company's usual and customary rates, and the patient is
responsible for deductibles and co-payments applicable under the terms of the
employer group health plan.
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If an ESRD patient elects to enter into a self-care training program or home
dialysis training program during the first three months of dialysis, the
three-month waiting period is waived. In this case, if the patient has an
employer group health plan, the period for which the health plan will be the
primary payor is 30 months. If the patient has only Medicare coverage,
Medicare immediately becomes the primary payor effective as of the initiation
of dialysis.
Medicare Reimbursement. Each of the Company's dialysis facilities is
certified to participate in the Medicare program. The Company is reimbursed by
Medicare under a reimbursement system for chronic dialysis services provided
to ESRD patients. Under this system, the reimbursement rates are fixed in
advance and have been adjusted from time to time by Congress. Although this
form of reimbursement limits the allowable charge per treatment, it provides
the Company with predictable and recurring per treatment revenues and allows
the Company to retain any profit earned. Medicare has established a composite
rate set by HCFA that governs the Medicare reimbursement available for a
designated group of dialysis services, including the dialysis treatment,
supplies used for such treatment, certain laboratory tests and certain
medications. When Medicare assumes responsibility as the primary payor, it
pays for dialysis and related services (as described below) at 80% of the
composite rate. The Medicare composite rate is subject to regional differences
based upon certain factors, including regional differences in wage earnings.
Certain other services and items are eligible for separate reimbursement under
Medicare and are not part of the composite rate, including certain drugs
(including EPO), blood (for amounts in excess of three units per patient per
year), and certain physician-ordered tests provided to dialysis patients.
Claims for Medicare reimbursement must generally be presented within 15 to 27
months of treatment depending on the month in which the service was rendered.
The Company generally submits claims monthly and is usually paid by Medicare
within 30 days of the submission. If, in the future, Medicare were to include
in its composite reimbursement rate any of the ancillary services presently
reimbursed separately, the Company would not be able to seek separate
reimbursement for these services, adversely affecting the Company's operating
and financial results.
The Company receives reimbursement for outpatient dialysis services provided
to Medicare-eligible patients at rates that are currently between $117 and
$139 per treatment for routine dialysis services, depending upon regional wage
variations. The Medicare reimbursement rate is subject to change by
legislation and recommendations by the Medicare Payment Advisory Commission
("MedPAC"). MedPAC is a new commission that was mandated by the Balanced
Budget Act of 1997 to continue and expand upon the work of the Prospective
Payment Assessment Commission ("PROPAC"). The Medicare ESRD reimbursement rate
was unchanged from commencement of the program in 1972 until 1983. From 1983
through December 1990 numerous Congressional actions resulted in net reduction
of the average reimbursement rate from a fixed fee of $138 per treatment in
1983 to approximately $125 per treatment in 1990. Congress increased the ESRD
reimbursement rate, effective January 1, 1991, resulting in an average ESRD
reimbursement rate of $126 per treatment. In 1990, Congress required that the
Department of Health and Human Services ("HHS") and PROPAC study dialysis
costs and reimbursement and make findings as to the appropriateness of ESRD
reimbursement rates. In March 1998, MedPAC recommended a 2.7% increase in the
reimbursement rate. Congress is not required to implement any recommendation,
has not implemented this increase and could either raise or lower the
reimbursement rate. See "Risk Factors--Dependence on Third Party
Reimbursement."
On June 1, 1989, the FDA approved the production and sale of EPO, and HCFA
approved Medicare reimbursement for EPO's use by dialysis patients. EPO
stimulates the production of red blood cells and is beneficial in the
treatment of anemia, with the effect of reducing or eliminating the need for
blood transfusions for dialysis patients.
From June 1, 1989 through December 31, 1990, the Medicare ESRD program
reimbursed for EPO at the fixed rate of $40.00 per administration of EPO in
addition to the dialysis facility's allowable composite rate for dosages of up
to 9,999 units per administration. For higher dosages, an additional $30.00
per EPO administration was allowed. Effective January 1, 1991, the Medicare
allowable prescribed rate for EPO was changed to $11.00 per 1,000 units,
rounded to the nearest 100 units. Subsequently, legislation was enacted to
reduce the Medicare
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prescribed rate for EPO by $1.00 to $10.00 per 1,000 units after December 31,
1993. President Clinton's proposed fiscal year 1999 budget contains a further
reduction in reimbursement for EPO from $10.00 to $9.00 per 1,000 units
administered. See "Risk Factors--EPO Reimbursement and Supply."
In September 1997, HCFA promulgated a policy that would deny Medicare
reimbursement for EPO where a patient's proportion of red blood cells to total
blood volume exceeds an average of 36.5% during a 90-day period. That rule was
modified effective March 10, 1998, to provide that, if a doctor provides
medical justification for the prescription, Medicare will continue to
reimburse for EPO even if a patient's red blood cell count exceeds the maximum
level otherwise allowed for reimbursement. Further, even if no medical
justification is provided, the reimbursement will be reduced rather than
denied, to an amount equal to the lower of the actual EPO dosage administered
or 80% of the allowable dosage for the previous month.
Medicaid Reimbursement. The Company is a licensed ESRD Medicaid provider in
all states in which it does business. Medicaid programs are state-administered
programs partially funded by the federal government. These programs are
intended to provide coverage for patients whose income and assets fall below
state-defined levels or who are otherwise uninsured. The programs also serve
as supplemental insurance programs for the Medicare co-insurance portion and
provide certain coverage (e.g., oral medications) that is not provided by
Medicare. State regulations generally follow Medicare reimbursement levels and
coverage without any co-insurance amounts. Certain states, however, require
beneficiaries to pay a monthly share of the cost based upon levels of income
or assets.
Private Reimbursement. Everest derives a portion of its revenues from
reimbursement provided by non-governmental third-party payors. A substantial
portion of third-party health insurance in the U.S. is now furnished through
some type of managed care plan, including HMOs. Managed care plans are
increasing their market share, and this trend may accelerate as a result of
the merger and consolidation of providers and payors in the health care
industry, as well as discussions among members of Congress and the executive
branch regarding ways to increase the number of Medicare and Medicaid
beneficiaries served through managed care plans.
The Company generally is reimbursed for dialysis treatments at higher rates
by non-governmental payors than by governmental payors. However, managed care
plans are becoming more aggressive in selectively contracting with a smaller
number of providers willing to furnish services for lower rates and subject to
a variety of service restrictions. For example, managed care plans and
traditional indemnity third-party payors increasingly are demanding
alternative fee structures, such as capitation arrangements whereby a provider
receives a fixed payment per month per enrollee and bears the risk of loss if
the costs of treating such enrollee exceed the capitation payment. These
market forces are creating downward pressure on the reimbursement that Everest
receives for its services and products.
Everest's ability to secure favorable rates with indemnity and managed care
plans has largely been due to the relatively small number of ESRD patients
enrolled in any single HMO. By regulation, ESRD patients have been prohibited
from joining an HMO unless they are otherwise eligible for Medicare coverage,
due to age or disability, and are members of a managed care plan when they
first experience kidney failure. HCFA has implemented a pilot project in which
several managed care companies were allowed to recruit ESRD patients beginning
in 1997 and which, if successful, could result in the opening of the ESRD
treatment market to many managed care companies thereafter. As Medicare HMO
enrollments increase and the number of ESRD patients in managed care plans
also increases, managed care plans may have increased leverage in negotiating
lower rates. In addition, an HMO may contract with another provider for, or
may have tighter utilization controls with respect to, certain ancillary
services typically provided by Everest to ESRD patients, which could limit
Everest's revenues from such services. See "Risk Factors--Dependence on Third
Party Reimbursement."
As managed care companies expand their market share and gain greater
bargaining power vis-a-vis health care providers, there may be increasing
pressure to reduce the amounts paid for outpatient dialysis services and
products. These trends could be accelerated if future changes to the Medicare
ESRD program require private
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payors to assume a greater percentage of the cost of care given to dialysis
patients. Everest believes that the historically higher rates of reimbursement
paid by non-governmental payors may not be maintained at such levels. Everest
is presently seeking to expand the portion of its revenues attributable to
non-governmental private payors. However, if substantially more patients join
managed care plans or such plans reduce reimbursement levels, Everest's
business and results of operations could be materially adversely affected.
COMPETITION
Dialysis Services Market. The dialysis industry is fragmented and highly
competitive, particularly with respect to competition for the acquisition of
existing dialysis centers. Because, in most cases, the prices of dialysis
services and products in the U.S. are directly or indirectly regulated by
Medicare, competition for patients is based primarily on quality and
accessibility of service and the ability to obtain referrals from physicians
and hospitals. Certain of the Company's competitors in the dialysis services
market have greater financial resources than the Company and compete with the
Company for the acquisition of centers in markets targeted by the Company.
Competition for acquisitions has increased the costs of acquiring dialysis
facilities. There is no assurance that the Company can continue to compete
effectively with existing and new competitors. See "Risk Factors--
Competition."
Competition for recruiting qualified physicians to act as medical directors
is intense. In addition, the Company may experience competition from the
establishment of a facility by a former medical director or referring
physician. In cases where the Company has acquired a facility from one or more
physicians, or where one or more physicians own interests in facilities as
partners or co-shareholders with the Company, such physicians are generally
required to agree to refrain from owning interests in competing facilities for
various periods. Substantially all physicians who provide medical director
services to the Company have also executed non-competition agreements. Such
non-competition agreements may not be enforceable in certain jurisdictions.
Contract Services Market. The Contract Services market is also fragmented
and highly competitive. The Company estimates there are approximately 3,000
perfusionists practicing in the U.S., the majority of whom are employed by
hospitals, with the balance practicing as sole proprietors or employed by
companies offering perfusion services. Most hospitals requiring perfusion
services use their own staff to provide such services and equipment and, as
such, are the largest source of competition for the Company. The Company also
competes in regional markets with other independent providers of perfusion
services and with perfusionists in private practice. The Company's principal
competitor in the perfusion services market is Baxter International Inc. The
Company competes with hospitals and blood banks in the provision of apheresis
and auto-transfusion services. The Company competes with other dialysis
providers and hospitals in the provision of acute dialysis services.
Management believes that the competitive factors in the Contract Services
market are primarily cost, quality and breadth of service. Certain of the
Company's competitors in the Contract Services market have greater financial
resources than the Company. There can be no assurance that Everest will be
able to compete effectively with its competitors or that additional
competitors with greater resources will not enter the Company's markets. See
"Risk Factors--Competition."
HUMAN RESOURCES
As of March 31, 1998, the Company had 1,572 employees, including a
professional staff of approximately 768 nurses, social workers, dietitians and
perfusionists, a corporate and regional staff of approximately 125 employees
and a facilities support staff of approximately 679 employees. The Company
also contracts with numerous health care professionals, including physicians,
nurses, social workers, dietitians, perfusionists and technicians who are not
employees of Everest. See "Risk Factors--Dependence on Management and Other
Key Personnel." Medical directors of most of the Company's dialysis facilities
are not employees of the Company, although some medical directors are
employees of either Nephrology Associates of Northern Illinois, Ltd. ("NANI-
IL") or Nephrology Associates of Northern Indiana, P.C. ("NANI-IN"), each
owned by shareholders of the Company. In these cases, professional service
fees for the medical directors are paid by the Company to NANI-IL and NANI-IN
for medical director services performed for such corporations' dialysis units.
See
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"Certain Relationships and Related Transactions." In the majority of cases,
however, the fees are payable directly to the medical directors.
Perfusionists generally enter into written agreements with the Company which
specify their duties and establish their compensation. Such agreements are
terminable by either party on advance written notice.
As of March 31, 1998, approximately 103 of the Company's employees were
members of unions. The Company believes that its relationships with its
employees are good.
TRAINING AND DEVELOPMENT
The Company believes that its dialysis patient care staff, Contract Services
professionals, facility managers and regional directors represent its most
valuable corporate assets. Accordingly, Everest devotes substantial efforts
and resources to recruiting, training and retaining these individuals. The
Company's training emphasizes teamwork to facilitate an environment based upon
skilled individuals working together to provide high-quality care. The Company
trains its patient care staff and requires that such employees undertake
continuing education and meet with trainers who provide ongoing competency
testing. If such testing reveals skills that are below the level required for
a specific employee, the Company implements further training as required.
PROPERTIES
The Company operates 63 dialysis centers, all of which are located in leased
facilities ranging from approximately 3,000 to 15,000 square feet. These
leases generally have terms of 10 years and typically contain renewal options.
The Company owns 13,800 square feet of office space in Oak Park, Illinois
which is used for its corporate headquarters. In addition, the Company leases
approximately 22,000 square feet of space in Bellwood, Illinois which houses
the acute dialysis team, corporate training, purchasing and distribution and
medical records. The Company also leases space for its regional offices in
Tucson, Arizona; Panama City, Florida; Dearborn, Michigan; and Houston, Texas.
The regional offices range in size from 230 square feet to approximately 3,500
square feet under leases with expiration dates through December 1998.
The Company considers its physical properties to be in good operating
condition and suitable for the purposes for which they are being used.
LIABILITY INSURANCE
The Company maintains property and general liability insurance, professional
liability insurance and other insurance coverage in amounts deemed adequate by
management based upon historical claims and the nature and risks of the
business. The Company's property, casualty and worker's compensation insurance
is provided by an affiliated entity. See "Certain Relationships and Related
Transactions." The Company's professional liability insurance would provide
coverage, subject to policy limits, in the event the Company is held liable in
a lawsuit for professional malpractice against a physician, however, there can
be no assurance that future claims will not exceed applicable insurance
coverage, that malpractice and other liability insurance will be available at
a reasonable cost or that the Company will be able to maintain adequate levels
of malpractice insurance and other liability insurance in the future or that
the insurers will not be successful in denying claims. Physicians practicing
at the dialysis facilities are required to maintain their own malpractice
insurance. However, the Company maintains coverage for the activities of its
medical directors (but not for their individual private medical practices).
See "Risk Factors--Liability Exposure."
REGULATORY MATTERS
General
The Company is subject to extensive federal, state and local governmental
regulations. These regulations require the Company to meet various standards
relating to, among other things, the management of centers,
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personnel, maintenance of proper records, equipment and quality assurance
programs. The Company's dialysis centers are subject to periodic inspection by
state agencies and other governmental authorities to determine if the
premises, equipment, personnel and patient care meet applicable standards. To
receive Medicare and Medicaid reimbursement, the Company's dialysis centers
must be certified by HCFA. All of the Company's dialysis centers are so
certified.
Any loss by the Company of its federal certifications, its authorization to
participate in the Medicare or Medicaid programs or its licenses under the
laws of any state or other governmental authority from which a substantial
portion of its revenues is derived or any change resulting from health care
reform reducing dialysis reimbursement or reducing or eliminating coverage for
dialysis services would have a material adverse effect on the Company's
operating and financial results. To date, the Company has maintained its
licenses and Medicare and Medicaid authorizations. The Company believes that
the health care services industry will continue to be subject to intense
regulation at the federal, state and local levels, the scope and effect of
which cannot be predicted. No assurance can be given that the activities of
the Company will not be reviewed and challenged by government regulators or
that health care reform will not result in a material adverse effect on the
Company. Furthermore, the Company could be held responsible for actions
previously taken by entities it has acquired. There can be no assurance that
previous operating practices of the Company or the entities it has acquired
will not be reviewed and challenged by governmental regulators or that the
Company will not be liable for such practices. See "Risk Factors--Extensive
Government Regulation."
Federal Fraud and Abuse
The Company's operations are subject to the illegal remuneration provisions
of the Social Security Act (sometimes referred to as the "Anti-Kickback Law")
that impose criminal and civil sanctions on persons who knowingly and
willfully solicit, offer, receive or pay any remuneration, whether directly or
indirectly, in return for, or to induce, the referral of a patient for
treatment, or, among other things, the ordering, purchasing, or leasing, of
items or services that may be paid for in whole or in part by Medicare,
Medicaid or other federal health care programs. Additionally, federal
enforcement officials may attempt to impose civil false claims liability with
respect to claims resulting from an Anti-Kickback Law violation. Violations of
the federal Anti-Kickback Law are punishable by criminal penalties, including
imprisonment, fines and exclusion of the provider from future participation in
the Medicare or Medicaid programs. Civil penalties for violation of the
federal Anti-Kickback Law include assessments of $50,000 per improper claim
for payment plus three times the amount of such claim, as well as suspension
from future participation in Medicare and Medicaid. While the federal Anti-
Kickback Law expressly prohibits transactions that have traditionally had
criminal implications, such as kickbacks, rebates or bribes for patient
referrals, its language has been construed broadly and has not been limited to
such obviously wrongful transactions. Court decisions state that, under
certain circumstances, the Anti-Kickback Law is also violated where any part
of the purpose (as opposed to the "primary" or "material" purpose) of a
payment is to induce referrals. Congress has frequently considered federal
legislation that would expand the federal Anti-Kickback Law to include the
same broad prohibitions to all situations involving the inducement of
referrals, regardless of payor source.
In July 1991, November 1992 and January 1996, the Secretary of HHS published
regulations that create exceptions or "safe harbors" for certain business
transactions. Transactions that satisfy the criteria under applicable safe
harbors will be deemed not to violate the federal Anti-Kickback Law.
Transactions that do not satisfy all elements of a relevant safe harbor do not
necessarily violate the statute, although such transactions may be subject to
scrutiny by enforcement agencies. The Company seeks to structure its various
business arrangements to satisfy as many safe harbor elements as possible
under the circumstances, although many of the Company's arrangements do not
satisfy all of the elements of a safe harbor. Although the Company has never
been challenged under the Anti-Kickback Law, and the Company believes that it
complies in all material respects with the federal Anti-Kickback Law and all
other applicable related laws and regulations, there can be no assurance that
the Office of Inspector General or other governmental agency will not take a
contrary position or that the Company will not be required to change its
practices or will not experience a material adverse effect as
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a result of any such challenge or any sanction that might be imposed. In
recent years, new legislation and amendments to the existing federal fraud and
abuse laws have strengthened the government's enforcement powers, and there
has been a significant increase in the number of health care fraud and abuse
investigations and prosecutions. Some of these new investigations and
prosecutions scrutinize practices that have been widely utilized by health
care providers in the past. The Company is unable to predict whether the
enforcement agencies will ultimately prevail in their stepped-up enforcement
activities or what impact these enforcement activities may ultimately have on
the interpretation of the federal fraud and abuse laws.
On July 21, 1994, the Secretary of HHS proposed a rule that would modify the
original set of safe harbor provisions to give greater clarity to the rule's
original intent. The proposed rule would make changes to the safe harbors on
personal services, management contracts, investment interests, and space
rentals, among others. The Company does not believe that its current
operations, as set forth above, would be materially impacted if the proposed
rule were adopted in the form proposed. However, the Company cannot predict
the outcome of the rule making process or whether changes in the safe harbors
rule will affect the Company's position with respect to the federal Anti-
Kickback Law. See "Risk Factors--Extensive Government Regulation."
Physician Ownership. A significant portion of the Company's issued stock is
presently owned or controlled by physicians. The Company has also issued stock
options to various individuals, including many of its medical directors.
Additionally, many of the Company's outpatient dialysis centers are owned on a
joint-venture basis between the Company, or one of its wholly owned
subsidiaries, and local physicians. Because many of these physicians refer
patients to the Company's facilities, the federal Anti-Kickback Law could be
found to apply to referrals by such physicians to the Company's facilities.
However, the Company believes these ownership relationships are in material
compliance with the federal Anti-Kickback Law. The Company believes that the
value of stock issued and options granted to physicians has been consistent
with the fair market value of assets transferred to, or services performed by
such physicians for the Company, and there is no intent to induce referrals to
the Company's facilities. There is a safe harbor for certain investments in
non-publicly traded entities such as the Company, and the Company believes
that its physician ownership and investment relationships meet some of the
criteria for this safe harbor. However, these relationships do not satisfy all
of the criteria for the safe harbor and there can be no assurance that these
relationships will not subject the Company to investigation or prosecution by
enforcement agencies.
Medical Director Relationships. The conditions for coverage under the
Medicare ESRD program mandate that treatment at a dialysis center be under the
general supervision of a medical director who is a licensed physician.
Additionally, the medical director must be board certified or board eligible
in internal medicine or pediatrics and have had at least 12 months of
experience or training in the care of patients at ESRD centers. The medical
directors engaged by the Company typically exceed the Medicare requirements
and are generally board certified nephrologists. The Company has engaged
medical directors at each of its centers under contracts with physicians or
their group practices. The compensation of the medical directors and other
physicians under contract with the Company is separately negotiated and
generally depends upon competitive factors in the local market, the
physician's professional qualifications and responsibilities and the size of
the center. The aggregate compensation of the medical directors and other
physicians under contract with the Company is generally fixed in advance for
periods of one year or more by written agreement, is set to reflect the fair
market value of the services rendered and does not take into account the
volume or value of patients referred to the Company's facilities. Because in
all cases the medical directors and the other physicians under contract with
the Company refer patients to the Company's centers, the federal Anti-Kickback
Law could be found to apply. However, the Company believes that its
contractual arrangements with these physicians are in material compliance with
the federal Anti-Kickback Law. The Company seeks to comply with the
requirements of the personal services and management contract safe harbor when
entering into agreements with its medical directors and other physicians. See
"Certain Relationships and Related Transactions--NANI-IL and NANI-IN."
Acute Inpatient Dialysis Services. Under the Company's acute inpatient
dialysis service arrangements, the Company agrees to provide a hospital with
supervised emergency and acute dialysis services, including qualified
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nursing and technical personnel, technical services, supplies, and, in many
cases, equipment. Because physicians under contract with the Company, or who
have an ownership interest in the Company and/or its affiliates, may refer
patients to hospitals with which the Company has an acute dialysis service
arrangement, the federal Anti-Kickback Law could be found to apply, However,
the Company believes that its contractual arrangements with hospitals for
acute inpatient dialysis services are in material compliance with the federal
Anti-Kickback Law. In all instances, the Company seeks to comply with the
requirements of the personal services and management contract and equipment
lease safe harbors when entering into agreements or contracts for acute
inpatient dialysis services.
The Health Insurance Portability and Accountability Act of 1996. HIPAA was
enacted in August 1996 and substantively changed federal fraud and abuse laws
by expanding their reach to all federal health care programs, establishing new
bases for exclusions and mandating minimum exclusion terms, creating an
additional exception to the anti-kickback penalties for risk-sharing
arrangements, requiring the Secretary of HHS to issue advisory opinions,
increasing civil money penalties to $10,000 (formerly $2,000) per item or
service and assessments to three times (formerly twice) the amount claimed,
creating a specific health care offense and related health fraud crimes, and
expanding investigative authority and sanctions applicable to health care
fraud. It also prohibits provider payments which could be deemed an inducement
to patient selection of a provider.
In addition to establishing minimum periods of exclusion from government
health programs, the statute authorizes exclusion of an individual with a
direct or indirect ownership or control interest in a sanctioned entity if the
individual "knows or should know" of the activity leading to the conviction or
exclusion of the entity or where the individual is an officer or managing
employee of the entity. Significantly, the law expands criminal sanctions for
health care fraud involving any governmental or private health benefit
program, including freezing of assets and forfeiture of property traceable to
commission of a health care offense.
Balanced Budget Act of 1997. In August 1997, President Clinton signed the
Balanced Budget Act of 1997 ("BBA") which contains sweeping adjustments to
both the Medicare and Medicaid programs, as well as further expansion of the
fraud and abuse laws. Specifically, the BBA created a civil monetary penalty
for violations of the federal anti-kickback statute whereby violations will
result in damages equal to three times the amount involved as well as a
penalty of $50,000 per violation. In addition, the new provisions expanded the
exclusion requirements so that any person or entity convicted of three health
care offenses is automatically excluded from federally funded health care
programs for life. Individuals or entities convicted of two offenses are
subject to mandatory exclusion of 10 years, while any provider or supplier
convicted of any felony may be denied entry into the Medicare program by the
Secretary of HHS if deemed to be detrimental to the best interests of the
Medicare program or its beneficiaries.
The BBA also provides that any person or entity that arranges or contracts
with an individual or entity that has been excluded from a federally funded
health care program will be subject to civil monetary penalties if the
individual or entity "knows or should have known" of the sanction. In
addition, the BBA requires HCFA to issue advisory opinions in response to
inquiries as to whether physician referrals for designated health services are
prohibited by the Stark law.
Finally, the BBA creates a Medicare+Choice Program that is designed to
provide a variety of options to Medicare beneficiaries, almost all of whom may
enroll in a Medicare+Choice Plan. The options include provider sponsored
organizations, coordinated care plans, HMOs with and without point of service
options involving out-of-network providers, and medical savings accounts
offered as a demonstration project.
Stark Law
The federal prohibition against self-referral amendments to the Social
Security Act (commonly known as the "Stark" provisions) restricts physician
referrals for certain "designated health services" to entities with which a
physician or an immediate family member has a "financial relationship." The
Stark law was enacted by
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Congress in two parts, and is commonly referred to individually as "Stark I"
and "Stark II." The Stark I legislation, which became effective in 1992, was
only applicable to clinical laboratory services. Whereas, the Stark II
legislation, which became effective January 1, 1995, expanded the self-
referral prohibition from only clinical laboratory services to all "designated
health services." Under the Stark provisions, an entity is prohibited from
claiming payment under the Medicare or Medicaid programs for services rendered
pursuant to a prohibited referral and is liable for the refund of amounts
received pursuant to prohibited claims. The Stark provisions also set forth
certain reporting requirements that require entities providing services to
Medicare beneficiaries to report certain ownership arrangements to the
Secretary of HHS. In addition to being obligated to refund any payments
received in violation of the Stark provisions, entities can also incur civil
penalties of up to $15,000 per improper claim, $10,000 per day for each day
that the entities fail to comply with the reporting obligations, and can be
excluded from participation in the Medicare and Medicaid programs.
A "financial relationship" under Stark is defined as an ownership or
investment interest in an entity by a physician (or an immediate family
member), or a compensation arrangement between a physician (or an immediate
family member) and an entity. The Company has entered into compensation
agreements with its medical directors or their respective professional
corporations for the services such physicians provide as medical directors.
Additionally, a number of physicians own shares of the Company or its joint
ventures, and options to purchase shares of stock in the Company. Accordingly,
physicians that have entered into such arrangements with the Company,
including its medical directors, may be deemed to have a "financial
relationship" with the Company for purposes of Stark.
For purposes of Stark, "designated health services" include, among other
things: clinical laboratory services; parenteral and enteral nutrients,
equipment and supplies; prosthetics, orthotics, prosthetic devices and
supplies; physical and occupational therapy services; outpatient prescription
drugs; durable medical equipment and supplies; radiology services (including
MRI, CAT scans and ultrasound services); radiation therapy services and
supplies; home health services; and inpatient and outpatient hospital
services. Dialysis is not a designated health service under Stark. However,
the definition of "designated health services" includes items and services
that are components of dialysis or that may be provided to a patient in
connection with dialysis, if such items and services are considered separately
rather than collectively as dialysis. Under the final Stark I regulations
published in August 1995, HCFA provided an exception from Stark I for clinical
laboratory services reimbursed under the Medicare "composite rate" for
dialysis. The Company believes it likely that, when final Stark II regulations
are published, they will contain a similar exception for the various dialysis
related items that fall within the definition of "designated health services,"
but that are reimbursed under the composite rate for dialysis. However, there
can be no assurance that HCFA will adopt such a position.
On January 9, 1998, HCFA issued proposed Stark II regulations (the "1998
Proposed Regulations"). The 1998 Proposed Regulations provide that EPO and
other outpatient drugs used in connection with dialysis treatments, and home
health services and supplies used in home dialysis services are not considered
"designated health services" for purposes of Stark II. There can be no
assurance, however, that final Stark II regulations will adopt such a
position. With respect to the other items and services provided by the Company
that are likely to be deemed to be "designated health services" subject to the
Stark II prohibition, the language of the Stark II amendments and the Stark I
final regulations suggest that the Company will not be permitted to offer, or
seek reimbursement for, such services in the absence of a Stark II exception.
Because physicians under contract with the Company may refer patients to
hospitals with which the Company has a Contract Services arrangement, Stark II
may be interpreted to apply to the Company's Contract Services arrangements
with hospitals. However, Stark II contains exceptions for certain equipment
rental, personal services and fair market value arrangements and the Company
believes that most of its Contract Services arrangements are in material
compliance with the requirements of such exceptions to Stark II. Moreover, the
1998 Proposed Regulations exclude from the definition of "inpatient hospital
services" acute dialysis services furnished by a physician-owned contractor
when the hospital is not certified to provide ESRD services. There can be no
assurance, however, that final Stark II regulations will adopt such a
position.
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<PAGE>
Stark II contains exceptions for ownership and compensation arrangements
that meet certain specific criteria set forth in the statute or in forthcoming
regulations. With respect to ownership, certain qualifying in-office physician
and ancillary services provided by or under the supervision of physicians in a
single group practice are exempt from both ownership and compensation
arrangement restrictions. With respect to compensation arrangements, the
exceptions available for certain qualifying arrangements include the following
areas: (i) bona fide employment relationships; (ii) personal service
arrangements; (iii) space and equipment leasing arrangements; (iv) certain
group practice arrangements with a hospital that were in existence prior to
December 1989; and (v) purchases by physicians of laboratory services, or
other items and services at fair market value. In order to be exempt from the
Stark II self-referral prohibition, it is necessary to meet all of the
criteria of a particular exception for each financial relationship existing
between an entity and a referring physician. Based on the existing regulations
and the 1998 Proposed Regulations, the Company believes that many of its
financial relationships with referring physicians will not be subject to the
Stark self-referral prohibitions. Further, to the extent that some of the
Company's financial arrangements are subject to Stark, the Company believes
that all such financial arrangements meet the criteria for an exception under
either the existing regulations or the 1998 Proposed Regulations.
However, because of its broad language, Stark II may be interpreted to apply
to certain of the Company's operations. Consequently, Stark II may require the
Company to restructure certain existing compensation agreements with its
medical directors, or, in the alternative, to refuse to accept referrals for
designated health services from certain physicians. Moreover, since Stark II
prohibits Medicare or Medicaid reimbursement of items or services provided
pursuant to a prohibited referral, and imposes substantial civil monetary
penalties on entities which present or cause to be presented claims for
reimbursement in such cases, the Company could be required to repay amounts
reimbursed for items and services that HCFA determines to have been furnished
in violation of Stark II, and could be subject to substantial civil monetary
penalties, either or both of which could have a material adverse effect on the
Company's operations and financial results and condition. The Company believes
that if Stark II is interpreted to apply to the Company's operations, it is
likely that the Company will be able on a prospective basis to bring its
financial relationships with referring physicians into material compliance
with the provisions of Stark II, including relevant exceptions. However,
prospective compliance would not affect amounts or penalties determined to be
owed for past conduct, and there can be no assurance that such prospective
compliance, if possible, would not have a material adverse effect on the
Company.
The Company's certificate of incorporation has certain provisions which are
designed to comply with the requirements of the Stark Law. The Certificate
provides that if the holder of the Company's stock or an immediate family
member of the holder is a physician, then the stock will represent no
investment or ownership interest in any entity to which such physician has
made or is making referrals. The Certificate also contains dividend and
transfer policies which are designed to cure potential violations of the Stark
Law which would occur should a physician with an investment or ownership
interest in the Company make referrals to an entity and indirectly derive
financial gain from such activities. The transfer policies have the additional
function of subjecting future holders of the Company's stock to the same
restrictions being imposed upon current holders.
Other Regulation
False Claims. The Company is also subject to federal and state laws
prohibiting an individual or entity from knowingly and willfully presenting
claims for payment (by Medicare, Medicaid and certain other third-party
payors) that contain false or fraudulent information. These laws provide for
both criminal and civil penalties. Furthermore, providers found to have
submitted claims which they knew or should have known were false or
fraudulent, or for items or services that were not provided as claims, may be
excluded from Medicare and Medicaid participation, required to repay
previously collected amounts, and/or subject to substantial civil monetary
penalties, resulting in the possibility of substantial financial penalties for
small billing errors repeated over a large number of claims, as each
individual error may be deemed to be a separate violation of the False Claims
Act. Although false claim violations are generally subject to investigation
and prosecution by the applicable governmental agency, violations of the
federal False Claim Act can also be the subject of Qui Tam
55
<PAGE>
(or whistle blower) litigation. In Qui Tam situations, certain individuals
with knowledge of False Claim Act violations can bring suit, on behalf of the
federal government, for such violations. As a "reward" for bringing successful
Qui Tam cases, Qui Tam plaintiffs are entitled to a significant percentage of
any penalties ultimately recovered by the federal government as a result of
the violations prosecuted in the Qui Tam action. The number of health care Qui
Tam cases is growing, and these cases increasingly involve arguments that a
violation of the Anti-Kickback and Stark Laws could constitute a false claim
under the federal False Claims Act, and thus subject health care providers to
Qui Tam actions for alleged Anti-Kickback and Stark Law violations.
Although dialysis centers are generally reimbursed by Medicare based on
prospective composite rates, the submission of Medicare cost reports and
requests for payment by dialysis centers are covered by these laws. The
Company believes that it has procedures to ensure the accurate completion of
cost reports and requests for payment. However, there can be no assurance that
cost reports or requests of payment filed by the Company will be materially
accurate or will not be subject to challenge under these laws. Furthermore,
there can be no assurance that cost reports or payment requests previously
submitted by any of the entities that the Company has acquired will not be
challenged under these laws. Any such challenges, including any related
sanctions which might be assessed, could have a material adverse effect on the
Company.
State Anti-Kickback Provisions. Many states have enacted statutes
prohibiting health care providers from providing kickbacks or other forms of
remuneration to individuals, including physicians, who induce, or refer
patients, to the provider. Many of these laws have proscriptions similar to
the Anti-Kickback Law, but apply more broadly to all patients, and not just
those entitled to reimbursement under Medicare, Medicaid or other federal
health care programs. The Company has no reason to believe that any of its
arrangements with physicians are not in material compliance with such state
laws. However, given the recent enactment of such state laws, there is an
absence of definitive interpretive guidance in many areas and there can be no
assurance that one or more of the practices of the Company or any of its
acquired entities might not be subject to challenge under such state laws. If
one or more of such state laws is interpreted to apply to the Company and the
Company is determined to be liable for violations of such state laws, the
application of such state laws could have a material adverse effect on the
Company.
State Self-Referral Provisions. Numerous states have enacted statutes
prohibiting physicians from holding financial interests in various types of
medical centers or providers to which they refer patients. Many of these laws
have proscriptions similar to the Stark law, but apply more broadly to all
patients, and not just those entitled to reimbursement under the Medicare and
Medicaid programs. The Company has no reason to believe that any of its
arrangements with physicians are not in material compliance with such state
laws. However, given the recent enactment of such state laws, there is an
absence of definitive interpretive guidance in many areas and there can be no
assurance that one or more of the practices of the Company or any of its
acquired entities might not be subject to challenge under such state laws. If
one or more of such state laws is interpreted to apply to the Company and the
Company is determined to be liable for violations of such state laws, the
application of such state laws could have a material adverse effect on the
Company.
State Laws Regarding Provision of Medicine and Insurance. The laws of many
states prohibit physicians from splitting fees with non-physicians and
prohibit non-physician entities from practicing medicine. These laws may, in
some states, prohibit the Company from owning dialysis centers or may
otherwise restrict the Company's operations. These laws vary from state to
state and are enforced by the courts and regulatory authorities with broad
discretion. Although the Company believes its operations are in material
compliance with existing applicable laws, many aspects of the Company's
business operations, including the structure of the Company's relationship
with physicians, have not been the subject of state or federal regulatory
interpretation. There can be no assurance that review of the Company's
business by courts or regulatory authorities will not result in determinations
that could materially adversely affect the operating and financial results of
the Company or that the health care regulatory environment will not change so
as to restrict the Company's existing operations or their expansion. In
addition, expansion of the operations of the Company to certain jurisdictions
may require structural modifications of the Company's form of relationships
with physician groups, which could have a material adverse effect on the
Company.
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<PAGE>
Additionally, most states have laws regulating insurance companies and HMOs.
The Company is not qualified in any state to engage in the insurance or HMO
business. However, as the managed care business evolves, state regulators may
begin to scrutinize the practices of, and relationships between, third-party
payors, medical service providers and entities providing management and other
services to medical service providers with respect to the application of
insurance and HMO laws and regulations. The Company believes, based on its
knowledge of the health care, HMO and insurance industries as operated in the
states in which the Company has locations, that its practices are consistent
with those of other health care companies and should not be subject to such
laws and regulations. However, given the limited regulatory history with
respect to such practices, there can be no assurance that states will not
attempt to regulate the Company as an insurer or HMO. If the Company is
subject to prosecution or other enforcement proceedings by state regulatory
agencies, it may be required to change or discontinue certain practices which
could have a material adverse effect on the Company.
Health Care Reform. Members of Congress from both parties and the executive
branch are continuing to consider many health care proposals, some of which
are comprehensive and far-reaching in nature. As noted above, the
Medicare+Choice Program was developed as part of the amendments in the BBA.
This program is designed to expand the options for Medicare beneficiaries and
may have a significant impact on the manner in which health care is delivered
in the future. Several states are also currently considering health care
proposals. The Company is unable to predict what additional action, if any,
the federal government or any state may ultimately take with respect to health
care reform or when any such action will be taken. Health care reform may
bring radical changes in the financing and regulation of the health care
industry, which could have a material adverse effect on the Company.
Other Regulations. The Company's operations are subject to various state
hazardous waste disposal laws. Those laws, as currently in effect, do not
classify most of the waste produced during the provision of dialysis services
to be hazardous, although disposal of non-hazardous medical waste is also
subject to regulation. OSHA regulations require employers of workers who are
occupationally subject to blood or other potentially infectious materials to
provide those workers with certain prescribed protections against blood-borne
pathogens. These regulatory requirements apply to all health care centers,
including dialysis centers, and require employers to make a determination as
to which employees may be exposed to blood or other potentially infectious
materials and to have in effect a written exposure control plan. In addition,
employers are required to provide hepatitis B vaccinations, personal
protective equipment, infection control training, post-exposure evaluation and
follow-up, waste disposal techniques and procedures, and engineering and work
practice controls. Employers are also required to comply with certain record-
keeping requirements. The Company believes that it is in material compliance
with the foregoing laws and regulations.
Some states have established certificate of need ("CON") programs regulating
the establishment or expansion of health care centers, including dialysis
centers. In those states where CON laws apply to dialysis centers, the Company
is required to go through a regulatory process that generally requires the
identification and documentation of "need" for dialysis services, prior to
being able to establish or expand its dialysis operations. The existence of
CON laws and their application by regulatory agencies could have a material
impact on the Company's ability to expand its dialysis operations in those
states with CON requirements.
There can be no assurance that in the future the Company's business
arrangements, past or present, will not be the subject of an investigation or
prosecution by a federal or state governmental authority. Such investigation
could result in any, or any combination, of the penalties discussed above
depending upon the agency involved and such investigation and prosecution.
None of the Company's business arrangements with physicians, vendors, patients
or others have been the subject of investigation by any governmental
authority. The Company monitors legislative developments and would seek to
restructure a business arrangement if the Company determined that one or more
of its business relationships placed it in material noncompliance with
applicable law. The Company believes that in the near future the health care
service industry will continue to be subject to substantial regulation at the
federal and state levels, the scope and effect of which cannot be predicted by
the Company. Any loss by the Company of its various federal certifications,
its authorization to participate in the Medicare and Medicaid
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programs or its licenses under the laws of any state or other governmental
authority from which a substantial portion of its revenues are derived would
have a material adverse effect on its operating and financial results.
LEGAL PROCEEDINGS
The Company is subject to claims and suits in the ordinary course of
business, including those arising from patient treatment. The Company believes
it will be covered by malpractice insurance with respect to these claims and
does not believe that the ultimate resolution of pending proceedings will have
a material adverse effect on the Company. However, claims against the Company,
regardless of their merit or eventual outcome, could require management to
devote time to matters unrelated to the operation of the Company's business,
and may also have a material adverse effect on the Company's ability to
attract patients or expand its business. See "Risk Factors--Liability
Exposure."
58
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Craig W. Moore.......... 53 Chairman of the Board of Directors, Chief Executive Officer
Arthur M. Morris, M.D... 58 President and Director
Martin Fox.............. 43 Executive Vice President, General Manager and Director
Michael J. Carbon, M.D.. 58 Senior Vice President and Director
Nicki M. Norris......... 46 Executive Vice President and General Manager
James E. Becks.......... 47 Chief Executive Officer (Contract Services division)
John B. Bourke.......... 50 Chief Financial Officer
Paul Balter, M.D........ 59 Secretary, Treasurer and Director
Thomas Creel............ 50 Vice President of Business Development-Northern U.S.
and Director
Alan Berry.............. 51 Director
George Dunea, M.D....... 65 Director
Ashutosh Gupta, M.D..... 50 Director
Douglas Mufuka, M.D..... 57 Director
</TABLE>
Mr. Moore is Chairman of the Board of Directors and Chief Executive Officer
of the Company. He has served in those capacities since 1995. Mr. Moore joined
Everest in 1986 as an Executive Vice President. He holds a Bachelor of Arts in
Business and Finance from Adrian College and completed the Institute for
Management at Northwestern University in 1976. He has worked for U.S. Steel
Corporation, American Hospital Supply Corporation and Baxter Healthcare
Corporation in a variety of management assignments including Division
President of American Micro-Surgery Specialties. He served four years in the
U.S. Navy as a line officer. Mr. Moore is a member of the Board of Directors
of Biologic Systems Corporation.
Dr. Morris is the President and a director of the Company. Dr. Morris joined
Everest in 1971. He received his medical degree from the State University of
New York at Buffalo in 1965 and completed a Fellowship in Renal Disease at
Rush-Presbyterian-St. Luke's Hospital in Chicago in 1971. Dr. Morris was board
certified in Internal Medicine in 1971 and in Nephrology in 1972. He has been
on the Board of Directors of the National Kidney Foundation of Illinois since
1973. From 1979 to 1981, he served as Chairman of the ESRD Network 15. In 1984
Dr. Morris was appointed by Governor Thompson to serve on the State of
Illinois Renal Disease Advisory Council, on which he continues to serve. Dr.
Morris is a Fellow in the American College of Physicians, has been a member of
the board of trustees at West Suburban Hospital Medical Center since 1990 and
a member of Loyola University Health System Board of Directors since 1996. He
has been in private practice since 1971.
Mr. Fox is the Executive Vice President, General Manager of Managed Care
Business and a director of the Company. Mr. Fox joined Everest in those
capacities in 1996. He is a graduate of Northern Arizona University where he
earned a Bachelor of Science in Accounting and is a Certified Public
Accountant. Mr. Fox has over ten years of management experience in the
dialysis industry. He began his career in the dialysis industry as the Chief
Financial Officer of Southwest Kidney Institute and later, beginning in 1992,
was named Chief Executive Officer of HDA. Mr. Fox is a former treasurer of the
National Renal Administrators Association.
Dr. Carbon is the Senior Vice President and a director of the Company. Dr.
Carbon joined Everest in 1979. Dr. Carbon received his M.D. from the
University of Illinois in 1965. He completed his fellowship in both Internal
Medicine in 1970 and Nephrology in 1971 from the University of Miami, Miami,
Florida. Dr. Carbon served in the U.S. Army Medical Corps from 1966 to 1968.
Dr. Carbon has been in private practice since 1971 specializing in nephrology
and hypertensive disease. Dr. Carbon has been a board member of Central DuPage
Hospital since 1994 and formerly served as president of the hospital's medical
staff. He is chief operating officer of NANI-IL and NANI-IN and medical
director of the Company's Contract Services business.
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<PAGE>
Ms. Norris is the Executive Vice President and General Manager of the
Company with responsibility for operations of the chronic dialysis centers.
Ms. Norris joined Everest in that capacity in 1996. She is a graduate of the
University of Illinois at Urbana--Champaign where she earned a Bachelor of
Science in Finance and a Masters in Business Administration. She received a
Professional Accounting Certificate from Northwestern University and is a
Certified Public Accountant. Ms. Norris has more than twenty years of business
experience, having worked for Baxter Healthcare Services Corporation
("Baxter"), a subsidiary of Baxter International Inc., and Stone Container
Corporation in managerial positions in the areas of finance, operations,
marketing, strategic planning and human resources. Most recently, Ms. Norris
was Vice President of Business Process Innovation (strategic planning) at
Baxter from 1994 to 1996.
Mr. Becks is Chief Executive Officer of the Company's Contract Services
division and has served in that capacity since 1996. Mr. Becks joined Everest
in 1989. Mr. Becks is a registered nurse and a graduate of Northwestern
University where he earned a Bachelor of Science Degree. Mr. Becks served in
the U.S. Navy following which he worked for American V. Mueller, a division of
American Hospital Supply Corp., in a variety of sales, marketing, and
management assignments including Vice President of Business Development. Mr.
Becks was previously (from 1989 to 1996) a General Manager of the Company's
Continental Healthcare affiliate.
Mr. Bourke is the Chief Financial Officer of the Company. Mr. Bourke joined
Everest in that capacity in 1996. He is a graduate of Denver University where
he earned his Bachelor of Science, Bachelor of Arts, majoring in Accounting.
Mr. Bourke received his Masters of Management from Northwestern University and
is also a Certified Public Accountant. Mr. Bourke's experience includes ten
years at Arthur Andersen & Company as Senior Audit Manager and, most recently,
fourteen years at George J. Ball, Inc. There he held various accounting,
operational and general management positions, the last of which from 1983 to
1996 was Senior Vice President and Chief Financial Officer for Ball Seed
Company.
Dr. Balter is the Secretary/Treasurer and a director of the Company. He also
serves as chairman of the Company's Corporate Quality Improvement Committee.
Dr. Balter joined Everest in 1971. Dr. Balter received his M.D. from Yale
University in 1965 and completed his renal fellowship there in 1969. He served
as a nephrologist in the U.S. Army from 1969 to 1971, and served in the only
hemodialysis unit in Vietnam from 1970 to 1971. Dr. Balter was board certified
in Internal Medicine in 1972 and in Nephrology in 1974. Dr. Balter specializes
in systems applications of quality assurance. He has been in private practice
since 1971.
Mr. Creel has been a member of the board of directors of Everest since 1997.
Mr. Creel received his Bachelor of Arts degree from the University of South
Florida. Following two years in the U.S. Army, Mr. Creel began his sales
career in health care with Parke-Davis Pharmaceutical Co. He later joined
Baxter Laboratories Renal Division where he became Vice President of Sales and
Service-U.S. He was one of the founders of Home Dialysis of America, Inc.,
where he served since 1992 as Managing Director of Business Development and
Operations. Since June of 1996, Mr. Creel has been the Vice President of
Business Development-North for Everest.
Mr. Berry has been a member of the board of directors of Everest since 1996.
Mr. Berry received his Bachelor of Science degree in 1966 from the University
of Wisconsin and a Juris Doctor degree in 1969 from Boston University. Mr.
Berry is a Partner in the law firm of Katten Muchin & Zavis in Chicago,
Illinois, which he joined in 1974. He currently serves on the Board of
Directors of the National Kidney Foundation of Illinois. Mr. Berry also serves
on the board of directors of each of Abrix Group, Health Care Management
Consultants and MedOpSys.
Dr. Dunea has been a member of the board of directors of Everest since 1990.
He received his medical degree from University of Sydney Medical School in
1957 and completed nephrology fellowships at the Cleveland Clinic in 1965 and
at Presbyterian St. Luke's and University of Illinois Hospitals in 1966. Dr.
Dunea was board certified in Internal Medicine in 1973 and in Nephrology in
1974. Since 1969 he has served as the Chairman of the Department of
Nephrology-Hypertension at the Cook County Hospital, a Professor of Clinical
Medicine at the Chicago campus of the University of Illinois College of
Medicine and the Scientific Director of
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<PAGE>
the Hektoen Institute. In addition to an extensive background of scientific
publications including articles, book chapters and books, Dr. Dunea serves as
the editor of Kidney and the coordinating editor of International Journal of
Artificial Organs. Dr. Dunea is a Fellow in the Royal College of Physicians
(London and Edinburgh) and the Royal Society of Medicine (London).
Dr. Gupta has been a member of the Board of Directors of the Company since
1987. Dr. Gupta received his medical degree at the University of Delhi in
Delhi, India in 1970, and completed his nephrology fellowship at the
University of Chicago in 1978. Dr. Gupta was board certified in Internal
Medicine in 1981 and in Nephrology in 1988. His professional memberships
include the American Society of Nephrology, the International Society of
Nephrology and the American Medical Association. He has been in private
practice in Internal Medicine and Nephrology since 1978. Dr. Gupta is a fellow
of the American College of Physicians and serves as an associate editor of
Kidney.
Dr. Mufuka has been a member of the board of directors of Everest since
1987. He received his medical degree from the State University of New York in
Syracuse, New York in 1973 and completed his Nephrology Fellowship at
Northwestern University Medical Center in 1978. Dr. Mufuka is board certified
in Internal Medicine. His professional memberships include the American
Society of Nephrology, International Society of Nephrology, the American
Medical Association and the American College of Physicians. In addition, Dr.
Mufuka is a current director of WSKC Dialysis Services, Inc. He has been in
private practice since 1978.
There is no family relationship among any of the officers and directors.
Messrs. Creel and Fox are each entitled to a seat on the Board of Directors
pursuant to a Shareholders Agreement. See "Certain Relationships and Related
Transactions--Shareholders Agreements."
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the cash
compensation paid by the Company for services rendered during the fiscal year
ended September 30, 1997 to the chief executive officer and the four other
most highly compensated executive officers (the "Named Executive Officers") of
the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
---------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (#) COMPENSATION
--------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Craig W. Moore, $416,000 $34,894 50,584 $20,283(1)
Chairman and Chief Executive
Officer
Nicki M. Norris, 168,000 75,600 23,500 17,622(2)
Executive Vice President and
General Manager
John B. Bourke, 152,000 72,908 23,500 20,283(1)
Chief Financial Officer
Martin Fox, 205,000 19,479 -- 20,217(3)
Executive Vice President and
General Manager
Thomas Creel, 205,000 19,479 -- 17,147(4)
Vice President of Business
Development--Northern U.S.
</TABLE>
- --------
(1) Includes profit sharing plan contributions of $15,533 and 401(k) plan
matching contributions of $4,750.
(2) Includes profit sharing plan contributions of $15,533 and 401(k) plan
matching contributions of $2,089.
(3) Includes profit sharing plan contributions of $15,533 and 401(k) plan
matching contributions of $4,684.
(4) Includes profit sharing plan contributions of $15,533 and 401(k) plan
matching contributions of $1,614.
61
<PAGE>
Certain executive officers of the Company, including Drs. Morris, Carbon and
Balter, are compensated by NANI. The Company pays fees to NANI for medical
director and other services provided by these physicians and other NANI
employees. See "Certain Relationships and Related Transactions--NANI-IL and
NANI-IN" and "--Compensation Agreement."
DIRECTOR COMPENSATION
The Company has quarterly directors' meetings and pays each of its 10
directors $8,000 per year. Certain directors also provide consulting services
to the Company through NANI. See "Certain Relationships and Related
Transactions--NANI-IL and NANI-IN."
EMPLOYMENT AGREEMENTS
The Company and Mr. Moore entered into an employment agreement effective
January 1, 1997 and continuing on a year-to-year basis thereafter, subject to
termination by either party on 48 hours' notice. The agreement provides for an
annual salary of $440,000 in addition to health insurance, disability
insurance and other standard benefits. If the agreement is terminated by the
Company for any reason or by Mr. Moore for any reason upon at least 45 days'
prior notice, Mr. Moore will be entitled to severance pay in the amount of
$598,833, as well as life, health and disability insurance and other benefits
for nine months after the termination date. The agreement contains restrictive
covenants that prohibit Mr. Moore from competing with the Company for a period
of two years following his termination of employment.
In connection with the acquisition of HDA, the Company entered into
employment agreements with Messrs. Fox and Creel. Each of these agreements was
effective June 20, 1996 and provides for an initial term of three years,
subject to (i) an automatic two-year extension if certain revenue goals are
achieved, and (ii) two-year extensions from time to time at the option of the
Company. Messrs. Fox and Creel are each entitled to receive an annual salary
of $205,000 for the first five years. The agreements provide for a 10% salary
increase if the agreement is extended on the fifth anniversary of its
effective date and a 6% salary increase if the agreement is extended on the
seventh or any later anniversary of the effective date. The agreements also
provide that Messrs. Fox and Creel are entitled to participate in Everest's
general bonus plan as well as a special incentive plan pursuant to which the
former shareholders of HDA (including Messrs. Fox and Creel) in the aggregate
may be entitled to receive up to 2% of Everest's common stock. The agreements
provide for insurance and other benefits commensurate with those generally
provided to officers of the Company. If either of these agreements is
terminated: (i) by the Company without cause (as defined); (ii) due to the
employee's permanent disability; or (iii) by the employee for good reason (as
defined), the employee will be entitled to receive as severance (A) his base
salary for the greater of one year or the then remaining employment period and
(B) if the employment agreement is terminated after the sixth month of any
fiscal year, his prorated bonus for such partial fiscal year; provided,
however, that if the agreement is terminated prior to June 20, 1999 by the
Company without cause or by the employee for good reason, the employee will be
entitled to receive his base salary through June 19, 2001 as well as the
amount, if any, payable pursuant to clause (A) above. If an agreement expires
on the fifth anniversary of the effective date and the Company has not offered
the employee an extension, the employee will be entitled to his base salary
for one year following the expiration date, in addition to any bonus payable
in accordance with the preceding sentence. The agreements contain restrictive
covenants that prohibit Messrs. Fox and Creel from competing with the Company
for at least two years following termination of employment.
STOCK OPTION PLANS
Stock Award Plan. Pursuant to the Company's 1996 Stock Award Plan (the
"Plan"), the Company has granted to certain employees and medical directors
options to purchase shares of the Company's common stock. As of May 31, 1998,
options to purchase a total of 1,198,400 shares of common stock had been
granted under the Plan at an exercise price of $9.10 per share. Such options
vest in four equal increments on each of the first four anniversaries of the
grant date. The Plan includes a provision that upon a change in control the
committee administering the Plan has the discretion to declare all outstanding
options exercisable. Such options expire after
62
<PAGE>
a ten-year period, or earlier if an employee is terminated for cause. The
options will become fully exercisable upon termination of employment by reason
of death, disability or retirement. In the case of an employee whose
employment is terminated for a reason other than cause, the Company may in its
sole discretion purchase the option for an amount equal to the aggregate per
share fair market value minus the aggregate per share exercise price.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options by the Company to the Named Executive Officers during the fiscal year
ended September 30, 1997:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PERCENTAGE OF PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION
SHARES GRANTED TO FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(2)
OPTIONS GRANTED IN FISCAL YEAR BASE PRICE EXPIRATION ---------------
NAME (#)(1) (%) ($/SH) DATE 5%($) 10%($)
- ---- --------------- -------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Craig W. Moore(3)....... 50,584 3.9 9.10 2/5/07 289,340 733,468
Nicki M. Norris......... 23,500 1.8 9.10 2/5/07 134,420 340,750
John B. Bourke.......... 23,500 1.8 9.10 2/5/07 134,420 340,750
Martin Fox.............. -- -- -- -- -- --
Thomas Creel............ -- -- -- -- -- --
</TABLE>
- --------
(1) These options were subsequently cancelled and replacement options with
identical terms were issued on February 5, 1998 pursuant to the
reorganization of the Company. See "The Company," "Management's Discussion
and Analysis of Financial Condition and Results of Operation--
Reorganization" and "Certain Relationships and Related Transactions--
Peak."
(2) Assumes that the fair market value of the common stock as of September 30,
1997 was $9.10 per share, which is equal to the fair market value of the
common stock on February 5, 1997 (the date of grant) as determined by the
Board of Directors.
(3) The options shown for Mr. Moore represent the maximum number of options
indirectly granted to him through Peak Liquidating. The actual number of
options Mr. Moore is entitled to receive will vary depending on the
valuation of certain assets of Peak Liquidating or its predecessor entity.
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<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table contains information regarding the Named Executive
Officers' unexercised options as of September 30, 1997. None of the Named
Executive Officers exercised any options during the fiscal year ended
September 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AS OF IN-THE-MONEY OPTIONS AS
SEPTEMBER 30, 1997 (#) (1) OF SEPTEMBER 30, 1997 ($)
--------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ --------------- ----------- -------------
<S> <C> <C> <C> <C>
Craig W. Moore(2). -- 50,584 -- (3)
Nicki M. Norris... -- 23,500 -- (3)
John B. Bourke.... -- 23,500 -- (3)
Martin Fox........ -- -- -- --
Thomas Creel...... -- -- -- --
</TABLE>
- --------
(1) These options were subsequently terminated and replacement options with
identical terms were issued on February 5, 1998 pursuant to the
reorganization of the Company. See "The Company," "Management's Discussion
and Analysis of Financial Condition and Results of Operation--
Reorganization" and "Certain Relationships and Related Transactions--
Peak."
(2) The options shown for Mr. Moore represent the maximum number of options
indirectly granted to him through Peak Liquidating. The actual number of
options Mr. Moore is entitled to receive will vary depending on the
valuation of certain assets of Peak Liquidating or its predecessor entity.
(3) Everest is a privately held company. There is no market for its
securities, and no valuation of Everest for the purpose of determining its
value as of September 30, 1997 has been undertaken.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee or other Board committee
performing similar functions. Each of Craig Moore, Martin Fox and Thomas Creel
participated in deliberations of the Company's board of directors concerning
executive officer compensation. See "Certain Relationships and Related
Transactions." All Founding Directors other than Mr. Moore are also directors
of NANI-IL and NANI-IN.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is subject to various actual and potential conflicts of interest
arising out of its relationships and related transactions with the Company's
directors and officers and other entities controlled by them. While the
Company believes these transactions generally provide for financial terms that
would be obtainable from an unaffiliated third party, the agreements and
transactions described below were not the result of arm's-length negotiations.
Peak. In November 1997, in order to simplify its ownership structure and
better position the Company for future growth, the shareholders of the Company
entered into a series of related transactions. See "Management's Discussion
and Analysis--Reorganization" and "Security Ownership of Certain Beneficial
Owners and Management." Peak sold Continental Healthcare, Ltd. ("Continental")
to the Company. See "--Continental Healthcare." The members of Peak
contributed their membership interests in Peak to a new limited liability
company, Peak Liquidating, in exchange for all of its outstanding membership
interests. Peak Liquidating contributed all of its interest in Peak to a newly
formed corporation, Everest Healthcare II, Inc. ("EHII"), in exchange for
common stock of EHII. The shareholders of Everest Healthcare Services
Corporation other than Peak exchanged all of their shares for shares of EHII,
and Peak Liquidating distributed to its members approximately 55% of the
outstanding common stock of EHII. Peak was then liquidated. In March 1998,
Everest Healthcare Services Corporation was merged with and into EHII, which
changed its name to "Everest Healthcare Services Corporation."
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<PAGE>
Peak Notes. Through 1995, the Founding Directors advanced funds to the
Company's predecessor evidenced by promissory notes which the Founding
Directors contributed to Peak in 1995. The Founding Directors also contributed
funds to Peak which were advanced to Everest. The aggregate principal amount
of these advances (the "Peak Notes") was $5,118,809. In connection with the
1997 reorganization, the Peak Notes (together with the note issued in
connection with the purchase of Continental described below) were distributed
by Peak to the Founding Directors individually. The Peak Notes bore interest
at the prime rate plus 1% per annum and matured at various times throughout
1998. The Company repaid the Peak Notes with a portion of the net proceeds of
the Initial Offering. See "Use of Proceeds."
NANI-IL and NANI-IN. Nephrology Associates of Northern Indiana, P.C. ("NANI-
IN") and Nephrology Associates of Northern Illinois, Ltd. ("NANI-IL" and,
together with NANI-IN, "NANI") are medical service corporations which employ
physicians and personnel to engage in the business of providing dialysis and
dialysis related services. The shareholders of NANI are the Founding
Directors, excluding Mr. Moore. On January 1, 1997, Mr. Moore, who was
previously an employee of NANI, became an employee of the Company.
The Company and NANI-IL have entered into a medical director and
administrative services agreement (the "Administrative Services Agreement").
Under the terms of the Administrative Services Agreement, NANI-IL provides
services to the Company relating to the development and implementation of
medical policies and procedures, as well as medical director services to
certain chronic dialysis facilities operated by the Company and its
subsidiaries. The Company pays NANI-IL an annual consulting fee of $1,284,920,
plus an incentive amount for medical director services not greater than
$80,080 (25% of the calculated value of the medical director component) in any
year in the event the medical directors cause the facilities for which they
provide medical director services to meet certain quality, utilization and
other performance measurements. In fiscal 1995, 1996 and 1997, and for the six
months ended March 31, 1998, the Company paid NANI-IL $4,315,000, $2,369,000,
$1,883,000 and $876,000 respectively, pursuant to the terms of the
Administrative Services Agreement. For fiscal 1997, certain employees of NANI-
IL also earned a bonus of $209,362 for services provided under the
Administrative Services Agreement.
Pursuant to a management service agreement (the "Management Agreement"), the
Company provides certain administrative and accounting services to NANI-IL,
including services related to billing and collections. Under the terms of the
Management Agreement, NANI-IL pays the Company an annual fee of $825,000, plus
a fixed fee for each acute treatment billed and administered by the Company on
behalf of NANI-IL. In fiscal 1995, 1996 and 1997, and for the six months ended
March 31, 1998, NANI-IL paid the Company $3,558,000, $1,579,000, $1,295,000
and $768,000 respectively, pursuant to the terms of the Management Agreement.
Each of the above-described agreements between the Company and NANI-IL is
for a period of five years, renewable for consecutive one-year periods
thereafter. After the initial five-year period which will end on October 1,
2002, the agreements may be terminated upon 90 days' notice by either party.
NANI-IL also has an outstanding loan payable to the Company of approximately
$8,133,890 as of March 31, 1998. The loan payable bears interest at prime plus
1% and is due on demand.
Pursuant to a lease assigned to the Company in June 1998, the Company leases
2,284 square feet of office space to NANI-IL at an annual rent of $38,348,
payable monthly. The lease term expires in December 1999.
Pursuant to a letter agreement, the Founding Directors have agreed that as
soon as practicable and as permitted by law, they will cause the business of
NANI-IL as it relates to the provision of acute dialysis services to hospital
patients to be sold to the Company at fair market value.
Continental Healthcare. On November 30, 1997 Peak, which was wholly owned by
the Founding Directors, sold all of the stock of Continental to the Company
for a promissory note in the amount of $2,090,000 and cash in the amount of
$110,000. The Note matured on November 29, 2000 and bore interest at the prime
rate plus 1% per annum. The Company repaid such note with a portion of the net
proceeds of the Initial Offering. See "Use of Proceeds." Continental owns and
leases dialysis equipment to the Company. In fiscal 1995, 1996 and 1997, and
for the six months ended March 31, 1998, the Company or its subsidiaries paid
Continental a total of $354,385, $417,352, $377,792 and $109,287 respectively,
for interest on such leases.
65
<PAGE>
ARE Partnership. The Founding Directors, together with Sandra Gadson and
Thomas Golubski, two shareholders of the Company, are also partners in ARE
Partnership, an Illinois general partnership ("ARE"). ARE owns real property
and improvements which it leases to the Company and certain of its
subsidiaries, and which are used primarily for the corporate headquarters and
certain dialysis facilities. In 1995, 1996 and 1997, the Company and its
subsidiaries paid ARE $684,562, $791,678 and $872,691, respectively. For the
six months ended March 31, 1998, the Company and its subsidiaries paid ARE
$414,436. On June 3, 1998, the Company and ARE entered into a Real Estate
Purchase Agreement pursuant to which the Company will purchase ARE's assets
for approximately $4,800,000 in cash. The transaction is expected to close in
June 1998.
Three M&L Partnership. Three M&L Partnership, an Illinois general
partnership ("3M&L"), owns various properties on which certain dialysis
facilities of the Company and its subsidiaries are located. The partners of
3M&L are Arthur Morris, the President and a director of the Company, and
Robert Muehrcke, a shareholder of the Company. Pursuant to the terms of the
lease arrangements with 3M&L, the Company and its subsidiaries, in each of
fiscal 1995, 1996 and 1997, collectively paid 3M&L $148,980. For the six
months ended March 31, 1998, the Company and its subsidiaries paid 3M&L
$74,490. Two of the leases are currently in month-to-month renewal periods;
the remaining lease expires in August 1998 and is expected to be renewed.
Security General. An Illinois general partnership, Security General
Partnership ("Security General") is owned collectively by the Founding
Directors and John Bourke, the Company's Chief Financial Officer. Security
General owns a 6.67% interest in Infinity Insurance, Ltd., an entity which
provides property and casualty and workers compensation insurance to the
Company and its subsidiaries. The annual premiums paid by the Company and its
subsidiaries to Infinity in the last three policy years were $435,996,
$479,870 and $479,870, respectively.
Shareholders Agreements. The Shareholders Agreement, dated as of November
30, 1997, by and among EHII, Peak Liquidating, the Founding Directors and
Martin Fox, individually, and as agent for the HDA shareholders, Thomas Creel,
Paul Zabetakis and Anthony Unruh (collectively, the "HDA Shareholders"),
established certain rights and restrictions with respect to the management of
the Company and the voting and transfer of the Company's common stock. A
voting committee was established consisting of Craig Moore, Arthur Morris,
M.D. and Paul Balter, M.D. and one designee of the HDA Shareholders, Martin
Fox. Decisions of the Voting Committee are binding upon the remaining
shareholders signatory to the agreement, which shareholders have agreed to
vote together, subject to the voting rights of the Founding Directors
described below. The agreement also sets forth various share transfer
restrictions. Upon the termination of an HDA Shareholder's employment with the
Company, each share held by such HDA Shareholder is subject to repurchase by,
in order of priority, the other HDA Shareholders, Peak Liquidating, the
Founding Directors and the Company.
Under a Restricted Stock Agreement dated as of November 30, 1997 by and
among the Founding Directors and the Company, and the Operating Agreement of
Peak Liquidating, the Founding Directors have agreed to vote their shares
together with respect to certain matters. The approval of Dr. Morris is
required for any sale of Peak Liquidating to a third party, or any sale of the
Company to a third party for consideration less than a specified amount. In
addition, the approval of Dr. Morris and two other voting members is required
for a merger or consolidation of the Company, a disposition of more than 10%
of its stock, a public offering and certain other specified events.
All shareholders of the Company, other than Paul Zabetakis, Anthony Unruh
and the Company's directors, are party to one or more restricted stock
agreements which grant the Company a right of first refusal with respect to
any proposed transfer of Company shares by such shareholders. Such restricted
stock agreements also grant the Company a repurchase right upon the occurrence
of certain events. Such restricted stock agreements also contain provisions
requiring the shareholder to cooperate and consent to any sale of the Company
to a third party.
66
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of common stock
beneficially owned as of May 31, 1998 by: (i) each person who is known by the
Company to beneficially own more than 5% of the outstanding common stock; (ii)
each director of the Company; (iii) each Named Executive Officer; and (iv) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME SHARES OWNED OF TOTAL
---- ------------ --------
<S> <C> <C>
Peak Liquidating, L.L.C.(1)(2)(3)......................... 2,615,025 19.0%
Arthur M. Morris, M.D.(3)(4).............................. 1,966,901 14.3
Paul Balter, M.D.(3)(4)................................... 824,226 6.0
Michael J. Carbon, M.D.(3)(4)............................. 811,043 5.9
George Dunea, M.D. Revocable Trust(3)(4).................. 811,043 5.9
Ashutosh Gupta, M.D.(3)(4)................................ 811,043 5.9
Douglas Mufuka, M.D.(3)(4)................................ 811,043 5.9
Martin Fox(5)............................................. 797,500 5.8
Thomas Creel(5)........................................... 797,500 5.8
AJ BCA, Ltd.(5)(6)........................................ 780,000 5.7
Craig W. Moore(3)(4)(7)................................... 615,201 4.5
Alan M. Berry(8).......................................... -- --
Nicki M. Norris(8)(9)..................................... 5,875 *
James E. Becks(10)........................................ 11,775 *
John B. Bourke(8)(9)...................................... 5,875 *
All executive officers and directors as a group(11)(12)... 10,883,550 79.2
</TABLE>
- --------
*Less than 1.0%.
(1) The members of Peak Liquidating are Arthur M. Morris, M.D., Paul Balter,
M.D., Michael J. Carbon, M.D., George Dunea, M.D. Revocable Trust,
Ashutosh Gupta, M.D., Douglas Mufuka, M.D., and Craig W. Moore.
(2) Includes options to purchase 615,025 shares which are exercisable within
60 days of the date of this Prospectus.
(3) Subject to the Shareholders Agreement dated as of November 30, 1997 and
the Restricted Stock Agreement dated as of November 30, 1997. See
"Certain Relationships and Related Transactions--Shareholders
Agreements."
(4) Does not include shares beneficially owned by Peak Liquidating, of which
shares the members of Peak Liquidating share voting and dispositive
control and may be deemed to be beneficial owners.
(5) Subject to the Shareholders Agreement dated as of November 30, 1997. See
"Certain Relationships and Related Transactions--Shareholders
Agreements."
(6) AJ BCA, Ltd. is a nominee of Anthony Unruh.
(7) Does not include options to purchase 50,584 shares indirectly granted to
Mr. Moore through Peak Liquidating.
(8) Excludes participations in value of Peak Liquidating to which such person
may be entitled pursuant to an agreement with members of Peak
Liquidating.
(9) Includes options to purchase 5,875 shares which are exercisable within 60
days of the date of this Prospectus.
(10) Includes options to purchase 11,775 shares which are exercisable within
60 days of the date of this Prospectus.
(11) Includes shares held indirectly through Peak Liquidating.
(12) Includes options to purchase 638,050 shares which are exercisable within
60 days of the date of this Prospectus.
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<PAGE>
DESCRIPTION OF CREDIT FACILITY
In May of 1998, the Company refinanced the Prior Credit Facility with a
series of credit facilities, as described below (referred to herein
collectively as the "New Credit Facility") provided by Harris Trust and
Savings Bank (the "Bank"). A portion of the net proceeds of the Initial
Offering was utilized to repay in full the amounts then outstanding under the
Prior Credit Facility. See "Use of Proceeds."
The New Credit Facility consists of three separate facilities: (i) a $35.0
million revolving credit facility (including a $1.0 million sub-limit for
letters of credit) maturing on May 15, 2001, which may be extended for two
one-year periods at the Bank's discretion (the "Working Capital Facility");
(ii) a $65.0 million acquisition financing facility maturing on May 15, 1999
(the "Acquisition Facility"), which includes the right to convert all or a
portion of the borrowings outstanding thereunder to one or more five-year term
loans (the "Term Loans"); and (iii) a $15.0 million supplemental revolving
credit facility (the "Supplemental Facility") maturing on May 15, 1999. The
total amount drawn under the Acquisition Facility and the Supplemental
Facility may not exceed $65.0 million, and the total drawn under all three
facilities may not exceed $100.0 million.
The Working Capital Facility supports the working capital needs of the
Company and its majority-owned subsidiaries (the "Bank Restricted
Subsidiaries"); the Acquisition Facility may be used to finance acquisitions
and de novo facilities; and the Supplemental Facility enables the Company to
make advances to companies in which it has a less than majority ownership (the
"Bank Unrestricted Subsidiaries"). The New Credit Facility is currently
secured by all existing and future assets of the Company and its Bank
Restricted Subsidiaries, including accounts receivable, inventories, fixed
assets and all non-current assets (including intangibles and trademarks), and
the common stock of the Company's subsidiaries. Each of the three facilities
is cross-defaulted and cross-collateralized with the other two. Loans under
the Working Capital Facility may only be made to the extent of 75% of eligible
accounts receivable that have been outstanding no longer than 120 days. The
New Credit Facility also is secured by the joint and several guarantees of all
Bank Restricted Subsidiaries.
The New Credit Facility provides for an annual fee to the Bank, unused
commitment fees and letter of credit fees. The New Credit Facility bears
interest at LIBOR plus margins ranging from 1.75% to 2.25% in the case of the
Working Capital Facility, and from 2.20% to 2.50% in the case of the
Acquisition Facility and the Supplemental Facility, based on applicable
leverage ratios.
The New Credit Facility contains operating and financial covenants,
including, without limitation, requirements to maintain leverage and debt
service coverage ratios and minimum tangible net worth. In addition, the New
Credit Facility includes customary covenants relating to the delivery of
financial statements, reports, notices and other information, access to
information and properties, maintenance of insurance, payment of taxes,
maintenance of assets, nature of business, corporate existence and rights,
compliance with applicable laws, including environmental laws, transactions
with affiliates, use of proceeds, limitation on indebtedness, limitations on
liens, limitations on certain mergers and sales of assets, limitations on
investments, limitations on stock repurchases, and limitations on debt
payments and other distributions, including prepayment or redemption of the
Notes.
The New Credit Facility contains certain events of default after expiration
of applicable grace periods, including defaults relating to: (i) nonpayment of
principal, interest, fees or other accounts; (ii) violation of covenants;
(iii) material inaccuracy of representations and warranties; (iv) bankruptcy;
(v) material judgments; (vi) certain ERISA liabilities; and (vii) actual or
asserted invalidity of any loan documents.
68
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued as a separate series under an indenture
(the "Indenture"), dated as of May 5, 1998, by and among the Company, the
Subsidiary Guarantors and American National Bank and Trust Company of Chicago,
as Trustee (the "Trustee"). The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Trust Indenture Act of 1939, as amended
(the "TIA"), and to all of the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the TIA as in effect on the date of the Indenture. A
copy of the Indenture and Registration Rights Agreement is available from the
Company. The definitions of certain capitalized terms used in the following
summary are set forth below under "--Certain Definitions." For purposes of
this section, references to the "Company" include only Everest Healthcare
Services Corporation, and not its Subsidiaries, and references to interest
includes Additional Interest (as defined under "The Exchange Offer--Purpose
and Effect of the Exchange Offer").
The Private Notes are, and the Exchange Notes will be, general unsecured
obligations of the Company subordinated in right of payment to all existing
and future Senior Indebtedness of the Company, including the Company's
obligations under the New Credit Facility. The Guarantees are and will be
general unsecured obligations of the Subsidiary Guarantors and are and will be
subordinated in right of payment to all existing and future Guarantor Senior
Indebtedness of the Subsidiary Guarantors. As of March 31, 1998, as adjusted
to give effect to the Initial Offering and the application of the net proceeds
therefrom, the Company and its Subsidiaries would have had an aggregate of
approximately $1.6 million of Senior Indebtedness outstanding (excluding
unused commitments of $65 million available under the Prior Credit Facility).
The Company has obtained a New Credit Facility which has replaced the Prior
Credit Facility, provides for borrowings of up to $100.0 million and is
secured by the assets of the Company and certain of its subsidiaries. The
Notes also are and will be structurally subordinated to all indebtedness and
other obligations of each of the Company's Subsidiaries other than the
Subsidiary Guarantors (to the extent of the assets of such Subsidiary). As of
March 31, 1998, as adjusted to give effect to the Initial Offering and the
application of the net proceeds therefrom, Subsidiaries of the Company that
are not Subsidiary Guarantors would have had approximately $1.6 million of
outstanding liabilities to which the Notes would have been effectively
subordinated. The Indenture permits the incurrence of additional Indebtedness
in the future, including Senior Indebtedness. See "Risk Factors--Subordination
of Exchange Notes; Structural Subordination; Asset Encumbrance," "--Reliance
on Payments from Subsidiaries," and "--Suretyship Defenses."
The Company is a holding company, and substantially all of its operations
are conducted through its Subsidiaries, and the Company, therefore, is
dependent upon the cash flow of its Subsidiaries to meet its debt obligations,
including its obligations under the Notes. While all of the existing wholly-
owned Subsidiaries of the Company are Subsidiary Guarantors, none of the less
than wholly-owned Subsidiaries of the Company are Subsidiary Guarantors, and
future Subsidiaries of the Company may not be Subsidiary Guarantors and may be
restricted in their ability to pay dividends to the Company pursuant to
instruments governing indebtedness of such Subsidiaries. See "Risk Factors--
Reliance on Payments from Subsidiaries" and "--Suretyship Defenses."
Under certain circumstances, the Company will be able to designate any
Subsidiary formed by the Company or acquired by the Company after the original
issuance of the Notes as an Unrestricted Subsidiary. Unrestricted Subsidiaries
will not be Subsidiary Guarantors and will not be subject to most of the
restrictive covenants set forth in the Indenture.
The Exchange Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Notes. The Notes
may be presented for registration or transfer and exchange at the offices of
the Registrar, which initially will be the Trustee's corporate trust office.
The Company may change any Paying Agent and Registrar without notice to
holders of the Notes (the "Holders"). The Company will pay principal (and
premium, if any) on the Notes at the Trustee's corporate office in New York,
New York. Except as set forth below under "Book Entry; Delivery and Form--
Same-Day Settlement and Payment," at the Company's option, interest may be
paid
69
<PAGE>
at the Trustee's corporate trust office or by check mailed to the registered
address of Holders; provided that, except as set forth below under "Book
Entry; Delivery and Form," all payments of principal, interest, and premium,
if any, with respect to Notes, the Holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available next day funds to the accounts specified by the Holders
thereof.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150,000,000, of
which $100,000,000 were issued in the Initial Offering and will mature on May
1, 2008. Additional amounts may be issued in one or more series from time to
time, subject to the limitations set forth under "--Certain Covenants--
Limitation on Incurrence of Additional Indebtedness" and the restrictions
contained in the New Credit Facility. Interest on the Notes will accrue at the
rate of 9 3/4% per annum and will be payable semiannually in cash on each May
1 and November 1, commencing on November 1, 1998, to the Persons who are
registered Holders at the close of business on the April 15 and October 15
immediately preceding the applicable interest payment date. Interest on the
Exchange Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from and including the date of
original issuance, May 5, 1998. Holders whose Private Notes are accepted for
exchange will be deemed to have waived the right to receive any interest
accrued on the Private Notes. Interest will be computed on the basis of a 360-
day year comprised of twelve 30-day months.
MANDATORY REDEMPTION
Except as set forth below under "--Change of Control" and "--Certain
Covenants--Limitation on Asset Sales," the Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.
OPTIONAL REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole or in part from time to time, on and after May 1, 2003, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on May 1 of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption (subject to the rights of holders of record
on the relevant record date to receive interest due on the relevant interest
payment date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.......................... 104.875%
2004.......................... 103.250
2005.......................... 101.625
2006 and thereafter........... 100.000
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to May 1, 2001, the Company may, at its option, use the
net cash proceeds of one or more Public Equity Offerings to redeem up to an
aggregate of 35% of the principal amount of the Notes originally issued at a
redemption price equal to 109.75% of the principal amount thereof plus accrued
and unpaid interest thereon, if any, to the date of redemption (subject to the
rights of holders of record on the relevant record date to receive interest
due on the relevant interest payment date); provided that at least 65% of the
aggregate principal amount of the Notes originally issued in the Initial
Offering remain outstanding immediately after the occurrence of any such
redemption. In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Company is required to make such redemption
not more than 60 days after the consummation of any such Public Equity
Offering.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
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exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis
or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note (subject to DTC procedures). On and
after the redemption date, interest will cease to accrue on Notes or portions
thereof called for redemption so long as the Company has deposited with the
Paying Agent funds in satisfaction of the applicable redemption price pursuant
to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Indebtedness, whether outstanding on the Issue Date or
thereafter incurred. Upon any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to
creditors in an Insolvency or Liquidation Proceeding relating to the Company
or its property, whether voluntary or involuntary, all Obligations due upon
all Senior Indebtedness shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Indebtedness, by the Company or any of its Subsidiaries,
before any payment or distribution of any kind or character is made on account
of any Obligations on the Notes, or for the acquisition, by the Company or any
of its Subsidiaries, of any of the Notes for cash or property, except for
Permitted Insolvency Payments. Upon any such Insolvency or Liquidation
Proceeding, any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than Permitted
Insolvency Payments), to which the Holders of the Notes or the Trustee would
otherwise be entitled will be paid by the Company or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other person making such payment
or distribution, or by the Holders of the Notes or by the Trustee if received
by them, directly to the holders of Senior Indebtedness (pro rata to such
holders on the basis of the amounts of Senior Indebtedness held by such
holders) or their Representatives, as their interests may appear, for
application to the payment of the Senior Indebtedness remaining unpaid until
all such Senior Indebtedness has been paid in full, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders
of Senior Indebtedness.
If either (i) any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, reimbursement for drawings under letters of credit
issued as part of, or regularly accruing fees with respect to, any Senior
Indebtedness, or (ii) any default occurs and is continuing with respect to any
Designated Senior Indebtedness resulting in the acceleration of the maturity
of all or any portion of any Designated Senior Indebtedness, no payment of any
kind or character (other than Permitted Insolvency Payments) shall be made by
the Company or any of its Subsidiaries with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property. In addition, if any
other event of default occurs and is continuing with respect to any Designated
Senior Indebtedness, as such event of default is defined in the instrument
creating or evidencing such Designated Senior Indebtedness, permitting the
holders of such Designated Senior Indebtedness then outstanding to accelerate
the maturity thereof and if the Representative for the respective issue of
Designated Senior Indebtedness gives written notice of the event of default to
the Trustee (a "Default Notice"), then, unless and until all events of default
have been cured or waived or have ceased to exist or the Trustee receives
notice from the Representative for the respective issue of Designated Senior
Indebtedness terminating the Blockage Period (as defined below), during the
179 days after the delivery of such Default Notice (the "Blockage Period"),
neither the Company nor any of its
Subsidiaries shall (x) make any payment of any kind or character (other than
Permitted Insolvency Payments)
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with respect to any Obligations on the Notes or (y) acquire any of the Notes
for cash or property (other than in exchange for Permitted Insolvency
Payments). Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 179 days from the date of the commencement of
the Blockage Period and only one such Blockage Period may be commenced within
any 365 consecutive days. No event of default which existed or was continuing
on the date of the commencement of any Blockage Period with respect to the
Designated Senior Indebtedness shall be, or be made, the basis for
commencement of a second Blockage Period by the Representative of such
Designated Senior Indebtedness whether or not within a period of 365
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action, or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an event of default pursuant to any provisions
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose). The Indenture will
contain other customary subordination provisions regarding turnover of
payments, deferral of subrogation and the like.
By reason of such subordination, in the event of an Insolvency or
Liquidation Proceeding relating to the Company, creditors of the Company who
are not holders of Senior Indebtedness, including the Holders of the Notes,
may recover less, ratably, than holders of Senior Indebtedness. See "Risk
Factors--Subordination of Exchange Notes; Structural Subordination; Asset
Encumbrance."
GUARANTEES
Each Subsidiary Guarantor has fully and unconditionally guaranteed and will
fully and unconditionally guarantee, jointly and severally, to each Holder and
the Trustee, subject to subordination provisions substantially the same as
those described above, the full and prompt payment of principal of and
interest on the Private Notes and Exchange Notes, respectively, and of all
other obligations under the Indenture.
The obligations of each Subsidiary Guarantor under its Guarantee are and
will be limited to the maximum amount as will, after giving effect to all
other contingent and fixed liabilities of such Subsidiary Guarantor
(including, without limitation, any Obligations under the New Credit Facility)
and after giving effect to any collections from or payments made by or on
behalf of any other Subsidiary Guarantor in respect of the obligations of such
other Subsidiary Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of such Subsidiary
Guarantor under such Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Subsidiary Guarantor that
makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in a pro rata amount based
on the Adjusted Net Assets of each Subsidiary Guarantor.
The Indebtedness evidenced by each Guarantee (including the payment of
principal of, premium, if any, and interest on the Notes) is and will be
subordinated to Guarantor Senior Indebtedness (defined with respect to the
Indebtedness of a Guarantor in the same manner as Senior Indebtedness is
defined with respect to the Company) on the same terms as the Notes are
subordinated to Senior Indebtedness. As of March 31, 1998, as adjusted to give
effect to the Initial Offering and the application of the net proceeds
therefrom, there would have been approximately $1.6 million of Guarantor
Senior Indebtedness. See "--Subordination" above.
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless, subject to the provisions of the following
paragraph, (i) the Person formed by or surviving any such consolidation or
merger (if other than such Subsidiary Guarantor) assumes all the Obligations
of such Subsidiary Guarantor under the Notes, the Indenture, and the
Registration Rights Agreement pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee; (ii) immediately after
giving effect to such transaction, no Default or Event of Default exists;
(iii) such Subsidiary Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth (immediately after
giving effect to such transaction), equal to or greater than the Consolidated
Net Worth of such Subsidiary Guarantor immediately preceding the transaction;
and (iv) the
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Company would be permitted to incur at least $1.00 of additional Indebtedness
(in addition to Permitted Indebtedness) pursuant to the "Limitation on
Incurrence of Additional Indebtedness" covenant. The requirements of clauses
(i), (iii) and (iv) of this paragraph will not apply in the case of a
consolidation with or merger with or into the Company or another Subsidiary
Guarantor.
The Indenture provides that (a) in the event of a sale or other disposition
of all or substantially all of the assets of any Subsidiary Guarantor, by way
of merger, consolidation or otherwise, or a sale or other disposition of all
of the Capital Stock of any Subsidiary Guarantor to a Person other than the
Company or a Subsidiary Guarantor, or (b) in the event that the Company
designates a Subsidiary Guarantor to be an Unrestricted Subsidiary, or such
Subsidiary Guarantor ceases to be a Subsidiary of the Company, then such
Subsidiary Guarantor (in the event of a sale or other disposition, by way of
such a merger, consolidation or otherwise, of all of the capital stock of such
Subsidiary Guarantor to a Person other than the Company or a Subsidiary
Guarantor or any such designation) or the entity acquiring the property (in
the event of a sale or other disposition of all of the assets of such
Subsidiary Guarantor) will be released and relieved of any obligations under
its Guarantee; provided that the Net Cash Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "--Change of Control" and "--Certain Covenants--Limitation on
Asset Sales."
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
The New Credit Facility restricts the Company from repurchasing any Notes
and also provides that certain asset sales and change of control events with
respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
the Company becomes a party may contain similar restrictions and provisions.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full all Indebtedness and terminate all
commitments under the New Credit Facility and all other Senior Indebtedness
the terms of which require repayment upon a Change of Control or prohibit a
Change of Control Offer or offer to repay in full and terminate all
commitments under all Indebtedness under the New Credit Facility and all other
such Senior Indebtedness and to repay the Indebtedness owed to each lender
which has accepted such offer or (ii) obtain the requisite consents under the
New Credit Facility and all other Senior Indebtedness to permit the repurchase
of the Notes as provided below. If the Company does not obtain such consent or
repay such borrowings, the Company will remain prohibited from purchasing
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the New Credit Facility and would likely cause an
event of default under any other outstanding Senior Indebtedness. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes. See "Risk Factors--Subordination of
Exchange Notes; Structural Subordination; Asset Encumbrance" and "Description
of Credit Facility."
Within 30 days following the date upon which the Change of Control occurs,
the Company must send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, other than as may be required by law (the "Change of
Control Payment Date"). Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third business day prior to the Change of Control
Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders
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seeking to accept the Change of Control Offer. In the event the Company is
required to purchase outstanding Notes pursuant to a Change of Control Offer,
the Company expects that it would seek third party financing to the extent it
does not have available funds to meet its purchase obligations. However, there
can be no assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Subsidiaries by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction, and the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction that does not constitute a
Change of Control.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of each of the Company and its Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times, and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Indenture provides
that the Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that if
no Default or Event of Default shall have occurred and be continuing at the
time of or as a consequence of the incurrence of any such Indebtedness, the
Company and its Restricted Subsidiaries may incur Indebtedness (including,
without limitation, Acquired Indebtedness) if on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater
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than 2.0 to 1.0. The accrual of interest and the accretion of original issue
discount shall not constitute the incurrence of Indebtedness.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any
distribution (other than dividends or distributions payable in Qualified
Capital Stock of the Company) on or in respect of shares of the Company's
Capital Stock or any Restricted Subsidiary's Capital Stock, (b) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the
Company or any Subsidiary of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock, (c) make any
Investment (other than Permitted Investments) or (d) make any payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness subordinated in right of payment to the Notes or
the Guarantees, except a payment of interest or principal at Stated Maturity
(each of the foregoing actions set forth in clauses (a), (b), (c) and (d)
being referred to as a "Restricted Payment"), unless at the time of such
Restricted Payment and immediately after giving effect thereto, (i) no Default
or an Event of Default shall have occurred and be continuing; and (ii) the
Company is able to incur at least $1.00 of additional Indebtedness (in
addition to Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant and (iii) the aggregate amount
of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) is less
than the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company earned subsequent to the Issue Date and on or prior to the date
the Restricted Payment occurs (the "Reference Date") (treating such period as
a single accounting period); plus (x) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company; plus
(y) 100% of the net cash proceeds from the sale of Investments by the Company
(other than Permitted Investments) provided that such Investment was made
after the Issue Date, plus (z) without duplication of any amounts included in
clause (iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(x) and (z), any net cash
proceeds from a Public Equity Offering to the extent used to redeem the
Notes).
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall not prohibit: (1) the payment of any dividend within
60 days after the date of declaration of such dividend if the dividend would
have been permitted on the date of declaration; or (2) if no Default or Event
of Default shall have occurred and be continuing, the acquisition of any
shares of Qualified Capital Stock of the Company or payment, redemption,
acquisition or defeasance of Indebtedness subordinated in right of payment to
the Notes or the Guarantees, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company and Refinancing Indebtedness or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock of the Company (excluding, in the case of clause (2)(ii), any
net cash proceeds from a Public Equity Offering to the extent used to redeem
the Notes); (3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Refinancing Indebtedness; (4) the payment of any dividend or distribution by a
Restricted Subsidiary of the Company to the Company or a Wholly Owned
Restricted Subsidiary of the Company; (5) the repurchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company held
by any member of the Company's (or any of its Restricted Subsidiaries')
management either (a) pursuant to any management equity subscription agreement
or stock option agreement in effect as of the date of the Indenture, or (b)
upon the termination of such person's employment; provided that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Capital
Stock pursuant to clauses (a) and (b) shall not exceed $1.0 million in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; (6) if no Default or Event
of Default shall have occurred and be continuing, repurchases of Capital Stock
deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof; (7) Investments
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in, including Contributions to, a Restricted Subsidiary if such Restricted
Subsidiary is not a Foreign Subsidiary, including Investments in, or
Contributions to a Person which becomes a Restricted Subsidiary as a result
thereof and, if such Person is not already a Subsidiary Guarantor, such Person
(a) executes and delivers to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall guarantee all of the Obligations of the Company with respect
to the Indenture and the Notes and (b) delivers to the Trustee an Opinion of
Counsel reasonably satisfactory to the Trustee to the effect that such
supplemental indenture has been duly executed and delivered by such Restricted
Subsidiary and is in compliance with the terms of the Indenture; (8) so long
as no Default or Event of Default shall have occurred and be continuing,
dividends and distributions by a Restricted Subsidiary pro rata to the holders
of its Capital Stock as their interests may appear; (9) the payment of a
preferred return to certain of the equity holders of Tri-State Perfusion, LLC,
pursuant to agreements in effect as of the Issue Date; and (10) the
acquisition of any equity in The Extracorporeal Alliance, L.L.C., pursuant to
the terms of one or more of the Put/Call Agreements dated November 26, 1996,
by and among the Company, The Extracorporeal Alliance, L.L.C., Great Lakes
Perfusion, Inc., Bay Extracorporeal Technologies, Inc., Everest Management,
Inc., and certain other parties signatory thereto with the cash proceeds
actually received by the Company or the Trustee under the terms of the related
Trust Agreement from any life insurance policy insuring the life of the party
whose estate or beneficiary is exercising such put; provided, that any
increase in the annual premiums for such policies over the annual premium in
effect as of the Issue Date shall be deemed to be an "Investment" for purposes
of the Indenture. In determining the aggregate amount of Restricted Payments
made subsequent to the Issue Date in accordance with clause (iii) of the
immediately preceding paragraph, amounts expended pursuant to clauses (1) and
(5) shall be included in such calculation.
Not later than 45 days after the end of each calendar quarter, the Company
shall deliver to the Trustee an Officers' Certificate stating that any
Restricted Payment made during such quarter complies with the Indenture and
setting forth in reasonable detail the basis upon which the required
calculations were computed, which calculations may be based upon the Company's
latest available internal quarterly financial statements.
Limitation on Asset Sales. The Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, consummate an Asset
Sale unless (i) the Company or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by the Company's Board of Directors), (ii) at least
75% of the consideration received by the Company or the Restricted Subsidiary,
as the case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such disposition; provided that the
amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than (I) contingent liabilities (except to the extent
reflected (or reserved for) on a balance sheet of the Company or any
Restricted Subsidiary as of the date prior to the date of consummation of such
transaction) and (II) liabilities that are by their terms subordinated to the
Notes or the Guarantees) that are assumed by the transferee of any such assets
and (y) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are converted within
90 days by the Company or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent so received), shall be deemed to be cash or Cash
Equivalents for purposes of this provision; and (iii) upon the consummation of
an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within 180 days of
receipt thereof either (A) to prepay any Senior Indebtedness and, in the case
of any Senior Indebtedness under any Credit Facility, effect a permanent
reduction in the availability under such Credit Facility, (B) to make an
investment in properties and assets (other than cash, Cash Equivalents or
inventory) that replace the properties and assets that were the subject of
such Asset Sale or in properties and assets that will be used in a Permitted
Business ("Replacement Assets"), or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the
181st day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each,
a "Net Proceeds Offer Trigger Date"), the portion of such aggregate amount of
Net Cash Proceeds which have not been
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applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence equal
to the principal amount of the Notes divided by the sum of the principal
amount of the Notes and all Indebtedness constituting Pari Passu Debt (each a
"Net Proceeds Offer Amount") shall be applied by the Company or such
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on
a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if at any time any non-cash consideration received by
the Company or any Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash or Cash Equivalents (other than interest received with respect to
any such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. The Company may defer the
Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under the covenant titled "Merger,
Consolidation and Sale of Assets," the successor corporation shall be deemed
to have sold the properties and assets of the Company and its Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets
of the Company or its Subsidiaries deemed to be sold shall be deemed to be Net
Cash Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets (including,
for purposes of this paragraph only, inventory) and the remainder constitutes
cash or Cash Equivalents and (ii) such Asset Sale is for fair market value;
provided that any consideration not constituting Replacement Assets
(including, for purposes of this paragraph only, inventory) received by the
Company or any of its Subsidiaries in connection with any Asset Sale permitted
to be consummated under this paragraph shall constitute Net Cash Proceeds
subject to the provisions of the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly
tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law. To the extent that the
aggregate amount of Notes tendered pursuant to a Net Proceeds Offer is less
than the Net Proceeds Offer Amount, the Company may use any remaining Net
Proceeds Offer Amount for general corporate purposes, and the Net Proceeds
Offer Amount shall return to zero.
The Credit Facility will restrict the Company from repurchasing any Notes
and also provides that certain asset sales and change of control events with
respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
the Company becomes a party may contain similar restrictions and provisions.
The Indenture will provide that, prior to the mailing of the notice referred
to below, but in any event within 30 days following any Net Proceeds Offer
Trigger Date, the Company covenants to (i) repay in full all Indebtedness and
terminate all commitments under the Credit Facility and all other Senior
Indebtedness the terms of which would prohibit the Net Proceeds Offer, or (ii)
obtain the
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requisite consents under the Credit Facility and all other Senior Indebtedness
to permit the Net Proceeds Offer. If the Company does not obtain such consent
or repay such borrowings, the Company will remain prohibited from purchasing
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Credit Facility and would likely cause an event
of default under any other outstanding Senior Indebtedness. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes. See "Risk Factors--Subordination of
Notes; Structural Subordination; Asset Encumbrance" and "Description of Credit
Facility."
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that the Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary of the
Company to (a) pay dividends or make any other distributions on or in respect
of its Capital Stock; (b) make loans or advances or to pay or guarantee any
Indebtedness or other obligation owed to the Company or any other Restricted
Subsidiary of the Company; or (c) transfer any of its property or assets to
the Company or any other Restricted Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) the Indenture; (3) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of any Subsidiary of the
Company; (4) any instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or the properties or assets of the Person so
acquired; (5) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; (6) purchase money
obligations for property acquired that impose restrictions of the nature
described in clause (4) above on the property so acquired; (7) any instrument
or agreement governing Indebtedness permitted to be incurred under the
Indenture, which is secured by a Lien permitted to be incurred under the
Indenture, which encumbrance or restriction is not applicable to any property
or assets other than the property or assets subject to such Lien; (8) an
agreement governing Indebtedness incurred to Refinance the Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in clause
(2), (4), (5), (6) or (7) above; provided, however, that the provisions
relating to such encumbrance or restriction contained in any such Refinancing
Indebtedness are no less favorable to the Company in any material respect as
determined by the Board of Directors of the Company in their reasonable and
good faith judgment than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clause (2), (4), (5),
(6) or (7); or (9) any restrictions imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all of the Capital
Stock or property of any Restricted Subsidiary that apply pending the closing
of such sale or disposition.
Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries. The Indenture provides that the Company (i) will not, and will
not permit any of its Restricted Subsidiaries to, transfer, convey, sell,
lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary
of the Company to any Person (other than the Company or a Restricted
Subsidiary of the Company), unless both (a) either (x) after giving effect to
such transfer, conveyance, sale, lease or other disposition such Person
remains a Restricted Subsidiary of the Company or (y) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of
such Restricted Subsidiary and (b) the Net Cash Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with
the covenant described above under the caption "Limitation on Asset Sales,"
and (ii) will not permit any Restricted Subsidiary of the Company to issue any
of its Capital Stock (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person, unless after giving
effect to such issuance such Restricted Subsidiary remains a Restricted
Subsidiary of the Company.
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Notwithstanding the foregoing, the Company may transfer up to 2% of the equity
in Dialysis Specialists of Northeast Ohio, Ltd. pursuant to the terms of the
Operating Agreement of such entity as in effect on the Issue Date.
Limitation on Liens. The Indenture provides that the Company will not, and
will not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or permit or suffer to exist any Liens of
any kind against or upon any property or assets of the Company or any of its
Restricted Subsidiaries whether owned on the Issue Date or acquired after the
Issue Date, or any proceeds therefrom, or assign or otherwise convey any right
to receive income or profits therefrom unless (i) in the case of Liens
securing Indebtedness that is expressly subordinate or junior in right of
payment to the Notes, the Notes are secured by a Lien on such property, assets
or proceeds that is senior in priority to such Liens and (ii) in all other
cases, the Notes are equally and ratably secured, except for (A) Liens
existing as of the Issue Date to the extent and in the manner such Liens are
in effect on the Issue Date; (B) Liens securing Senior Indebtedness; (C) Liens
securing Guarantor Senior Indebtedness; (D) Liens in favor of the Company or a
Wholly Owned Restricted Subsidiary of the Company on assets of any Restricted
Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness which
is incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with
the provisions of the Indenture; provided, however, that such Liens (x) are no
less favorable to the Holders and are not more favorable to the lienholders
with respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (y) do not extend to or cover any property or assets of the
Company or any of its Subsidiaries not securing the Indebtedness so
Refinanced; and (F) Permitted Liens.
Prohibition on Layering. The Indenture provides that (i) the Company will
not incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is both (a) subordinate or junior in right of payment to any
Senior Indebtedness and (b) senior in any respect in right of payment to the
Notes and (ii) no Subsidiary Guarantor will incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is both (a)
subordinate or junior in right of payment to its Guarantor Senior Indebtedness
and (b) senior in right of payment to its Guarantee.
Merger, Consolidation and Sale of Assets. The Indenture provides that the
Company will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer,
lease, convey or otherwise dispose of (or cause or permit any Subsidiary of
the Company to sell, assign, transfer, lease, convey or otherwise dispose of)
all or substantially all of the Company's assets (determined on a consolidated
basis for the Company and the Company's Subsidiaries) whether as an entirety
or substantially as an entirety to any Person unless: (i) either (1) the
Company shall be the surviving or continuing corporation or (2) the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and
of the Company's Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due
and punctual payment of the principal of, and premium, if any, and interest on
all of the Notes and the performance of every covenant of the Notes, the
Indenture and the Registration Rights Agreement on the part of the Company to
be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction), the Company or such Surviving Entity, as the case may be,
(1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction
and (2) shall be able to incur at least $1.00 of additional Indebtedness (in
addition to Permitted Indebtedness) pursuant to the "Limitation on Incurrence
of Additional Indebtedness" covenant; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and (iv) the
Company or the Surviving Entity shall have delivered to the Trustee an
Officers'
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Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition
and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with the applicable provisions
of the Indenture and that all conditions precedent in the Indenture relating
to such transaction have been satisfied.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, lease or transfer is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture and the Notes with the same effect
as if such Surviving Entity had been named as such.
Limitations on Transactions with Affiliates. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction or
series of related transactions (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with,
or for the benefit of, any Affiliate of the Company or its Restricted
Subsidiaries (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under the next succeeding paragraph below and (y)
Affiliate Transactions on terms that are no less favorable to the Company or
such Restricted Subsidiary than those that could reasonably have been obtained
in a comparable transaction at such time on an arm's-length basis from a
Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1.0 million shall be
approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or
a series of related Affiliate Transactions related to a common plan) that
involves aggregate payments or other property with a fair market value of more
than $5.0 million, the Company or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the
same with the Trustee. For purposes of calculating the fair market value of
any transaction with or for the benefit of an Article 28 Company, the value of
any investment in any Subsidiary of the Company that engages in transactions
with such Article 28 Company shall be disregarded.
The restrictions set forth in the preceding paragraph shall not apply to,
and the following shall be deemed not to be Affiliate Transactions: (i)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors or employees of the Company or any Subsidiary of the
Company as determined in good faith by the Company's Board of Directors; (ii)
transactions exclusively between or among the Company and any of its Wholly
Owned Restricted Subsidiaries or exclusively between or among such Wholly
Owned Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by the Indenture and in the case of transactions involving Wholly
Owned Restricted Subsidiaries that are Foreign Subsidiaries, such transactions
are on terms no less favorable to the other Wholly Owned Restricted Subsidiary
than those that could reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Subsidiary; (iii) any agreement as in effect
as of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement agreement is
not more disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date; (iv) transactions permitted
by the provisions of the Indenture described under the covenant entitled
"Sales of Accounts Receivable;" (v) Restricted Payments and Permitted
Investments permitted by the Indenture; (vi) contracts pursuant to which the
Company or a Wholly Owned Restricted Subsidiary provides management services
to an Affiliate in exchange for payments in cash or Cash Equivalents, that are
no less favorable to the Company or such Wholly Owned Restricted Subsidiary
than those that could reasonably be obtained in a
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comparable transaction at such time on an arm's length basis from a Person
that is not an Affiliate of the Company or such Wholly Owned Restricted
Subsidiary; and (vii) leases of employees for payments in cash or Cash
Equivalents that are greater than or equal to the wage and benefit cost of
such employees.
Sale and Leaseback Transactions. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, enter
into any Sale and Leaseback Transaction; provided that the Company or any
Restricted Subsidiary may enter into a Sale and Leaseback Transaction if (i)
the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such Sale and Leaseback Transaction pursuant to
the covenant described above under the caption "Limitation on Incurrence of
Additional Indebtedness" and (b) incurred a Lien to secure such Indebtedness
pursuant to the covenant described above under the caption "Limitation on
Liens" and (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (in the case of gross cash
proceeds in excess of $1.0 million as determined in good faith by the Board of
Directors of such Person and set forth in an Officers' Certificate delivered
to the Trustee) of the property that is the subject of such Sale and Leaseback
Transaction.
Limitation on Restricted and Unrestricted Subsidiaries. The Indenture
provides that the Board of Directors of the Company may, if no Default or
Event of Default shall have occurred and be continuing or would arise
therefrom, designate an Unrestricted Subsidiary to be a Restricted Subsidiary,
provided, however, that (i) any such redesignation shall be deemed to be an
incurrence as of the date of such redesignation by the Company and its
Restricted Subsidiaries of the Indebtedness (if any) of such redesignated
Subsidiary for purposes of the "Limitation on Incurrence of Additional
Indebtedness" covenant above, (ii) unless such redesignated Subsidiary shall
not have any Indebtedness outstanding (other than Permitted Indebtedness), no
such designation shall be permitted if immediately after giving effect to such
redesignation and the incurrence of any such additional Indebtedness (other
than Permitted Indebtedness) the Company could not incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation
on Incurrence of Additional Indebtedness" covenant above.
The Indenture provides that the Board of Directors of the Company also may,
if no Default or Event of Default shall have occurred and be continuing or
would arise therefrom, designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if (i) such designation is at that time permitted
under the "Limitation on Restricted Payments" covenant above, (ii) immediately
after giving effect to such designation, the Company could incur $1.00 of
additional Indebtedness (in addition to Permitted Indebtedness) pursuant to
the "Limitation of Incurrence of Additional Indebtedness" covenant above,
(iii) such Subsidiary meets the requirements of the definition of the term
Unrestricted Subsidiary, and (iv) any Subsidiary of such designated Restricted
Subsidiary is also designated as, and meets the requirements of, an
Unrestricted Subsidiary. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under
the caption "Limitation on Restricted Payments" and setting forth in
reasonable detail the underlying calculations.
The Indenture provides that for purposes of the covenant described under
"Limitation on Restricted Payments" above, (i) an "Investment" shall be deemed
to have been made at the time any Restricted Subsidiary of the Company is
designated as an Unrestricted Subsidiary in an amount (proportionate to the
Company's equity interest in such Subsidiary) equal to the net worth of such
Restricted Subsidiary at the time that such Restricted Subsidiary is
designated as an Unrestricted Subsidiary; (ii) at any date, the aggregate
amount of all Restricted Payments made as Investments since the Issue Date
shall exclude and be reduced by an amount (proportionate to the Company's
equity interest in such Subsidiary) equal to the net worth of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated as a
Restricted Subsidiary, not to exceed, in the case of any such redesignation of
an Unrestricted Subsidiary as a Restricted Subsidiary, the amount of
Investments previously made by the Company and its Restricted Subsidiaries in
such Unrestricted Subsidiary (in each case (i) and (ii), "net worth" is to be
calculated based upon the fair market value of the assets of such Subsidiary
as
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of any such date of designation); and (iii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at its fair market value at
the time of such transfer.
The Indenture provides that if, at any time, any Unrestricted Subsidiary
would fail to meet the requirements of the definition of the term Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such
date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Limitation on Incurrence
of Additional Indebtedness," the Company shall be in default of such
covenant).
The Indenture provides that Subsidiaries of the Company that are not
designated by the Board of Directors of the Company as Restricted or
Unrestricted Subsidiaries will be deemed to be Restricted Subsidiaries of the
Company. Notwithstanding the foregoing, all Subsidiaries of an Unrestricted
Subsidiary will be Unrestricted Subsidiaries.
Business Activities. The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries to, engage in any business
other than Permitted Businesses, except to such extent as would not be
material to the Company and its Restricted Subsidiaries taken as a whole.
Sales of Accounts Receivable. The Company may, and any of its Restricted
Subsidiaries may, sell, at any time and from time to time, all of their
respective accounts receivable to an Accounts Receivable Subsidiary; provided
that (i) the cash received in each sale is not less than 90% of the aggregate
face value of the receivables sold and the remainder of the consideration
received in each such sale is a promissory note (a "Promissory Note") which is
subordinated to no Indebtedness or obligation other than that due to the
financial institution or other entity providing the financing to the Accounts
Receivable Subsidiary with respect to such accounts receivable (a
"Financier"); provided further that the Initial Sale will include all eligible
accounts receivable of the Company and/or its Restricted Subsidiaries that
will be party to such arrangements in existence on the date of the Initial
Sale, (ii) the cash proceeds received from the Initial Sale less reasonable
and customary transaction costs will be deemed to be Net Cash Proceeds and
will be applied in accordance with the covenant entitled "Limitation on Asset
Sales," and (iii) the Company and its Restricted Subsidiaries will sell their
accounts receivable to the Accounts Receivable Subsidiary no less frequently
than on a weekly basis.
The Company (i) will not permit any Accounts Receivable Subsidiary to sell
any accounts receivable purchased from the Company or any of its Restricted
Subsidiaries to any other person except on an arm's-length basis and solely
for consideration in the form of cash or Cash Equivalents, (ii) will not
permit the Accounts Receivable Subsidiary to engage in any business or
transaction other than the purchase, financing and sale of accounts receivable
of the Company and its Restricted Subsidiaries and activities incidental
thereto, (iii) will not permit any Accounts Receivable Subsidiary to incur
Indebtedness in an amount in excess of the book value of such Accounts
Receivable Subsidiary's total assets, as determined in accordance with GAAP,
(iv) will, at least as frequently as monthly, cause the Accounts Receivable
Subsidiary to remit to the Company or the relevant Restricted Subsidiary, as
the case may be, as payment on the Promissory Notes, all available cash or
Cash Equivalents not held in a collection account pledged to a Financier, to
the extent not applied to pay or maintain reserves for reasonable operating
expenses of the Accounts Receivable Subsidiary or to satisfy reasonable
minimum operating capital requirements and (v) will not, and will not permit
any of its Restricted Subsidiaries to, sell accounts receivable to any
Accounts Receivable Subsidiary upon (1) the occurrence of a Default with
respect to the Company and its Restricted Subsidiaries and (2) the occurrence
of certain events of bankruptcy or insolvency with respect to such Accounts
Receivable Subsidiary.
Payments for Consent. The Indenture provides that neither the Company nor
any of its Restricted Subsidiaries will, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid or is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
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Additional Guarantees. The Indenture provides that (i) if the Company or any
of its Restricted Subsidiaries shall, after the date of the Indenture,
transfer or cause to be transferred, including by way of any Investment, in
one or a series of transactions (whether or not related), any assets,
businesses, divisions, real property or equipment having an aggregate fair
market value (as determined in good faith by the Board of Directors) in excess
of $1.0 million to any Restricted Subsidiary that is not a Subsidiary
Guarantor or a Foreign Subsidiary, (ii) if the Company or any of its
Restricted Subsidiaries shall acquire another Restricted Subsidiary other than
a Foreign Subsidiary having total assets with a fair market value (as
determined in good faith by the Board of Directors) in excess of $1.0 million,
or (iii) if any Restricted Subsidiary other than a Foreign Subsidiary shall
incur Indebtedness in excess of $1.0 million, then the Company shall, at the
time of such transfer, acquisition or incurrence, (i) cause such transferee,
acquired Restricted Subsidiary or Restricted Subsidiary incurring Indebtedness
(if not then a Subsidiary Guarantor) to execute a Guarantee of the Obligations
of the Company under the Notes in the form set forth in the Indenture and (ii)
deliver to the Trustee an Opinion of Counsel, in form reasonably satisfactory
to the Trustee, that such Guarantee is a valid, binding and enforceable
obligation of such transferee, acquired Restricted Subsidiary or Restricted
Subsidiary incurring Indebtedness, subject to customary exceptions for
bankruptcy, fraudulent conveyance and equitable principles. Notwithstanding
the foregoing, the Company or any of its Restricted Subsidiaries may make an
Investment (which does not constitute a Permitted Investment) in any
Restricted Subsidiary of the Company without compliance with this covenant,
provided that such Investment is permitted by the covenant described under the
caption, "Limitation on Restricted Payments."
Reports to Holders. The Indenture provides that the Company will deliver to
the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents
and other reports, if any, which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture
will further provide that, notwithstanding that the Company may not be subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will file with the Commission, to the extent permitted, and provide
the Trustee and Holders with such annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of TIA (S) 314(a).
The Indenture will provide that, at the Company's expense, the Company shall
cause an annual report if furnished by it to stockholders generally and each
quarterly or other financial report if furnished by it to stockholders
generally to be filed with the Trustee and mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar at
the time of such mailing or furnishing to stockholders. The Company shall make
such annual, quarterly and other financial reports available to securities
analysts and prospective investors upon request.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes or any amount payable pursuant
to any Guarantee with respect to interest when the same becomes due and
payable and the default continues for a period of 30 days (whether or not
such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes or any amount payable
pursuant to any Guarantee (other than as provided in (i)), when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period
of 30 days after the Company receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Notes
(except in the case of a default with respect to the "Merger, Consolidation
and Sale of Assets" covenant, which will constitute an Event of Default
with such notice requirement but without such passage of time requirement);
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(iv) there shall be a default under any Indebtedness of the Company or any
Restricted Subsidiary, whether such Indebtedness now exists or shall
hereinafter be created, if both (A) such default either (1) results from
the failure to pay any such Indebtedness at its stated final maturity or
(2) relates to an obligation other than the obligation to pay such
Indebtedness at its stated final maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior
to its stated final maturity and (B) the principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at stated final
maturity or the maturity of which has been so accelerated, aggregates $5.0
million or more at any one time outstanding;
(v) one or more judgments (to the extent not covered by insurance and as to
which the insurer has not acknowledged coverage in writing) in an aggregate
amount in excess of $5.0 million shall have been rendered against the
Company or any of its Restricted Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such
judgment or judgments become final and non-appealable;
(vi) certain events of bankruptcy affecting the Company, any Subsidiary
Guarantor or any of their Significant Subsidiaries; or
(vii) except as permitted by the Indenture, any Guarantee shall cease to
be, or shall be asserted in writing by any Subsidiary Guarantor or the
Company not to be, in full force and effect, and enforceable in accordance
with its terms.
If an Event of Default (other than an Event of Default specified in clause
(vi) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Notes may declare the principal
of and accrued interest on all the Notes to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under the Credit Facility, shall become immediately
due and payable upon the first to occur of an acceleration under the Credit
Facility or 5 business days after receipt by the Company and the
Representative under the Credit Facility of such Acceleration Notice. If an
Event of Default specified in clause (vi) above occurs and is continuing, then
all unpaid principal of, and premium, if any, and accrued and unpaid interest
on all of the outstanding Notes shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the Holders
of a majority in principal amount of the Notes may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due
solely because of the acceleration, (iii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an Officers' Certificate
and an Opinion of Counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its
consequences, except a Default or Event of Default described in clause (i) or
(ii) of the description of Events of Default.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all
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provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the then outstanding Notes 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.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Notes prior to the First Call Date, then the premium specified in the
Indenture for redemption as of the First Call Date shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
Under the Indenture, the Company is required to provide an Officers'
Certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee or stockholder, as such, of the Company or
any Subsidiary shall have any liability for any obligations of the Company or
any Subsidiary under the Notes, any Guarantee or the Indenture. Each holder of
the Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
This provision does not affect any possible claims under the federal
securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes (and each
Subsidiary Guarantor shall be discharged from any and all obligations with
respect thereto and with respect to its Guarantee) ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes,
except for (i) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on the Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payments, (iii)
the rights, powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants (including those relating to a Change of Control
Offer and a Net Cash Proceeds Offer) that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, reorganization and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient (without
reinvestment), in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received
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from, or there has been published by, the Internal Revenue Service a ruling or
(B) since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance,
the Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that the Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; (iv) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under the Indenture or
any other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; (vii) the Company shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; (viii) the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Senior
Indebtedness, including, without limitation, those arising under the Indenture
and (B) after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; and (ix) certain other
customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company has paid all other sums payable under the Indenture by
the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Subsidiary Guarantors and the Trustee,
without the consent of the Holders, may amend the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies,
so long as such change does not, in the opinion of the Trustee, adversely
affect the rights of any of the Holders in any material respect. In
formulating its opinion on such matters, the Trustee will be entitled to rely
on such evidence as it deems appropriate, including, without limitation,
solely on an Opinion of Counsel. Other modifications and amendments of the
Indenture may be made with the consent of the Holders of a majority in
principal amount of the then outstanding Notes issued under the Indenture,
except that, without the consent of
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each Holder affected thereby, no amendment may: (i) reduce the amount of Notes
whose Holders must consent to an amendment; (ii) reduce the rate of or change
or have the effect of changing the time for payment of interest, including
defaulted interest, on any Notes; (iii) reduce the principal of or change or
have the effect of changing the fixed maturity of any Notes, or change the
date on which any Notes may be subject to redemption or repurchase, or reduce
the redemption or repurchase price therefor; (iv) make any Notes payable in
money other than that stated in the Notes; (v) make any change in provisions
of the Indenture protecting the right of each Holder to receive payment of
principal of and interest on such Note on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default; (vi) amend,
change or modify in any material respect the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of Control
or make and consummate a Net Proceeds Offer with respect to any Asset Sale or
modify any of the provisions or definitions with respect thereto; (vii) modify
or change any provision of the Indenture or the related definitions affecting
the subordination or ranking of the Notes or the Guarantees in a manner which
adversely affects the Holders or (viii) release any Subsidiary Guarantor from
any of its obligations under the Guarantee other than in accordance with the
terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York, but without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Accounts Receivable Subsidiary" means a newly created, Unrestricted
Subsidiary of the Company (i) which is formed solely for the purpose of, and
which engages in no activities other than activities in connection with,
financing accounts receivable of the Company and/or its Restricted
Subsidiaries, (ii) which is designated by the Board of Directors of the
Company as an Accounts Receivable Subsidiary pursuant to a Board of Directors'
resolution set forth in an Officers' Certificate and delivered to the Trustee,
(iii) that has total assets at the time of such creation and designation with
a book value of $10,000 or less, (iv) which has no Indebtedness other than
Non-Recourse Debt, and (v) with which neither the Company nor any Restricted
Subsidiary of the Company has any contract, agreement, arrangement or
understanding other than contracts, agreements, arrangements and
understandings entered into in the ordinary course of business in connection
with sales of accounts receivable in accordance with the covenant entitled
"Sales of Accounts Receivable" and fees payable in the ordinary course of
business in connection with servicing accounts receivable.
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"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with,
or in anticipation or contemplation of, such Person becoming a Subsidiary of
the Company or such acquisition, merger or consolidation.
"Act" means the Securities Act of 1933, as amended.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date), but
excluding liabilities under the Guarantee of such Subsidiary Guarantor at such
date and (y) the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on
such date and after giving effect to any collection from any Subsidiary of
such Subsidiary Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding debt in respect of the Guarantee, as they
become absolute and matured.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
provided, that beneficial ownership of 10% or more of the voting Capital Stock
of a Person shall be deemed to be control. The terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Article 28 Company" means an entity organized and operated for the primary
purpose of conducting a Permitted Business and subject to a federal or state
law or regulation that: (i) limits or restricts the types of individuals or
entities that are permitted to hold an ownership or investment interest in
such an entity; and (ii) prohibits the Company and its Subsidiaries from being
able to directly hold an ownership or investment interest in such an entity.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
(x) shall become a Restricted Subsidiary of the Company, or (y) shall be
merged with or into the Company or any Restricted Subsidiary of the Company,
or (b) the acquisition by the Company or any Restricted Subsidiary of the
Company of the assets of any Person (other than a Subsidiary of the Company)
which constitute all or substantially all of the assets of such Person or
comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by the Company or any
of its Restricted Subsidiaries (including any Sale and Leaseback Transaction)
to any Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company of (a) any Capital Stock of any Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary
of the Company; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Subsidiaries receive aggregate consideration of less than $1.0 million; (ii)
sales of accounts receivables to the Accounts Receivable Subsidiary in
accordance with the covenant entitled "Sales of Accounts Receivable," other
than the Initial Sale; and (iii) the sale, lease, conveyance, disposition or
other transfer (w) of the Capital Stock of an Unrestricted Subsidiary, (x) of
all or substantially all of the assets of the Company as permitted under
"Merger, Consolidation and Sale of Assets," (y) involving only cash, Cash
Equivalents or inventory in the ordinary course of business or obsolete
equipment in the ordinary course of business consistent with past practices of
the Company, or (z) involving only the lease or sublease of any assets in the
ordinary course of business.
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"Attributable Debt" in respect of a Sale and Leaseback Transaction means at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or other entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of
the United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having the highest
ratings obtainable from both Standard & Poor's Ratings Services ("S&P") and
Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing
no more than one year from the date of creation thereof and, at the time of
acquisition, having the highest rating obtainable from both S&P and Moody's;
(iv) certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (i) through
(v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole to any Person or group of
related Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
together with any Affiliates thereof (whether or not otherwise in compliance
with the provisions of the Indenture); (ii) the approval by the holders of
Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of the Indenture); (iii) the acquisition of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) in one or more
transactions by any Person or Group other than a Person who is a stockholder
of the Company as of the Issue Date or Group comprised solely of such Persons
(the "Control Group") of either more than 25% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of the Company
or more than 25% of the aggregate issued and outstanding Common Stock of the
Company and such beneficial ownership percentage is greater than the
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beneficial ownership of the Control Group; (iv) Home Dialysis of America, Inc.
or West Suburban Kidney Center, S.C. cease to be a Wholly Owned Restricted
Subsidiary of the Company, or (v) the replacement of a majority of the Board
of Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at
least a majority of the Board of Directors of the Company then still in office
who either were members of such Board of Directors at the beginning of such
period or whose election as a member of such Board of Directors was previously
so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Subsidiaries paid or accrued in accordance with GAAP
for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business or other transactions the
effect of which has been excluded from Consolidated Net Income), (B)
Consolidated Interest Expense and (C) Consolidated Non-cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Subsidiaries in
accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital or revolving credit
facilities, occurring during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such incurrence or repayment, as the case may be (and the
application of the proceeds thereof), had occurred on the first day of the
Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including
any Person who becomes a Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (provided that such Consolidated EBITDA
shall be included only to the extent includable pursuant to the definition of
"Consolidated Net Income") attributable to the assets which are the subject of
the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last day of
the Four Quarter Period and on or prior to the Transaction Date, as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Acquired Indebtedness) had occurred on the first day of
the Four Quarter Period. If such Person or any of its Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually
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incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four Quarter
Period; and (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of such
agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person and its Restricted Subsidiaries (other than
dividends paid in Qualified Capital Stock or dividends to the extent payable
to the Company or its Restricted Subsidiaries) paid, accrued or scheduled to
be paid or accrued during such period (other than in the case of Preferred
Stock of such Person and its Restricted Subsidiaries for which the dividends
are tax deductible for Federal income tax purposes, which shall be included in
Consolidated Fixed Charges without being multiplied by the fraction in (y))
and (y) a fraction, the numerator of which is one and the denominator of which
is one minus the then current effective consolidated federal, state and local
tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, whether paid or
accrued, including without limitation, (a) any amortization of debt discount
and amortization or write-off of deferred financing costs, (b) the net costs
under Interest Swap Obligations, (c) all capitalized interest and (d) the
interest portion of any deferred payment obligation, including with respect to
Attributable Debt; (ii) the aggregate dividend payments of such Person and its
Restricted Subsidiaries for such period with respect to Disqualified Capital
Stock; and (iii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for
such period on a consolidated basis (before Preferred Stock (other than
Disqualified Stock) dividend requirements), determined in accordance with
GAAP; provided that there shall be excluded therefrom (a) after-tax gains from
Asset Sales or abandonments of reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains or losses, (c) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Subsidiary of the referent Person or is merged
or consolidated with the referent Person or any Subsidiary of the referent
Person, (d) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted (or
subject to tax) by a contract, operation of law or otherwise, (e) the net
income of any Person, other than a Restricted Subsidiary of the referent
Person, except to the extent of cash dividends or distributions paid to the
referent Person or to a Restricted Subsidiary of the referent Person by such
Person (subject to the limitation in clause (d)), (f) any restoration to
income of any contingency reserve, except to the extent that provision for
such reserve reduced Consolidated Net Income accrued at any time following the
Issue Date, (g) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued), (h) in the
case of a successor to the referent Person by consolidation or merger or as a
transferee of the referent Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets, (i) any
gain realized in connection with the disposition of any securities other than
Cash Equivalents by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (j) all gains or losses from the cumulative effect of any
change in accounting principles.
"Consolidated Net Worth" means, (A) with respect to any partnership, the
common and preferred partnership equity of such partnership and its
consolidated subsidiaries, as determined on a consolidated basis in accordance
with GAAP, and (B) with respect to any other Person as of any date, the sum of
(i) the consolidated
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equity of the common equityholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts reported on such
Person's balance sheet as of such date with respect to any series of preferred
equity (other than Disqualified Capital Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred equity, less (x) all write-ups (other than write-
ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person,
plus (y) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate Consolidated Pooling Expenses, depreciation,
amortization and other non-cash expenses of such Person and its Subsidiaries
reducing Consolidated Net Income of such Person for such period, determined on
a consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires
an accrual of or a reserve relating to possible cash charges or expenditures
for any future or past period).
"Consolidated Pooling Expenses" of any Person means for any period, with
respect to such Person and its Subsidiaries on a consolidated basis, the
transaction or transactions-related expenses for such period in connection
with a pooling of interests transaction, determined in accordance with GAAP,
but only to the extent such expenses would have been capitalized, in
accordance with GAAP, if such transaction had been a purchase transaction.
"Contributions" means any loans, cash advances, capital contributions,
investments or other transfers of assets for either (i) Capital Stock or (ii)
less than fair value by the Company or any of its Restricted Subsidiaries to
any Subsidiary or other Affiliate of the Company other than to a Subsidiary
Guarantor.
"Credit Facility" means the Amended and Restated Credit Agreement, dated as
of May 15, 1997 (referred to herein as the Prior Credit Facility), as amended
(including by the New Credit Facility), among the Company, Harris Trust and
Savings Bank, individually and as Agent, and the lenders which are or become
parties thereto, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available
borrowings thereunder; provided that such increase in borrowings is permitted
by the "Limitation on Incurrence of Additional Indebtedness" covenant above)
all or any portion of the Indebtedness under such agreement or any successor
or replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means (i) Indebtedness under or in respect
of the Credit Facility and (ii) any other Indebtedness constituting Senior
Indebtedness which, at the time of determination, has an aggregate principal
amount of at least $35,000,000 and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"Disqualified Capital Stock" means, with respect to any person, any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is
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exchangeable for Indebtedness, or is redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after
the date on which the Notes mature.
"Eligible Joint Venture" means any Person which meets all of the following
criteria: (a) no Affiliate of the Company or a Restricted Subsidiary (other
than a Restricted Subsidiary of the Company) has an investment in such Person,
(b) such Person is engaged in a Permitted Business, (c) the Company and/or any
of its Restricted Subsidiaries at all times (i) controls, by voting power,
board or management committee membership, or through the provisions of any
applicable partnership, shareholder or other similar agreement or under an
operating, maintenance or management agreement or otherwise, the business
operations of such Person, and (ii) owns at least 20% of the total outstanding
Capital Stock of such Person entitled to participate in distributions in
respect of the earnings, sale or liquidation of such Person, (d) no more than
$100,000 principal amount of the Indebtedness of such Person outstanding at
any one time is not Non-Recourse Debt, and (e) a default or event of default
under the Indebtedness of such Person would not result in a default or event
of default under any Indebtedness of the Company or its Restricted
Subsidiaries, except for Indebtedness permitted pursuant to (d).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Board of Directors of the Company delivered to the Trustee.
"First Call Date" means May 1, 2003.
"Foreign Subsidiary" means any Subsidiary of the Company either (a) which is
organized outside of the United States of America, (b) whose principal
activities are conducted outside of the United States of America or (c) whose
only material assets are Capital Stock in Subsidiaries which are Foreign
Subsidiaries.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Indebtedness" means with respect to any Person, without duplication, (i)
all indebtedness of such Person, whether or not contingent, for borrowed
money, (ii) all indebtedness of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all Capitalized Lease Obligations of
such Person, (iv) all indebtedness or other obligations of such Person issued
or assumed as the deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not in default or overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all indebtedness for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations
in respect of Indebtedness referred to in clauses (i) through (v) above and
clause (viii) below, (vii) all indebtedness of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any lien on any
property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured, (viii) all indebtedness under Currency
Agreements and Interest Swap Agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified
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Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock. The amount of any Indebtedness (other than
Disqualified Capital Stock) outstanding as of any date shall be (i) the
accreted value thereof, to the extent such Indebtedness does not require
current payments of interest, (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness, (iii) in the case of Currency Agreements and Interest Swap
Agreements, the amount that would appear on the consolidated balance sheet of
the Person in accordance with GAAP and (iv) in the case of any guarantee or
other contingent obligation in respect of Indebtedness of any other Person
shall be deemed to be equal to the maximum amount of such indebtedness, unless
the liability is limited by the terms of such guarantee or contingent
obligation, in which case the amount of such guarantee or other obligation
shall be deemed to equal the maximum amount of such liability.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Initial Sale" means the first transaction in which accounts receivable are
sold by the Company and/or its Restricted Subsidiaries to an Accounts
Receivable Subsidiary.
"Insolvency or Liquidation Proceedings" means with respect to any Person (i)
any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding relative to
such Person or to the creditors of such Person, as such, or to the assets of
such Person, or (ii) any liquidation, dissolution, reorganization or winding-
up of such Person, whether voluntary or involuntary, or (iii) any assignment
for the benefit of creditors or any other marshaling of assets and liabilities
of such Person.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person (including a Subsidiary of the referent Person).
"Investment" shall exclude extensions of trade credit by the Company and its
Subsidiaries on commercially reasonable terms in accordance with normal trade
practices of the Company or such Subsidiary, as the case may be. If the
Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Capital Stock of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Capital Stock of such
Subsidiary not sold or disposed. For the purposes of the "Limitation on
Restricted Payments" covenant, the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by the Company, or any of its Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce
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the amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income.
"Issue Date" means May 5, 1998.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) income taxes paid or payable after
taking into account any reduction in consolidated income tax liability due to
available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with
such Asset Sale, (d) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale, (e)
proceeds required to be placed in escrow, provided, that upon the release of
any such proceeds from such escrow to the Company or a Subsidiary of the
Company such released proceeds shall constitute "Net Cash Proceeds" and (f) in
the case of a sale by a Restricted Subsidiary that is not a Wholly Owned
Restricted Subsidiary, the minority interests' proportionate share of such Net
Cash Proceeds.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness, but excluding, in the case of (x) the Accounts Receivable
Subsidiary, warranty claims, indemnity rights and rights of set-off with
respect to accounts receivable that are sold to such Accounts Receivable
Subsidiary, and (y) any Eligible Joint Venture, any amounts loaned by the
Company or any such Restricted Subsidiary to such Eligible Joint Venture for
working capital purposes); (b) is directly or indirectly liable (as a
guarantor or otherwise, except as set forth in (a)); or (c) constitutes the
lender (except as set forth in (a)); (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and (iii) as to which the lenders, except for lenders under
Indebtedness in existence on the Issue Date or instruments governing Acquired
Indebtedness (a) have acknowledged that they do not have recourse to the
holder of the Capital Stock of the debtor or (b) have been notified in writing
that they will not have any recourse to the stock or assets of either the
Company or any of its Restricted Subsidiaries.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Pari Passu Debt" means any Indebtedness of the Company or its Restricted
Subsidiaries which, by its terms, is pari passu in right of payment to the
Notes or the Guarantees.
"Permitted Business" means the business of the Company and its Subsidiaries
as existing on the Issue Date or such other businesses as the Board of
Directors of the Company determines are businesses reasonably related thereto
as evidenced by a Board Resolution.
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"Permitted Indebtedness" means without duplication, each of the following:
(i) Indebtedness under the Notes and the Indenture;
(ii) Indebtedness under the Guarantees;
(iii) Indebtedness incurred pursuant to the Credit Facility (and the
guarantees thereunder) in an aggregate principal amount at any time
outstanding not to exceed $100,000,000, less the amount of any required
permanent repayments, if any (which are accompanied by a corresponding
permanent commitment reduction) thereunder (excluding any such payments on
the Issue Date or to the extent refinanced at the time of payment);
(iv) other Indebtedness of the Company and its Subsidiaries outstanding
on the Issue Date reduced by the amount of any scheduled amortization
payments or mandatory prepayments when actually paid or permanent
reductions thereon;
(v) Interest Swap Obligations of the Company covering Indebtedness of the
Company or any of its Subsidiaries and Interest Swap Obligations of any
Subsidiary of the Company covering Indebtedness of such Subsidiary;
provided, however, that (x) such Interest Swap Obligations are designed to
protect the Company and its Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with the Indenture (and are
used for bona fide hedging, and not speculative, purposes); and (y) the
notional principal amount of such Interest Swap Obligation does not exceed
the principal amount of the Indebtedness to which such Interest Swap
Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that such Currency
Agreements: (i) are designed to protect against fluctuations in currency
value (and are used for bona fide hedging, and not speculative, purposes)
and (ii) in the case of Currency Agreements which relate to Indebtedness,
such Currency Agreements do not increase the Indebtedness of the Company
and its Subsidiaries outstanding other than as a result of fluctuations in
foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vii) Indebtedness of a Wholly Owned Restricted Subsidiary of the Company
to the Company or to a Wholly Owned Restricted Subsidiary of the Company
for so long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien held
by a Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company; provided that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of a Restricted Subsidiary of the Company permitted
pursuant to clause (7) of the second paragraph of the covenant described
under "Limitation on Restricted Payments" or clause (ix) or (x) of the term
"Permitted Investment";
(ix) Indebtedness of the Company to a Restricted Subsidiary of the
Company for so long as such Indebtedness is held subject to no Lien;
provided that (a) any Indebtedness of the Company to a Restricted
Subsidiary of the Company is unsecured and subordinated, pursuant to a
written agreement, to the Company's Obligations under the Indenture and the
Notes and (b) if as of any date any Person other than a Restricted
Subsidiary of the Company owns or holds any such Indebtedness or any Person
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;
(x) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(xi) Indebtedness of the Company or any of its Subsidiaries represented
by letters of credit for the account of the Company or such Subsidiary, as
the case may be, in order to provide security for workers'
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compensation claims, payment obligations in connection with self-insurance
or similar requirements in the ordinary course of business;
(xii) Refinancing Indebtedness;
(xiii) Indebtedness incurred by the Company or any Restricted Subsidiary
of the Company in connection with the purchase or improvement of property
(real or personal) or equipment or other capital expenditures in the
ordinary course of business or consisting of Capitalized Lease Obligations;
provided that at the time of the incurrence thereof, such Indebtedness
which is then outstanding does not exceed $5.0 million;
(xiv) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary, for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred in connection with the disposition of
any business, assets or Restricted Subsidiary, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; provided that the maximum aggregate liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and the Restricted Subsidiary in connection with
such disposition;
(xv) Obligations in respect of performance bonds and completion
guarantees provided by the Company or any Restricted Subsidiary of the
Company in the ordinary course of business;
(xvi) Guarantees by the Company or a Restricted Subsidiary of the Company
of Indebtedness incurred by the Company or a Restricted Subsidiary of the
Company so long as the incurrence of such Indebtedness by the Company or
any such Restricted Subsidiary of the Company is otherwise permitted by the
terms of the Indenture;
(xvii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $7.5 million at
any one time outstanding.
"Permitted Insolvency Payments" means (i) securities distributed to the
Holders of the Notes in an Insolvency or Liquidation Proceeding pursuant to a
plan of reorganization consented to by each class of the Senior Indebtedness,
but only if all of the terms and conditions of such securities (including,
without limitation, term, tenor, interest, amortization, subordination,
standstills, covenants and defaults), are at least as favorable (and provide
the same relative benefits) to the holders of Senior Indebtedness and to the
holders of any security distributed in such Insolvency or Liquidation
Proceeding on account of any such Senior Indebtedness as the terms and
conditions of the Notes and the Indenture are, and provide to the holders of
Senior Indebtedness, and (ii) payments from a trust established pursuant to
the provisions of the Indenture described under "Satisfaction and Discharge of
the Indenture", provided that payment into such trust was not made either (x)
within 90 days prior to the commencement of an Insolvency or Liquidation
Proceeding, or (y) during any period in which payment on the Notes is blocked
pursuant to the subordination provisions of the Indenture.
"Permitted Investments" means (i) Investments by the Company or any
Subsidiary of the Company in any Person engaged in a Permitted Business that
is or will become immediately after such Investment a Wholly Owned Restricted
Subsidiary of the Company other than a Foreign Subsidiary or that will merge
or consolidate into the Company or a Wholly Owned Restricted Subsidiary of the
Company other than a Foreign Subsidiary; (ii) Investments in the Company by
any Restricted Subsidiary of the Company; provided that any Indebtedness
evidencing such Investment is unsecured and subordinated to the Company's
obligations under the Notes and the Indenture, pursuant to a written agreement
and to the same extent that the Notes are subordinated to Senior Indebtedness;
(iii) investments in cash and Cash Equivalents; (iv) loans and advances to
employees and officers of the Company and its Subsidiaries in the ordinary
course of business for bona fide business purposes not in excess of $1.0
million at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Subsidiaries' businesses and otherwise in compliance with the Indenture; (vi)
Investments in securities of trade creditors or customers received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (vii) Investments made by the
Company or any of its Subsidiaries as a result of consideration received in
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connection with an Asset Sale made in compliance with the "Limitation on Asset
Sales" covenant; (viii) Investments in an Accounts Receivable Subsidiary
received in consideration of sales of accounts receivable in accordance with
the covenant entitled "Sales of Accounts Receivable"; (ix) Investments by the
Company or any Restricted Subsidiary in a Restricted Subsidiary or an Eligible
Joint Venture in an amount at any one time outstanding not to exceed $5.0
million in the aggregate, so long as that after giving effect to any such
Investment, no Default or Event of Default shall have occurred, and the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.5 to
1.0; and (x) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (x) that are at the time outstanding,
not to exceed $10.0 million, so long as that after giving effect to any such
Investment, no Default or Event of Default shall have occurred.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) being contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries, as
the case may be, shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(iv) Liens securing letters of credit issued in the ordinary course of
business consistent with past practice in connection with the items
referred to in clause (iii) or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(v) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(vi) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(viii) purchase money Liens to finance property or assets of the Company
or any Subsidiary of the Company acquired in the ordinary course of
business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Subsidiary
of the Company, other than the property and assets so acquired and (B) the
Lien securing such Indebtedness shall be created within 90 days of such
acquisition;
(ix) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(x) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
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(xi) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(xii) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xiii) Liens securing Indebtedness under Currency Agreements;
(xiv) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company, and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Subsidiary of the Company, and (B) such
Liens do not extend to or cover any property or assets of the Company or of
any of its Subsidiaries, other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Restricted Subsidiary of the Company, and
are no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company or a Subsidiary of the Company;
(xv) Liens to secure Attributable Debt that is permitted to be incurred
pursuant to the covenant entitled "Sale and Leaseback Transactions;"
provided that any such Liens shall not extend to or cover any assets of the
Company or any Restricted Subsidiary, other than the assets which are the
subject of the Sale and Leaseback Transaction in which the Attributable
Debt is incurred;
(xvi) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its Restricted
Subsidiaries;
(xvii) any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating other than any
such interest or title resulting from or arising out of a default by the
Company or any of its Restricted Subsidiaries of its obligations under such
lease;
(xviii) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of personal property
that are otherwise permitted under the Indenture and under which the
Company or any of its Restricted Subsidiaries is lessee;
(xix) Liens arising by virtue of any statutory or common law provisions
relating to banker's Liens, rights of setoff or similar rights as to
deposit accounts or other funds maintained with a creditor depositary
institution; and
(xx) Liens in favor of the Trustee and any substantially equivalent Lien
granted to any trustee or similar institution under any indenture governing
Indebtedness permitted to be incurred or outstanding under the Indenture.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, a governmental
agency or political subdivision thereof or other entity.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" means an underwritten equity offering, pursuant to
an effective registration statement under the Act, of the Qualified Capital
Stock of the Company, or of any entity of which the Company is a direct or
indirect subsidiary, to the extent the proceeds thereof shall have been
received or contributed to the Company.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
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"Refinancing Indebtedness" means any Refinancing by the Company or any
Subsidiary of the Company of Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (iii), (v), (vi), (vii), (x), (xi), (xii) or (xiii) of the
definition of Permitted Indebtedness), in each case that does not (1) result
in an increase in the aggregate principal amount of Indebtedness of such
Person as of the date of such proposed Refinancing (plus the amount of any
premium or penalty required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses
incurred by the Company in connection with such Refinancing) or (2) create
Indebtedness with (A) a Weighted Average Life to Maturity that is less than
the Weighted Average Life to Maturity of the Indebtedness being Refinanced or
(B) a final maturity earlier than the final maturity of the Indebtedness being
Refinanced; provided that (x) if such Indebtedness being Refinanced is solely
Indebtedness of the Company, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes or any Guarantee, then such
Refinancing Indebtedness shall have a final maturity date later than 91 days
after the final maturity date of the Notes and shall be subordinate to the
Notes at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior
Indebtedness shall at all times constitute the holders of a majority in
outstanding principal amount of such Designated Senior Indebtedness in respect
of any Designated Senior Indebtedness.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of any property, whether owned by the
Company or any Subsidiary at the Issue Date or later acquired, which has been
or is to be sold or transferred by the Company or such Subsidiary to such
Person or to any other Person from whom funds have been or are to be advanced
by such Person on the security of such Property.
"Senior Indebtedness" means, all Indebtedness and other Obligations
specified below payable directly or indirectly by the Company or any of its
Restricted Subsidiaries (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law), whether outstanding on the Issue Date or
thereafter created, incurred or assumed, by the Company or any of its
Restricted Subsidiaries: (i) the principal of, interest on and all other
Obligations related to the Credit Facility (including without limitation all
loans, letters of credit and other extensions of credit under the Credit
Facility, and all expenses, fees, reimbursements, indemnities and other
amounts owing pursuant to the Credit Facility); (ii) amounts payable in
respect of any Interest Swap Obligations and Currency Agreements; (iii) all
Indebtedness not prohibited by the "Limitation on Incurrence of Additional
Indebtedness" covenant that is not expressly pari passu with or subordinated
to the Notes; and (iv) all permitted Refinancings thereof. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include (a) any Indebtedness of the
Company to a Subsidiary of the Company, (b) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of the Company or
any Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (c) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (d) Indebtedness
represented by Disqualified Capital Stock, (e) any liability for federal,
state, local or other taxes owed or owing by the Company, (f) Indebtedness
incurred in violation of the Indenture provisions set forth under "Limitation
on Incurrence of Additional Indebtedness," (g) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company and (h) any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
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"Stated Maturity" means, with respect to any installment of interest,
accreted value or principal on any series of Indebtedness, the date on which
such payment of interest or principal is due or is scheduled to be paid in the
original documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest,
accreted value or principal prior to the date originally scheduled for the
payment or accretion thereof.
"Subsidiary" with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means (i) as of the date of the Initial Offering,
Amarillo Acute Dialysis Specialists, L.L.C., Con-Med Supply Company, Inc.,
Continental Health Care, Ltd., Dialysis Specialists of Corpus Christi, L.L.C.,
Dialysis Specialists of South Texas, L.L.C., Dupage Dialysis Ltd., Everest
Management, Inc., Hemo Dialysis of Amarillo L.L.C., Home Dialysis of America,
Inc., Home Dialysis of Dayton, Inc., Lake Avenue Dialysis Center, Inc., Mercy
Dialysis Center, Inc., New York Dialysis Management, Inc., North Buckner
Dialysis Center, Inc., Northwest Indiana Dialysis, Inc., Ohio Valley Dialysis
Center, Inc., and WSKC Dialysis Services, Inc., and (ii) each of the Company's
Subsidiaries that in the future executes a supplemental indenture in which
such Subsidiary agrees to be bound by the terms of the Indenture as a
Subsidiary Guarantor; provided that any Person constituting a Subsidiary
Guarantor as described above shall cease to be a Subsidiary Guarantor when its
respective Guarantee is released in accordance with the terms thereof.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) on the date of such designation
is not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company or such
Restricted Subsidiary; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Capital Stock or (y) to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or its Restricted Subsidiaries, and has at least one executive
officer that is not a director or executive officer of the Company or its
Restricted Subsidiaries.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) 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, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities are
owned by such Person or any Wholly Owned Restricted Subsidiary of such Person.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Private Notes were originally sold by the Company on April 30, 1998 to
the Initial Purchaser pursuant to the Purchase Agreement, dated as of April
30, 1998, by and among the Initial Purchaser, the Company and the Subsidiary
Guarantors (the "Purchase Agreement"). The Initial Purchaser subsequently
placed the Private Notes (i) within the United States to qualified
institutional buyers in reliance on Rule 144A under the Securities Act and
(ii) to a limited number of institutional "accredited investors," within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act, that
agreed in writing to comply with certain transfer restrictions and other
conditions. As a condition to the Purchase Agreement, the Company, the
Subsidiary Guarantors and the Initial Purchaser entered into the Registration
Rights Agreement on the Issue Date pursuant to which the Company agreed, for
the benefit of the holders, that it will at its expense (i) within 45 days
after the Issue Date (the "Filing Date"), file a registration statement on an
appropriate registration form (the "Exchange Offer Registration Statement")
with the Commission with respect to a registered offer (the "Exchange Offer")
to exchange the Private Notes for notes of the Company (the "Exchange Notes"),
guaranteed by the Subsidiary Guarantors, which Exchange Notes will have terms
identical to the Private Notes (except (A) the Exchange Notes will bear a
different CUSIP Number from the Private Notes, (B) the issuance of the
Exchange Notes will have been registered under the Securities Act and,
therefore, the Exchange Notes will not bear legends restricting the transfer
thereof, and (C) holders of the Exchange Notes will not be entitled to certain
rights of holders of Private Notes under the Registration Rights Agreement)
and (ii) use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 120 days
after the Issue Date. Upon the Exchange Offer Registration Statement being
declared effective, the Company and the Subsidiary Guarantors will offer the
Exchange Notes (and the related Guarantees) in exchange for surrender of the
Private Notes (and the related Guarantees). The Company and the Subsidiary
Guarantors will keep the Exchange Offer open for acceptance for not less than
thirty days (or longer if required by applicable law) after the date notice of
the Exchange Offer is mailed to the holders of Private Notes. For each of the
Private Notes surrendered pursuant to the Exchange Offer, the holder who
surrendered such Private Note will receive an Exchange Note having a principal
amount equal to that of the surrendered Private Note. Interest on each
Exchange Note will accrue from the Issue Date. Holders whose Private Notes are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Private Notes.
Under existing interpretations of the Commission contained in several no-
action letters to third parties, the Exchange Notes (and the related
Guarantees) will be transferable by holders thereof (other than affiliates of
the Company and the Subsidiary Guarantors and persons participating in the
distribution of the Notes) after the Exchange Offer without further
registration under the Securities Act; provided, however, that each Holder
that wishes to exchange its Private Notes for Exchange Notes will be required
to represent (i) that any Exchange Notes to be received by it will be acquired
in the ordinary course of its business, (ii) that it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes in violation of the
Securities Act, (iii) that it is not an "affiliate" (as defined in Rule 405
promulgated under the Securities Act) of the Company or any Subsidiary
Guarantor, (iv) if such Holder is not a broker-dealer, that it is not engaged
in, and does not intend to engage in, the distribution of Exchange Notes and
(v) if such Holder is a broker-dealer (a "Participating Broker-Dealer") that
will receive Exchange Notes for its own account in exchange for Notes that
were acquired as a result of market-making or other trading activities, that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Commission has taken the position that Participating Broker-Dealers
may fulfill their prospectus delivery requirements with respect to the
Exchange Notes (other than a resale of an unsold allotment from the original
sale of the Private Notes) with the prospectus contained in the Exchange Offer
Registration Statement. The Company and the Subsidiary Guarantors have agreed
to make available, during the period required by the Securities Act, a
prospectus meeting the requirements of the Securities Act for use by
Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements for use in connection with any resale of
Exchange
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Notes. In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions
or an exemption therefrom is available and complied with.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company and the Subsidiary
Guarantors are not permitted to effect an Exchange Offer, (ii) the Exchange
Offer is not consummated within 150 days of the Issue Date, (iii) in certain
circumstances, certain holders of unregistered Exchange Notes so request, or
(iv) in the case of any Holder that participates in the Exchange Offer, such
Holder does not receive Exchange Notes on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than
due solely to the status of such Holder as an affiliate of the Company or any
Subsidiary Guarantor within the meaning of the Securities Act), then in each
case, the Company and the Subsidiary Guarantors will (x) promptly deliver to
the Holders and the Trustee written notice thereof and (y) at their sole
expense, (a) as promptly as practicable, and in any event prior to 30 days
after such filing obligation arises, file a shelf registration statement
covering resales of the Private Notes (the "Shelf Registration Statement"),
(b) use their best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act on or prior to 90 days after the
filing thereof, and (c) use their best efforts to keep effective the Shelf
Registration Statement until the earlier of two years after the Issue Date or
such time as all of the applicable Notes have been sold thereunder. The
Company and the Subsidiary Guarantors will, in the event that a Shelf
Registration Statement is filed, provide to each Holder copies of the
prospectus that is a part of the Shelf Registration Statement, notify each
such Holder when the Shelf Registration Statement for the Private Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Private Notes. A Holder that sells Private Notes
pursuant to the Shelf Registration Statement will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus
to purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by
the provisions of the Registration Rights Agreement that are applicable to
such Holder (including certain indemnification rights and obligations).
If the Company or the Subsidiary Guarantors fail to comply with the above
provision or if the Exchange Offer Registration Statement or the Shelf
Registration Statement fails to become effective, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable in
respect of the Private Notes as follows:
(i) if (A) neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement is filed with the Commission within 45 days
following the Issue Date or (B) notwithstanding that the Company and the
Subsidiary Guarantors have consummated or will consummate an Exchange
Offer, the Company and the Subsidiary Guarantors are required to file a
Shelf Registration Statement and such Shelf Registration Statement is not
filed on or prior to the date required by the Registration Rights
Agreement, then commencing on the day after either such required filing
date, Additional Interest shall accrue on the principal amount of the
Private Notes at a rate of .50% per annum for the first 90 days immediately
following each such filing date, such Additional Interest rate increasing
by an additional .50% per annum at the beginning of each subsequent 90-day
period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the Commission within 120
days following the Issue Date or (B) notwithstanding that the Company and
the Subsidiary Guarantors have consummated or will consummate an Exchange
Offer, the Company and the Subsidiary Guarantors are required to file a
Shelf Registration Statement and such Shelf Registration Statement is not
declared effective by the Commission on or prior to the 90th day following
the date such Shelf Registration Statement was required to be filed, then,
commencing on the day after either such required effective date, Additional
Interest shall accrue on the principal amount of the Private Notes at a
rate of .50% per annum for the first 90 days immediately following such
date, such Additional Interest rate increasing by an additional .50% per
annum at the beginning of each subsequent 90-day period; or
(iii) if (A) the Company and the Subsidiary Guarantors have not exchanged
Exchange Notes for all Private Notes validly tendered in accordance with
the terms of the Exchange Offer on or prior to the 30th
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day after the date on which the Exchange Offer Registration Statement was
declared effective or (B) if applicable, the Shelf Registration Statement
has been declared effective and such Shelf Registration Statement ceases to
be effective at any time prior to the second anniversary of the Issue Date
(other than after such time as all Private Notes have been disposed of
thereunder), then Additional Interest shall accrue on the principal amount
of the Private Notes at a rate of .50% per annum for the first 90 days
commencing on (x) the 31st day after such effective date, in the case of
(A) above, or (y) the day such Shelf Registration Statement ceases to be
effective in the case of (B) above, such Additional Interest rate
increasing by an additional .50% per annum at the beginning of each
subsequent 90-day period;
provided, however, that the Additional Interest rate on the Private Notes may
not exceed in the aggregate 1.0% per annum; provided, further, however, that
(1) upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration or a Shelf Registration
Statement (in the case of clause (ii) above), or (3) upon the exchange of
Exchange Notes for all Private Notes tendered (in the case of clause (iii) (A)
above), or upon the effectiveness of the Shelf Registration Statement which
had ceased to remain effective (in the case of clause (iii) (B) above),
Additional Interest on the Private Notes as a result of such clause (or the
relevant subclause thereof), as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or (iii)
above will be payable in cash on the same original interest payment dates as
the Private Notes.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Private Notes accepted in the Exchange Offer. Holders may tender some or all
of their Private Notes pursuant to the Exchange Offer. However, Private Notes
may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the Exchange Notes bear a different CUSIP
Number from the Private Notes, (ii) the Exchange Notes have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (iii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for an increase in the interest rate on the Private
Notes in certain circumstances relating to the timing of the Exchange Offer,
all of which rights will terminate when the Exchange Offer is terminated. The
Exchange Notes will evidence the same debt as the Private Notes and will be
entitled to the benefits of the Indenture. See "Description of Exchange
Notes."
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Private Notes were outstanding. This Prospectus and the Letter of
Transmittal are being mailed to persons who were Holders of Private Notes on
the close of business on the date of this Prospectus.
Holders of Private Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
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If any tendered Private Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Private Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered Holders an announcement thereof, each prior to 9:00 a.m., New York
City time on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under
"--Conditions" shall not have been satisfied, by giving oral or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange Offer in any manner, whether before or after any
tender of the Private Notes. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes will accrue from the Issue Date, May 5, 1998,
payable semi-annually in arrears on May 1 and November 1 of each year,
commencing November 1, 1998, at the rate of 9 3/4% per annum. Holders whose
Private Notes are accepted for exchange will be deemed to have waived the
right to receive any interest accrued on the Private Notes.
PROCEDURES FOR TENDERING
Only a Holder of Private Notes may tender such Private Notes in the Exchange
Offer. To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the
Private Notes and any other required documents, to the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date. To be tendered
effectively, the Private Notes, Letter of Transmittal and other required
documents must be completed and received by the Exchange Agent at the address
set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date. Delivery of the Private Notes may be made by book-
entry transfer in accordance with the procedures described below. Confirmation
of such book-entry transfer must be received by the Exchange Agent prior to
the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Company
the representations set forth above in the second paragraph under the heading
"--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
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THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE
THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Private Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined). In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantees must be by a member firm of the Medallion System
(an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Private
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Private Notes at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and, subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Private Notes by causing such Book-Entry
Transfer Facility to transfer such Private Notes into the Exchange Agent's
account with respect to the Private Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
Private Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Private Notes and withdrawal of tendered
Private Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Private Notes not properly tendered or any Private
Notes the Company's acceptance of which would, in the opinion of counsel for
the Company, be unlawful. The Company also reserves the right in its sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Private Notes. The Company's interpretation of the
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terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Private
Notes must be cured within such time as the Company shall determine. Although
the Company intends to notify holders of defects or irregularities with
respect to tenders of Private Notes, neither the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Private Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Private
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available, (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer,
prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Private Notes and the principal amount of Private Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificates(s) representing the Private Notes (or a confirmation of book-
entry transfer of such Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility), and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificates(s) representing all
tendered Private Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Private Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility), and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within five
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
ACCEPTANCE OF PRIVATE NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Private Notes
properly tendered and will issue the Exchange Notes promptly after acceptance
of the Private Notes. See "Conditions" below. For purposes of the Exchange
Offer, the Company will be deemed to have accepted properly tendered Private
Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. For each Private Note accepted for
exchange, the holder of such Private Note will receive an Exchange Note having
a principal amount equal to that of the surrendered Private Note.
In all cases, issuance of Exchange Notes for Private Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Private Notes or a
timely Book-Entry Confirmation of such Private Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal and all other required documents. If any
tendered Private Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Private Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted
or non-exchanged Private Notes will be returned without expense to the
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tendering holder thereof (or, in the case of Private Notes tendered by book-
entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry procedures described below, such non-
exchanged Private Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration
or termination of the Exchange Offer.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Private Notes to be
withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn
(including the certificate number(s) and principal amount of such Private
Notes, or, in the case of Private Notes transferred by book-entry transfer,
the name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Private Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Private Notes register the transfer of such Private Notes into the name of the
person withdrawing the tender and (iv) specify the name in which any such
Private Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Private Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Private Notes so withdrawn are validly retendered. Any Private
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Private Notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or issue Exchange Notes for, any Private
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Private Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by any governmental agency which might materially impair the ability of the
Company or the Subsidiary Guarantors to proceed with the Exchange Offer or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company or the Subsidiary Guarantors;
(b) the Exchange Offer violates applicable law or any applicable
interpretation of the staff of the Commission; or
(c) any governmental approval has not been obtained, which approval the
Company and the Subsidiary Guarantors shall deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Private Notes and
return all tendered Private Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Private Notes tendered prior to the expiration
of the Exchange Offer, subject, however, to the rights of holders to withdraw
such Private Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes which have not been withdrawn. In addition,
the Company has reserved the right, notwithstanding the satisfaction of each
of the foregoing conditions, to terminate or amend the Exchange Offer.
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The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Private Notes being tendered or accepted for exchange.
EXCHANGE AGENT
American National Bank and Trust Company of Chicago, which also acts as
Trustee under the Indenture, has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for a
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
By Registered or By Facsimile Transmission By Overnight Courier
Certified Mail American National Bank American National Bank
American National Bank and Trust Company of and Trust
and Trust Company of Chicago Company of Chicago
Chicago
(312) 407-1067 Corporate Trust
Securities
ATTN: Barbara Arndt
Corporate Trust Confirm by Telephone: 1 N. State Street Teller
Redemption Barbara Arndt 9th Floor
Unit (312) 336-9123 Chicago, IL 60670
1 First National Plaza For Information Call: ATTN: Barbara Arndt
9th Floor, Anjali J. Gottreich
Suite 0124 (312) 661-6042
Chicago, IL 60670-0124
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional
solicitations may be made by telegraph, telecopy, telephone or in person by
officers and employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others to
solicit acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Private Notes, which is face value, as reflected in the Company's accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company. The expenses of the Exchange Offer
will be amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Private Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Private
Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) so long as the Private Notes are eligible for resale pursuant
to Rule 144A, to a person
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inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act
in a transaction meeting the requirements of Rule 144A, in accordance with
Rule 144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Company), (iii) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act, or (iv) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
Following the consummation of the Exchange Offer, holders of the Private
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Private Notes will not have any further registration rights,
except with respect to a Shelf Registration Statement in the event that a
Shelf Notice is delivered by the Company, and such Private Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity
of the market for such Private Notes could be adversely affected.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in certain "no-action" letters issued to
third parties and unrelated to the Company and the Exchange Offer, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Private Notes may be offered for resale, resold and otherwise transferred
by holders thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no intention, nor any
arrangement or understanding with any person, to participate in the
distribution of such Exchange Notes in violation of the provisions of the
Securities Act. However, if any holder acquires Exchange Notes in the Exchange
Offer for the purpose of distributing or participating in the distribution of
the Exchange Notes, such holder cannot rely on the position of the staff of
the Commission set forth in such "no-action" letters or any similar
interpretive letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction, unless an exemption from registration is otherwise available.
Further, each Participating Broker-Dealer that receives Exchange Notes for its
own account in exchange for Private Notes, where such Private Notes were
acquired by such Participating Broker-Dealer as a result of market-making or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such Notes. As contemplated by these "no-
action" letters and the Registration Rights Agreement, each holder accepting
the Exchange Offer is required to make certain representations to the Company
in the Letter of Transmittal. See "--Purpose and Effect of Exchange Offer."
BOOK ENTRY; DELIVERY AND FORM
Except as described below under "--Certificated Securities," the Private
Notes (and the related Guarantees) are represented by one or more permanent
global certificates in definitive, fully registered form (the "Outstanding
Global Notes") and the Exchange Notes will be issued in the form of one or
more permanent global certificates in definitive fully registered form (the
"Exchange Global Notes"). The term "Global Notes" means the Outstanding Global
Notes or the Exchange Global Notes, as the context may require. The
Outstanding Global Notes were deposited on the date of closing of the sale of
the Private Notes, and the Exchange Global Notes will be deposited on the date
of closing of the Exchange Offer, with the Trustee as custodian for The
Depository Trust Company ("DTC"), New York, New York, and registered in the
name of a nominee of DTC, in each case for credit to an account of a direct or
indirect participant as described below. The Outstanding Global Notes are
subject to certain restrictions on transfer set forth therein and bear a
legend regarding such restrictions.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. In addition, transfer of beneficial interests in the
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Global Notes will be subject to the applicable rules and procedures of DTC and
its direct or indirect participants, which may change from time to time.
Beneficial interests in the Global Notes may not be exchanged for Notes in
certificated form except in the limited circumstances described below. See "--
Certificated Securities."
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of Participants. The Participants include securities brokers and
dealers (including the Initial Purchaser), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Exchange Global Note, DTC will credit the accounts
of Participants designated by the Initial Purchaser with portions of the
principal amount of the Exchange Global Note and (ii) ownership of such
interests in the Exchange Global Notes will be shown on, and the transfer
ownership thereof will be effected only through, records maintained by DTC
(with respect to Participants) or by Participants and the Indirect
Participants (with respect to other owners of beneficial interests in the
Exchange Global Note). Investors in the Exchange Global Note may hold their
interests therein directly through DTC, if they are Participants in such
system, or indirectly through organizations that are Participants in such
system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in a Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of
a person having a beneficial interest in a Global Note to pledge such interest
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Notes, see "--Certificated Securities."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal and premium and interest on a Global
Note registered in the name of DTC or its nominee will be payable by the
Trustee to DTC or its nominee in its capacity as the registered holder under
the Indenture. Under the terms of the Indenture, the Company and the Trustee
will treat the persons in whose names the Notes, including the Global Note,
are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or
will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Note or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants.
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DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or its Participants in
identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its Participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants
to whose account DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given direction. However,
if there is an Event of Default under the Indenture, DTC reserves the right to
exchange the Global Note for legended Notes in certificated form, and to
distribute such Notes to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Initial
Purchaser or the Trustee will have any responsibility for the performance by
DTC or their Participants or Indirect Participants of their obligations under
the rules and procedures governing their operations.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in certificated form ("Certificated Securities"). Upon any
such issuance, the Trustee is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such person
or persons (or the nominee of any thereof). All such certificated Notes would
be subject to the legend requirements described herein under "Transfer
Restrictions." In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and
the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each person that the Global Note Holder
and the Depositary identify as being the beneficial owner of the related
Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal of, interest and premium, if any, on
the Global Note) be made by wire transfer of immediately available
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funds to the accounts specified by the Global Note Holder. With respect to
Certificated Securities, the Company will make all payments of principal of,
interest and premium, if any, on the Notes, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no
such account is specified, by mailing a check to each such Holder's registered
address. Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearing-house or next-day funds. In contrast,
the Notes represented by the Global Note are expected to trade in DTC's Same-
Day Funds Settlement System, and any permitted secondary market trading in
such Notes will, therefore, be required by DTC to be settled in immediately
available funds. The Company expects that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the material anticipated federal income tax
consequences of the issuance of Private Notes and the Exchange Offer is based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the final, temporary and proposed regulations promulgated thereunder,
and administrative rulings and judicial decisions now in effect, all of which
are subject to change (possibly with retroactive effect) or different
interpretations. The following summary is not binding on the Internal Revenue
Service ("IRS"), and there can be no assurance that the IRS will take a
similar view with respect to the tax consequences described below. No ruling
has been or will be requested by the Company from the IRS on any tax matters
relating to the Private Notes or the Exchange Offer. This discussion is for
general information only and does not purport to address all of the possible
federal income tax consequences or any state, local or foreign tax
consequences of the acquisition, ownership and disposition of the Private
Notes, the Exchange Notes or the Exchange Offer. For purposes of this
discussion regarding "Certain Federal Income Tax Considerations," unless
otherwise specified, the Private Notes and the Exchange Notes are collectively
referred to as the "Notes." This discussion is limited to investors who will
hold the Private Notes and the Exchange Notes as capital assets and does not
address the federal income tax consequences that may be relevant to particular
investors in light of their unique circumstances or to certain types of
investors (such as dealers in securities, insurance companies, financial
institutions, tax-exempt entities, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
"functional currency" is not the United States dollar) who may be subject to
special treatment under federal income tax laws.
EXCHANGE OFFER
The exchange of the Private Notes for Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" because the Exchange
Notes should not be considered to differ materially in kind or extent from the
Private Notes. Rather, the Exchange Notes received by a holder of the Private
Notes should be treated as a continuation of the Private Notes in the hands of
such holder. As a result, there should be no adverse federal income tax
consequences to holders exchanging the Private Notes for the Exchange Notes
pursuant to the Exchange Offer.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means the beneficial owner of a Note
that for U.S. federal income tax purposes is (i) a citizen or resident (as
defined in Section 7701(b) of the Code) of the U.S., (ii) a corporation,
partnership or other entity formed under the laws of the U.S. or any political
subdivision hereof, (iii) an estate the income of which is subject to U.S.
federal income taxation regardless of its source, (iv) in general, a trust
subject to the primary supervision of a court within the U.S. and the control
of a U.S. person as described in Section 7701(a)(30) of the Code, and (v) any
other person whose income or gain with respect to a Note is effectively
connected with the conduct of a U.S. trade or business. A "Non-U.S. Holder" is
any beneficial owner other than a U.S. Holder.
INTEREST
A holder of a Note will be required to report stated interest on the Note as
interest income in accordance with the holder's method of accounting at the
time the interest is accrued or (actually or constructively) received. The
Company expects that the Notes will not be considered to be issued with
original issue discount for tax purposes.
TAX BASIS IN NOTES
A holder's tax basis in a Note will be the holder's purchase price for the
Note. If a holder of a Private Note exchanges the Private Note for an Exchange
Note pursuant to the Exchange Offer, the tax basis of the Exchange
114
<PAGE>
Note immediately after such exchange should equal the holder's tax basis in
the Private Note immediately prior to the exchange.
DISPOSITION OF NOTES
The sale, exchange, redemption or other disposition of a Note, except in the
case of an exchange pursuant to the Exchange Offer (see the above discussion),
generally will be a taxable event. A holder generally will recognize gain or
loss equal to the difference between (i) the amount of cash plus the fair
market value of any property received upon such sale, exchange, redemption or
other taxable disposition of the Note (except to the extent attributable to
accrued interest) and (ii) the holder's adjusted tax basis in such debt
instrument. Such gain or loss will be capital gain or loss. The recently
enacted Taxpayer Relief Act of 1997 made certain changes with respect to
taxation of long-term capital gains earned by taxpayers other than a
corporation. In general and subject to certain transition rules, the maximum
tax rate for individual taxpayers on net long-term capital gains (i.e., the
excess of net long-term capital gain over net short-term capital loss) is
lowered to 20% for most assets held for more than 18 months at the time of
disposition. Capital gains on the disposition of assets held for more than one
year and not more than 18 months at the time of disposition will be taxed as
"mid-term gain" at a maximum rate of 28%. A lower rate of 18% will apply after
December 31, 2000 for assets held for more than 5 years. However, the 18% rate
applies only to assets acquired after December 31, 2000 unless the taxpayer
elects to treat an asset held prior to such date as sold for fair market value
on January 1, 2001. In the case of individuals whose ordinary income is taxed
at a 15% rate, the 20% rate for assets held for more than 18 months is reduced
to 10% and the 18% rate for assets held for more than five years is reduced to
8%.
PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE OR DATE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquire Notes other than at par, including those provisions
of the Internal Revenue Code relating to the treatment of "market discount"
and "amortizable bond premium." Any such purchaser should consult its tax
advisor as to the consequences of the acquisition, ownership and disposition
of Notes.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Notes and (2)
the issue price of the Exchange Notes must be withheld and remitted to the
U.S. Treasury. Therefore, each holder should complete and sign IRS Form W-9 so
as to provide the information and certification necessary to avoid backup
withholding. However, certain holders (including, among others, certain
foreign persons) are not subject to these backup withholding and reporting
requirements. To qualify as an exempt foreign recipient, that holder should
complete and sign IRS Form W-8, attesting to that individual's exempt foreign
status. Such statements can be obtained from the Company. For further
information concerning backup withholding and instructions for completing the
IRS Form W-8 and IRS Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the IRS Form
W-8 and IRS Form W-9 if the Notes are held in more than one name), contact the
Company.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be
reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Non-U.S. Holder.
115
<PAGE>
For purposes of withholding tax on interest discussed below, a Non-U.S.
Holder (as defined above) includes a non-resident fiduciary of an estate or
trust. For purposes of the following discussion, interest and gain on the
sale, exchange or other disposition of a Note will generally be considered to
be "U.S. trade or business income" if such income or gain is (i) effectively
connected with the conduct of a U.S. trade or business or (ii) in the case of
most treaty residents, attributable to a permanent establishment (or, in the
case of an individual, a fixed base) in the U.S.
Stated Interest. Generally, any interest paid to a Non-U.S. Holder of a Note
that is not U.S. trade or business income will not be subject to U.S. federal
income tax if the interest qualifies as "portfolio interest." Generally,
interest on the Notes will qualify as portfolio interest if (i) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total voting
power of all voting stock of the Company and is not a "controlled foreign
corporation" with respect to which the Company is a "related person" within
the meaning of the Code, (ii) the beneficial owner, under penalty of perjury,
certifies that the beneficial owner is not a U.S. person and such certificate
provides the beneficial owner's name and address, (iii) the Non-U.S. Holder is
not a bank receiving interest on an extension of credit made pursuant to a
loan agreement made in the ordinary course of its trade or business, and (iv)
the Notes are in registered form.
An obligation is treated as an obligation in registered form if: (i) the
obligation is registered as to both principal and any stated interest with the
issuer (or its agent) and transfer of the obligation may be effected only by
surrender of the old instrument and either the reissuance by the issuer of the
old instrument to the new holder or the issuance by the issuer of a new
instrument to the new holder; or (ii) the right to principal and interest may
only be transferred through a book entry system maintained by the issuer (or
its agent). The Restricted Global Note is in registered form, has been
deposited with DTC and may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee. Except for
certain circumstances under which certificated notes are issued, beneficial
interests in the Restricted Global Note may only be transferred through the
book-entry system of DTC. If Certificated Securities are issued, such
securities may only be transferred by surrender of the old instrument and
issuance by the Company of a new instrument. See "Book Entry; Delivery and
Form."A withholding agent that has determined that the payee is a foreign
person must determine whether the payee is entitled to a reduced rate of
withholding. The documentation required is documentation that a withholding
agent must be able to associate with a payment upon which it can rely to treat
the payment as made to a foreign person that is the beneficial owner of the
payment. Portfolio interest is exempt from such withholding. A withholding
agent may only rely on the beneficial owner's claim of foreign status absent
actual knowledge or reason to know otherwise. The withholding agent must hold
the documentation prior to payment and must not have been notified by the IRS
that any of the information on the withholding certificate is incorrect or
unreliable. For payments made after 1998, a beneficial owner withholding
certificate is valid only if it is provided on IRS Form W-8 (for payments
before 1999, a substitute form may be provided). An IRS Form W-8 is valid only
if its validity period has not expired, it is signed under penalties of
perjury by the beneficial owner and it contains all of the information
required on the form. The required information is the beneficial owner's name,
permanent resident address, tax identification number (if required), the
country under the laws of which the beneficial owner is created, incorporated
or governed, the classification of the entity, and such other information as
may be required by the regulations. As long as these certification
requirements and the other qualifications mentioned in clauses (i) through
(iii) in the preceding paragraph discussed above are satisfied, interest paid
to Non-U.S. Holders of the Notes should not be subject to U.S. federal income
tax.
The gross amount of payments to a Non-U.S. Holder of interest that does not
qualify for the portfolio interest exemption and that is not U.S. trade or
business income will be subject to U.S. federal income tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding.
U.S. trade or business income will be taxed at regular U.S. tax rates rather
than the 30% gross rate. In the case of a Non-U.S. Holder that is a
corporation, such U.S. trade or business income may also be subject to the
branch profits tax (which is generally imposed on a foreign corporation on the
actual or deemed repatriation from the U.S. of earnings and profits
attributable to U.S. trade or business income) at a 30% rate. The branch
profits tax may not apply (or may apply at a reduced rate) if a recipient is a
qualified resident of certain countries with which the U.S. has an
116
<PAGE>
income tax treaty. To claim the benefit of a tax treaty or to claim exemption
from withholding because the income is U.S. trade or business income, the Non-
U.S. Holder must provide a properly executed IRS Form 1001 or IRS Form 4224
(or such successor forms as the IRS designates), as applicable, prior to the
payment of interest. these forms must be periodically updated. Under recently
issued Treasury Regulations (the "New Regulations"), the required IRS Form
1001 and IRS Form 4224 will be replaced by a new IRS Form W-8. Under the New
Regulations, a Non-U.S. Holder who is claiming the benefits of a treaty may be
required to obtain a U.S. taxpayer identification number and make certain
certifications to the Company. Special procedures are provided in the New
Regulations for payments through qualified intermediaries. Prospective
investors should consult their tax advisors regarding the effect, if any, of
the New Regulations.
Sale, Exchange or Redemption of Notes. Except as described below and subject
to the discussion concerning backup withholding, any gain realized by a Non-
U.S. Holder on the sale, exchange or redemption of a Note generally will not
be subject to U.S. federal income tax, unless (i) such gain is U.S. trade or
business income, (ii) subject to certain exceptions, the Non-U.S. Holder is an
individual who holds the Note as a capital asset and is present in the U.S.
for 183 days or more in the taxable year of the disposition, or (iii) the Non-
U.S. Holder is subject to tax pursuant to the provisions of U.S. tax law
applicable to certain U.S. expatriates (including certain former citizens or
residents of the U.S.).
Information Reporting and Backup Withholding. The Company must report
annually to the IRS and each Non-U.S. Holder any interest that is subject to
withholding, or that is exempt from U.S. withholding tax pursuant to a tax
treaty, or interest that is exempt from U.S. tax under the portfolio interest
exception. Copies of these information returns may also be made available
under the provisions of a specific treaty or agreement to the tax authorities
of the country in which the Non-U.S. Holder resides.
Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments of principal on the Notes by
the Company to a Non-U.S. Holder if the holder certifies as to its Non-U.S.
status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor its Paying Agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemption
are not in fact, satisfied).
The payment of the proceeds from the disposition of Notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
Non-U.S. Holder status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a Note
to or through a non-U.S. office of a non-U.S. broker that is not a U.S.
related person will not be subject to information reporting or backup
withholding. For this purpose, a "U.S. related person" is (i) a "controlled
foreign corporation" for U.S. federal income tax purposes, (ii) a foreign
person 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment (or for
such part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a U.S. trade or
business, or (iii) with respect to payments made after December 31, 1998, a
foreign partnership that, at any time during its taxable year, is 50% or more
(by income or capital interest) owned by U.S. persons or is engaged in the
conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of Notes to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, information reporting is required on the payment unless the
broker has documentary evidence in the files that the owner is a Non-U.S.
Holder and the broker has no knowledge to the contrary. Backup withholding
will not apply to payments made through foreign offices of a broker that is
not a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
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<PAGE>
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES IS
FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS
OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING
AND DISPOSING OF THE NOTES OF THE COMPANY, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN
APPLICABLE LAWS.
PLAN OF DISTRIBUTION
Except as provided herein, this Prospectus may not be used for an offer to
resell, resale or other transfer of Exchange Notes. There is no existing
market for the Private Notes. No assurance can be given as to the liquidity
of, or trading markets for, the Exchange Notes.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and
subject to the immediately following sentence, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by the holders thereof without
further compliance with the registration and prospectus delivery provisions of
the Securities Act. However, any holder of Private Notes who is an "affiliate"
of the Company or who intends to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes (i) will not be able to rely on the
interpretation by the staff of the Commission set forth in the above-mentioned
no-action letters, (ii) will not be able to tender its Private Notes in the
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Private Notes unless such sale or transfer is made pursuant to
an exemption from such requirements.
Each holder of the Private Notes (other than certain specified holders) who
wishes to exchange Private Notes for Exchange Notes in the Exchange Offer will
be required to represent to the Company, among other things, (i) that any
Exchange Notes to be received by it will be acquired in the ordinary course of
its business, (ii) that at the time of the commencement of the Exchange Offer,
it has no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes
in violation of the Securities Act, (iii) that it is not an "affiliate" (as
defined in Rule 405 promulgated under the Securities Act) of the Company, (iv)
if such holder is not a Participating Broker-Dealer, that it is not engaged
in, and does not intend to engage in, the distribution of the Exchange Notes
and (v) if such holder is a Participating Broker-Dealer that will receive
Exchange Notes for its own account in exchange for Private Notes that were
acquired as a result of market-making or other trading activities, that it
will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal also states that by acknowledging that it
will deliver a prospectus, and by delivering such a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of the Private Notes) with the
Prospectus contained in the Exchange Offer Registration Statement. The Company
and the Subsidiary Guarantors have agreed to make available, during the period
required by the Securities Act, a prospectus meeting the requirements of the
Securities Act for use by Participating Broker-Dealers and other persons, if
any, with similar prospectus delivery requirements for use in connection with
any resale of such Exchange Notes. In addition, until , 1998 (90 days
after the date of this Prospectus), all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver
this Prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer who holds Private Notes acquired for its
own account as a result of market-making activities or other trading
activities in connection with resales of Exchange Notes received in exchange
for Private Notes.
118
<PAGE>
The Company will not receive any proceeds from the exchange of Private Notes
for Exchange Notes, including those exchanged by Participating Broker-Dealers.
Exchange Notes received by broker-dealers for their own account pursuant to
the Exchange Offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the
writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, or at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through broker-dealers who
may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any Exchange Notes. Any broker-
dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any person that participates in the
distribution of such Exchange Notes may be deemed an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such broker-dealers
may be deemed to be underwriting compensation under the Securities Act.
For a period of 90 days after the Expiration Date, the Company will send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any Participating Broker-Dealer that requests such documents in
the Letter of Transmittal. The Company has agreed to pay all expenses
incidental to the Exchange Offer other than discounts or commissions of any
broker-dealers and will indemnify the holders of the Private Notes (including
Participating Broker-Dealers) participating in the Exchange Offer against
certain liabilities, including liabilities under the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for Private Notes pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Company of the happening of any event which
makes any statement in this Prospectus untrue in any material respect or which
requires the making of any changes in this Prospectus in order to make any
statement herein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend the use of
this Prospectus until the Company has amended or supplemented this Prospectus
to correct such misstatement or omission and has furnished copies of the
amended and supplemented Prospectus to such broker-dealer. If the Company
gives any such notice to suspend the use of the Prospectus, it will extend the
90-day period referred to above by the number of days during the period from
and including the date of the giving of such notice up to and including when
broker-dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of Exchange Notes.
The Company has agreed, pursuant to the Registration Rights Agreement, to
pay all expenses incident to the Exchange Offer (other than any underwriting
discounts or commissions), including reasonable fees and disbursements of one
special counsel for all of the Holders of the Notes. In addition, the Company
and the Subsidiary Guarantors agreed to indemnify the holders of the Notes
against certain liabilities.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Peak Healthcare, L.L.C. as of and
for the years ending September 30, 1996 and 1997, and the financial statements
of West Suburban Kidney Center, S.C. for the year ended September 30, 1995
included in this Prospectus, have been audited by Ernst & Young LLP,
independent accountants, as set forth in their reports thereon and included
herein.
LEGAL MATTERS
The validity of the Exchange Notes being offered hereby is being passed upon
for the Company by Katten Muchin & Zavis, Chicago, Illinois. Alan Berry, a
partner in Katten Muchin & Zavis, is a director of the Company. See
"Management."
119
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-4 under the Securities Act
with respect to the Exchange Notes offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information, reference is made to the Registration Statement and exhibits
thereto. The information so omitted, including exhibits, may be obtained from
the Commission at its principal office in Washington, D.C. upon the payment of
the prescribed fees, or may be examined without charge at the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-
1004.
120
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EVEREST HEALTHCARE SERVICES CORPORATION (THE COMPANY)
Unaudited Condensed Consolidated Balance Sheet at March 31, 1998........ F-2
Unaudited Condensed Consolidated Statements of Operations for the Six
Months Ended March 31, 1998 and 1997................................... F-3
Unaudited Consolidated Statement of Stockholders' Equity for the Six
Months Ended March 31, 1998 and 1997................................... F-4
Unaudited Condensed Consolidated Statements of Cash Flows for the Six
Months Ended March 31, 1998 and 1997................................... F-5
Notes to Unaudited Condensed Consolidated Financial Statements.......... F-6
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
Report of Independent Auditors.......................................... F-7
Consolidated Balance Sheets at September 30, 1996 and 1997.............. F-8
Consolidated Statements of Operations and Equity Interests for the Years
Ended September 30, 1996 and 1997...................................... F-9
Consolidated Statements of Cash Flows for the Years Ended September 30,
1996 and 1997.......................................................... F-10
Notes to Consolidated Financial Statements.............................. F-11
WEST SUBURBAN KIDNEY CENTER, S.C. AND SUBSIDIARY
Report of Independent Auditors.......................................... F-23
Consolidated Statement of Operations for the Year Ended September 30,
1995................................................................... F-24
Consolidated Statement of Cash Flows for the Year Ended September 30,
1995................................................................... F-25
Notes to Consolidated Financial Statements.............................. F-26
</TABLE>
F-1
<PAGE>
EVEREST HEALTHCARE SERVICES CORPORATION (THE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 3,140,103
Patient accounts receivable, less allowance of $3,544,000....... 33,521,626
Other current assets............................................ 4,940,490
------------
Total current assets.......................................... 41,602,219
Other assets:
Goodwill, net................................................... 62,859,099
Amounts due from affiliates..................................... 14,396,704
Other........................................................... 9,491,232
------------
Total other assets............................................ 86,747,035
Property and equipment, net....................................... 17,850,064
------------
Total assets................................................ $146,199,318
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 7,309,795
Accrued liabilities............................................. 13,592,904
Current portion of long-term obligations........................ 881,564
------------
Total current liabilities..................................... 21,784,263
Notes payable to banks............................................ 42,733,387
Notes payable to stockholders..................................... 7,208,809
Notes payable--other.............................................. 7,000,000
Capital lease obligations......................................... 714,530
Minority interests................................................ 1,352,991
Stockholders' equity
Common stock.................................................... 127,317
Additional paid-in capital...................................... 56,434,451
Retained earnings............................................... 8,843,570
------------
Total stockholders' equity.................................... 65,405,338
------------
Total liabilities and stockholders' equity.................. $146,199,318
============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-2
<PAGE>
EVEREST HEALTHCARE SERVICES CORPORATION (THE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Net revenues.......................................... $53,244,542 $67,531,294
Operating expenses:
Patient care costs.................................. 37,046,700 43,872,007
General and administrative.......................... 8,376,926 12,423,698
Provision for bad debts............................. 562,335 1,920,741
Depreciation and amortization....................... 2,081,981 2,834,886
----------- -----------
Total operating expenses.......................... 48,131,620 61,051,332
----------- -----------
Income from operations................................ 5,176,600 6,479,962
Nonoperating income (expense):
Interest expense.................................... (1,411,361) (2,201,391)
Interest income..................................... 438,398 718,372
Minority interests in earnings...................... (764,496) 118,186
----------- -----------
(1,737,459) (1,364,833)
----------- -----------
Income before income taxes............................ 3,439,141 5,115,129
Income taxes.......................................... 1,722,249 2,618,598
----------- -----------
Net income............................................ $ 1,716,892 $ 2,496,531
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-3
<PAGE>
EVEREST HEALTHCARE SERVICES CORPORATION (THE COMPANY)
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED EQUITY
STOCK CAPITAL EARNINGS INTERESTS TOTAL
-------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at October 1,
1997................... $ -- $ -- $ -- $ 42,439,405 $42,439,405
Distributions to
members................ -- -- -- (7,808,831) (7,808,831)
Reorganization.......... 87,500 28,196,035 6,347,039 (34,630,574) --
Acquisition of minority
interests.............. 37,500 26,572,500 -- -- 26,610,000
Issuance of common
stock.................. 2,317 1,665,916 -- -- 1,668,233
Net income.............. -- -- 2,496,531 -- 2,496,531
-------- ----------- ---------- ------------ -----------
$127,317 $56,434,451 $8,843,570 $ -- $65,405,338
======== =========== ========== ============ ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-4
<PAGE>
EVEREST HEALTHCARE SERVICES CORPORATION (THE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
-------------------------
1997 1998
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... $ 1,716,891 $ 2,496,531
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for bad debts.......................... (244,022) 433,000
Depreciation and amortization.................... 2,081,981 2,834,866
Minority interests in earnings................... 764,496 478,769
Changes in operating assets and liabilities (net
of effect of acquisitions):
Patient and other accounts receivable.......... (5,892,288) (1,308,947)
Other current assets........................... (2,370,098) (2,338,272)
Accounts payable, accruals, and other
liabilities................................... 8,202,702 3,244,721
----------- ------------
Net cash provided by (used in) operating
activities.................................. 4,259,662 5,840,668
INVESTING ACTIVITIES:
Additions to property and equipment................ (3,842,800) (3,253,237)
Acquisition of businesses, net of cash acquired.... (4,865,962) (11,772,505)
(Increase) decrease in amounts due from affiliates. (7,872,125) (1,706,574)
----------- ------------
Net cash (used in) investing activities...... (16,580,887) (16,732,316)
FINANCING ACTIVITIES:
Proceeds from notes payable to banks............... 12,392,256 49,303,574
Payments on notes payable to banks................. -- (36,328,457)
Payments on other notes payable.................... (71,031) --
Payments on shareholders notes..................... -- (233,658)
Payments on capital leases......................... -- (566,355)
Distributions to members........................... -- (600,022)
----------- ------------
Net cash provided by (used in) financing
activities.................................. 12,321,225 11,575,082
----------- ------------
Increase in cash and cash equivalents.............. -- 683,434
Cash and cash equivalents at beginning of period... -- 2,456,669
----------- ------------
Cash and cash equivalents at end of period......... $ -- $ 3,140,103
=========== ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-5
<PAGE>
EVEREST HEALTHCARE SERVICES CORPORATION (THE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION AND BASIS OF PRESENTATION
Everest Healthcare Services Corporation ("Everest II") is a newly-formed
Delaware Subchapter C corporation and successor to Peak Healthcare, L.L.C.
("Peak"). Effective November 30, 1997, Peak was reorganized whereby the
following transactions occurred simultaneously. The members in Peak
contributed all of their interests in Peak for an equal number of membership
interests in Peak Liquidating, L.L.C. ("Peak Liquidating"), a newly formed
limited liability company. The operating agreement and number and classes of
interests of Peak Liquidating were identical to Peak. Upon the exchange, Peak
Liquidating, the sole member of Peak, contributed its interests in Peak for
shares of common stock of Everest II. The number of shares of common stock of
Everest II received by Peak Liquidating was equal to the number of shares of
Everest Healthcare Services Corporation ("Everest") held by Peak. The number
and class of authorized shares of Everest II upon formation was identical to
that of Everest. Following the exchange, Peak was liquidated. Upon the
consummation of these transactions, Everest II issued shares of common stock
to the minority interest holders in Everest in exchange for their shares of
Everest common stock. The acquisition of minority interest was treated as a
purchase in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," and goodwill of approximately $21.6 million was
recognized. Upon the consummation of these transactions, Everest became a
wholly-owned subsidiary of Everest II.
2. INTERIM FINANCIAL INFORMATION
The financial information at March 31, 1998 and for the six months ended
March 31, 1997 and 1998 is unaudited but includes all adjustments (consisting
only of normal recurring adjustments) that the Company considers necessary for
a fair presentation of the financial position at such date and the results of
operations and cash flows for those periods. Results of operations for the six
months ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the entire year.
3. OTHER FINANCIAL INFORMATION
The Company is a holding company with no independent assets or operations.
Full separate statements of the Subsidiary Guarantors have not been presented
as the guarantors are wholly-owned subsidiaries of the Company. Management
does not believe that inclusion of such financial statements would be material
to investors. The respective financial statement data at March 31, 1998 and
for the six months ended March 31, 1998 of the Subsidiary Guarantors and the
subsidiaries of the Company that are not Subsidiary Guarantors (the "Non-
Subsidiary Guarantors") are set forth below:
<TABLE>
<CAPTION>
NON-
SUBSIDIARY SUBSIDIARY
GUARANTORS GUARANTORS TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Statement of Operations Data:
Net revenue........................... $54,361,465 $13,169,829 $67,531,294
Patient care costs.................... 34,174,330 9,697,677 43,872,007
General and administrative expenses... 10,457,890 1,965,808 12,423,698
Provision for bad debts............... 1,780,928 139,813 1,920,741
Depreciation and amortization......... 2,334,197 500,689 2,834,886
Income from operations................ 5,614,120 865,842 6,479,962
Interest expense, net................. 956,290 526,729 1,483,019
Minority interests in earnings........ (218,569) 100,383 (118,186)
Income before income taxes............ 4,876,399 238,730 5,115,129
Income taxes.......................... 2,618,598 -- 2,618,598
Net income............................ 2,257,801 238,730 2,496,531
Balance Sheet Data:
Assets:
Current assets...................... $33,719,367 $ 7,882,852 $41,602,219
Property and equipment, net......... 15,393,582 2,456,482 17,850,064
Goodwill, net....................... 50,099,308 12,759,791 62,859,099
Other assets........................ 28,777,329 (4,889,393) 23,887,936
Total assets........................ 127,989,586 18,209,732 146,199,318
Liabilities and Stockholders' Equity:
Current liabilities................. 18,635,390 3,148,873 21,784,263
Long-term liabilities............... 50,957,640 8,052,077 59,009,717
Total stockholders' equity.......... 58,396,556 7,008,782 65,405,338
Total liabilities and stockholders'
equity............................. 127,989,586 18,209,732 146,199,318
</TABLE>
F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Members
Peak Healthcare, L.L.C.
We have audited the accompanying consolidated balance sheets of Peak
Healthcare, L.L.C. and Subsidiaries (the "Company") as of September 30, 1996
and 1997, and the related consolidated statements of operations and equity
interests and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Peak Healthcare, L.L.C. and Subsidiaries at September 30, 1996 and 1997,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young llp
ERNST & YOUNG LLP
Chicago, Illinois
March 13, 1998
F-7
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
ASSETS 1996 1997
------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ -- $ 2,456,669
Patient accounts receivable, less allowance of
$3,014,000 and $2,791,000.......................... 15,704,736 30,464,607
Other receivables................................... 1,591,871 1,922,716
Medical supplies inventories........................ 1,631,408 2,640,442
Deferred income taxes............................... 1,678,000 --
Prepaid expenses and other.......................... 379,185 787,669
----------- ------------
Total current assets.............................. 20,985,200 38,272,103
Other assets:
Goodwill, net....................................... 22,259,051 32,611,655
Deferred financing costs, net....................... -- 730,508
Amounts due from affiliates......................... 7,919,078 12,690,130
Investments in affiliated companies................. 806,724 827,118
Prepaid pension cost................................ 790,160 790,160
Deferred income taxes............................... 253,000 --
Other............................................... 1,698,365 1,861,501
----------- ------------
Total other assets................................ 33,726,378 49,511,072
Property and equipment:
Leasehold improvements.............................. 6,490,106 7,704,607
Medical equipment................................... 12,596,371 11,940,791
Furniture and fixtures.............................. 4,221,122 7,799,119
Building............................................ -- 140,121
Land................................................ -- 40,048
Construction in progress............................ 87,754 1,917,397
----------- ------------
23,395,353 29,542,083
Less: Accumulated depreciation and amortization..... 13,180,558 14,567,911
----------- ------------
10,214,795 14,974,172
----------- ------------
Total assets.................................... $64,926,373 $102,757,347
=========== ============
<CAPTION>
LIABILITIES AND EQUITY INTERESTS
--------------------------------
<S> <C> <C>
Current liabilities:
Cash overdraft...................................... $ 91,976 $ --
Accounts payable.................................... 4,428,300 6,094,306
Accrued liabilities................................. 5,169,696 9,734,258
Income taxes payable................................ 462,802 --
Notes payable to affiliates......................... 25,040 --
Current portion of long-term debt................... 1,374,868 795,492
Current portion of capital lease obligations........ 918,618 952,779
----------- ------------
Total current liabilities......................... 12,471,300 17,576,835
Notes payable to banks................................ 9,459,278 28,962,778
Notes payable--other.................................. -- 7,000,000
Capital lease obligations, less current portion....... 702,979 630,920
Notes payable to members.............................. 447,294 233,658
Minority interests.................................... 3,865,735 5,913,751
Equity interests...................................... 37,979,787 42,439,405
----------- ------------
Total liabilities and equity interests.......... $64,926,373 $102,757,347
=========== ============
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND EQUITY INTERESTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
Net revenues......................................... $83,171,214 $113,808,296
Operating expenses:
Patient care costs................................. 54,884,784 72,057,929
General and administrative......................... 17,462,670 24,710,169
Provision for bad debts............................ 2,523,354 714,166
Depreciation and amortization...................... 3,185,364 4,605,410
----------- ------------
Total operating expenses......................... 78,056,172 102,087,674
----------- ------------
Income from operations............................... 5,115,042 11,720,622
Nonoperating income (expense):
Interest expense................................... (1,012,727) (2,961,528)
Interest income.................................... 736,822 813,006
Minority interests in earnings..................... (810,314) (1,600,784)
Gain on curtailment of pension benefits............ 3,043,628 --
Other.............................................. 39,288 278,849
----------- ------------
1,996,697 (3,470,457)
----------- ------------
Income before income taxes........................... 7,111,739 8,250,165
Income taxes......................................... 2,800,000 3,689,000
----------- ------------
Net income........................................... 4,311,739 4,561,165
Equity interests at beginning of year................ 32,041,118 37,979,787
Capital contributions................................ 1,656,425 --
Distribution to members.............................. (29,495) (101,547)
----------- ------------
Equity interests at end of year...................... $37,979,787 $ 42,439,405
=========== ============
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... $ 4,311,739 $ 4,561,165
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for bad debts.......................... 2,523,354 714,166
Depreciation and amortization.................... 3,185,364 4,605,410
Gain on sale of assets........................... -- (2,161)
Gain on curtailment of pension benefits.......... (3,043,628) --
Deferred income taxes............................ 194,000 531,000
Minority interests in earnings................... 810,314 1,600,784
Changes in operating assets and liabilities (net
of effect of acquisitions):
Patient and other accounts receivable.......... (970,893) (14,321,410)
Medical supply inventories, prepaid expenses,
and other assets.............................. 115,083 (2,453,422)
Cash overdraft, accounts payable, and accrued
liabilities................................... (930,482) 6,515,211
----------- ------------
Net cash provided by operating activities.... 6,194,851 1,750,743
INVESTING ACTIVITIES:
Additions to property and equipment................ (1,441,890) (7,757,161)
Acquisition of businesses, net of cash acquired.... (3,201,756) (5,041,736)
Increase in amounts due from affiliates............ (8,268,297) (4,771,052)
----------- ------------
Net cash (used in) investing activities...... (12,911,943) (17,569,949)
FINANCING ACTIVITIES:
Proceeds from notes payable to banks............... 10,664,369 69,260,975
Proceeds from notes payable to affiliates.......... 1,667,425 --
Proceeds from notes payable to members............. 447,294 --
Payments on notes payable to banks................. (4,715,734) (50,606,979)
Payments on notes payable to affiliates............ (1,175,522) (25,040)
Payments on capital lease obligations.............. (1,797,670) (37,898)
Payments on notes payable to members............... -- (213,636)
Capital contributions.............................. 1,656,425 --
Distributions to members........................... (29,495) (101,547)
----------- ------------
Net cash provided by financing activities.... 6,717,092 18,275,875
----------- ------------
Increase in cash and cash equivalents.............. -- 2,456,669
Cash and cash equivalents at beginning of year..... -- --
----------- ------------
Cash and cash equivalents at end of year........... $ -- $ 2,456,669
=========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid.................................. $ 2,134,000 $ 2,068,000
Interest paid...................................... 1,262,978 2,706,479
Stock issued for acquisition of business........... 8,891,255 --
Debt issued for acquisition of business............ -- 7,000,000
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1997
1. BASIS OF PRESENTATION
Peak Healthcare, L.L.C. ("Peak" or the "Company") was formed, as a limited
liability company, on October 1, 1995. Peak issued its membership units in
exchange for the ownership interests of certain of the owners of seven kidney
dialysis companies and Continental Healthcare, Ltd. ("Continental") on October
1, 1995. The most significant of these companies, West Suburban Kidney Center,
S.C., was designated as the accounting acquiror and the transaction was
accounted for as a purchase. Upon completion of this exchange, Peak and the
other owners of the seven kidney dialysis companies contributed their
ownership interests in such companies for common stock of Everest Healthcare
Services Corporation ("Everest"), a newly formed company. Upon completion of
this transaction, Peak owned 88% of Everest and 100% of Continental. Peak is a
holding company with no independent assets or operations. All references to
the Company, unless otherwise noted, refer collectively to Peak and its
subsidiaries.
In June 1996, Everest issued 2,500,000 shares of its common stock (as
adjusted for its 1,000 for one stock split) for the acquisition of Home
Dialysis of America, Inc. (Note 7), which reduced Peak's ownership in Everest
to approximately 70%.
2. EQUITY INTERESTS
Peak was organized on October 1, 1995, under the provisions of the Delaware
Limited Liability Company Act. Under the terms of the Peak operating
agreement, the Company shall continue until December 31, 2045, unless
terminated at an earlier date as provided in the agreement. The Company has
seven classes of interest all having the same rights, preferences, and
obligations except for distributions made from operations or upon liquidation
of the Company. Preferences upon distribution are set forth below (in order of
A through F), with 100% of the distributions to a specific class of interest
being required to be made before distributions are made to the next class. All
interest holders in each class receive a pro rata share of the distribution to
the class of interest. Interests outstanding and distribution rights are as
follows:
<TABLE>
<CAPTION>
CLASS OF INTERESTS DISTRIBUTION
INTEREST OUTSTANDING PREFERENCE
-------- ----------- ------------
<S> <C> <C>
A 12,791,939 $12,791,939
B1 2,809,331 2,809,331
B2 3,729,291 3,729,291
C 43,142,803 43,142,803
D 21,626,250 21,626,250
E 86,505,000 86,505,000
F 700 Thereafter
</TABLE>
3. NATURE OF BUSINESS
The Company operates in two business segments, as a provider of chronic
dialysis services and as a contract services provider. The operations of the
chronic dialysis segment principally involve the delivery of health care
services, primarily outpatient dialysis treatments. The contract services
segment principally involves acute dialysis, perfusion, apheresis and auto-
transfusion treatments for hospitalized patients. Hospitals pay for these
services at contracted rates.
F-11
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts and transactions
of Peak and its subsidiaries. All intercompany accounts and transactions are
eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
Medical Supplies Inventories
Medical supplies inventories are stated at the lower of cost or market. Cost
is determined on a first-in, first-out ("FIFO") basis.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the respective lease terms or the service
lives of the improvements, whichever is shorter.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair
value of the net assets acquired in the Company's business combinations. The
amounts are being amortized over the estimated remaining economic lives
ranging from 25 to 40 years. Accumulated amortization of goodwill amounted to
$375,000 and $1,513,000 at September 30, 1996 and 1997, respectively.
Deferred Financing Costs
Deferred financing costs represents capitalized fees associated with
obtaining financing. The costs are being amortized as interest expense over
the term of the related financing. At September 30, 1997, accumulated
amortization of the deferred financing costs amounted to approximately
$54,000.
Income Taxes
The Company is a limited liability company and, as such, income taxes are
"passed through" to the holders of equity interest. The Company's subsidiaries
include Delaware Subchapter C corporations which are subject to federal,
state, and local income taxes. Deferred income taxes are recognized for the
difference in reporting of certain assets and liabilities for financial
reporting and tax purposes. These temporary differences are determined by
applying enacted statutory rates applicable to future years to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities. The effect of a change in tax rates is recognized in
the period that includes the enactment date.
Stock Options
The Company, through Everest, has issued stock options. The Company accounts
for stock options in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees"
F-12
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
("APB 25"). In accordance with APB 25, compensation expense is recognized
based upon the excess of fair value of the underlying stock over the option
exercise price on the measurement date, the date at which both the exercise
price and the number of shares to be issued are known. The Company has elected
to continue to measure compensation expense under the provisions of APB 25;
however, in accordance with Statement of Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), an estimate of the
fair value of the stock options has been made by the Company to determine the
pro forma effect on earnings had the provisions of SFAS 123 been applied in
the financial statements (Note 12).
Revenue Recognition
Revenue is recognized upon the delivery of health care services.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts reported in the Company's balance sheets for variable-
rate long-term debt approximate fair value, as the underlying long-term debt
instruments are comprised of notes that are repriced on a short-term basis.
The carrying amounts of the amounts due to and from affiliated companies bear
interest at the prime rate plus 1% and approximate fair value.
The Company estimates the fair value of fixed-rate long-term debt
obligations using the discounted cash flow method with interest rates
currently available for similar obligations. The carrying amounts reported in
the Company's balance sheets for these obligations approximate fair value.
Long-Lived Assets
The Company evaluates its long-lived assets (including related goodwill) on
an ongoing basis. Identifiable intangibles are reviewed for impairment
wherever events or changes in circumstances indicate that the carrying amount
of the related asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of the asset
to future undiscounted cash flows expected to be generated by the asset. If
the asset is determined to be impaired, the impairment recognized is measured
by the amount by which the carrying value of the asset exceeds its fair value.
Concentration of Credit Risk
The Company's concentration of credit risk related to patient accounts
receivable is limited as a result of the diversity of patients and third-party
payors.
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). In addition to net income, comprehensive income includes items
recorded directly to equity. The provisions of SFAS 130 establish new
F-13
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
standards for reporting and displaying comprehensive income and its components
in a full set of financial statements. Application of the provisions of SFAS
130 is required for fiscal years beginning after December 15, 1997. The
Company is in the process of evaluating the specific reporting requirements of
SFAS 130; however, the adoption of SFAS 130 will have no impact on the
Company's consolidated results of operations, financial position, or cash
flows.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131"). The provisions of SFAS 131
establish standards for the way companies report information about operating
segments in annual financial statements and require that such companies report
selected information about operating segments in interim financial reports
issued to shareholders. The provisions of SFAS 131 require the disclosure of
segment information be based on a "management approach" whereby disclosures
are made of information that is available and evaluated regularly by the chief
decision makers of the Company in deciding how to allocate resources and
assessing performance. Application of the provisions of SFAS 131 is required
for fiscal years beginning after December 15, 1997. The Company operates in
two business segments; as a provider of chronic dialysis services and as a
contract service provider of extracorporeal services including perfusion,
apheresis, and autotransfusion. The Company is managed as such, and,
therefore, the Company believes that its adoption of SFAS 131 will not have a
material impact on its future disclosure requirements.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 ("SFAS 132"), "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS 132
revises the previous disclosure requirements of pension and postretirement
plans. The Statement does not change the recognition or measurement of pension
plans. The Company is evaluating the disclosure requirements of SFAS 132 and
believes that its adoption will not have a material impact on its future
disclosure requirements.
5. NET REVENUES
The Company provides dialysis and other extracorporeal blood treatment
services to certain patients under government-sponsored programs such as
Medicare and Medicaid, as well as other insurance reimbursement arrangements.
Provision has been made in the financial statements for the estimated
contractual adjustment, representing the difference between the Company's
standard charges for services and the estimated payments to be received from
the various third-party payors. Gross and net revenues for the fiscal years
ended September 30 include the following:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Medicare/Medicaid............................... $150,350,085 $178,374,063
Other........................................... 24,162,283 17,951,240
------------ ------------
Gross revenues.................................. 174,512,368 196,325,303
Contractual allowances.......................... 93,328,650 84,747,325
------------ ------------
Net revenues.................................... $ 81,183,718 $111,577,978
============ ============
</TABLE>
In addition, the Company has included in net revenues, non-patient-related
revenues representing management fees earned for administrative services
performed for unconsolidated affiliated companies and unaffiliated companies.
These revenues amounted to approximately $1,987,000 and $2,230,000 for the
years ended September 30, 1996 and 1997, respectively.
F-14
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INVESTMENTS IN AFFILIATED COMPANIES
The Company uses the equity method of accounting for its investments in the
common stock of various companies. Investments in these companies at September
30, 1996 and 1997, amounted to approximately $807,000 and $827,000,
respectively. The percentages of ownership in these companies range from 25%
to 50%. In addition, the Company has advanced funds to certain of these
companies (Note 13). Total aggregate assets, liabilities, and net income for
these investees were $6,785,700, $4,990,900 and $89,200, respectively, at
September 30, 1996, and for the year then ended. Total aggregate assets,
liabilities, and net loss for these investees were $13,533,215, $7,260,543 and
$202,297, respectively, at September 30, 1997, and for the year then ended.
7. BUSINESS COMBINATIONS
Effective November 1, 1996, Everest purchased an 80% interest in The
Extracorporeal Alliance, LLC ("Alliance"). Alliance performs blood oxygenation
services for hospitalized patients. The purchase price of the acquisition was
approximately $12,042,000, including a $7,000,000 note payable. The
acquisition was accounted for as a purchase, and as such, the results of
operations of Alliance subsequent to the date of acquisition have been
included in the Company's consolidated results of operations. In connection
with the acquisition, the Company recognized goodwill of approximately
$10,815,000 which is being amortized over 25 years. Effective September 1,
1997, Alliance acquired a 51% interest in Tri-State Perfusion, LLC ("Tri-
State"). Alliance acquired its interest in Tri-State, a newly formed joint
venture, in exchange for the use of its expertise in performing perfusion
services as well as to provide additional service capabilities.
On June 20, 1996, Everest purchased Home Dialysis of America, Inc. ("HDA"),
by issuing 2,500,000 shares of common stock (as adjusted for the 1,000-for-one
stock split), with a fair value of $8,891,000, in exchange for 100% of the
stock of HDA. Goodwill of $7,370,000 was recognized in the acquisition and is
being amortized over 40 years. This transaction was accounted for as a
purchase and, as such, HDA's results of operations subsequent to the date of
acquisition are included in the consolidated statement of operations.
On July 1, 1996, Everest purchased certain assets and operations of an
outpatient dialysis facility for $1,400,000. This transaction was accounted
for as a purchase resulting in the recording of goodwill of $1,331,000 which
is being amortized over 40 years. Results of operations subsequent to the date
of acquisition are included in the consolidated statement of operations.
On August 30, 1996, Everest purchased an 80% interest in an outpatient
dialysis facility. The Company contributed $2,060,000 and the minority
stockholder contributed $419,000 towards the total purchase price of
$2,479,000. This transaction was accounted for as a purchase resulting in the
recording of goodwill of $2,386,000 which is being amortized over 40 years.
Results of operations subsequent to the date of acquisition are included in
the consolidated statement of operations.
8. LEASES AND RELATED PARTY TRANSACTIONS
Capital Leases
The Company leases medical equipment, whose terms and conditions qualify the
obligations for treatment as capital leases. The lease agreements require the
Company to pay all maintenance costs. Interest rates on the leases range from
8.0% to 14.0%. Capital leases included in medical equipment and related
accumulated amortization aggregated to $3,724,767 and $2,000,498,
respectively, at September 30, 1996, and $4,955,720 and
F-15
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$2,161,965, respectively, at September 30, 1997. Amortization of assets
recorded under capital leases is included with depreciation of property and
equipment.
Future minimum payments under these capital leases with initial or remaining
terms of one year or more consisted of the following at September 30, 1997:
<TABLE>
<S> <C>
1998.......................................................... $1,026,265
1999.......................................................... 552,789
2000.......................................................... 126,768
----------
Total minimum lease payments.................................. 1,705,822
Amounts representing interest................................. 122,123
----------
Present value of minimum lease payments....................... 1,583,699
Less: Current portion......................................... 952,779
----------
$ 630,920
==========
</TABLE>
Operating Leases
The Company leases land and building space under operating leases for some
of its dialysis centers, its corporate offices and its supplies warehouse from
ARE Partnership and Three M&L Partnership, related parties with common
ownership. For the years ended September 30, 1996 and 1997, rents of
approximately $871,000 and $952,000, respectively, were paid to these related
parties. Expiration dates for these leases continue through March 2025.
Additionally, the Company leases land and building space under operating
leases from unaffiliated entities for certain of its dialysis facilities. For
the years ended September 30, 1996 and 1997, approximately $1,619,000 and
$2,072,000, respectively, was recorded as rent expense for such leases.
Expiration dates for these leases continue through July 2005.
Approximate minimum rental payments under operating leases are as follows:
<TABLE>
<CAPTION>
UNAFFILIATED
AFFILIATES ENTITIES TOTAL
---------- ------------ -----------
<S> <C> <C> <C>
1998.................................. $ 497,122 $ 1,544,551 $ 2,041,673
1999.................................. 479,466 1,482,256 1,961,722
2000.................................. 410,092 1,364,260 1,774,352
2001.................................. 360,824 1,159,746 1,520,570
2002.................................. 231,733 1,124,390 1,356,123
Thereafter............................ 521,398 18,112,371 18,633,769
---------- ----------- -----------
$2,500,635 $24,787,574 $27,288,209
========== =========== ===========
</TABLE>
9. EMPLOYEE BENEFIT PLANS
The Company maintains three defined-benefit pension plans ("defined-benefit
plans"), a money purchase defined-contribution pension plan ("money purchase
plan"), and an employee savings and profit-sharing plan.
The defined-benefit plans cover all employees of the Company and a related
party with common ownership, Nephrology Associates of Northern Illinois, Ltd.
("NANI"), who meet certain eligibility requirements. Retirement benefit
payments are based on years of credited service and average compensation over
the final five
F-16
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
years of employment. The funding policy was to contribute annually amounts
which were deductible for federal income tax purposes. Effective May 16, 1996,
all participant benefits in the defined-benefit plans were frozen. The Company
and NANI ceased funding the defined-benefit plans as of May 16, 1996, and no
additional years of benefit service were accrued by plan participants
subsequent to that date. The net assets remaining in the plan have not been
distributed subsequent to May 16, 1996, other than for normal benefits paid to
participants. The Company recognized a curtailment gain of approximately
$3,044,000 relating to this event.
The following table sets forth the funded status of the defined-benefit
plans at September 30:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including
vested benefits (1996--$4,140,000; 1997--
$6,720,000).................................... $ 4,814,667 $7,370,000
=========== ==========
Projected benefit obligation for service
rendered to date............................... $ 4,814,667 $7,370,000
Plan assets at fair value....................... 6,853,912 7,247,000
----------- ----------
Funded status................................... 2,039,245 (123,000)
Unrecognized net loss (gain).................... (1,249,085) 913,160
----------- ----------
Prepaid pension cost............................ $ 790,160 $ 790,160
=========== ==========
</TABLE>
Net periodic pension cost of the defined-benefit plans for the years ended
September 30 included the following components:
<TABLE>
<CAPTION>
1996 1997
----------- ---------
<S> <C> <C>
Service cost-benefit earned during the year...... $ 813,773 $ --
Interest cost on projected benefit obligation.... 582,276 510,447
Actual return on plan assets..................... (942,678) (575,573)
Net amortization and deferral.................... 389,237 65,126
----------- ---------
Net pension expense before curtailment........... 842,608 --
Gain resulting from curtailment of pension
benefits........................................ (3,043,628) --
----------- ---------
Net pension income expense....................... $(2,201,020) $ --
=========== =========
</TABLE>
Key assumptions used for the defined-benefit plans at September 30 are as
follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Discount rate................................................. 7.3% 7.3%
Long-term rate of return on assets............................ 9.0 8.4
</TABLE>
The assets of the defined-benefit plans primarily consist of mutual funds,
corporate bonds and real estate holdings.
The Company has a money purchase plan that covers substantially all
employees hired prior to July 1, 1987. Prior to fiscal year 1996,
contributions to the money purchase pension plan were equal to 10% of each
eligible participant's compensation. The money purchase plan was amended on
May 16, 1996, to eliminate future contributions.
The employee savings and profit-sharing plan covers substantially all
employees. Under the savings component of this plan, the Company matches 50%
of employee contributions up to a maximum of 6% of
F-17
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
each eligible participant's compensation. The profit-sharing plan component of
this plan became effective on January 1, 1996. Under this component of the
plan, the Company's annual contribution is dependent on various factors,
including the Company's profitability for the fiscal year. Contributions to
the employee savings and profit-sharing plan amounted to approximately
$765,000 and $702,000 for the years ended September 30, 1996 and 1997,
respectively.
10. NOTES PAYABLE
Notes payable to banks consists of the following at September 30:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Revolving credit facility........................ $ 4,961,000 $11,553,813
Acquisition funding facility..................... 3,600,000 17,276,000
Installment notes................................ 2,273,146 928,457
----------- -----------
10,834,146 29,758,270
Less: Current portion............................ 1,374,868 795,492
----------- -----------
$ 9,459,278 $28,962,778
=========== ===========
</TABLE>
The Company has a revolving credit facility which matures on May 15, 2000.
During the year, the revolving credit facility was amended to allow aggregate
borrowings of $15.0 million (previously limited to aggregated borrowings of
$10.0 million). The borrowings are subject to 75.0% of eligible accounts
receivable. Interest is payable at the Company's option of: (i) the bank's
prime rate (8.5% at September 30, 1997); or (ii) LIBOR plus 2.25% (7.97% at
September 30, 1997). Interest on approximately $6.5 million is payable at the
bank's prime rate, and interest on approximately $5.0 million is payable at
LIBOR plus 2.25%. Commitment fees of .375% of the unused portion of the line
of credit are payable quarterly.
The acquisition funding facility was amended during the year to increase
available borrowings from $15.0 million to $35.0 million. Interest is payable
at the Company's option of: (i) the bank's prime rate plus 0.5% (9.0% at
September 30, 1997); or (ii) LIBOR plus 2.5% (8.22% at September 30, 1997). At
September 30, 1997, interest on approximately $5.5 million is payable at the
bank's prime rate plus 0.5%, and interest on approximately $11.8 million is
payable at LIBOR plus 2.5%. The acquisition funding facility matures on May
15, 1998. The Company has the option, on the maturity date, of paying the
outstanding balance on the facility or converting the facility to a term note
requiring 60 monthly installments and bearing interest at the Company's option
of: (i) the bank's prime rate plus 0.5%; or (ii) LIBOR plus 2.5%. The Company
intends to convert the outstanding indebtedness to an installment note.
Commitment fees on the unused balance of the acquisition funding facility of
0.5% are payable quarterly.
The credit agreements covering the revolving credit facility and the
acquisition funding facility contain covenants, which among other things,
require the Company to maintain certain financial ratios and minimum levels of
net worth. The facilities are collateralized by a lien on assets of the
Company. The credit agreements are also secured by an assignment of key-man
life insurance for a period of not less than three years, with the amount of
such insurance to be not less than $10.0 million through December 31, 1997,
$7.5 million thereafter, through and including December 31, 1998, and $5.0
million through December 31, 1999.
On October 31, 1997, the Company entered into a new agreement increasing its
revolving credit facility from $15.0 million to $20.0 million, subject to a
limit of 75.0% of eligible accounts receivable. In addition, the agreement
increases the acquisition financing facility from $35.0 million to $45.0
million. There were no changes in the maturity date, the interest rates, the
commitment fees payable on the unused balance, or the required covenants from
the prior agreement.
F-18
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has entered into various installment notes payable which are
payable through February 1999, and bear interest at rates ranging from 8.75%
to 9.25%. The notes are collateralized by medical equipment.
In connection with the acquisition of Alliance (Note 7), the Company
incurred $7.0 million in notes payable to the former owners of Alliance. The
notes mature on October 31, 2002 and bear interest at the 5-year Treasury Note
rate (as determined on November 1 of each year) plus 3.0% (8.79% as of
September 30, 1997). Interest is payable monthly.
Maturities of notes payable to banks at September 30, 1997 are as follows:
<TABLE>
<S> <C>
1998......................... $18,071,492
1999......................... 130,439
2000......................... 11,556,339
-----------
$29,758,270
===========
</TABLE>
Maturities of notes payable for the year ended September 30, 1998 include
$17,276,000 under the acquisition funding facility. The Company has the
ability and the intent to convert the facility into a term note, and as such,
has reflected the amount as a long-term liability.
11. INCOME TAXES
At September 30, 1997, the Company has net operating loss carryforwards of
approximately $86,000 that expire through 2008. Utilization of these
carryforwards is restricted due to changes in ownership.
Deferred income taxes reflect the net effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of deferred income taxes at September 30, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Allowance for uncollectible accounts............. $1,193,000 $ 1,109,000
Accrued vacation................................. 540,000 511,000
Net operating loss carryforwards................. 302,000 29,000
---------- -----------
Total deferred tax assets.................... 2,035,000 1,649,000
Patient accounts receivable basis difference..... -- (1,740,000)
Other............................................ (104,000) (17,000)
---------- -----------
Total deferred tax liabilities............... (104,000) (1,757,000)
---------- -----------
Net deferred tax asset (liability)............... $1,931,000 $ (108,000)
========== ===========
</TABLE>
The provision for income tax expense consists of the follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Current:
Federal........................................... $2,106,000 $2,555,000
State............................................. 500,000 603,000
Deferred............................................ 194,000 531,000
---------- ----------
$2,800,000 $3,689,000
========== ==========
</TABLE>
F-19
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Federal income taxes at the statutory rate are reconciled with the Company's
income tax provision as follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Federal statutory rate........................................ 34.0% 34.0%
State income taxes, net of federal benefit.................... 4.4 5.0
Minority interests in earnings................................ 2.8 6.6
Nondeductible goodwill amortization........................... 1.3 3.6
Other, net.................................................... (3.1) (4.5)
---- ----
39.4% 44.7%
==== ====
</TABLE>
12. STOCK OPTIONS
Effective January 15, 1997, the Company, through Everest, established the
Everest Healthcare Corporation 1996 Stock Award Plan (the "Plan"). The Plan
permits the granting of options to certain key executive, managerial, and
administrative employees of the Company to purchase shares of Everest's common
stock. The total number of shares reserved and eligible for distribution as
awards under the Plan is 1,500,000. On February 5, 1997, Everest granted
1,209,500 stock options (including 354,100 issued to Peak) pursuant to the
Plan. The stock options have an exercise price of $9.10. The stock option
awards vest ratably over a four-year period in yearly increments of 25%. The
stock options granted expire ten years from the date of grant. In addition,
the Plan contains provisions that restrict the sale of stock obtained through
the exercise of stock options. At September 30, 1997, no options issued under
the Plan were exercisable.
Had the provisions of SFAS 123 been used in the calculation of compensation
expense (calculated using the minimum value method for nonpublic companies),
pro forma net income would have been approximately $35,000 lower than the net
income reported in the statement of operations for the year ended September
30, 1997.
The following table summarizes the Company's stock options outstanding
(exclusive of stock options held by Peak) at September 30, 1997:
<TABLE>
<CAPTION>
EXERCISE
OPTIONS PRICE
------- --------
<S> <C> <C>
Balance at September 30, 1996............................ -- --
Granted.................................................. 855,400 $9.10
Exercised................................................ -- --
Forfeited................................................ -- --
-------
Balance at September 30, 1997............................ 855,400 $9.10
=======
</TABLE>
13. RELATED PARTY TRANSACTIONS
The Company provides administrative and purchasing services to several of
its unconsolidated affiliates, all of which are owned, or substantially owned,
by the majority equityholders of the Company. Fees charged to affiliates for
services were approximately $1,579,000 and $1,295,000 during the years ended
September 30, 1996 and 1997, respectively, and are included in the
accompanying consolidated statement of operations. In addition, the Company
provides advances to certain affiliates. Amounts due from unconsolidated
affiliates at September 30, 1996 and 1997, were approximately as follows:
F-20
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Nephrology Associates of Northern Illinois, Ltd.. $7,137,000 $ 7,643,000
Unconsolidated joint ventures.................... 434,000 4,736,000
Others........................................... 348,000 311,000
---------- -----------
$7,919,000 $12,690,000
========== ===========
</TABLE>
Nephrology Associates of Northern Illinois, Ltd., an unconsolidated
affiliate substantially owned by the majority equityholders of the Company,
provides management and physician supervisory services to the Company's
outpatient maintenance dialysis operations. Total fees incurred for such
services amounted to approximately $2,369,000 and $1,883,000 during the years
ended September 30, 1996 and 1997, respectively, and are included in the
accompanying consolidated statement of operations.
The Company earned interest on outstanding balances due from unconsolidated
affiliates of approximately $748,000 and $1,368,000 during the years ended
September 30, 1996 and 1997, respectively.
14. SEGMENT INFORMATION
The following table presents the Company's financial information by its
business segments.
<TABLE>
<CAPTION>
DIALYSIS CONTRACT
SERVICES SERVICES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Year ended September 30,
1996:
Net revenues............ $83,013,309 $ 157,905 $ -- $ 83,171,214
Income from operations.. 5,097,894 17,148 -- 5,115,042
Total assets............ 64,480,941 445,432 -- 64,926,373
Depreciation and amorti-
zation................. 3,183,573 1,791 -- 3,185,364
Capital expenditures.... 1,298,573 143,317 -- 1,441,890
<CAPTION>
DIALYSIS CONTRACT
SERVICES SERVICES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Year ended September 30,
1997:
Net revenues............ $99,172,280 $14,664,981 $(28,965) $113,808,296
Income from operations.. 10,576,770 1,143,852 -- 11,720,622
Total assets............ 87,583,526 15,173,821 -- 102,757,347
Depreciation and amorti-
zation................. 4,035,428 569,962 -- 4,605,410
Capital expenditures.... 7,547,556 209,605 -- 7,757,161
</TABLE>
15. SUBSEQUENT EVENTS
Effective November 30, 1997, Peak was reorganized whereby the following
transactions occurred simultaneously. The members in Peak contributed all of
their interests in Peak for an equal number of membership interests in Peak
Liquidating, L.L.C. ("Peak Liquidating"), a newly formed limited liability
company. The operating agreement and number and classes of interests of Peak
Liquidating were identical to Peak. Upon the exchange, Peak Liquidating, the
sole member of Peak, contributed its interests in Peak for shares of common
stock of Everest Healthcare II, Inc. ("Everest II"), a newly formed Delaware
Subchapter C corporation. The number of shares of common stock of Everest II
received by Peak Liquidating was equal to the number of shares of Everest held
by Peak. The number and class of authorized shares of Everest II upon
formation was identical to that of Everest. Following the exchange, Peak was
liquidated. Upon the consummation
F-21
<PAGE>
PEAK HEALTHCARE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
of these transactions, Everest II issued shares of common stock to the
minority interest holders in Everest in exchange for their shares of Everest
common stock. The acquisition of minority interest was treated as a purchase
in accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations," and goodwill of approximately $12.1 million was recognized.
Upon the consummation of these transactions, Everest became a wholly-owned
subsidiary of Everest II.
Effective March 4, 1998, the Company completed the reorganization described
above by merging Everest with and into Everest II. The merger was treated as a
statutory merger under Delaware law. After the merger, Everest II, the
surviving entity, changed its name to "Everest Healthcare Services
Corporation."
OTHER FINANCIAL INFORMATION
The Company is a holding company with no independent assets or operations.
Full separate statements of the Subsidiary Guarantors have not been presented
as the guarantors are wholly-owned subsidiaries of the Company. Management
does not believe that inclusion of such financial statements would be material
to investors. The financial statement data as of September 30, 1997 of the
Subsidiary Guarantors and the Non- Subsidiary Guarantors are below.
<TABLE>
<CAPTION>
SUBSIDIARY NON-SUBSIDIARY
GUARANTORS GUARANTORS TOTAL
----------- -------------- ------------
<S> <C> <C> <C>
Statement of Operations Data:
Net revenue........................ $94,692,355 $19,115,941 $113,808,296
Patient care costs................. 58,095,256 13,962,673 72,057,929
General and administrative
expenses.......................... 21,776,465 2,933,704 24,710,169
Provision for bad debts............ 578,049 136,117 714,166
Depreciation and amortization...... 3,824,790 780,620 4,605,410
Income from operations............. 10,417,795 1,302,827 11,720,622
Interest expense, net.............. 1,476,916 671,606 2,148,522
Minority interests in earnings..... 1,493,418 107,366 1,600,784
Gain on curtailment of pension
benefits.......................... -- -- --
Other income, net.................. (278,849) -- (278,849)
Income before income taxes......... 7,726,310 523,855 8,250,165
Income taxes....................... 3,689,000 -- 3,689,000
Net income......................... 4,037,310 523,855 4,561,165
Balance Sheet Data:
Assets:
Current assets................... $31,441,782 $ 6,830,321 $ 38,272,103
Property and equipment, net...... 12,706,175 2,267,997 14,974,172
Goodwill, net.................... 19,750,409 12,861,246 32,611,655
Other assets..................... 20,697,883 (3,798,466) 16,899,417
Total assets..................... 84,596,249 18,161,098 102,757,347
Liabilities and Stockholders'
Equity:
Current liabilities.............. 14,060,192 3,516,643 17,576,835
Long-term liabilities............ 34,851,426 7,889,681 42,741,107
Total stockholders' equity....... 35,684,631 (6,754,774) 42,439,405
Total liabilities and
stockholders' equity............ 84,596,249 18,161,098 102,757,347
</TABLE>
F-22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
West Suburban Kidney Center, S.C.
We have audited the accompanying consolidated statements of operations and
cash flows of West Suburban Kidney Center, S.C. and Subsidiary (the "Company")
for the year ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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 statements of operations and cash flows referred to
above present fairly, in all material respects, the consolidated results of
operations and cash flows of West Suburban Kidney Center, S.C. and Subsidiary
for the year ended September 30, 1995, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young llp
ERNST & YOUNG LLP
Chicago, Illinois
March 13, 1998
F-23
<PAGE>
WEST SUBURBAN KIDNEY CENTER, S.C. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Net revenues....................................................... $47,275,868
Operating expenses:
Patient care costs............................................... 31,340,348
General and administrative....................................... 12,691,216
Provision for bad debts.......................................... 753,407
Depreciation and amortization.................................... 1,270,833
-----------
Total operating expenses....................................... 46,055,804
-----------
Income from operations............................................. 1,220,064
Nonoperating income (expense):
Interest income.................................................. 354,734
Interest expense................................................. (722,518)
-----------
(367,784)
-----------
Income before income taxes......................................... 852,280
Income taxes....................................................... 325,000
-----------
Net income..................................................... $ 527,280
===========
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
WEST SUBURBAN KIDNEY CENTER, S.C. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income...................................................... $ 527,280
Adjustments to reconcile net income to cash provided by
operating activities:
Provision for bad debts....................................... 753,407
Depreciation and amortization................................. 1,270,833
Deferred income taxes......................................... 54,000
Loss on sale of equipment..................................... 19,333
Changes in operating assets and liabilities:
Patient and other accounts receivable....................... 1,089,059
Amounts due from affiliates................................. 575,685
Medical supply inventories, prepaid expenses, and other
assets..................................................... 316,058
Cash overdraft, accounts payable, and accrued liabilities... (714,973)
------------
Net cash provided by operating activities................. 3,890,682
INVESTING ACTIVITIES:
Additions to property and equipment............................. (1,580,641)
Proceeds from sale of equipment................................. 380,494
------------
Net cash used in investing activities..................... (1,200,147)
FINANCING ACTIVITIES:
Proceeds from notes payable to banks............................ 41,380,000
Payments on notes payable to banks.............................. (43,153,306)
Payments on capital lease obligations........................... (917,229)
------------
Net cash used in financing activities..................... (2,690,535)
------------
Change in cash and cash equivalents............................. --
Cash and cash equivalents at beginning of year.................. --
------------
Cash and cash equivalents at end of year........................ $ --
============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid................................................... $ 737,456
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE>
WEST SUBURBAN KIDNEY CENTER, S.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Operations and Basis of Consolidation
West Suburban Kidney Center, S.C. ("Company"), an Illinois corporation, is
engaged principally in providing dialysis services to patients. The
consolidated financial statements include the accounts and transactions of the
Company and its wholly-owned subsidiary, The Lamm Organization, Inc. All
intercompany accounts and transactions are eliminated in consolidation.
Depreciation and Amortization
Depreciation of property and equipment is calculated on the straight-line
method over the estimated useful lives of the assets. Amortization of capital
leases is computed using the straight-line method over the shorter of the life
of the lease or the estimated useful life of the asset. Depreciation and
amortization expense was approximately $1,271,000. The lease payments are
expensed as incurred for income tax purposes.
Revenue Recognition
Revenue is recognized upon the delivery of health care services.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
2. NET REVENUES
The Company provides dialysis services to certain patients under government-
sponsored programs such as Medicare and Medicaid, and other insurance
reimbursement arrangements. Provision has been made in the financial
statements for the estimated contractual adjustments, representing the
difference between the Company's standard charges for services and the
estimated payments to be received from the various third-party payors. Gross
and net revenues for the year ended September 30, 1995 include the following:
<TABLE>
<S> <C>
Medicare/Medicaid............................................. $75,147,364
Other......................................................... 20,665,013
-----------
Gross revenues................................................ 95,812,377
Contractual allowances........................................ 52,094,292
-----------
Net revenues.................................................. $43,718,085
===========
</TABLE>
In addition, the Company has included approximately $3,558,000 in net
revenues representing management fees earned for administrative services
performed for affiliated companies.
F-26
<PAGE>
WEST SUBURBAN KIDNEY CENTER, S.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LEASES
Capital Leases
The Company leases medical equipment and furniture from Continental Health
Care, Ltd., an unconsolidated affiliate of the Company, on terms and
conditions that qualify the obligations for treatment as capital leases. The
lease agreements require the Company to pay all maintenance costs.
Amortization of assets recorded under capital leases is included with
depreciation of property and equipment.
Operating Leases
The Company leases land and building space under operating leases for some
of its dialysis centers, its administration building, and its supplies
warehouse from ARE and Three M&L (affiliates of the Company). Additionally,
the Company leases land and building space under operating leases from
nonaffiliated entities for certain of its dialysis facilities. Rent expense of
approximately $311,000 was paid to affiliates of the Company.
4. EMPLOYEE BENEFIT PLANS
The Company and an unconsolidated affiliate substantially owned by the
stockholders of the Company, Nephrology Associates of Northern Illinois, Ltd.
("NANI"), maintain two defined-benefit pension plans (the "Plans") covering
all employees meeting certain eligibility requirements. Generally, the funding
policies are to contribute annually amounts which are deductible for federal
income tax purposes. Retirement benefit payments are based on years of
credited service and average compensation over the final five years of
employment.
Net periodic pension cost of the Plans for the year ended September 30,
1995, included the following components:
<TABLE>
<S> <C>
Service cost-benefit earned during the period............... $ 946,000
Interest cost on projected benefit obligation............... 511,000
Actual return on plan assets................................ (1,333,000)
Net amortization and deferral............................... 892,000
-----------
Net periodic pension cost................................... $ 1,016,000
===========
The Company's portion of net periodic pension cost included
in the consolidated statement of operations................ $ 904,000
===========
</TABLE>
Key assumptions included the weighted-average discount rate used of 7.0% and
an expected rate of return on assets of the Plans of 8.5%.
The Company also maintains a money purchase pension plan covering
substantially all employees hired prior to July 1, 1987. The Company's
contributions to the money purchase pension plan are equal to 10.0% of each
eligible participant's compensation. Approximately $455,000 was expensed
relating to this plan.
The Company also maintains an employee savings plan covering substantially
all employees hired after June 30, 1987. The Company matches 50.0% of employee
contributions to the employee savings plan up to a maximum of 3.0% of each
eligible participant's compensation. $125,000 was expensed relating to this
plan.
F-27
<PAGE>
WEST SUBURBAN KIDNEY CENTER, S.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
5. INCOME TAXES
Components of income tax for the year ended September 30, 1995, are
summarized as follows:
<TABLE>
<S> <C>
Current:
Federal........................................................ $205,000
State.......................................................... 66,000
Deferred......................................................... 54,000
--------
$325,000
========
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Company provides administrative and purchasing services to several
affiliated companies. Total management fee revenues from affiliates for these
services were approximately $3,558,000.
The Company earned interest on outstanding balances due from affiliates of
approximately $355,000.
The Company purchases from NANI certain management and physician supervisory
services. Fees incurred for such services totaled approximately $4,315,000 for
the year ended September 30, 1995.
The Company has promissory notes outstanding to an affiliated company. The
notes provide for interest to be paid at the prime rate plus 1%, adjusted on
the first day of each calendar quarter. Interest expense totaled approximately
$169,000.
F-28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY SUBSIDIARY GUARANTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECU-
RITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COM-
PANY OR ANY SUBSIDIARY GUARANTOR SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PRO-
SPECTUS.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 14
The Company............................................................... 23
Use of Proceeds........................................................... 23
Capitalization............................................................ 24
Unaudited Pro Forma Consolidated Statements of Operations................. 25
Selected Financial Data................................................... 29
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 30
Business.................................................................. 38
Management................................................................ 59
Certain Relationships and Related Transactions............................ 64
Security Ownership of Certain Beneficial Owners and Management............ 67
Description of Credit Facility............................................ 68
Description of Exchange Notes............................................. 69
The Exchange Offer........................................................ 102
Book Entry; Delivery and Form............................................. 110
Certain Federal Income Tax Considerations................................. 114
Plan of Distribution...................................................... 118
Independent Accountants................................................... 119
Legal Matters............................................................. 119
Available Information..................................................... 120
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
--------------------------
PROSPECTUS
--------------------------
LOGO
OFFER FOR ALL OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2008 IN EXCHANGE
FOR 9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
BY FACSIMILE:
(312) 407-1067
CONFIRM BY TELEPHONE:
(312) 336-9123
ATTENTION: BARBARA ARNDT
BY OVERNIGHT COURIER:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
CORPORATE TRUST SECURITIES
1 NORTH STATE STREET TELLER, 9TH FLOOR
CHICAGO, ILLINOIS 60602
ATTENTION: BARBARA ARNDT
BY HAND/MAIL
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
CORPORATE TRUST REDEMPTION UNIT
1 FIRST NATIONAL PLAZA, 9TH FLOOR, SUITE 0124
CHICAGO, ILLINOIS 60670-0124
ATTENTION: BARBARA ARNDT
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who
are (or are threatened to be made) parties to any threatened, pending or
completed legal action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of their being directors or
officers of the corporation. The indemnity may include expenses, attorneys'
fees, judgments, fines and amounts paid in settlement, provided such sums were
actually and reasonably incurred in connection with the action, suit or
proceeding and provided the director or officer acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
corporation's best interests and, in the case of criminal proceedings,
provided he had no reasonable cause to believe that his or her conduct was
unlawful. The corporation may indemnify directors and officers in a derivative
action (in which suit is brought by a stockholder on behalf of the
corporation) under the same conditions, except that no indemnification is
permitted without judicial approval if the director or officer is adjudged
liable to the corporation. If the director or officer is successful on the
merits or otherwise in defense of any actions referred to above, the
corporation must indemnify him against the expenses and attorneys' fees he
actually and reasonably incurred.
Article XI of the Company's By-laws provides that the Company shall
indemnify its officers and directors to the fullest extent permitted by
Section 145; provided, however, that the Company shall not be obligated to
indemnify any such director (i) with respect to proceedings, claims or actions
initiated or brought voluntarily by such person and not by way of defense or
brought against such person in response to a proceeding, claim or action by
such person against the Company, or (ii) for any amounts paid in settlement of
an action effected without the prior written consent of the Company to such
settlement or, (iii) if liability was incurred because the director breached
or failed to perform a duty he owes to the Company and the breach or failure
to perform constitutes (a) a willful failure to deal fairly with the Company
or its stockholders in connection with a matter in which the director has a
material conflict of interest, (b) a violation of criminal law, unless the
director had reasonable cause to believe his conduct was lawful or no
reasonable cause to believe his conduct was unlawful, (c) a transaction from
which the director derived an improper personal profit, or (d) willful
misconduct. The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea, does not, by
itself, create a presumption that indemnification of the director or officer
is not required. A director or officer who seeks indemnification is required
to make a written request to the Company. Such indemnification is not
exclusive of any other right to indemnification provided by law, agreement or
otherwise. The determination as to right to indemnification is required to be
made by a majority vote of a quorum of the Board of Directors consisting of
directors not at the time parties to the same or related proceedings. If a
quorum of disinterested directors cannot be obtained, the determination will
be made by majority vote of a committee duly appointed by the Board of
Directors and consisting solely of two or more directors not at the time
parties to the same or related proceedings. Directors who are parties to the
same or related proceedings may participate in the designation of members of
the committee.
The Company has applied for a policy of insurance, under which the Company
would be entitled to be reimbursed for certain indemnity payments it is
required or permitted to make to directors and officers of the Company.
ITEM 21. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<C> <S> <C>
3.1 Certificate of Incorporation of the Company.
3.2 By-laws of the Company, as amended.
3.3 Articles of Organization of Amarillo Acute Dialysis Spe-
cialists, L.L.C.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S> <C>
3.4 Operating Agreement of Amarillo Acute Dialysis Special-
ists, L.L.C.
3.5 Articles of Incorporation of Con-Med Supply Company, Inc.
3.6 By-laws of Con-Med Supply Company, Inc.
3.7 Articles of Incorporation of Continental Health Care, Ltd.
3.8 By-laws of Continental Health Care, Ltd.
3.9 Articles of Organization of Dialysis Specialists of Corpus
Christi, L.L.C.
3.10 Operating Agreement of Dialysis Specialists of Corpus
Christi, L.L.C.
3.11 Articles of Organization of Dialysis Specialists of South
Texas, L.L.C.
3.12 Operating Agreement of Dialysis Specialists of South Tex-
as, L.L.C.
3.13 Articles of Incorporation of DuPage Dialysis, Ltd.
3.14 By-laws of DuPage Dialysis, Ltd.
3.15 Certificate of Incorporation of Everest Management, Inc.
3.16 By-laws of Everest Management, Inc.
3.17 Articles of Organization of Hemo Dialysis of Amarillo,
L.L.C.
3.18 Operating Agreement of Hemo Dialysis of Amarillo, L.L.C.
3.19 Articles of Incorporation of Home Dialysis of America,
Inc.
3.20 By-laws of Home Dialysis of America, Inc.
3.21 Articles of Incorporation of Home Dialysis of Dayton, Inc.
3.22 By-laws of Home Dialysis of Dayton, Inc.
3.23 Articles of Incorporation of Lake Avenue Dialysis Center,
Inc.
3.24 By-laws of Lake Avenue Dialysis Center, Inc.
3.25 Articles of Incorporation of Mercy Dialysis Center Inc.
3.26 By-laws of Mercy Dialysis Center, Inc.
3.27 Articles of Incorporation of New York Dialysis Management,
Inc.
3.28 By-laws of New York Dialysis Management, Inc.
3.29 Certificate of Incorporation of North Buckner Dialysis
Center, Inc.
3.30 By-laws of North Buckner Dialysis Center, Inc.
3.31 Articles of Incorporation of Northwest Indiana Dialysis,
Inc.
3.32 By-laws of Northwest Indiana Dialysis, Inc.
3.33 Articles of Incorporation of Ohio Valley Dialysis Center,
Inc.
3.34 By-laws of Ohio Valley Dialysis Center, Inc.
3.35 Articles of Incorporation of WSKC Dialysis Services, Inc.
3.36 By-laws of WSKC Dialysis Services, Inc.
3.37 Certificate of Incorporation of Everest New York Holdings,
Inc.
3.38* By-laws of Everest New York Holdings, Inc.
3.39 Certificate of Incorporation of Everest One IPA, Inc.
3.40* By-laws of Everest One IPA, Inc.
4.1 Indenture dated as of May 5, 1998, among the Company, the
Subsidiary Guarantors and American National Bank and Trust
Company of Chicago, as Trustee.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
4.2 Purchase Agreement dated April 30, 1998, among the Compa-
ny, the Subsidiary Guarantors and BT Alex. Brown Incorpo-
rated.
4.3 Registration Rights Agreement dated May 5, 1998, among the
Company, the Subsidiary Guarantors and BT Alex. Brown In-
corporated.
4.4 Form of Exchange Note (included in Exhibit 4.1).
4.5 Form of Guarantee (included in Exhibit 4.1).
4.6 Second Amended and Restated Credit Agreement dated as of
May 18, 1998, among the Company, Harris Trust and Savings
Bank, and the Lenders identified therein.
4.7 Revolving Credit Note, between the Company and Harris
Trust and Savings Bank.
4.8 Acquisition Financing Note, between the Company and Harris
Trust and Savings Bank.
4.9 Supplemental Revolving Credit Note, between the Company
and Harris Trust and Savings Bank.
4.10 Amended and Restated Security Agreement, by and among the
Company, the Debtors (as defined therein) and Harris Trust
and Savings Bank.
4.11 Amended and Restated Guaranty Agreement, by and among the
Guarantors (as defined therein) and Harris Trust and Sav-
ings Bank.
4.12 Amended and Restated Pledge Agreement, by and among the
Company, the Pledgors (as defined therein) and Harris
Trust and Savings Bank.
5 Opinion of Katten Muchin & Zavis as to the legality of the
securities being registered (including consent).
9 Restricted Stock Agreement dated as of November 30, 1997.
10.1 Employment Agreement with Craig W. Moore dated January 1,
1997.
10.2 Employment Agreement with Martin Fox dated June 20, 1996.
10.3 Employment Agreement with Thomas Creel dated June 20,
1996.
10.4 Stock Award Plan dated January 15, 1997.
10.5 Peak Liquidating, L.L.C. Operating Agreement dated Novem-
ber 30, 1997.
10.6 Administrative Services Agreement dated October 1, 1997,
between the Company and NANI-IL.
10.7 Management Agreement dated October 1, 1997, between the
Company and NANI-IL.
10.8 Shareholders Agreement dated as of November 30, 1997.
10.9 Form of Individual Restricted Stock Agreements.
12 Computation of ratio of earnings to fixed charges.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Katten Muchin & Zavis (contained in its opinion
to be filed as Exhibit 5).
24 Power of Attorney (see signature page).
25 Statement of eligibility under the Trust Indenture Act of
1939, as amended, on Form T-1 of American National Bank
and Trust Company of Chicago, as Trustee under the Inden-
ture.
27 Financial Data Schedule.
99.1 Form of Letter of Transmittal for the Exchange Notes.
99.2 Form of Notice of Guaranteed Delivery for the Exchange
Notes.
99.3 Letter to Registered Holders and The Depository Trust Com-
pany Participants.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
99.4 Letter to Clients.
99.5 Instruction to Registered Holder and/or Book Entry Trans-
fer Participant from Beneficial Owner.
99.6 Guidelines for Certificate of Taxpayer Identification Num-
ber on Substitute Form W-9.
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES.
Included herein as pages II-26 and II-27.
(c) NOT APPLICABLE.
ITEM 22. UNDERTAKINGS.
(a) (i) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(ii) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(iii) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Everest Healthcare Services
Corporation
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board, Chief June 17, 1998
____________________________________ Executive Officer
Craig W. Moore (principal executive
officer)
/s/ Arthur M. Morris, M.D. Director June 17, 1998
____________________________________
Arthur M. Morris, M.D.
/s/ Martin Fox Director June 17, 1998
____________________________________
Martin Fox
/s/ Michael J. Carbon, M.D. Director June 17, 1998
____________________________________
Michael J. Carbon, M.D.
/s/ John B. Bourke Chief Financial Officer June 17, 1998
____________________________________ (principal financial
John B. Bourke officer and accounting
officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
/s/ Thomas Creel Director June 17, 1998
____________________________________
Thomas Creel
/s/ Alan Berry Director June 17, 1998
____________________________________
Alan Berry
/s/ George Dunea Director June 17, 1998
____________________________________
George Dunea, M.D.
/s/ Ashutosh Gupta Director June 17, 1998
____________________________________
Ashutosh Gupta, M.D.
/s/ Douglas Mufuka, M.D. Director June 17, 1998
____________________________________
Douglas Mufuka, M.D.
</TABLE>
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Amarillo Acute Dialysis Specialists,
L.L.C
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chief Executive Officer
of the Member
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chief Executive Officer June 17, 1998
____________________________________ of the Member (principal
Craig W. Moore executive officer)
/s/ John B. Bourke Chief Financial Officer June 17, 1998
____________________________________ (principal financial
John B. Bourke officer and accounting
officer)
</TABLE>
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Con-Med Supply Company, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer
and President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Continental Health Care, Ltd.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer
and President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Dialysis Specialists of Corpus
Christi, L.L.C.
/s/ Craig W. Moore
By___________________________________
Craig W. Moore
Chief Financial Officer
of the Member
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chief Executive Officer June 17, 1998
____________________________________ of the Member (principal
Craig W. Moore executive officer)
/s/ John B. Bourke Chief Financial Officer June 17, 1998
____________________________________ (principal financial
John B. Bourke officer and accounting
officer)
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Dialysis Specialists of South Texas,
L.L.C.
/s/ Craig W. Moore
By___________________________________
Craig W. Moore
Chief Financial Officer
of the Member
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chief Executive Officer June 17, 1998
____________________________________ of the Member (principal
Craig W. Moore executive officer)
/s/ John B. Bourke Chief Financial Officer June 17, 1998
____________________________________ (principal financial
John B. Bourke officer and accounting
officer)
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Dupage Dialysis Ltd.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer
and President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Everest Management, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Hemo Dialysis of Amarillo, L.L.C.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chief Executive Officer of the
Member
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chief Executive Officer June 17, 1998
____________________________________ of the Member (principal
Craig W. Moore executive officer)
/s/ John B. Bourke Chief Financial Officer June 17, 1998
____________________________________ (principal financial
John B. Bourke officer and accounting
officer)
</TABLE>
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Home Dialysis of America, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Home Dialysis of Dayton, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Lake Avenue Dialysis Center, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-17
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Mercy Dialysis Center, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
New York Dialysis Management, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
North Buckner Dialysis Center, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Northwest Indiana Dialysis, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-21
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Ohio Valley Dialysis Center, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-22
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
WSKC Dialysis Services, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-23
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Everest New York Holdings, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-24
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OAK PARK,
ILLINOIS ON JUNE 17, 1998.
Everest One IPA, Inc.
/s/ Craig W. Moore
By: _________________________________
Craig W. Moore
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CRAIG W. MOORE, JOHN B. BOURKE AND MARGUERITE M. ELIAS AND EACH OF THEM HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-4 AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION UNDER THE SECURITIES
ACT, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE IN AND ABOUT THE PREMISES, AS FULLY AND TO ALL INTENTS AND PURPOSES AS
EACH MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING EACH ACT
THAT SAID ATTORNEYS-IN-FACT AND AGENTS MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Craig W. Moore Chairman of the Board and June 17, 1998
____________________________________ Chief Executive Officer
Craig W. Moore (principal executive
officer)
/s/ John B. Bourke Chief Financial Officer and June 17, 1998
____________________________________ Director (principal
John B. Bourke financial officer and
accounting officer)
/s/ Paul Balter, M.D. Director June 17, 1998
____________________________________
Paul Balter, M.D.
</TABLE>
II-25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Peak Healthcare,
L.L.C. as of September 30, 1997 and 1996, and for the years then ended, and
have issued our report thereon dated March 13, 1998 (included elsewhere in
this Registration Statement). We have also audited the financial statements of
West Suburban Kidney Center, S.C. for the year ended September 30, 1995, and
have issued our report thereon dated March 13, 1998 (included elsewhere in
this Registration Statement). Our audits also included the financial statement
schedule listed in Item 21(b) of this Registration Statement. 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,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
March 13, 1998
II-26
<PAGE>
SCHEDULE II
VALUATION & QUALIFYING ACCOUNTS
EVEREST HEALTHCARE SERVICES CORPORATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE ---------------- BALANCE
AT CHARGED CHARGED AT END
BEGINNING TO TO OTHER OF
OF PERIOD EXPENSE ACCOUNTS RECOVERIES PERIOD
--------- ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Everest Healthcare Services
Corporation
Six months ended March 31,
1998
Deducted form asset accounts:
Allowance for patient
accounts receivable........ $2,791 $ 753 $-- $-- $3,544
------ ------ ---- ---- ------
Total..................... $2,791 $ 753 $-- $-- $3,544
====== ====== ==== ==== ======
Peak Healthcare, L.L.C.
(Predecessor)
Year ended September 30, 1997
Deducted form asset accounts:
Allowance for patient
accounts receivable........ $3,014 $ 714 $-- $937 $2,791
------ ------ ---- ---- ------
Total..................... $3,014 $ 714 $-- $937 $2,791
====== ====== ==== ==== ======
Peak Healthcare, L.L.C.
(Predecessor)
Year ended September 30, 1996
Deducted form asset accounts:
Allowance for patient
accounts receivable........ $ -- $2,523 $491 $-- $3,014
------ ------ ---- ---- ------
Total..................... $ -- $2,523 $491 $-- $3,014
====== ====== ==== ==== ======
West Suburban Kidney Center,
S.C. (Predecessor)
Year ended September 30, 1997
Deducted form asset accounts:
Allowance for patient
accounts receivable........ $ -- $ 753 $-- $-- $ 753
------ ------ ---- ---- ------
Total..................... $ -- $ 753 $-- $-- $ 753
====== ====== ==== ==== ======
</TABLE>
II-27
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S> <C>
3.1 Certificate of Incorporation of the Company.
3.2 By-laws of the Company, as amended.
Articles of Organization of Amarillo Acute Dialysis Specialists,
3.3 L.L.C.
Operating Agreement of Amarillo Acute Dialysis Specialists,
3.4 L.L.C.
3.5 Articles of Incorporation of Con-Med Supply Company, Inc.
3.6 By-laws of Con-Med Supply Company, Inc.
3.7 Articles of Incorporation of Continental Health Care, Ltd.
3.8 By-laws of Continental Health Care, Ltd.
Articles of Organization of Dialysis Specialists of Corpus
3.9 Christi, L.L.C.
Operating Agreement of Dialysis Specialists of Corpus Christi,
3.10 L.L.C.
Articles of Organization of Dialysis Specialists of South Texas,
3.11 L.L.C.
Operating Agreement of Dialysis Specialists of South Texas,
3.12 L.L.C.
3.13 Articles of Incorporation of DuPage Dialysis, Ltd.
3.14 By-laws of DuPage Dialysis, Ltd.
3.15 Certificate of Incorporation of Everest Management, Inc.
3.16 By-laws of Everest Management, Inc.
3.17 Articles of Organization of Hemo Dialysis of Amarillo, L.L.C.
3.18 Operating Agreement of Hemo Dialysis of Amarillo, L.L.C.
3.19 Articles of Incorporation of Home Dialysis of America, Inc.
3.20 By-laws of Home Dialysis of America, Inc.
3.21 Articles of Incorporation of Home Dialysis of Dayton, Inc.
3.22 By-laws of Home Dialysis of Dayton, Inc.
3.23 Articles of Incorporation of Lake Avenue Dialysis Center, Inc.
3.24 By-laws of Lake Avenue Dialysis Center, Inc.
3.25 Articles of Incorporation of Mercy Dialysis Center Inc.
3.26 By-laws of Mercy Dialysis Center, Inc.
3.27 Articles of Incorporation of New York Dialysis Management, Inc.
3.28 By-laws of New York Dialysis Management, Inc.
Certificate of Incorporation of North Buckner Dialysis Center,
3.29 Inc.
3.30 By-laws of North Buckner Dialysis Center, Inc.
3.31 Articles of Incorporation of Northwest Indiana Dialysis, Inc.
3.32 By-laws of Northwest Indiana Dialysis, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S> <C>
3.33 Articles of Incorporation of Ohio Valley Dialysis Center, Inc.
3.34 By-laws of Ohio Valley Dialysis Center, Inc.
3.35 Articles of Incorporation of WSKC Dialysis Services, Inc.
3.36 By-laws of WSKC Dialysis Services, Inc.
3.37 Certificate of Incorporation of Everest New York Holdings,
Inc.
3.38* By-laws of Everest New York Holdings, Inc.
3.39 Certificate of Incorporation of Everest One IPA, Inc.
3.40* By-laws of Everest One IPA, Inc.
4.1 Indenture dated as of May 5, 1998, among the Company, the
Subsidiary Guarantors and American National Bank and Trust
Company of Chicago, as Trustee.
4.2 Purchase Agreement dated April 30, 1998, among the Company,
the Subsidiary Guarantors and BT Alex. Brown Incorporated.
4.3 Registration Rights Agreement dated May 5, 1998, among the
Company, the Subsidiary Guarantors and BT Alex. Brown
Incorporated.
4.4 Form of Exchange Note (included in Exhibit 4.1).
4.5 Form of Guarantee (included in Exhibit 4.1).
4.6 Second Amended and Restated Credit Agreement dated as of May
18, 1998, among the Company, Harris Trust and Savings Bank,
and the Lenders identified therein.
4.7 Revolving Credit Note, between the Company and Harris Trust
and Savings Bank.
4.8 Acquisition Financing Note, between the Company and Harris
Trust and Savings Bank.
4.9 Supplemental Revolving Credit Note, between the Company and
Harris Trust and Savings Bank.
4.10 Amended and Restated Security Agreement, by and among the Com-
pany, the Debtors (as defined therein) and Harris Trust and
Savings Bank.
4.11 Amended and Restated Guaranty Agreement, by and among the
Guarantors (as defined therein) and Harris Trust and Savings
Bank.
4.12 Amended and Restated Pledge Agreement, by and among the Compa-
ny, the Pledgors (as defined therein) and Harris Trust and
Savings Bank.
5* Opinion of Katten Muchin & Zavis as to the legality of the
securities being registered (including consent).
9 Restricted Stock Agreement dated as of November 30, 1997.
Employment Agreement with Craig W. Moore dated January 1,
10.1 1997.
10.2 Employment Agreement with Martin Fox dated June 20, 1996.
10.3 Employment Agreement with Thomas Creel dated June 20, 1996.
10.4 Stock Award Plan dated January 15, 1997.
Peak Liquidating, L.L.C. Operating Agreement dated November
10.5 30, 1997.
Administrative Services Agreement dated October 1, 1997,
10.6 between the Company and NANI-IL.
Management Agreement dated October 1, 1997, between the
10.7 Company and NANI-IL.
10.8 Shareholders Agreement dated as of November 30, 1997.
10.9 Form of Individual Restricted Stock Agreements.
12 Computation of ratio of earnings to fixed charges.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S> <C>
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
Consent of Katten Muchin & Zavis (contained in its opinion to be
23.2* filed as Exhibit 5).
24 Power of Attorney (see signature page).
25 Statement of eligibility under the Trust Indenture Act of 1939,
as amended, on Form T-1 of American National Bank and Trust
Company of Chicago, as Trustee under the Indenture.
27 Financial Data Schedule.
99.1 Form of Letter of Transmittal for the Exchange Notes.
99.2 Form of Notice of Guaranteed Delivery for the Exchange Notes.
99.3 Letter to Registered Holders and The Depository Trust Company
Participants.
99.4 Letter to Clients.
99.5 Instruction to Registered Holder and/or Book Entry Transfer
Participant from Beneficial Owner.
99.6 Guidelines for Certificate of Taxpayer Identification Number on
Substitute Form W-9.
</TABLE>
- --------
*To be filed by amendment.
<PAGE>
EXHIBIT 3.1
State of Delaware
Office of the Secretary of State
________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP,
WHICH MERGES:
"EVEREST HEALTHCARE SERVICES CORPORATION", A DELAWARE CORPORATION,
WITH AND INTO "EVEREST HEALTHCARE II, INC." UNDER THE NAME OF "EVEREST
HEALTHCARE SERVICES CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE
LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE THIRD
DAY OF MARCH, A.D. 1998, AT 4 O'CLOCK P.M.
[SEAL APPEARS HERE] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9046119
DATE: 04-24-98
<PAGE>
[STAMP APPEARS HERE]
CERTIFICATE OF OWNERSHIP AND MERGER
OF
EVEREST HEALTHCARE SERVICES CORPORATION
(A DELAWARE CORPORATION)
WITH AND INTO
EVEREST HEALTHCARE II, INC.
(A DELAWARE CORPORATION)
* * * * * * *
In accordance with Section 253
of the General Corporation Law of the
State of Delaware
* * * * * * *
Everest Healthcare II, Inc., a corporation duly organized and existing
under the laws of the State of Delaware.
DOES HEREBY CERTIFY
FIRST: That this corporation was incorporated on the twenty-sixth day of
November, 1997, pursuant to the General Corporation Law of the State of Delaware
(the"DGCL"), the provisions of which permit the merger of a corporation of said
state and another corporation organized and existing under the laws of the same
state.
SECOND: That this corporation owns all of the outstanding common stock of
Everest Healthcare Services Corporation, a Delaware corporation incorporated on
the fifth day of July, 1995, pursuant to the DGCL.
<PAGE>
THIRD: That the directors of this corporation, by the following resolutions
of its Board of Directors adopted on February 23, 1998, which are filed with
minutes of the Board, determined to merge said Everest Healthcare Services
Corporation with and into itself in the manner prescribed by Section 253 of the
DGCL.
RESOLVED: That this corporation, a Delaware corporation, does hereby cause
Everest Healthcare Services Corporation, a Delaware corporation, to merge
with and into itself, thereby assuming all of the obligations of Everest
Healthcare Services Corporation, a Delaware corporation pursuant to Section
253 of the DGCL.
FURTHER RESOLVED: That the merger shall become effective upon the filing of
the appropriate certificate of merger with the Secretary of Delaware.
FURTHER RESOLVED: That the proper officer of this corporation be and be is
hereby directed to make and execute a Certificate of Ownership and Merger
setting forth a copy of the resolutions to merge Everest Healthcare
Services Corporation, a Delaware corporation, into this corporation and the
date of adoption thereof, and to cause the same to be filed with the
Secretary of State of the State of Delaware, and to do all acts and things
whatsoever, whether within or without the State of Delaware, which may be
in any way necessary and proper to effect said merger.
FOURTH: That the proposed merger has been adopted, approved, certified,
executed and acknowledged by this corporation, in accordance with the laws of
the State of Delaware, under which this corporation was organized.
FIFTH: That this corporation, a Delaware corporation, shall merge Everest
Healthcare Services Corporation, a Delaware corporation, with and into itself,
with this corporation being the surviving corporation. Upon the effective time
of the merger, the corporate name of this corporation. Everest Healthcare D.
Inc., as the surviving corporation, shall be changed pursuant to Section 253(b)
of the DGCL to Everest Healthcare Services Corporation.
2
<PAGE>
SIXTH: (a) The total number of shares of stock which this corporation
has authority to issue is as follows:
<TABLE>
<CAPTION>
Number of Par Value
Class shares per share
----- ------ ---------
<S> <C> <C>
Common 20,000.000 $0.001
</TABLE>
(b) The total number of shares of stock which Everest Healthcare
Services Corporation, a Delaware corporation, has authority to issue is as
follows:
<TABLE>
<CAPTION>
Number of Par Value
Class shares per share
----- ------ ---------
<S> <C> <C>
Common 20,000.000 $0.001
</TABLE>
SEVENTH: Anything herein or elsewhere to the contrary notwithstanding, this
merger may be amended or terminated or abandoned by the Board of Directors of
this corporation at any time prior to the date of filing the Certificate of
Ownership and Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, this corporation has caused this Certificate of
Ownership and Merger to be signed by Craig W. Moore, its Chief Executive
Officer, this 27th day of February, 1998.
EVEREST HEALTHCARE II, INC.
(a Delaware corporation)
BY: /s/ Craig W. Moore
-----------------------
Craig W. Moore
Chief Executive Officer
3
<PAGE>
State of Delaware
Office of the Secretary of State
________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "EVEREST HEALTHCARE II, INC.", FILED IN THIS OFFICE ON THE
TWENTY-SIXTH DAY OF NOVEMBER, A.D. 1997, AT 12 O'CLOCK P.M.
[SEAL APPEARS HERE] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9046120
DATE: 04-24-98
<PAGE>
[STAMP APPEARS HERE]
CERTIFICATE OF INCORPORATION
OF
EVEREST HEALTHCARE II, INC.
FIRST: The name of the corporation is Everest Healthcare II, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, in the county of
New Castle. The name of the Corporation's registered agent is Corporation
Service Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware (the
"DGCL").
FOURTH: (a) The total number of shares of capital stock with the
Corporation shall have authority to issue is 20,000,000 shares of common stock,
par value $.001 per share.
(b) "Dividend Policies": Prior to making any distribution to
-----------------
the holders of the Corporation's common stock (other than dividends payable
solely in shares of common stock), the Chief Financial Officer of the
Corporation shall send a notice (the "Distribution Notice") to each of the
Corporation's stockholders requesting that each of them return to the
Corporation a statement (a "Distribution Statement") containing the following
information, certified by the stockholder to be accurate and correct:
1. A statement as to whether or not the stockholder is (A) a physician or
(B) an immediate family member of a physician or (C) an entity
(including a trust) controlled, directly or indirectly, by (A) or (B)
(in each case, a "Restricted Stockholder"); and
2. If the stockholder is a Restricted Stockholder, a list of all
facilities and providers of health care services (other than
physicians), including addresses, to which the Restricted Stockholder,
or physician affiliated with such Restricted Stockholder, as
applicable, refers patients.
Each stockholder shall, no later than 10 business days following receipt of the
Distribution Notice, deliver its Distribution Statement to the Corporation.
Upon receipt of the Distribution Statement from each stockholder and to the
extent the stockholder is a Restricted Stockholder, the Corporation shall review
its operations and determine those programs or entities providing "Designated
Health Services" (as hereinafter
<PAGE>
defined), which are directly or indirectly owned by the Corporation, and to
which the Restricted Stockholder, or the physician affiliated with such
Restricted Stockholder, as applicable, is making, or has made, referrals (the
"Subsidiaries") that would be considered a violation of Section 1877(a) of the
Social Security Act (the "Stark Law") if such Restricted Stockholder had an
ownership or investment interest in the Subsidiaries. The Corporation shall then
determine the proportionate economic interest of the Restricted Stockholder in
any such Subsidiaries which the Restricted Stockholder would have but for the
provisions of this Article FOURTH and shall reduce the amount of any
distribution to be made to such Restricted Stockholder by the amount which, but
for the provisions of this Article FOURTH, would be attributable to such
Restricted Stockholder's proportionate interest in such Subsidiaries. No
distribution shall be made to any stockholder who has not delivered to the
Corporation a Distribution Statement requested by the Corporation.
Each stockholder shall indemnify and hold the Corporation harmless from any
claims, liabilities , penalties, costs, damages or expenses (including
attorneys' fees) incurred as a result of any false or inaccurate statements or
information contained in any Distribution Statement delivered to the Corporation
by the stockholder.
(c) "Transfer Policies": Prior to any transfer of securities in
-----------------
the Corporation, the stockholder intending to make such transfer will deliver to
the Chief Financial Officer of the Corporation a written notice (the "Intended
Transfer Notice") which shall contain the following:
1. Certified by the transferor stockholder to be accurate and correct:
(i) a statement as to whether or not the transferor is a Restricted
Stockholder; and
(ii) if the transferor is a Restricted Stockholder, a list of all
facilities and providers of health care services (other than
physicians), including addresses, to which the Restricted
Stockholder, or the physician affiliated with such Restricted
Stockholder, as applicable, refers patients.
2. Certified by the intended transferee to be accurate and correct:
(i) a statement as to whether or not the transferee is (A) a
physician or (B) an immediate family member of a physician or
(C) an entity (including a trust) controlled, directly or
indirectly, by (A) or (B) (in each case, a "Restricted
Transferee");
(ii) if the transferee is a Restricted Transferee, a list of all
facilities and providers of health care services (other than
physicians), including addresses, to which the Restricted
Transferee, or the physician affiliated with such Restricted
Transferee, as applicable, refers patients; and
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<PAGE>
(iii) an agreement by the transferee that any subsequent transfer of
the Corporation's securities by such transferee will be
governed by and subject to compliance with the Transfer
Policies and Dividend Policies set forth in the Corporation's
Certificate of Incorporation.
3. Certified jointly by the transferor stockholder and intended
transferee to be accurate and correct:
(i) a summary of the terms and conditions of the proposed transfer,
including without limitation, the price to be paid for the
Corporation's securities; and
(ii) a statement as to whether or not the intended transferee is a
Permitted Transferee. A "Permitted Transferee" shall mean, with
respect to such stockholder transferor, (A) a spouse,
descendant of parent of such stockholder or (B) a trust or
family partnership solely for the benefit of such stockholder
or such individual identified in (A).
Upon receipt of the Intended Transfer Notice and to the extent the
transferor is a Restricted Stockholder and the intended transferee is not a
Permitted Transferee, the Corporation shall review its operations and determine
those programs or entities providing "Designated Health Services" (as
hereinafter defined), which are directly or indirectly owned by the Corporation,
and to which the Restricted Stockholder or the physician affiliated with such
Restricted Stockholder is making, or has made, referrals (the "Subsidiaries")
that would be considered a violation of the Stark Law if such Restricted
Stockholder had an ownership or investment interest in the Subsidiaries. The
Corporation shall then value what would be the proportionate economic interest
of the Restricted Stockholder in any such Subsidiaries and give notice thereof
(the "Value Statement") to such Restricted Stockholder. In the event the
transferor is not a Restricted Stockholder or the intended transferee is a
Permitted Transferee, the Corporation shall provide notice of its acceptance of
the Intended Transfer Notice from such transferor (the "Acceptance"). The
Corporation shall use its reasonable efforts to deliver the Value Statement to
the Restricted Stockholder, or the Acceptance to such other transferor, within
90 days after receipt of the Intended Transfer Notice.
The transferor shall then have 30 days after receipt of the Corporation's
Value Statement or Acceptance, as appropriate, to consummate the transaction
described in the Intended Transfer Notice, and if such transferor is a
Restricted Stockholder and the intended transferee is not a Permitted
Transferee, at a price which is reduced by the amount indicated in the
Corporation's Value Statement. As a condition to any transfer, the transferor
shall deliver to the Corporation a written certification that the transfer
complies in all respects with the provisions of these Transfer Policies, and if
the transferee is a Restricted Transferee, such Restricted Transferee shall
deliver to the Corporation a written agreement to notify the Corporation
promptly of any change to the list of facilities to which the Restricted
Transferee, or the physician affiliated with such Restricted Transferee, as
applicable, refers patients, as listed in the Intended Transfer
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<PAGE>
Notice. Each transferor who submits an Intended Transfer Notice shall be
responsible for all costs, including valuation costs, incurred by the
Corporation in connection with processing the transfer referenced in the
Intended Transfer Notice.
Each stockholder shall indemnify and hold the Corporation harmless from any
claims, liabilities, penalties, costs, damages or expenses (including
attorneys's fees) incurred as a result of any false or inaccurate statements or
information contained in any Intended Transfer Notice delivered to the
Corporation by the stockholder.
(d) For purposes of this Article FOURTH, the phrase "Designated
Health Services" shall have the same meaning ascribed to it in the Stark Law at
42 U.S.C. (S)1395nn(h)(6). These "Dividend Policies" and "Transfer Policies"
will terminate at such time as the Stark Law no longer restricts the ownership
or investment interest of physicians, immediate family members of physicians
or entities controlled, directly or indirectly, by either of the foregoing, in
the Subsidiaries.
FIFTH: The name and mailing address of the Corporation's incorporator
is:
Name Mailing Address
---- ---------------
Keith A. Sigale c/o Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
SIXTH: The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation (the
"By-Laws").
SEVENTH: Elections of directors need not be by written ballot unless
otherwise provided in the By-Laws.
EIGHTH: At the request of any member of the Board of Directors of the
Corporation, which request shall be communicated to the other members of the
Board of Directors either orally or in writing and filed with the minutes of the
Corporation, and to the extent not otherwise required by the DGCL, only the
approval by the stockholders of the Corporation shall be necessary for the
approval by the Corporation of the following actions, notwithstanding the
approval by the Board of Directors of the Corporation of such actions:
(i) any merger, consolidation or reorganization of the
Corporation or any subsidiary of the Corporation with
any other corporation or other entity;
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<PAGE>
(ii) any sale, assignment, transfer or other disposition of assets
of the Corporation or any subsidiary of the Corporation
comprising more than 10% of the fair market value or book value
(determined in accordance with generally accepted accounting
principles), of the assets of the Corporation and its
subsidiaries on a consolidated basis, whichever is lower, in
any single transaction or series of related transactions;
(iii) the consummation of any public offering of equity or debt
securities of the Corporation or any subsidiary of the
Corporation;
(iv) the authorization of, issuance by or entering into any
agreement by the Corporation or a subsidiary of the Corporation
for the issuance (other than to a direct or indirect wholly-
owned subsidiary of the Corporation) of (a) any notes or debt
securities containing equity features or (b) any equity
securities or any securities convertible or exchangeable into
equity securities, in either case other than the issuance of
such securities to persons providing services to the
Corporation or any affiliate of the Corporation comprising not
more than five percent of the outstanding equity securities of
the Corporation on the date of issuance, as determined on a
fully diluted basis or $500,000, whichever is less, in any
single transaction or series of related transactions;
(v) incurrence of (or permitting incurrence of) any (a)
indebtedness for borrowed money or (b) mortgages, pledges,
liens, charges or encumbrances on any existing or future
property, asset (including the capital stock of any
subsidiaries), income or rights in any thereof, in each case in
an amount greater than $10,000,000 in the aggregate;
(vi) the dissolution or liquidation of the Corporation or any
subsidiary of the Corporation; and
(vii) any material transaction with any affiliate of the Corporation.
NINTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the DGCL.
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<PAGE>
The undersigned incorporator hereby acknowledges that the foregoing
certificate of incorporation is such incorporator's act and deed and that the
facts stated therein are true.
Dated: November 26, 1997 /s/ Keith A. Sigale
-- -----------------------------
Keith A. Sigale, Incorporator
c/o Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
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<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
EVEREST HEALTHCARE II, INC.
---------------------------
ARTICLE I
---------
IDENTIFICATION: OFFICES
-----------------------
SECTION 1.1. NAME. The name of the corporation is Everest Healthcare
----
II, Inc. (the "Corporation").
SECTION 1.2. REGISTERED OFFICES; OTHER OFFICES. The registered office
---------------------------------
of the Corporation in the State of Delaware shall be in the City of Wilmington
and County of New Castle. The Corporation may have such other offices, either
within or outside of the State of Delaware, as the business of the Corporation
may require from time to time.
ARTICLE II
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STOCKHOLDERS
------------
SECTION 2.1. ANNUAL MEETING. An annual meeting of the stockholders
--------------
shall be held on the first Monday in June of each year, or on such other date as
may be determined by resolution of the Board of Directors; provided, however,
that if in any year such date is a legal holiday, such meeting shall be held
on the next succeeding business day. At each annual meeting, the stockholders
shall elect directors to hold for the term provided in Section 3.1 of these
By-laws.
SECTION 2.2. SPECIAL MEETING. A special meeting of the stockholders
---------------
may be called by the President of the Corporation, the Board of Directors, or
by such other officers or persons as the Board of Directors may designate.
SECTION 2.3. PLACE OF STOCKHOLDER MEETINGS. The Board of Directors may
-----------------------------
designate any place, either within or without the State of Delaware, as the
place of meeting for any annual meeting or for any special meeting. If no such
place is designated by the Board of Directors, the place of meeting will be the
principal business office of the Corporation.
SECTION 2.4. NOTICE OF MEETINGS. Unless waived as herein provided,
------------------
whenever stockholders are required or permitted to take any action at a meeting,
written notice of the meeting shall be given stating the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Such written notice shall be given not less than
ten (10) days nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at the meeting or in the event of a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of all or
substantially all
<PAGE>
of the Corporation's property, business or assets not less than twenty (20) days
before the date of the meeting. If mailed, notice is given when deposited in the
United States mail, postage prepaid, directed to the stockholder at the
stockholder's address as it appears on the records of the Corporation.
When a meeting is adjourned to another time or place in accordance with
Section 2.5 of these By-laws, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting in which the
adjournment is taken. At the adjourned meeting the Corporation may conduct any
business which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTTION 2.5. QUORUM AND ADJOURNED MEETINGS. Unless otherwise
-----------------------------
provided by law or the Corporation's Certificate of Incorporation, a majority of
the shares entitled to vote, present in person or represented by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
shares entitled to vote at a meeting of stockholders is present in person or
represented by proxy at such meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the original meeting. The stockholders
present at a meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of such number of stockholders as may leave less
than a quorum.
SECTION 2.6. FIXING OF RECORD DATE. (a) For the purpose of determining
---------------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) For the purpose of determining stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is established by the Board of Directors, and
which date shall not be more than ten (10) days after the date on which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of
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<PAGE>
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal office, or an officer or agent of the Corporation having custody
of the book in which the proceedings of meetings of stockholders are recorded.
Delivery to the Corporation's registered office shall be by hand or by certified
or registered mail, return receipt requested. If no record date has been fixed
by the Board of Directors and prior action by the Board of Directors is required
by law, the record date for determining stockholders' consent to corporate
action in writing without a meeting shall be the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) For the purpose of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect to any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix the record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty (60) days prior to such
action. If no record date is fixed, the record date for determining the
stockholders for any such purpose shall be the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
SECTION 2.7. VOTING LIST. The officer who has charge of the stock
-----------
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.8. VOTING. Unless otherwise provided by the Certificate of
------
Incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by each stockholder. In all matters other than the election
of directors, the affirmative vote of the majority of shares present in person
or represented by proxy at the meeting and entitled to vote on the subject
matter be the act of the stockholders. Directors shall be elected by plurality
of the votes of the shares present in person or represented by a proxy at the
meeting entitled to vote on the election of directors.
SECTION 2.9. PROXIES. Each stockholder entitled to vote at a meeting
-------
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer
-3-
<PAGE>
period. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may remain
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
SECTION 2.10. RATIFICATION OF ACTS OF DIRECTORS AND OFFICERS. Except
----------------------------------------------
as otherwise provided by law or by the Certificate of Incorporation of the
Corporation, any transaction or contract or act of the Corporation or of the
directors or the officers of the Corporation may be ratified by the affirmative
vote of the holders of the number of shares which would have been necessary to
approve such transaction, contract or act at a meeting of stockholders, or by
the written consent of stockholders in lieu of a meeting.
SECTION 2.11. INFORMAL ACTION OF STOCKHOLDERS. Any action required to
-------------------------------
be taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. In the event that the action which is consented
to is such as would have required the filing of a certificate with any
governmental body, if such action had been voted on by stockholders at a meeting
thereof, the certificate filed shall state, in lieu of any statement required by
law concerning any vote of stockholders, that written consent had been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law, and that written notice has been given as provided in such
section.
SECTION 2.12. ORGANIZATION. Such person as the Board of Directors may
------------
designate or, in the absence of such a designation, the president of the
Corporation or, in his or her absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of such meeting. In the absence of the secretary of the Corporation,
the chairman of the meeting shall appoint a person to serve as secretary at the
meeting.
ARTICLE III
-----------
DIRECTORS
---------
SECTION 3.1. NUMBER AND TENURE OF DIRECTORS. The number of directors
------------------------------
of the Corporation shall consist of ten (10) members. Each director shall hold
office until such
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<PAGE>
director's successor is elected and qualified or until such director's earlier
resignation or removal. Any director may resign at any time upon written notice
to the Corporation.
SECTION 3.2. ELECTION OF DIRECTORS. Directors shall be elected at the
---------------------
annual meeting of stockholders. In all elections for directors, every
stockholder shall have the right to vote the number of shares owned by such
stockholder for each director to be elected.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of the Board of
----------------
Directors may be called by or at the request of the Chairman of the Board, the
President or at least one-third of the number of directors constituting the
whole board. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 3.4. NOTICE OF SPECIAL MEETINGS OF THE BOARD OF DIRECTORS.
----------------------------------------------------
Notice of any special meeting of the Board of Directors shall be given at least
two (2) days previous thereto by written notice to each director at his or her
address. If mailed, such notice shall be deemed to be delivered when deposited
in the United States Mail so addressed, with first-class postage thereon
prepaid. If sent by any other means (including facsimile, courier, or express
mail, etc.), such notice shall be deemed to be delivered when actually delivered
to the home or business address of the director.
SECTION 3.5. QUORUM. A majority of the total number of directors fixed
------
by these By-laws, or in the absence of a By-Law which fixes the number of
directors, the number stated in the Certificate of Incorporation or named by the
incorporators, shall constitute a quorum for the transaction of business. If
less than a majority of the directors are present at a meeting of the Board of
Directors, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 3.6. VOTING. The vote of the majority of the directors present
------
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the Delaware General Corporation Law or the Certificate of
Incorporation requires a vote of a greater number.
SECTION 3.7. VACANCIES. Vacancies in the Board of Directors may be
---------
filled by a majority vote of the Board of Directors or by an election either at
an annual meeting or at a special meeting of the stockholders called for that
purpose. Any directors elected by the stockholders to fill a vacancy shall hold
office for the balance of the term for which he or she was elected. A director
appointed by the Board of Directors to fill a vacancy shall serve until the next
meeting of stockholders at which directors are elected.
SECTION 3.8. REMOVAL OF DIRECTORS. A director, or the entire Board of
--------------------
Directors, may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors; provided,
however, that if cumulative voting
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<PAGE>
obtains and less than the entire Board of Directors is to be removed, no
director may be removed without cause if the votes cast against such director's
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors.
SECTION 3.9. INFORMAL ACTION OF DIRECTORS. Unless otherwise restricted
----------------------------
by the Certificate of Incorporation or these By-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
SECTION 3.10 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the
--------------------------------------
Board of Directors, or any committee designated by such board, may participate
in a meeting of the Board of Directors, or committee thereof, by means of
conference telephone or similar communications equipment as long as all persons
participating in the meeting can speak with and hear each other, and
participation by a director pursuant to this Section 3.10 shall constitute
presence in person at such meeting.
ARTICLE IV
----------
WAIVER OF NOTICE
----------------
SECTION 4.1. WRITTEN WAIVER OF NOTICE. A written waiver of any
------------------------
required notice, signed by the person entitled to notice, whether before or
after the date stated therein, shall be deemed equivalent to notice. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice.
SECTION 4.2 ATTENDANCE AS WAIVER OF NOTICE. Attendance of a person at
------------------------------
a meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, and objects at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
---------
COMMITTEES
----------
SECTION 5. GENERAL PROVISIONS. The Board of Directors may, by
------------------
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a
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<PAGE>
member at any meeting of a committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors, in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-laws of the Corporation; and, unless the resolution so provides, no such
committee shall have the power or authority to declare a dividend to authorize
the issuance of stock or to adopt a certificate of ownership and merger,
pursuant, to Section 253 of the Delaware General Corporation Law.
ARTICLE VI
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OFFICERS
--------
SECTION 6.1. GENERAL PROVISIONS. The Board of Directors shall elect
------------------
a President and a Secretary of the Corporation. The Board of Directors may also
elect a Chairman of the Board, one or more Vice Chairmen of the Board, one or
more Vice Presidents, a Treasurer, one or more Assistant Secretaries and
Assistant Treasurers and such additional officers as the Board of Directors may
deem necessary or appropriate from time to time. Any two or more offices may be
held by the same person. The officers elected by the Board of Directors shall
have such duties as are hereafter described and such additional duties as the
Board of Directors may from time to time prescribe.
SECTION 6.2. ELECTION AND TERM OF OFFICE. The officers of the
---------------------------
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers is not held at such meeting, such
election shall be held as soon thereafter as may be convenient. New offices of
the Corporation may be created and filled and vacancies in offices may be filled
at any time, at a meeting or by the written consent of the Board of Directors.
Unless removed pursuant to Section 6.3 of these By-laws, each officer shall hold
office until his successor has been duly elected and qualified, or until his
earlier death or resignation. Election or appointment of an officer or agent
shall not of itself create contract rights.
SECTION 6.3 REMOVAL OF OFFICERS. Any officer or agent elected or
-------------------
appointed by the Board of Directors may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person(s) so removed.
-7-
<PAGE>
SECTION 6.4. THE CHIEF EXECUTIVE OFFICER. The Board of Directors
---------------------------
shall designate whether the Chairman of the Board, if one shall have been
chosen, or the President shall be the Chief Executive Officer of the
Corporation. If a Chairman of the Board has not been chosen, or if one has been
chosen but not designated Chief Executive Officer, then the President shall be
the Chief Executive Officer of the Corporation. The Chief Executive Officer
shall be the principal executive officer of the Corporation and shall in general
supervise and control all of the business and affairs of the Corporation, unless
otherwise provided by the Board of Directors. The Chief Executive Officer shall
preside at all meetings of the stockholders and of the Board of Directors and
shall see that orders and resolutions of the Board of Directors are carried into
effect. The Chief Executive Officer may sign bonds, mortgages, certificates for
shares and all other contracts and documents whether or not under the seal of
the Corporation except in cases where the signing and execution thereof shall be
expressly delegated by law, by the Board of Directors or by these By-laws to
some other officer or agent of the Corporation. The Chief Executive Officer
shall have general powers of supervision and shall be the final arbiter of all
differences between officers of the Corporation and his decision as to any
matter affecting the Corporation shall be final and binding as between the
officers of the Corporation subject only to the Board of Directors.
SECTION 6.5. THE PRESIDENT. In the absence of the Chief Executive
-------------
Officer or in the event of his inability or refusal to act, if the Chairman of
the Board has been designated Chief Executive Officer, the President shall
perform the duties of the Chief Executive Officer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the Chief
Executive Officer. At all other times the President shall have the active
management of the business of the Corporation under the general supervision of
the Chief Executive Officer. The President shall have concurrent power with the
Chief Executive Officer to sign bonds, mortgages, certificates for shares and
other contracts and documents, whether or not under the seal of the Corporation
except in cases where the signing and execution thereof shall be expressly
delegated by law, by the Board of Directors, or by these By-laws to some other
officer or agent of the Corporation. In general, the President shall perform all
duties incident to the office of president and such other duties as the Chief
Executive Officer or the Board of Directors may from time to time prescribe.
SECTION 6.6. THE CHAIRMAN OF THE BOARD. The Chairman of the Board,
-------------------------
if one is chosen, shall be chosen from among the members of the board. If the
Chairman of the Board has not been designated Chief Executive Officer, the
Chairman of the Board shall perform such duties as may be assigned to the
Chairman of the Board by the Chief Executive Officer or by the Board of
Directors.
SECTION 6.7. VICE CHAIRMAN OF THE BOARD. In the absence of the Chief
--------------------------
Executive Officer or in the event of his inability or refusal to act, if the
Chairman of the Board has been designated Chief Executive Officer, the Vice
Chairman, or if there be more than one, the Vice Chairmen, in the order
determined by the Board of Directors, shall perform the duties of the Chief
Executive Officer, and when so acting shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer. At all other
times, the Vice Chairman
-8-
<PAGE>
or Vice Chairmen shall perform such duties and have such powers as the Chief
Executive Officer or the Board of Directors may from time to time prescribe.
SECTION 6.8. THE VICE PRESIDENT. In the absence of the President or
------------------
in the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Executive Vice President and
then the other Vice President or Vice Presidents in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.9. THE SECRETARY. The Secretary shall attend all meetings
-------------
of the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the Chief Executive Officer, under whose supervision
he shall be. The Secretary shall have custody of the corporate seal of the
Corporation and the Secretary, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
SECTION 6.10. THE ASSISTANT SECRETARY. The Assistant Secretary, or
-----------------------
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the Secretary or in the event of
his inability or refusal to act, perform the duties and exercise the powers of
the Secretary and shall perform such other duties and have such other powers as
the Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.11. THE TREASURER. The Treasurer shall have the custody of
-------------
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the
-9-
<PAGE>
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
SECTION 6.12. The Assistant Treasurer. The Assistant Treasurer, or if
-----------------------
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.13. Duties of Officers May be Delegated. In the absence of
------------------------------------
any officer of the Corporation, or for any other reason the Board of Directors
may deem sufficient, the Board of Directors may delegate the powers or duties,
or any of such powers or duties, of any officers or officer to any other officer
or to any director.
SECTION 6.14. Compensation. The Board of Directors shall have the
-------------
authority to establish reasonable compensation of all officers for services to
the Corporation.
ARTICLE VII
-----------
CERTIFICATES FOR SHARES
-----------------------
SECTION 7.1. Certificates of Shares. The shares of the Corporation
----------------------
shall be represented by certificates, provided that the Board of Directors of
the Corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, Chief Executive
Officer, or the President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all the signatures on the certificate may be a facsimile.
SECTION 7.2. Signatures of Former Officer, Transfer Agent or
-----------------------------------------------
Registrar. In case any officer, transfer agent, or registrar who has signed or
- ---------
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same
-10-
<PAGE>
effect as if such person or entity were such officer, transfer agent or
registrar at the date of issue.
SECTION 7.3. TRANSFER OF SHARES. Transfers of shares of the
------------------
Corporation shall be made only on the books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his or her attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of certificate for such
shares. Prior to due presentment of a certificate for shares for registration of
transfer, the Corporation may treat a registered owner of such shares as the
person exclusively entitled to vote, to receive notifications and otherwise have
and exercise all of the right and powers of an owner of shares.
SECTION 7.4. LOST, DESTROYED OR STOLEN CERTIFICATES. Whenever a
--------------------------------------
certificate representing shares of the Corporation has been lost, destroyed or
stolen, the holder thereof may file in the office of the Corporation an
affidavit setting forth, to the best of his knowledge and belief, the time,
place, and circumstance of such loss, destruction or theft together with a
statement of indemnity sufficient in the opinion of the Board of Directors to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss of any such certificate. Thereupon the Board may
cause to be issued to such person or such person's legal representative a new
certificate or a duplicate of the certificate alleged to have been lost,
destroyed or stolen. In the exercise of its discretion, the Board of Directors
may waive the indemnification requirements provided herein.
ARTICLE VIII
------------
DIVIDENDS
---------
SECTIONS 8. DIVIDENDS. The Board of Directors of the Corporation may
---------
declare and pay dividends upon the shares of the Corporation's capital stock in
any form determined by the Board of Directors, in the manner and upon the terms
and conditions provided by law.
ARTICLE IX
----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
SECTION 9.1. CONTRACTS. The Board of Directors may authorize any
---------
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
-11-
<PAGE>
SECTION 9.2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 9.3. Checks, Drafts, Etc. All checks, drafts or other orders
-------------------
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers or agents of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 9.4. Deposits. The funds of the Corporation may be deposited
--------
or invested in such bank account, in such investments or with such other
depositaries as determined by the Board of Directors.
ARTICLE X
---------
AMENDMENTS
----------
SECTION 10. Amendments. These By-laws may be adopted, amended or
----------
repealed by either the Corporation's Board of Directors or its stockholders;
provided, however, regarding indemnification of directors, Article XI may only
be amended by the Corporation's stockholders.
ARTICLE XI
----------
SECTION 11.1 Indemnification. The Corporation shall indemnify, in
---------------
accordance with and to the full extent now or hereafter permitted by law, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without limitation, any
action by or in the right of the Corporation), by reason of his acting as a
director of the Corporation (and the Corporation, in the sole discretion of the
Board of Directors, may so indemnify a person by reason of the fact that he is
or was an officer or employee of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation) against any liability or expense actually and reasonably incurred
by such person in respect thereof; provided, however, that the Corporation shall
not be obligated to indemnify any such director (i) with respect to proceedings,
claims or actions initiated or brought voluntarily by such person and not by way
of defense or brought against such person in response to a proceeding, claim or
action by such person against the Corporation, or (ii) for any amounts paid in
settlement of an action effected without the prior written consent of the
Corporation to such settlement or, (iii) if liability was incurred because the
director breached or failed to perform a duty he owes to the corporation and the
breach or failure to perform
-12-
<PAGE>
constitutes (a) a willful failure to deal fairly with the corporation or its
stockholders in connection with a matter in which the director has a material
conflict of interest, (b) a violation of criminal law, unless the director had
reasonable cause to believe his conduct was lawful or no reasonable cause to
believe his conduct was unlawful, (c) a transaction from which the director
derived an improper personal profit, or (d) willful misconduct. The termination
of a proceeding by judgment, order, settlement or conviction, or upon a plea of
no contest or an equivalent plea, shall not, by itself, create a presumption
that indemnification of the director or officer is not required. A director or
officer who seeks indemnification shall make a written request to the
Corporation. Such indemnification is not exclusive of any other right to
indemnification provided by law, agreement or otherwise.
SECTION 11.2 DETERMINATION OF RIGHTS TO INDEMNIFICATION. Unless
------------------------------------------
otherwise provided by the Corporation's Certificate of Incorporation, these by-
laws, or written agreement between the director or officer, the determination as
to right to indemnification shall be made by a majority vote of a quorum of the
Board of Directors consisting of directors not at the time parties to the same
or related proceedings. If a quorum of disinterested directors cannot be
obtained, the determination will be made by majority vote of a committee duly
appointed by the Board of Directors and consisting solely of two or more
directors not at the time parties to the same or related proceedings. Directors
who are parties to the same or related proceedings may participate in the
designation of members of the committee.
-13-
<PAGE>
[NO TEXT ON PAGE]
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<PAGE>
EXHIBIT 3.3
[STAMP APPEARS HERE]
ARTICLES OF ORGANIZATION
OF
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
--------------------------------------------
ARTICLE ONE
The name of the limited liability company is
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
ARTICLE TWO
The period of duration of the Company shall be perpetual or until the
termination of the company in accordance with regulations of the company.
ARTICLE THREE
The purpose for which the company is organized is the transaction of any
and all lawful business for which limited liability companies may be organized
under the Texas Limited Liability Company Act.
ARTICLE FOUR
The registered agent of the limited liability company is CT Corporation
System and the address of its registered office in the State is c/o CT
Corporation System, 350 N. St. Paul Street, Dallas, Texas 75201.
ARTICLE FIVE
The names and addresses of the members are as follows:
Name Address
---- -------
Martin Fox 6300 E. El Dorado Plaza, Suite 100
Tucson, Arizona 85715
Thomas Creel 1113 Furlong Drive,
Libertyville, Illinois 60048
The management of the Company will be vested in the members, the Company
will not have managers.
ARTICLE SIX
The name and addressee of the organizer is as follows:
Name Address
---- -------
Kimberley E. Bender 150 North Michigan Avenue
Suite 3100
Chicago, IL 60601
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of May, 1995.
/s/ Kimberley E. Bender
-------------------------
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF ORGANIZATION
OF
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
-------------------------------------------
Pursuant to the provisions of Article 3.06 of the Texas Limited
Liability Company Act (the "Act"), the undersigned company adopts the following
Articles of Amendment to its Articles of Organization:
ARTICLE I
The name of the limited liability company is:
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
ARTICLE II
ARTICLE FIVE of the Articles of Organization is hereby amended so as to read as
follows:
The name and address of the sole member are as follows:
HOME DIALYSIS OF AMERICA, INC.
6300 E. El Dorado Plaza, Suite 100
Tucson, AZ 85715
ARTICLE III
The amendment to the Articles of Organization set forth in Article II above was
approved and adopted by the members of the company pursuant Section D of Article
2.23 of the Act on May 24, 1995.
Dated: March 20, 1996.
AMARILLO ACUTE DIALYSIS
SPECIALISTS, L.L.C.
By: HOME DIALYSIS OF AMERICA, INC.
By: /s/ Martin Fox
------------------------------
Its: President
<PAGE>
EXHIBIT 3.4
REGULATIONS
OF
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
ARTICLE I
OFFICES AND COMPANY SEAL
------------------------
1. PRINCIPAL OFFICE. The principal office of the Company shall be located
----------------
at 7205 I-40 West, Suites A, B and C, Amarillo, Texas.
2. OTHER OFFICES. The Company may also maintain offices at such other
-------------
place or places, within the State of Texas, as may be designated from time to
time by the Members, and the business of the Company may be transacted at such
other offices with the same effect as that conducted at the principal office.
3. COMPANY SEAL. A company seal shall not be requisite to the validity of
------------
any instrument executed by or on behalf of the Company, but may be used.
ARTICLE II
FISCAL YEAR AND TERM
--------------------
1. FISCAL YEAR. The fiscal year of the Company shall begin on the first
-----------
day of January and end on the last day of December.
2. TERM OF COMPANY. The Company shall commence its existence upon the
---------------
date the Articles of Organization are filed with the Texas Secretary of State
and shall continue until December 31, 2025, unless sooner dissolved pursuant to
Article X.
3. INTENT. It is the intent of the Members that the Company shall always
------
be operated in a manner consistent with its treatment as a "partnership" for
federal and state income tax purposes. However, it is the intent of the Members
that the Company not be operated or treated as a "partnership" for purposes of
Section 303 of the Federal Bankruptcy Code. No Member shall take any action
inconsistent with the express intent of the parties hereto.
<PAGE>
ARTICLE III
MEMBERS
-------
1. MEMBERS' MEETINGS. The business of the Company shall be managed by the
-----------------
Members. All meetings of the Members shall be held at such place as may be fixed
from time to time by the Members, or by the President or Secretary of the
Company, either within or without the State of Texas, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
2. ANNUAL MEETINGS. Annual meetings of Members shall be held on the 1st
---------------
Wednesday in March if not a legal holiday, and if a legal holiday, then on the
next secular day following, or at such other date and time as shall be
designated from time to time by the Members and stated in the notice of the
meeting. At the annual meeting, Members shall elect officers and transact such
other business as may properly be brought before the meeting.
3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting stating
------------------------
the place, date and hour of the meeting shall be given to each Member of record
entitled to vote at such meeting not less than ten (10) nor more than sixty (60)
days before the date of the meeting. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail, addressed to the Member
at its address as it appears on the records of the Company with postage thereon
paid. When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken.
4. FIXING OF RECORD DATE. For the purpose of determining the Members
---------------------
entitled to notice of or to vote at any meeting of Members, the date fixed for
the payment of any dividend or distribution, the date of allotment of rights
or the date for participation in the execution of written consents, waivers or
releases, the Company may fix in advance a record date which shall not be more
than sixty (60) days. If no record date is fixed, the record date for the
determination of Members entitled to notice of or to vote at a meeting of
Members shall be the date next preceding the day on which notice is given or the
date next preceding the day on which the meeting is held if no notice is
required and the record date for the determination of Members for any other
purpose shall be the date on which the board of directors adopts the resolution
relating thereto. A determination of Members of record entitled to notice of or
to vote at a meeting of Members shall apply to any adjournment of the meeting.
5. VOTING LISTS. The officer or agent having charge of the transfer books
------------
for shares of the Company shall make at least five (5) days before meeting of
Members, a complete list of the Members entitled to vote at such meeting,
arranged in alphabetical order, showing the address of and the number of shares
registered in the name of the Member, which list shall be kept on file at the
registered office of the Company and shall be open to
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<PAGE>
inspection by any Member and subject to copying at the Member's expense at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and may be inspected by any Member during
the whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept this state, shall be prima facie evidence as to who are
the Members entitled to examine such list or share ledger or transfer book or to
vote any meeting of Members.
6. SPECIAL MEETINGS OF MEMBERS. Special meetings of the Members, for any
---------------------------
purpose or purposes, unless otherwise proscribed by statute or by the Articles
of Organization, may be called by the President or Secretary at the request in
writing or Members owning a majority in amount of the membership interests of
the Company issued, outstanding, and entitled to vote. Such request shall state
the purpose or purposes of the proposed meeting.
7. NOTICE OF SPECIAL MEETINGS. Written notice of a special meeting
--------------------------
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten (10) nor more than
fifty (50) days before the date of the meeting to each Member of record entitled
to vote at such meeting.
8. QUORUM AND ADJOURNMENT. The holders of a majority of the shares
----------------------
issued, outstanding, and entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the Members
for the transaction of business except as otherwise provided by statute or by
the Articles of Organization. If, however, such quorum shall not be present or
represented at any meeting of the Members, the Members entitled to vote at the
meeting, present in person or represented by proxy, shall have power to adjourn
the meeting to another time or place, without notice other than announcement at
the meeting at which adjournment is taken, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Member of record entitled to vote at the meeting.
9. MAJORITY REQUIRED. When a quorum is present at any meeting, the vote
-----------------
of the holders of a majority of the voting power present, whether in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes, the
Articles of Organization or these Regulations, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
10. VOTING. At every meeting of the Members, each Member shall be entitled
------
to one vote in person or by proxy for each share of the capital stock having
voting power held by such Member, but no proxy shall be voted or acted upon
after eleven (11) months from its date, unless the proxy provides for a longer
period.
-3-
<PAGE>
11. ACTION WITHOUT MEETING. Any action required or permitted to be taken
----------------------
at any annual or special meeting of Members may be taken without a meeting,
without prior notice, and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of all of the outstanding
Membership Interests entitled to vote with respect to the subject matter of the
action.
12. WAIVER OF NOTICE. Attendance of a Member at a meeting shall constitute
----------------
waiver of notice of such meeting, except when such attendance at the meeting is
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Any Member may waive notice of
any annual or special meeting of Members by executing a written waiver of notice
either before or after the time of the meeting.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
------------------------------------------
1. INITIAL CAPITAL CONTRIBUTIONS OF MEMBERS; AUTHORIZED AND ISSUED
---------------------------------------------------------------
MEMBERSHIP INTERESTS.
- --------------------
Upon execution of this Agreement, each Member shall be credited with a
contribution to the capital of the Company in the amounts set forth opposite
their respective names under the heading "Initial Capital Contribution" on
attached Exhibit A (the "Initial Capital Contributions"). Each Member shall
contribute such Initial Capital Contribution in cash or other property as
described on attached Exhibit A, concurrently with the execution of the
Regulation. Initial Capital Contributions shall not include any amounts
representing loans, other indebtedness or guarantees made by a Member to the
Company pursuant to Section 4.2 or Section 4.3 hereof. The Company shall issue
up to 100 Membership Interests. The Company shall not authorize or issue
additional Membership Interests without the unanimous written consent of the
Members, which consent may be withheld for any reason or no reason at each
Member's sole discretion. Except as otherwise specifically set forth herein, the
Members shall not be obligated in any manner or to any extent whatsoever to
contribute any additional capital to the Company.
2. ADDITIONAL CAPITAL CONTRIBUTIONS. The Company's additional capital
--------------------------------
requirements in excess of the Members' Initial Capital Contributions may be met
by (i) requests for additional capital contributions from the Members in
proportion to each Member's relative Membership percentage in the Company
("Additional Capital Contributions"); provided that no Member shall be required
to make any such Additional Capital Contributions without such Member's prior
written consent, which consent may be granted or withheld for any reason or no
reason whatsoever; or (ii) loans to the Company from any third party lending
institution or from any Member or affiliate of a Member on such terms as the
Members and the lending Member agree; provided, however, all Members not a party
to the loan transaction must approve the loan and its terms. All such loans
shall
-4-
<PAGE>
be evidenced by a promissory note. Nothing contained herein shall require any
Member to loan any funds to the Company.
3. CAPITAL ACCOUNTS. A Capital Account shall be established and
----------------
maintained by the Company for each Member.
(a) In general, each Member's Capital Account shall be increased
by:
(i) the amount of money contributed by the Member:
(ii) the fair market value of property contributed by the Member
(net of liabilities secured by the property that the
Company is considered to assume or take subject to); and
(iii) allocations of net profits to such Member.
(b) In general, each Member's Capital Account shall be decreased
by:
(i) the amount of money distributed to such Member;
(ii) the fair market value of property distributed to such Member
(net of liabilities secured by the distributed property that
the Member assumes or takes subject to); and
(iii) allocations of net losses to such member.
4. LIMITATIONS PERTAINING TO CAPITAL CONTRIBUTIONS.
-----------------------------------------------
(a) Except as otherwise provided in these Regulations, no Member
shall be entitled or permitted to demand, withdraw or receive the return of that
Member's Capital Contributions (or any part thereof) or any money or other
property from the Company without the unanimous written consent of the Members.
In the event a Member is to receive a return of any Capital Contribution, no
Member shall have the right to receive property in a form other than cash,
unless otherwise specifically agreed in writing by all Members at the time of
such distribution or at the time of the contribution of such property.
(b) No Member shall receive any interest with respect to such
Member's Capital Contributions or Capital Account.
(c) The Members shall not be liable for the debts, liabilities,
contracts or any other obligations of the Company (except to the extent
specifically assumed by such Member) beyond their Capital Contributions to the
Company. No Member of the Company shall have any personal liability for the
repayment of the Capital Contributions of any other Member.
-5-
<PAGE>
ARTICLE V
DISTRIBUTIONS AND ALLOCATIONS
-----------------------------
1. DETERMINATION OF COMPANY PROFITS AND LOSSES. The income, gains,
-------------------------------------------
losses, deductions and credits of the Company shall be determined for each
fiscal year in accordance with the accounting method followed by the Company for
federal income tax purposes and otherwise in accordance with generally accepted
accounting principles consistently applied.
2. DISTRIBUTIONS. Except as otherwise provided herein, distributions to
-------------
the Members may be authorized by the Members from time to time in their sole
discretion. Any such distributions shall be made on such dates designated by the
Members, shall be made in proportion to the Membership percentages at the time
of the distribution; provided that to the extent any distributions relate to
periods in which a Member did not hold all or any portion of such Member's
Membership Interests for the entire period, such distributions shall be adjusted
by the Members to take into account the actual period the Member owned such
Membership Interests.
3. ALLOCATION OF PROFITS AND LOSSES. The income, gains, losses,
--------------------------------
deductions, credits and any other items of the Company, including those items
not recognized in computing taxable income for income tax purposes, shall be
allocated to the Members based on Membership percentages.
4. SPECIAL ALLOCATIONS. Notwithstanding Section 3 above:
-------------------
(a) No allocations of loss, deduction and/or expenditures described
in Code Section 705(a)(2)(B) shall be made to a Member if such allocation
would cause or increase a deficit balance in such Member's Capital Account.
Any items that would be allocated to a Member but for the limitations
contained in this Section shall be allocated to the other Members in
accordance with their interests in Company profits pursuant to Section 3
above.
(b) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Sections 1.704-
1(b)(2)(ii)(d)(4), (5), or (6) of the Treasury Regulations, which create or
increase a deficit balance in such Member's Capital Account, then items of
Company income and gain (consisting of a pro rata portion of each item of
Company income, and gain for such year and, if necessary, for subsequent
years) shall be specially credited to the Capital Account of such Member in
an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the deficit Capital Account so created as quickly as
possible. It is the intent that this 4(b) be interpreted to comply with the
alternate test for economic effect set forth in Section 1.704-
1(b)(2)(ii)(d) of the Treasury Regulations.
-6-
<PAGE>
(c) Notwithstanding any other provision of this Section 4, if there
is a net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company, then,
the Capital Account of each Member shall be allocated items of income
(including gross income) and gain for such year (and if necessary for
subsequent years) equal to that Member's share of the net decrease in
Company minimum gain. This Section 4(c) is intended to comply with the
minimum gain chargeback requirement of Section 1.704-2 of the Treasury
Regulations and shall be interpreted consistently therewith.
(d) Items of Company loss, deduction and expenditures described in
Code Section 705(a)(2)(B) which are attributable to any nonrecourse debt of
the Company and are characterized as partner (Member) nonrecourse
deductions under Section 1.704-29(i) of the Treasury Regulations shall be
allocated to the Members' Capital Accounts in accordance with Section
1.704-2(i) of the Treasury Regulations.
(e) The income, gains, losses, deductions and credits of the Company
are allocable to a Member only if they are earned, paid or incurred by the
Company during the portion of the fiscal year that such Member is a Member
of the Company.
(f) The allocations set forth in Sections 4(a) through (d) hereof
(the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations Section 1.704-1.(b).
Notwithstanding any other provisions of this Article IV (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other profits, losses, and other items of income,
gain, loss and deduction among the Members so that, to the extent possible,
the net amount of such allocations of other profits, losses and other items
and the Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to each such Member if the Regulatory
Allocations had not occurred.
5. TAX MATTERS PARTNER. Home Dialysis of America, Inc. is designated the
-------------------
"Tax Matters Partner" (as defined in Code Section 6231), and is authorized and
required to represent the Company in connection with all examinations of the
Company's affairs by tax authorities, including, without limitation,
administrative and judicial proceedings, and is authorized to expend Company
funds for professional services and costs associated therewith to the extent
such expenditures are approved in advance in writing by the Members.
-7-
<PAGE>
ARTICLE VI
OFFICERS
--------
1. DESIGNATION OF TITLES. The officers of the Company shall be chosen by
---------------------
the Members and shall be a President, a Vice President, a Secretary, and a
Treasurer. The Members may also choose additional Vice Presidents, and one or
more Assistant Secretaries and Assistant Treasurers or other officers as the
Members deem necessary. Any number of offices, except the offices of President
and Secretary, may be held by the same person, unless the Articles of
Organization or these Regulations otherwise provide.
2. APPOINTMENT OF OFFICERS. The Members at their first meeting shall
-----------------------
choose a President, one or more Vice Presidents, a Secretary and a Treasurer,
each of whom shall serve at the pleasure of the Members. The President and
Secretary shall be different persons. The Members at any time may appoint such
other officers and agents as it shall deem necessary to hold offices at the
pleasure of the Members and to exercise sum and perform such duties as shall be
determined from time to time by the Board.
3. SALARIES. The salaries of the officers shall be fixed from time to
--------
time by the Members, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the Company. The
salaries of the officers or the rate by which salaries are fixed shall be set
forth in the minutes of the meetings of the Members.
4. VACANCIES. A vacancy in any office because of death, resignation,
---------
removal, disqualification or otherwise may be filled by the Members at any time.
6. PRESIDENT. The President shall preside at all meetings of Members. He
---------
or she shall sign all deeds and conveyances, all contracts and agreements, and
all other instruments requiring execution on behalf of the Company, and shall
act as operating and directing head of the Company, subject to policies
established by the Members.
7. VICE PRESIDENT. There shall be as many Vice Presidents as shall be
--------------
determined by the Members from time to time, and they shall perform such duties
as from time to time may be assigned to them. Any one of the Vice Presidents, as
authorized by the Members, shall have all the powers and perform all the duties
of the President in case of the temporary absence of the President or in case of
his or her temporary inability to act. In case of the permanent absence or
inability of the President to act, the office shall be declared vacant by the
Members and a successor chosen by the Members.
8. SECRETARY. The Secretary shall see that the minutes of all meetings of
---------
Members, and of any standing committees are kept. He or she shall be the
custodian of the company seal and shall affix it to all proper instruments when
deemed advisable by him or her. He or she shall give or cause to be given
required notices of all meetings of the Members. He or she shall have charge of
all the books and records of the Company except
-8-
<PAGE>
the books of account, and in general shall perform all the duties incident to
the office of Secretary of a Company and such other duties as may be assigned to
him or her.
9. TREASURER. The Treasurer shall have general custody of all the funds
---------
and securities of the Company except such as may be required by law to be
deposited with any state official. He or she shall see to the deposit of the
funds of the Company in such bank or banks as the Members may designate. Regular
books of account shall be kept under his or her direction and supervision, and
he or she shall render financial statements to the President and Members at
proper times. The Treasurer shall have charge of the preparation and filing of
such reports, financial statements, and returns as may be required by law. He
or she shall give to the Company such fidelity bond as may be required, and the
premium therefor shall be paid by the Company as an operating expense.
10. ASSISTANT SECRETARIES. There may be such number of Assistant
---------------------
Secretaries as from time to time the Members may fix, and such persons shall
perform such functions as from time to time may be assigned to them. No
Assistant Secretary shall have the power or authority to collect, account for,
or pay over any tax imposed by any federal, state or city government.
11. ASSISTANT TREASURERS. There may be such number of Assistant Treasurers
--------------------
as from time to time the Members may fix, and such persons shall perform such
functions as from time to time may be assigned to them. No Assistant Treasurer
shall have the power or authority to collect, account for, or pay over any tax
imposed by any federal, state or city government.
12. REMOVAL. Any officer elected or appointed by the Members may be
-------
removed by he Members whenever in its judgement the best interests of the
Company would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Election of an officer
shall not of itself create contract rights.
ARTICLE VII
LIABILITY
---------
No officer or Member shall be personally liable to the Company or to its
Members except to the extent that such limitation of liability is prohibited by
the provisions of Texas law, and except for liability resulting from (a) any
breach of the officers or Members duty of loyalty to the Company or to its
Members; (b) acts or omissions which are not in good faith or which involve
intentional misconduct or a knowing violation of law; (c) any transaction from
which the officer or Member derived an improper personal benefit; and (d)
authorizing the unlawful payment of a dividend or other distribution on the
Company's Membership Interest, or the unlawful purchase of its Membership
Interest.
-9-
<PAGE>
ARTICLE VIII
INDEMNIFICATION
---------------
1. POWER TO INDEMNIFY. The Company may indemnify a Member, officer,
------------------
employee or agent who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, if he or she acted, or failed to
act, in good faith and in a manner he or she reasonably believed and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In an action not by or in the right of the
Company, such indemnification may include expenses, attorney fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred. In an
action by or in the right of the Company, such indemnification may include
expenses, attorney fees and amounts paid in settlement actually and reasonable
incurred, but shall not include judgments and fines.
2. LIMITS ON INDEMNIFICATION. No person shall be indemnified if he or she
-------------------------
has been adjudged to be liable to the Company, unless otherwise ordered by the
court. The Company may refuse indemnification to any person who unreasonably
refuses to permit the Company, at its own expense and through counsel of its own
choosing, to defend him or her in the action.
3. DECISION-MAKING. A decision to indemnify a person shall be made by one
---------------
of the following: a majority vote of a quorum consisting of disinterested
Members; if such quorum is not obtainable, a written opinion of independent
legal counsel appointed by a majority of the disinterested Members; if there are
not disinterested Members, the court or other body before which the action was
brought, or any court of competent jurisdiction.
ARTICLE IX
REPEAL, ALTERATION OR AMENDMENT
-------------------------------
The Articles of Organization, and Regulations may be repealed, altered, or
amended only by a unanimous vote of all issued and outstanding Membership
Interests.
ARTICLE X
RESTRICTION ON TRANSFERS
------------------------
1. RESTRICTION ON TRANSFERS. No Member may sell, transfer, pledge,
------------------------
hypothecate, gift or otherwise dispose of or encumber all or any portion of its
Membership Interests without the prior unanimous written consent of the Members.
-10-
<PAGE>
2. ASSIGNEE OF A MEMBER'S MEMBERSHIP INTERESTS. If, notwithstanding the
-------------------------------------------
prohibitions in Article X, Section 1, a Member transfers all or any portion of
its Membership Interests (whether voluntarily, involuntarily or by operation of
law, including, but not limited to, the death, divorce, disability, or
bankruptcy of a Member,) and a person acquires such Membership Interests, (but
is not admitted as a substituted Member pursuant to the terms of this Agreement)
such person shall:
(a) be treated as an assignee of a Member's Membership Interests, as
provided in the Texas Limited Liability Company Act ("Act");
(b) have no right to participate in the business and affairs of the
Company or to exercise any rights of a Member under this Agreement or the Act;
and
(c) share in distributions from the Company with respect to the
transferred Membership Interests on the same basis as the transferring Member.
3. IRREPARABLE HARM. Each Member specifically acknowledges that a breach
----------------
of Section 1 would cause the Company and the Members to suffer immediate and
irreparable harm, which could not be remedied by the payment of money. In the
event of a breach or threatened breach by a Member of the provisions of Section
1, the Company or other Members shall be entitled to injunctive relief to
prevent or end such breach, without the requirement to post bond. Nothing herein
shall be construed to prevent the Company or other Members from pursuing any
other remedies available to it for such breach or such threatened breach,
including the recovery of damages.
4. ADMISSION OF TRANSFEREES. A transferee may be admitted to the Company
------------------------
as a substituted Member only with the prior unanimous written consent of the
Members.
5. OBLIGATIONS OF PERMITTED TRANSFEREES. In the case of any approved
------------------------------------
transfer or disposition of Membership Interests, the transferee shall execute
and deliver an appropriate instrument agreeing to be bound by these Regulations
as a Member and such additional agreements or instruments as the Members may
require. Any permitted transferee of Membership Interests shall receive and hold
such Membership Interests subject to these Regulations and all the restrictions,
obligations and rights created hereunder, and the Members and each transferee
shall be bound by their obligations under these Regulations with respect to each
subsequent transferee.
6. LEGEND. Each Certificate representing Membership Interests of the
------
Company shall include the following legend:
The Units of Membership Interest represented by this
Certificate are: (1) subject to transfer restrictions in
accordance with the terms of Regulations, a copy of which
may be obtained without
-11-
<PAGE>
charge by a Member on written request to the Company; and
(2) have not been registered under the federal or any
applicable state securities acts and cannot be transferred
without an opinion of counsel satisfactory to the Company's
legal counsel that such transfer will not violate any such
securities laws.
ARTICLE XI
DISSOLUTION, TERMINATION AND LIQUIDATION
----------------------------------------
1. EVENTS CAUSING DISSOLUTION OF THE COMPANY. The first to occur of the
-----------------------------------------
following events shall cause a dissolution of the Company:
(a) the consent of all the Members;
(b) the sale or other transfer of all or substantially all of the
Company Property;
(c) The bankruptcy, legal incapacity or dissolution of a Member, or
any other event that terminates a Member's membership in the Company (as
provided herein), unless the remaining Members, within the ninety (90) day
period following any such event, unanimously vote or consent to the continuation
of the Company. In the event the Company is continued after any such event, the
right of the affected Member to share in the profits and losses of the Company,
to receive distributions of Company funds and to assign its Membership Interests
shall, subject to the terms and conditions of this Agreement, devolve on its
personal representative or successor, as the case may be, and the Company shall
continue its existence. Such personal representative or successor, as the case
may be, shall be liable for all the obligations of the affected Member;
provided, however, in no event shall such Person become a Member without the
unanimous consent of Members; or
(d) expiration of the Company's term under Article II.
2. EFFECT OF DISSOLUTION. If the Company is dissolved, the Company shall
---------------------
be wound up and terminated in accordance with this Article XI.
3. FINAL ACCOUNTING. Upon dissolution of the Company, an accounting
----------------
shall be made of the accounts of each Member and of the Company property,
liabilities and operations, from the date of the last previous accounting to the
date of such dissolution.
4. LIQUIDATION. In the event of the dissolution of the Company, the
-----------
Members shall, in an orderly manner, commence to wind up the affairs of the
Company and liquidate its property.
- 12 -
<PAGE>
5. DISTRIBUTION. Following the payment of all debts and liabilities of
------------
the Company (other than loans or advances that have been made by any of the
Members) and all expenses of liquidation, and subject to the right of the
Members to set up cash reserves as it may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Company, the proceeds
of the liquidation and any other funds of the Company shall be distributed in
the following order of priority:
(a) First, to the repayment of any loans or advances that may have
been made by any of the Members to the Company, but if the amount available for
repayment of such loans or advances shall be insufficient, then to the Members
on account thereof in proportion to their respective advances; and
(b) Then, after allocation of all income, profits, losses and
deductions in accordance with Article V hereof and after adjustment to the
Capital Accounts required by Treasury Regulation (S)1.704.1(b), to the Members
in payment of the amount of their Capital Accounts, but if the amount available
for such repayment shall be insufficient, then to the Members on account thereof
in proportion to their respective Capital Accounts.
Each Member shall look solely to the Company property for all distributions
with respect to the Company and its Capital Contributions thereto and its share
of income, gains, losses and deductions thereof, and shall have no recourse
against any Members therefor. No Member shall have any rights to demand or
receive property in a form other than cash upon distribution and liquidation of
the Company, but the Members may, in their discretion, distribute property in a
form other than cash to a Member.
6. TERMINATION. A reasonable time shall be allowed for the orderly
-----------
liquidation of the assets of the Company and the discharge of liabilities to
creditors so as to enable the Members to minimize the normal losses attendant
upon a liquidation. Each of the Members shall be furnished with a statement
prepared by the Company's accountants, which shall set forth the property and
liabilities of the Company as of the date of complete liquidation. Upon
compliance with the distribution plan set forth herein, the Members shall cease
to be such, and the Members shall execute, acknowledge and cause to be filed a
Certificate of Dissolution of the Company. Upon completion of the dissolution,
winding up, liquidation and distribution of the liquidation proceeds, the
Company and this Agreement shall terminate.
-13-
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that the foregoing copy of the Regulations is a true and
correct copy of the Regulations of the Company as the same were adopted at the
first meeting of the Members.
/s/ Thomas Creel
----------------------------------
SECRETARY
-14-
<PAGE>
EXHIBIT A
---------
MEMBERSHIP INTERESTS/MEMBERSHIP PERCENTAGES
-------------------------------------------
<TABLE>
<CAPTION>
Initial Capital Membership Membership
--------------- ---------- ----------
Name and Addresses of Contribution Interests Percentage
- --------------------- ------------ --------- ----------
<S> <C> <C> <C>
* Home Dialysis of America, Inc. $1,000.00 10 100%
6300 East El Dorado Plaza
Tucson, AZ 85715
</TABLE>
* Initial Members were Thomas Creel and Martin Fox, who transferred their
shares to Home Dialysis of America, Inc.
-15-
<PAGE>
EXHIBIT 3.5
File Number 5255-060-2
-------------
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
[LOGO APPEARS HERE]
To all to whom these presents shall come, Greeting:
WHEREAS, ARTICLES OF INCORPORATION, duly signed and verified of CON-MED SUPPLY
COMPANY, INC. incorporated under the laws of the State of ILLINOIS have been
filed in the Office of the Secretary of State, as provided by The "Business
Corporation Act" of Illinois, in force July 13, A.D. 1933.
Now Therefore, I, Jim Edgar, Secretary of State of the State of Illinois by
virtue of the powers vested in me by law, do hereby issue this certificate and
attach thereto a copy of the Application of the aforesaid corporation.
THE TESTIMONY WHEREOF, Thereto set my hand and issue to be affixed the
Great Seal of the State of Illinois Done at the City of
Springfield this 29th day of October A.D. 1981 and of
[SEAL] the Independence of the United States the two hundred
and 6th
/s/ Jim Edgar
--------------------------------------------
SECRETARY OF STATE
<PAGE>
RIDER TO ARTICLES OF INCORPORATION
CON-MED SUPPLY COMPANY, INC.
others in connection with the operation, management, and development of
individual and corporate businesses and enterprises of every kind and
description throughout the world in order to secure information and data for
capital investment, both for its own account and as agent for others.
To engage in capital ventures and business enterprises of every kind and
description, whether as a promoter, partner, member, or associate, or as a
manager of such enterprises.
To engage in consultant and advisory work in connection with the organization,
financing, management, operation, and reorganization of industrial and
commercial enterprises. To manage and to provide management for and supervise
all or part of any and every kind of investment or business enterprise, and to
contract or arrange with any corporation, association, partnership, or
individual for the management, conduct, operation, and supervision of all kinds
of investments and businesses.
<PAGE>
EXHIBIT "A"
No holder of any of the shares of common stock of this corporation shall be
entitled as of right, to purchase or subscribe for any unissued stock of any
class or any additional shares of any class to be issued by any action of the
corporation, or any increase of the authorized capital stock of the corporation,
or bonds, certificates of indebtedness, debentures, or other securities
convertible into stock of the corporation, or carrying a right to purchase
stock of any class, and any such unissued stock or such additional authorized
issue of any stock, or other securities, convertible into stock or carrying a
right to purchase stock may be issued and disposed of pursuant to a resolution
of the Board of Directors to such persons, firms, corporations, or associations,
and upon such terms and conditions as may be deemed advisable by the Board of
Directors, in the exercise of its discretion, the intent of this provision being
to entirely deny the right of any holder of any shares of common stock of this
corporation, to any pre-emptive right to acquire any additional securities to be
issued by the corporation.
EXHIBIT "B"
ARTICLE NINE
A majority of directors then in office may properly fill one or more vacancies
arising between meetings of shareholders by reason of an increase in the number
of directors or otherwise. Any director so selected shall serve until the next
annual meeting of shareholders, but at no time may the number of directors
selected to fill vacancies in this manner during any interim period between
meetings of shareholders exceed 33-1/3% of the total membership of the Board of
Directors.
<PAGE>
----------------------------
File FORM BCA-47 (Do not write in this space)
in Date Paid 10-29-81
Duplicate ARTICLES OF INCORPORATION Initial License Fee $ .50
Franchise Tax $18.75
TO JIM EDGAR, Secretary of State Filing Fee $75.60
-----
Clerk 94.25
----------------------------
The name and address of the incorporators are as follows:
Name Number Street City State Zip code
- --------------------------------------------------------------------------------
Katie Murphy Suite 4100 55 E. Monroe St. Chicago, IL 60603
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
The above named incorporators, being one or more natural persons of the age of
twenty-one years or more or a corporation, and having subscribed to the shares
of the corporation to be organized pursuant hereto, for the purpose of forming a
corporation under "The Business Corporation Act" of the State of Illinois, do
hereby adopt the following Articles of Incorporation:
ARTICLE ONE
The name of the corporation hereby incorporated is: CON-MED SUPPLY COMPANY, INC
---------------------------
________________________________________________________________________________
ARTICLE TWO
The name and address of the initial registered agent and registered office are:
Registered agent David J. Hochman
----------------------------------------------------------------
Registered Office Suite 4100 55 E. Monroe St.
---------------------------------------------------------------
City, Zip code, County Chicago, IL, 60603 Cook
----------------------------------------------------------
ARTICLE THREE
The duration of the corporation is [x] perpetual OR ____________ years
ARTICLE FOUR
The purposes for which the corporation is organized are: TO ACQUIRE, BY
PURCHASE, EXCHANGE, LEASE OR OTHERWISE, AND TO OWN, MANAGE, CARE FOR AND
MAINTAIN, HOLD, USE, DEVELOP, OPERATE, SELL, ASSIGN, LEASE, TRANSFER, CONVEY,
MORTGAGE, GRANT SECURITY INTERESTS IN, PLEDGE, OR OTHERWISE DISPOSE OF OR DEAL
IN AND WITH REAL AND PERSONAL PROPERTY OF EVERY CLASS OR DESCRIPTION AND RIGHTS
AND PRIVILEGES THEREIN WHERESOEVER SITUATED. TO CARRY ON A GENERAL INVESTMENT
AND MANAGEMENT CONSULTANT AND ADVISORY BUSINESS RELATING TO INVESTMENTS AND THE
OPERATION OF BUSINESSES, PLANTS, PROPERTIES AND REAL AND PERSONAL PROPERTY OF
EVERY KIND, IN THE UNITED STATES AND FOREIGN COUNTRIES, SUBJECT TO THE
APPLICABLE LAWS THEREOF. TO MAINTAIN EXECUTIVE AND OPERATING PERSONNEL FOR THE
PURPOSE OF CONSULTING WITH AND ADVISING OTHERS IN ALL MATTERS RELATING TO
INVESTMENTS AND THE MANAGEMENT AND OPERATION OF BUSINESS, OR AND OTHER
PROPERTIES OF EVERY KIND. TO FURNISH BUSINESS INVESTMENT AND MANAGEMENT PLANS
AND PROGRAMS, TO FORMULATE POLICIES, AND GENERALLY TO ADVISE AND ASSIST OTHERS,
UNDER CONTRACT OR OTHERWISE, IN THE MANAGEMENT OF THEIR BUSINESSES, PLANTS,
PROPERTIES AND INVESTMENTS. TO BUY AND SELL PROJECTS AND DEVELOPMENTS ON ITS OWN
BEHALF AND ON BEHALF OF
(CONTINUED)
ARTICLE FIVE
Paragraph 1 The class, number of shares, the par value, if any, of each class
which the corporation's authorized to issue, the number the corporation proposes
to issue without further report to the Secretary of State, and the consideration
(expressed in dollars) to be received by the corporation therefor, are:
<TABLE>
<CAPTION>
Par or Number of shares Number of shares Total consideration
Class Series no par authorized to be issued to be received therefor
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common n/a $1.00 5,000 1,000 $1,000
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
=====================================================================================================
Total $1.00
------------------------
</TABLE>
<PAGE>
Paragraph 2: The preferences, qualifications, limitations, restrictions and the
special or relative rights in respect of the shares of each class are:
SEE EXHIBIT A
ARTICLE SIX
The corporation will not commence business until at least one thousand dollars
has been received as consideration for the issuance of shares.
ARTICLE SEVEN
The number of directors to be elected at the first meeting of the shareholders
is 4.
ARTICLE EIGHT
Paragraph 1: It is estimated that the value of all property to be owned by the
corporation for the following year wherever located will be $ __________
Paragraph 2: It is estimated that the value of the property to be located
within the State of Illinois during the following year will be $________
Paragraph 3: It is estimated that the gross amount of business which will be
transacted by the corporation during the following year will be $_______
Paragraph 4: It is estimated that the gross amount of business which will be
transacted at or from places of business in the State of Illinois during the
following year will be $_______
NOTE: If all the property of the corporation is to be located in this
State and all of its business is to be transacted at or from places of business
in this State, or if the incorporators elect to pay the initial franchise ?? on
the basis of its entire stated capital and paid-in surplus, then the information
called for in Article Eight need not be stated. The basis for computation of
franchise taxes payable by domestic corporations is set forth in Section 132 of
the Business Corporation Act.
SEE EXHIBIT B
Signatures of incorporators:
/s/ Katie Murphy NOTE: If a corporation acts as
______________________________________ incorporator the name of the
corporation and the state of
______________________________________ incorporation shall be shown and the
execution must be by its President
______________________________________ or Vice-President and verified by
him, and the corporate seal shall be
______________________________________ affixed and attested by its
Secretary or an Assistant Secretary.
As an incorporator, I declare that this document has been examined by me and is,
to the best of my knowledge and belief, true, correct and complete this 28th day
of October, 1981.
RETURN TO:
Corporation Department
Secretary of State
Springfield, Illinois 67756
Telephone (217) 782-7880
FORM BCA-47
===================================
ARTICLES OF INCORPORATION
The following fees are required to be paid at the time of Issuing Certificate of
Incorporation: Filing fee $75.00. Initial license fee of $.50 per $1,000.00 or
1/25 of 1% of the amount of stated capital and paid in surplus the corporation
proposes to issue without further report (Article Five): Initial franchise tax
of 1/10th of 1% of the issued, as above noted. However, the minimum initial
franchise tax is $25.00 and varies monthly on $25,000, or more and varies
monthly on $25,000 or less, as follows: January, $37.50; February, $35.42;
March, $33.33; April, $31.25; May, $29.17; June, $27.08; July, $25.00; August,
$22.92; September, $20.83; October, $18.75; November, $16.67; December, $14.58.
In excess of $25.000, the franchise tax per $1,000.00 is as follows: Jan. $1.50;
Feb., $1,4167; March 1,3334; April, $1.25; May, $1,1667; June, $1.0834;
July, $1.00; Aug., $.9167; Sept., $.8334; Oct., $.75; Nov., $.6667; Dec.,
$.5834.
All shares issued in excess of the amount mentioned in Article Five of this
application must be reported within 60 days from date of issuance thereof, and
franchise tax and franchise fee paid thereon; otherwise, the corporation is
subject to a penalty of 1% for each month on the amount until reported and
subject to a fine of not to exceed $500.00.
The same fees are required for a subsequent issue of shares except the filing
fee is $5.00 instead of $75.00.
FILED
OCT 29 1981
JIM EDGAR
Secretary of State
<PAGE>
BCA 6.10/6.20 (Rev. Jul 1984) File # D 5255-060-2
<TABLE>
<S> <C>
-----------------------
JIM EDGAR This Space For Use By
Submit in Duplicate Secretary of State Secretary of State
Remit payment in Check or Money State of Illinois
Order, payable to "Secretary of Date 6-25 86
State". STATEMENT OF CHANGE OF REGISTERED AGENT
DO NOT SEND CASH! AND/OR Filing Fee $5.00
REGISTERED OFFICE
Clerk /s/ PP
-----------------------
</TABLE>
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned corporation hereby submits the following statement.
1. The name of the corporation is CON-MED SUPPLY COMPANY, INC.
--------------------------------------------
2. The State or Country of incorporation is Illinois
-----------------------------------
3. The name and address of its registered agent and its registered office as
they appear on the records of the office of the Secretary of State (Before
Change) are:
Registered Agent David J. Hochman
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 70 W. Madison, Suite 2200
----------------------------------------------------
Number Street Suite No. (A P.O. Box alone
is not acceptable)
Chicago, IL 60602 Cook
----------------------------------------------------
City Zip Code County
4. The name and address of its registered agent and its registered office
shall be (After All Changes Herein Reported):
Registered Agent David J. Hochman
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 30 N. La Salle Street
----------------------------------------------------
Number Street Suite No. (A P.O. Box alone
is not acceptable)
Chicago, IL 60602 Cook
----------------------------------------------------
City Zip Code County
5. The address of the registered office and the address of the business office
of the registered agent, as changed, will be identical.
6. The above change was authorized by: ("X" one box only)
a. [_] By resolution duly adopted by the board of directors. (Note 5)
b. [X] By action of the registered agent. (Note 6)
(If authorized by the board of directors, sign here. See Note 5)
The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirm, under penalties of perjury, that
the facts stated herein are true.
Dated ________________________, 19 ____ ___________________________________
(Exact Name of Corporation)
attested by ___________________________ by ________________________________
(Signature of Secretary or (Signature of President or
Assistant Secretary) vice president)
___________________________ ________________________________
(Type or Print Name and (Type or Print Name and Title)
Title)
(If change of registered office by registered agent, sign here. See Note 6)
The undersigned, under penalties of perjury, affirms that the facts stated
herein are true.
Dated June 6, 1986 /s/ David J. Hochman
--------------------------------- -----------------------------------
(Signature of Registered Agent of
Record)
<PAGE>
NOTES
1. The registered office may, but need not be the same as the principal office
of the corporation. However, the registered office and the office address
of the registered agent must be the same.
2. The registered office must include a street or road address, a post office
box number alone is not acceptable.
3. A corporation cannot act as its own registered agent.
4. If the registered office is changed from one county to another, then the
corporation must file with the recorder of deeds of the new county a
certified copy of the articles of incorporation and a certified copy of the
statement of change of registered office. Such certified copies may be
obtained ONLY from the Secretary of State.
5. Any change of registered agent must be by resolution adopted by the board
of directors. This statement must then be signed by the President (or vice-
president) and by the Secretary (or an assistant secretary).
6. The registered agent may report a change of the registered office of the
corporation for which he or she is registered agent. When the agent reports
such a change, this statement must be signed by the registered agent.
FORM BCA-5.10/5.29
File No. D - 5255 - 060-2
-----------------
========================
STATEMENT OF CHANGE OF REGISTERED
AGENT AND/OR REGISTERED OFFICE
FILING FEE $5.00
Return to:
David J. Hochman, Esq.
Finger, Hochman & Delott, P.C.
30 North LaSalle Street
Chicago, IL 60602
RETURN TO:
CORPORATION DEPARTMENT
SECRETARY OF STATE
SPRINGFIELD, ILLINOIS 62756
TELEPHONE 217-782-7808
============================
<PAGE>
EXPEDITED
SECRETARY OF STATE
APR 27 1998
EXP. FEES 25.00
COPY. CERT. 10.00
STATE OF ILLINOIS
Office of the Secretary of State
I hereby certify that this is a true and
correct copy, consisting of seven pages,
as taken from the original on file in
this office.
[SEAL] /s/ George H. Ryan
GEORGE H. RYAN
SECRETARY OF STATE
DATED: April 27, 1998.
---------------------
BY: /s/ Julie Jaeger
------------------------
<PAGE>
EXHIBIT 3.6
BY-LAWS
OF
CON-MED SUPPLY COMPANY, INC.
---------------------------
<PAGE>
C O N T E N T S
---------------
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
ARTICLE I - OFFICES 1
- -------------------
ARTICLE II - SHAREHOLDERS
- -------------------------
Section 2.1. Annual Meeting 1
Section 2.2. Special Meetings 1
Section 2.3. Place of Meeting 1
Section 2.4. Notice of Meetings 1
Section 2.5. Fixing of Record Date 2
Section 2.6. Voting Lists 2
Section 2.7. Quorom 2
Section 2.8. Proxies 3
Section 2.9. Voting of Shares 3
Section 2.10. Voting of Shares by Certain Holders 3
Section 2.11. Cumulative Voting 4
Section 2.12. Inspectors 4
Section 2.13. Informal Action by Shareholders 4
Section 2.14. Voting by Ballot 5
ARTICLE III - DIRECTORS
- -----------------------
Section 3.1. General Powers 5
Section 3.2. Number, Tenure and Qualifications 5
Section 3.3. Regular Meetings 5
Section 3.4. Special Meetings 5
Section 3.5. Notice 5
Section 3.6. Quorum 6
Section 3.7. Manner of Acting 6
Section 3.8. Vacancies 6
Section 3.9. Action Without a Meeting 6
Section 3.10. Compensation 6
Section 3.11. Presumption of Assent 6
Section 3.12. Attendance by Conference Telephone 7
ARTICLE IV - EXECUTIVE COMMITTEE
- --------------------------------
Section 4.1. Appointment 7
Section 4.2. Powers 7
Section 4.3. Tenure and Qualifications 8
Section 4.4. Meetings 8
Section 4.5. Quorum 8
Section 4.6. Vacancies 8
Section 4.7. Resignations and Removal 8
Section 4.8. Procedure 8
</TABLE>
(i)
<PAGE>
C O N T E N T S
---------------
(continued)
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
ARTICLE V - OFFICERS
- --------------------
Section 5.1. Number 9
Section 5.2. Election and Term of Office 9
Section 5.3. Removal 9
Section 5.4. President 9
Section 5.5. The Vice-Presidents 10
Section 5.6. The Treasurer 10
Section 5.7. The Secretary 10
Section 5.8. Assistant Treasurers and Assistant Secretaries 11
Section 5.9. Salaries 11
ARTICLE VI - INDEMNIFICATION
- ----------------------------
Section 6.1. Indemnification of Directors and Officers 11
Section 6.2. Contract With the Corporation 12
Section 6.3. Indemnification of Employees and Agents 12
Section 6.4. Other Rights of Indemnification 12
Section 6.5. Liability Insurance 12
Section 6.6. Constituent Corporations 12
ARTICLE VII - CONTRACTS, LOANS, CHECKS AND DEPOSITS
- ---------------------------------------------------
Section 7.1. Contracts 13
Section 7.2. Loans 13
Section 7.3. Checks, Drafts, Etc. 13
Section 7.4. Deposits 13
ARTICLE VIII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
- ---------------------------------------------------------
Section 8.1. Certificates for Shares 13
Section 8.2. Lost Certificates 14
Section 8.3. Transfers of Shares 14
ARTICLE IX - FISCAL YEAR 14
- ------------------------
ARTICLE X - DIVIDENDS 14
- ---------------------
ARTICLE XI - SEAL 15
- -----------------
ARTICLE XII - WAIVER OF NOTICE 15
- ------------------------------
ARTICLE XIII - AMENDMENTS 15
- -------------------------
</TABLE>
(ii)
<PAGE>
BY-LAWS
-------
ARTICLE I
---------
OFFICES
-------
The corporation shall continuously maintain in the State of Illinois a
registered office and a registered agent whose office is identical with such
registered office, and may have other offices within or without the state.
ARTICLE II
----------
SHAREHOLDERS
------------
Section 2.1. Annual Meeting. An annual meeting of the shareholders shall
----------- --------------
be held on the second Monday in the month of August of each year for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday, such meeting shall be held on the next succeeding business day.
Section 2.2. Special Meetings. Special meetings of the shareholders may
----------- ----------------
be called either by the president, by the board of directors or by the holders
of not less than one-fifth of all the outstanding shares of the corporation,
for the purpose or purposes stated in the call of the meeting.
Section 2.3. Place of Meeting. The board of directors may designate any
----------- ----------------
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be at the registered office of the
corporation.
Section 2.4. Notice of Meetings. Written notice stating the place, date,
----------- ------------------
and hour of the meeting, and in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than forty days before the date of the meeting, or in the case of a
merger or consolidation not less than twenty nor more than forty days before the
meeting, either personally or by mail, by or at the direction of the president,
or the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the records of the
<PAGE>
corporation, with postage thereon prepaid. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken.
Section 2.5. Fixing of Record Date. For the purpose of determining the
----------- ---------------------
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of shares, or for the purpose of determining shareholders
for any other lawful reason, the board of directors of the corporation may fix
in advance a record date which shall not be more than sixty days and, for a
meeting of shareholders, not less than ten days, or in the case of a merger or
consolidation not less than twenty days, before the date of such meeting. If no
record date is fixed, the record date for the determination of shareholders
shall be the date on which notice of the meeting is mailed, and the record date
for the determination of shareholders for any other purpose shall be the date on
which the board of directors adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting.
Section 2.6. Voting Lists. The officer or agent having charge of the
----------- ------------
transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of the shareholder,
which list, for a period of ten days prior to such meeting, such be kept on file
at the registered office of the corporation and shall be open to inspection by
any shareholder for any purpose germane to the meeting, at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and may be inspected by any shareholder during the whole
time of the meeting. The original share ledger or transfer book, or a duplicate
thereof kept in this State, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer book or
to vote at any meeting of shareholders.
Section 2.7. Quorum. The holders of a majority of the outstanding shares
----------- ------
of the corporation, present in person or represented by proxy, shall constitute
a quorum at any meeting of shareholders; provided that if less than a majority
of the outstanding shares are represented at said meeting, a majority of the
shares so represented may adjourn the meeting at any time without further
notice. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting shall be the act of the shareholders, unless
the vote of a greater number or voting by classes is
-2-
<PAGE>
required by The Business Corporation Act, the articles of incorporation or these
by-laws. At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the original
meeting. Withdrawal of shareholders from any meeting shall not cause failure of
a duly constituted quorum at that meeting.
Section 2.8. Proxies. Each shareholder entitled to vote at a meeting of
----------- -------
shareholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 2.9. Voting of Shares. Each outstanding share, regardless of
----------- ----------------
class, shall be entitled to one vote upon each matter submitted to vote at a
meeting of shareholders.
Section 2.10. Voting of Shares by Certain Holders. Shares standing in the
------------ -----------------------------------
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian, or conservator, either in person or by proxy without a transfer of
such shares into the name of such administrator, executor, court appointed
guardian or conservator. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, for a period not to exceed ten years, by entering into a written
voting trust agreement specifying the terms and conditions of the voting trust,
and by transferring the terms and conditions of the voting trust, and by
transferring their shares to such trustee or trustees for the purpose of this
agreement. Any such trust agreement shall not become effective until a
counterpart of the agreement is deposited with the
-3-
<PAGE>
corporation at its registered office. The counterpart of the voting trust
agreement so deposited with the corporation shall be subject to the same right
of examination by a shareholder of the corporation, in person or by agent or
attorney, as are the books and records of the corporation, and shall be subject
to examination by any holder of a beneficial interest in the voting trust,
either in person or by agent or attorney, at any reasonable time for any proper
purpose.
Shares of its own stock belonging to this corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any given time, but shares of its own
stock held by it in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares at any given time.
Section 2.11. Cumulative Voting. In all elections for directors, every
------------ -----------------
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him, for as many persons as there are directors to be elected,
or to cumulate said shares, and give one candidate as many votes as the number
of directors multiplied by the number of shares shall equal, or the distribute
them on the same principle among as many candidates as he shall see fit.
Section 2.12. Inspectors. At any meeting of shareholders, the presiding
------------ ----------
officer may, or upon the request of any shareholder shall, appoint one or more
persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there be more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
facie evidence thereof.
Section 2.13. Informal Action by Shareholders. Any action required to be
------------ -------------------------------
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
-4-
<PAGE>
Section 2.14. Voting by Ballot. Voting on any question or in any election
------------ ----------------
may be by voice unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
ARTICLE III
-----------
DIRECTORS
---------
Section 3.1. General Powers. The business of the corporation shall be
----------- --------------
managed by its board of directors.
Section 3.2. Number, Tenure and Qualifications. The number of directors
----------- ---------------------------------
of the corporation shall be four (4). Each director shall hold office until the
next annual meeting of shareholders or until his successor shall have been
elected and qualified. Directors need not be residents of Illinois or
shareholders of the corporation. The number of directors may be increased or
decreased from time to time by the amendment of this section, but no decrease
shall have the effect of shortening the term of any incumbent director.
Section 3.3. Regular Meetings. A regular meeting of the board of
----------- ----------------
directors shall be held without other notice than this by-law, immediately after
the annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
Section 3.4. Special Meetings. Special meetings of the board of directors
----------- ----------------
may be called by or at the request of the president or any two directors. The
person or persons authorize to call special meetings of the board of directors
may fix any place as the place for holding any special meeting of the board of
directors called by them.
Section 3.5. Notice. Written notice of any special meetings shall be
----------- ------
delivered to each director at his business address at least three days previous
to said meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegram company. The attendance of a director
at any meeting shall constitute a waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
-5-
<PAGE>
Section 3.6. Quorum. A majority of the number of directors fixed by these
----------- ------
by-laws shall constitute a quorum for transaction of business at any meeting of
the board of directors, provided that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting at any time without further notice.
Section 3.7. Manner of Acting. The act of the majority of the directors
----------- ----------------
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless the act of a greater number is required by statute, these
by-laws, or the articles of incorporation.
Section 3.8. Vacancies. Any vacancy occurring in the board of directors
----------- ---------
arising by reason of an increase in the number of directors or otherwise, may be
filled by election at an annual meeting or a special meeting of shareholders
called for that purpose or as hereinafter provided, at any meeting of the board
of directors. If so provided in the articles of incorporation of this
corporation, a majority of the board of directors then in office may properly
fill one or more of such vacancies, provided however, that at no time may the
number of directors selected by the board of directors to fill such vacancies
exceed 33-1/3% of the total membership of the board of directors.
Section 3.9. Action Without a Meeting. Unless specifically prohibited by
---------- ------------------------
the articles of incorporation or the by-laws, any action required to be taken at
a meeting of the board of directors, or any other action which may be taken at a
meeting of the board of directors, or of any committee thereof; may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors entitled to vote with respect to the
subject matter thereof, or by all the members of such committee, as the case may
be. Any such consent signed by all the directors or all the members of the
committee shall have the same effect as a unanimous vote, and may be stated as
such in any document filed with the Secretary of State or with anyone else.
Section 3.10. Compensation. The board of directors, by the affirmative
------------ ------------
vote of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers, or otherwise. By resolution of the board of directors the directors
may be paid their expenses, if any, of attendance at each meeting of the board.
No such payment previously mentioned in this section shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 3.11. Presumption of Assent. A director of the corporation who is
------------ ---------------------
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively
-6-
<PAGE>
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 3.12. Attendance by Conference Telephone. Members of the board of
------------ ----------------------------------
directors or of any committees of the board of directors may participate in and
act at any meeting of such board or committee through the use of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, provided that a majority of
such members consent in writing to the recording of such communications and
provided that such recording is in fact made and becomes a part of the official
corporate records. Participation in such a meeting shall constitute attendance
and presence in person at the meeting of the person or persons so participating
for all purposes including fulfilling the requirement of Sections 3.6 and 3.7
hereof.
ARTICLE IV
----------
EXECUTIVE COMMITTEE
-------------------
Section 4.1. Appointment. The board of directors by resolution adopted by
----------- -----------
a majority of the whole board may designate two or more directors to constitute
an Executive Committee. The designation of such committee and the delegation
thereto of authority shall not operate to relieve the board of directors or any
member thereof of any responsibility imposed upon it or him by law.
Section 4.2. Powers. The Executive Committee, when the board of directors
----------- ------
is not in session, shall have and exercise all of the authority of the board of
directors in the management of the corporation except to the extent, if any,
that such authority shall be limited by the resolution appointing the Executive
Committee and except also that the Executive Committee shall not have the
authority of the board of directors in reference to amending the articles of
incorporation, adopting a plan of merger or adopting a plan of consolidation
with another corporation or corporations, recommending to the shareholders the
sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the property and assets of the corporation if not made in
the usual and regular course of its business, recommending to the shareholders a
voluntary dissolution of the corporation or a revocation thereof, amending,
altering or repealing the by-laws of the corporation, electing or removing
officers of the corporation or members of the Executive Committee, fixing the
compensation of any member of the Executive
-7-
<PAGE>
Committee, declaring dividends, or amending, altering or repealing any
resolution of the board of directors which by its terms and provides that it
shall not be amended, altered or repealed by the Executive Committee.
Section 4.3. Tenure and Qualifications. Each member of the Executive
----------- -------------------------
Committee shall hold office until the next regular annual meeting of the
directors following his designation and until his successor as a member of the
Executive Committee is elected and qualified. Members of the Executive Committee
must at all times be directors of the corporation.
Section 4.4. Meetings. Regular meetings of the Executive Committee may be
----------- --------
held without notice at such times and places as the Executive Committee may from
time to time by resolution fix. Special meetings of the Executive Committee may
be called by any member thereof upon not less than one day's notice stating the
place, date and hour of the meeting which notice may be written or oral and if
mailed, shall be deemed to be delivered when deposited in the United States mail
addressed to the member of the Executive Committee at his business address. Any
member of the Executive Committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the Executive Committee need not state the business
proposed to be transacted at the meeting.
Section 4.5. Quorum. A majority of the members of the Executive Committee
----------- ------
shall constitute a quorum for the transaction of business at any meeting thereof
and action of the Executive Committee must be authorized by the affirmative vote
of a majority of the members present at a meeting at which a quorum is present.
Section 4.6. Vacancies. Any vacancy in the Executive Committee may be
----------- ---------
filled by a resolution adopted by a majority of the whole board of directors.
Section 4.7. Resignations and Removal. Any member of the Executive
----------- ------------------------
Committee may be removed at any time with or without cause by resolution adopted
by a majority of the whole board of directors. Any member of the Executive
Committee may resign from the Executive Committee at any time by giving written
notice to the president or secretary of the corporation, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.8. Procedure. The Executive Committee shall elect a presiding
----------- ---------
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these by-laws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information
only at the meeting thereof held next after the proceedings shall have been
taken.
-8-
<PAGE>
ARTICLE V
---------
OFFICERS
--------
Section 5.1. Number. The officers of the corporation shall be a president,
----------- ------
one or more vice-presidents (the number thereof to be determined by the board of
directors), a treasurer, a secretary, and such assistant treasurers, assistant
secretaries or other officers as may be elected by the board of directors. Any
two or more offices may be held by the same person, except the offices of
president and secretary; provided, however, that if the number of directors
shall be one, the offices of president and secretary may be held by the same
person.
Section 5.2. Election and Term of Office. The officers of the corporation
----------- ---------------------------
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently possible. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Election of an officer shall
not of itself create contract rights.
Section 5.3. Removal. Any officer elected or appointed by the board of
----------- -------
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 5.4. President. The president shall be the principal executive
----------- ---------
officer of the corporation. Subject to the direction and control of the board of
directors, he shall be in charge of the business of the corporation; he shall
see that the resolutions and directions of the board of directors are carried
into effect except in those instances in which that responsibility is
specifically assigned to some other person by the board of directors; and, in
general, he shall discharge all duties incident to the office of president and
such other duties as may be prescribed by the board of directors from time to
time. He shall preside at all meetings of the shareholders and of the board of
directors. Except in those instances in which the authority to execute is
expressly delegated to another officer or agent of the corporation or a
different mode of execution is expressly prescribed by the board of directors or
these by-laws, he may execute for the corporation certificates for its shares,
and any contracts, deeds, mortgages, bonds, or other instruments which the board
of directors has authorized to be executed, and he may accomplish such execution
either
-9-
<PAGE>
under or without the seal of the corporation and either individually or with the
secretary, any assistant secretary, or any other officer thereunto authorized by
the board of directors, according to the requirements of the form of the
instrument. He may vote all securities which the corporation is entitled to vote
except as and to the extent such authority shall be vested in a different
officer or agent of the corporation by the board of directors.
Section 5.5. The Vice-Presidents. The vice-president (or in the event
----------- -------------------
there be more than one vice-president, each of the vice-presidents) shall assist
the president in the discharge of his duties as the president may direct and
shall perform such other duties as from time to time may be assigned to him by
the president or by the board of directors. In the absence of the president or
in the event of his inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated by the board of directors, or by the president if the board of
directors has not made such designation, or in the absence of any designation,
then in the order of seniority of tenure as vice-president) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. Except in those instances in
which the authority to execute is expressly delegated to another officer or
agent of the corporation or a different mode of execution is expressly
prescribed by the board of directors or these by-laws, the vice-president (or
each of them if there are more than one) may execute for the corporation
certificates for its shares and any contracts, deeds, mortgages, bonds or other
instruments which the board of directors has authorized to be executed, and he
may accomplish such execution either under or without the seal of the
corporation and either individually or with the secretary, any assistant
secretary, or any other officer thereunto authorized by the board of directors,
according to the requirements of the form of the instrument.
Section 5.6. The Treasurer. The treasurer shall be the principal
----------- -------------
accounting and financial officer of the corporation. He shall: (a) have charge
of and be responsible for the maintenance of adequate books of account for the
corporation; (b) have charge and custody of all funds and securities of the
corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the president
or by the board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such safety or sureties as the board of directors may determine.
Section 5.7. The Secretary. The secretary shall: (a) record the minutes
----------- -------------
of the shareholders' and of the board of directors' meetings in one or more
books provided for that purpose; (b) see
-10-
<PAGE>
that all notices are duly given in accordance with the provisions of these
by-laws or as required by law; (c) be custodian of the corporate records and of
the seal of the corporation; (d) keep a register of the post-office address of
each shareholder which shall be furnished to the secretary by such shareholder;
(e) sign with the president, or a vice-president, or any other officer thereunto
authorized by the board of directors, certificates for shares of the
corporation, the issue of which shall have been authorized by the board of
directors, and any contracts, deeds, mortgages, bonds, or other instruments
which the board of directors has authorized to be executed, according to the
requirements of the form of the instrument, except when a different mode of
execution is expressly prescribed by the board of directors or these by-laws;
(f) have general charge of the stock transfer books of the corporation; (g)
perform all duties incident to the office of secretary and such other duties as
from time to time may be assigned to him by the president or by the board of
directors.
Section 5.8. Assistant Treasurers and Assistant Secretaries. The assistant
----------- ----------------------------------------------
treasures and assistant secretaries shall perform such duties as shall be
assigned to them by the treasurer or the secretary, respectively, or by the
president or the board of directors. The assistant secretaries may sign with the
president or a vice-president, or any other officer thereunto authorized by the
board of directors, certificates for shares of the corporation, the issue of
which shall have been authorized by the board of directors, and any contracts,
deeds, mortgages, bonds, or other instruments which the board of directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the board of directors or these by-laws. The assistant treasurers shall
respectively, if required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the board of
directors shall determine.
Section 5.9. Salaries. The salaries of the officers shall be fixed from
----------- --------
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE VI
----------
INDEMNIFICATION
---------------
Section 6.1. Indemnification of Directors and Officers. The corporation
----------- -----------------------------------------
shall, to the fullest extent to which it is empowered to do so by The Business
Corporation Act of Illinois or any other applicable laws, as may from time to
time be in effect, indemnify any person who was or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
-11-
<PAGE>
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director or officer of the corporation, or is or was serving
at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding.
Section 6.2. Contract With The Corporation. The provisions of this
----------- -----------------------------
Article VI shall be deemed to be a contract between the corporation and each
director or officer who serves in any such capacity at any time while this
Article VI and the relevant provisions of The Business Corporation Act of
Illinois or other applicable law, if any, are in effect, and any repeal or
modification of any such law or of this Article VI shall not affect any rights
or obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or thereafter
brought or threatened based in whole or in part upon such state of facts.
Section 6.3. Indemnification of Employees and Agents. Persons who are not
----------- ---------------------------------------
covered by the foregoing provisions of this Article VI and who are or were
employees or agents of the corporation, or are or were serving at the request of
the corporation as employees or agents of another corporation, partnership,
joint venture, trust or other enterprise, may be indemnified to the extent
authorized at any time or from time to time by the board of directors.
Section 6.4. Other Rights of Indemnification. The indemnification
----------- -------------------------------
provided or permitted by this Article VI shall not be deemed exclusive of any
other rights to which those indemnified may be entitled by law or otherwise, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 6.5. Liability Insurance. The corporation shall have the power to
----------- -------------------
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article VI.
Section 6.6. Constituent Corporations. For purposes of this Article VI,
----------- ------------------------
references to "the corporation" shall exclude, in addition to the resulting
corporation, any constituent corporation
-12-
<PAGE>
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation or is or was serving at the request of constituent
corporation as a director, officer, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, shall not stand in the
same position under the provisions of this Article VI with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
ARTICLE VII
-----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 7.1. Contracts. The board of directors may authorize any officer
----------- ---------
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 7.2. Loans. No loans shall be contracted on behalf of the
----------- -----
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 7.3. Checks, Drafts, Etc. All checks, drafts or other orders for
----------- -------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 7.4. Deposits. All funds of the corporation not otherwise
----------- --------
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the board of directors
may select.
ARTICLE VIII
------------
CERTIFICATES FOR SHARES
AND THEIR TRANSFER
-----------------------
Section 8.1. Certificates for Shares. Certificates representing shares of
----------- -----------------------
the corporation shall be signed by the president or vice-president or by such
officer as shall be designated by resolution of the board of directors and by
the secretary or an assistant
-13-
<PAGE>
secretary, and shall be sealed with the seal or a facsimile of the seal of the
corporation. If both of the signatures of the officers be by facsimile, the
certificate shall be manually signed by or on behalf of a duly authorized
transfer agent or clerk. Each certificate representing shares shall be
consecutively numbered or otherwise identified, and shall also state the name of
the person to whom issued, the number and class of shares (with designation of
series, if any), the date of issue, the fact that the corporation is organized
under Illinois law, and the par value or a statement that the shares are without
par value. If the corporation is authorized and does issue shares of more than
one class or of a series within a class, the certificate shall also contain such
information or statement as may be required by law.
The name and address of each shareholder, the number and class of shares
held and the date on which the certificates for the shares were issued shall be
entered on the books of the corporation. The person in whose name shares stand
on the books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation.
Section 8.2. Lost Certificates. If a certificate representing shares has
----------- -----------------
allegedly been lost or destroyed the board of directors may in its discretion,
except as may be required by law, direct that a new certificate be issued upon
such indemnification and other reasonable requirements as it may impose.
Section 8.3. Transfers of Shares. Transfers of shares of the corporation
----------- -------------------
shall be recorded on the books of the corporation and except in the case of a
lost or destroyed certificate, on surrender for cancellation of the certificate
for such shares. A certificate presented for transfer must be duly endorsed and
accompanied by proper guaranty of signature and other appropriate assurances
that the endorsement is effective.
ARTICLE IX
----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
ARTICLE X
---------
DIVIDENDS
---------
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its articles of incorporation.
-14-
<PAGE>
ARTICLE XI
----------
SEAL
----
The corporate seal shall have inscribed thereon the name of the corporation
and the words "Corporate Seal, Illinois". The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XII
-----------
WAIVER OF NOTICE
----------------
Whenever any notice is required to be given under the provisions of these
by-laws or under the provisions of the articles of incorporation or under the
provisions of The Business Corporation Act of the State of Illinois, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XIII
------------
AMENDMENTS
----------
The power to make, alter, amend, or repeal the by-laws of the corporation
shall be vested in the board of directors, unless reserved to the shareholders
by the articles of incorporation. The by-laws may contain any provisions for the
regulation and management of the affairs of the corporation not inconsistent
with law or the articles of incorporation.
-15-
<PAGE>
CONSENT OF ALL OF THE DIRECTORS OF
CON-MED SUPPLY COMPANY, INC.
IN LIEU OF MEETING
----------------------------------
The undersigned, being all of the Directors of the above-captioned
corporation (the "Corporation"), do hereby authorize and consent in lieu of
meeting to the adoption of the following resolutions:
RESOLVED, that Sections 6.1, 6.2 and 6.3 of Article VI of the
Corporation's By-Laws are hereby amended in their entirety by substituting
the following Sections 6.1, 6.2 and 6.3:
"Section 6.1. INDEMNIFICATION. To the extent permitted by law, the Board
of Directors of the corporation may by resolution indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (whether or not by or in the right of the corporation) by reason
of the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had not reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.2. PROCEDURE. Any indemnification under Subsection (a) hereby
(unless ordered by a court) shall be made by the Board of Directors only upon a
determination in the specific case that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Subsection (a). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a
<PAGE>
quorum is not obtainable, or, even if obtainable and a quorum of disinterested
directors so directs, by independent legal counsel (compensated by the
corporation) in a written opinion, or (3) by the stockholders.
Section 6.3. OTHER RIGHTS OF INDEMNIFICATION. The indemnification provided
by this Section shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any agreement, vote of stockholders,
disinterested directors, or otherwise, both as to the action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person."
FURTHER RESOLVED, that Section 6.4 of Article VI of
the Corporation's By-Laws is hereby deleted.
FURTHER RESOLVED, that Sections 6.5 and 6.6 of Article
VI of the Corporation's By-Laws are hereby re-numbered as
Sections 6.4 and 6.5, respectively.
Dated: February 24, 1986
-------------------------
/s/ Harold S. Pascal /s/ Frederick C. Solar
- -------------------------------- ------------------------------------
Harold S. Pascal Frederick C. Solar
/s/ Douglas G. Mufuka
- --------------------------------
Douglas G. Mufuka
<PAGE>
EXHIBIT 3.7
Certificate No. 41201
---------
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
[LOGO]
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
WHEREAS, ARTICLES OF INCORPORATION, duly signed and verified of CONTINENTAL
HEALTH CARE, LTD. incorporated under the laws of the State of ILLINOIS have been
filed in the Office of the Secretary of State as provided by The "Business
Corporation Act" of Illinois, in force July 13, A.D. 1933.
Now Therefore, I Alan J. Dixon, Secretary of State of the State of Illinois by
virtue of the powers vested in me by law, do hereby issue this certificate and
attach thereto a copy of the Application of the aforesaid corporation.
IN TESTIMONY WHEREOF, Thereto set my hand and cause to be affixed the
Great Seal of the State of Illinois. Done at
the City of Springfield this 4th day of August
A.D. 1980 and of the Independence of the United
(SEAL) States the two hundred and 5th
/s/ Alan J. Dixon
------------------
SECRETARY OF STATE
<PAGE>
-------------------------------
(Do not write in this space)
Date Paid 8-4-80
Initial License Fee $ .50
Franchise Tax $ 22.90
Filing Fee $ 75.00
______
Clerk M V 98.40
-------------------------------
FORM BCA-47
ARTICLES OF INCORPORATION
TO ALAN J. DIXON, Secretary of State
The name and address of the incorporators are as follows:
<TABLE>
<CAPTION>
Name Number Street City State Zip Code
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Faye G. Koutselas 55 East Monroe St., Suite 4100, Chicago, IL 60603
------------------------------------------------------------------------------------------------------------
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
</TABLE>
The above named incorporators, being one or more natural persons of the age
of twenty-one years or more or a corporation, and having subscribed to the
shares of the corporation to be organized pursuant hereto, for the purpose
of forming a corporation under "The Business Corporation Act" of the State
of Illinois, do hereby adopt the following Articles of Incorporation:
ARTICLE ONE
The name of the corporation hereby incorporated is: Continental Health
Care, Ltd.
ARTICLE TWO
The name and address of the initial registered agent and registered office
are:
Registered agent David J. Hocluman, Esq.
----------------------------------------------------------
Registered office 55 East Monroe St., Suite 4100
---------------------------------------------------------
City, Zip Code, County Chicago, IL 60603 County - Cook
----------------------------------------------------
ARTICLE THREE
The duration of the corporation is [X] perpetual OR ________ years
ARTICLE FOUR
The purposes for which the corporation is organized are: To acquire, by
purchase, exchange, lease, or otherwise, and to own, manage, care for and
maintain, hold, use, develop, operate, sell, assign, loans, trasfer, convey,
mortgage, grant security interests in, pledge, or otherwise dispose of or deal
in and with real and personal property of every class or description and rights
and privileges therein wheresoever situated. To carry on a general investment
and management consultant and advisory business relating to investments and the
operation of businesses, plants, properties, and real and personal property of
every kind, in the United States and foreign countries, subject to the
applicable laws thereof. To maintain executive and operating personnel for the
purpose of consulting with and advising others in all matters relating to
investments and the management and operation of businesses and other properties
of every kind. To furnish business investment and management plans and
programs, to formulate policies, and generally to advise and assist others,
under contract or otherwise, in the management of their businesses, plants,
properties and investments. To buy and sell projects and developments on its own
behalf and on behalf of others in connection with the operation, management, and
development of individual and corporate businesses and enterprises of every kind
and description throughout the world in order to secure information and data for
capital investment, both for it ARTICLE FIVE own account and as agent for
others.
(CONTINUED)
Paragraph 1: The class, number of shares, the par value, if any, of each
class which the corporation is authorized to issue, the number the
corporation proposes to issue without further report to the Secretary of
State, and the consideration (expressed in dollars) to be received by the
corporation therefor, are:
<TABLE>
<CAPTION>
Par or Number of shares Number of shares Total consideration
Class Series no par authorized to be issued to be received therefor
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common None $1.00 10,000 1,000 $ 1,000.00
--------------------------------------------------------------------------------------------------------------------
____________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________
Total of all classes 10,000 1,000 Total $ 1,000.00
------ ----- --------
</TABLE>
<PAGE>
Paragraph 2: Where there is more than one class, the preferences,
qualifications, limitations, restrictions and the special or relative rights in
respect of the shares of each class are:
NOT APPLICABLE
ARTICLE SIX
The corporation will not commence business until at least one thousand dollars
has been received as consideration for the issuance of shares.
ARTICLE SEVEN
The number of directors to be elected at the first meeting of the shareholders
is four (4)
ARTICLE EIGHT
Paragraph 1: It is estimated that the value of all property to be owned by the
corporation for the following year wherever located will be $ ______.
Paragraph 2: It is estimated that the value of the property to be located within
the State of Illinois during the following year will be $ ______.
Paragraph 3: It is estimated that the gross amount of business which will be
transacted by the corporation during the following year will be $ _____.
Paragraph 4: It is estimated that the gross amount of business which will be
transacted at or from places of business in the State of Illinois during the
following year will be $ _____. The corporation elects to pay its initial
franchise tax on the basis of its entire stated capital.
NOTE: If all the property of the corporation is to be located in this State
and all of its business is to be transacted at or from places of business in
this State, or if the incorporators elect to pay the initial franchise tax on
the basis of its entire stated capital and paid-in surplus, then the information
called for in Article Nine need not be stated. The basis for computation of
franchise taxes payable by domestic corporations is set forth in Section 132 of
the Business Corporation Act.
Signature of incorporators: OATH AND ACKNOWLEDGEMENT
/s/ Faye G. Koutselas I, Jan Szczesniewski a Notary
- ----------------------------------------
Public, do hereby certify that on
the 31 day
________________________________________
of July, 1980, the above person or
________________________________________
persons appeared before me and being
________________________________________
first duly sworn by me that they
signed the foregoing document in the
capacity therein set forth and
declared that the statements therein
contained are true.
NOTE: If a corporation acts as IN WITNESS WHEREOF, I have hereunto
incorporator the name of the corporation set my hand and seal the day and
and the state of the corporation shall be year above written.
shown and the execution must be by its
President or Vice-President and verified by Place
him, and the corporate seal shall be Notarial Seal /s/ Jan Szczesniewski
affixed and attested by its Secretary or an Here ---------------------
Assistant Secretary. Notary public
As an incorporator, I declare that this document has been examined by me and is,
to the best of my knowledge and belief, true, correct and complete.
5212-696-7
FORM BCA-47
================================================================================
ARTICLES OF INCORPORATION
SECRETARY OF STATE
CORPORATION DEPARTMENT
SPRINGFIELD, ILLINOIS 62756
TELEPHONE (217) 787-7880
- --------------------------------------------------------------------------------
The following fees are required to be paid at the time of Issuing Certificate of
Incorporation: Filing fee $75.00. Initial license fee of 50% per $1,000.00 or
1/20th of 1% of the amount of stated capital and paid in surplus the
corporation proposes to issue. Without further report (Article Six): Initial
franchise tax of 1/10th of 1% of the issued, as above noted. However, the
minimum initial franchise tax is $25.00 and varies monthly on $25.000, or less,
as follows: January, $37.50; February, $35.47; March, $33.33; April, $31.25;
May. $29.17; June, $27.08; July, $25.00; August, $72.97; September, $20.83;
October, $18,75, November, $16,67; December, $14.38; (See Section 133 BCA).
In excess of $25.00 the franchise tax per $1000.00 is as follows: Jan., $1.50;
Feb., $1,4167; March, $1,3324; April, $1.25; May, $1,1667; June, $10,834; July,
$1,00; Aug., $.9167; Sep., $.8324; Oct., $.75; Nov., $.6667; Dec., $.5834.
All shares issued in excess of the amount mentioned in Article Six of this
application must be reported with 60 days from date of issuance thereof, and
franchise tax and license fee paid thereon; otherwise, the corporation is
subject to a penalty of 1% for each month on the amounts until reported and
subject to a fine of not to exceed $500.00.
The same fees are required for a subsequent issue of shares except the filing
fee is $5.00 instead of $75.00.
/s/ Alan J Dixon
Secretary of State
<PAGE>
RIDER TO ARTICLES OF INCORPORATION OF
Continental Health Care, Ltd.
To engage in capital ventures and business enterprises of every kind and
description, whether as a promoter, partner, member, or associate, or as a
manager of such enterprises.
To engage in consultant and advisory work in connection with the
organization, financing, management, operation, and reorganization of industrial
and commercial enterprises. To manage and to provide management for and
supervise all or part of any and every kind of investment or business
enterprise, and to contract or arrange with any corporation, association,
partnership, or individual for the management, conduct, operation, and
supervision of all kinds of investments and businesses.
<PAGE>
[NO TEXT ON PAGE]
<PAGE>
Certificate No. 55?40
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
[LOGO]
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
WHEREAS, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION, duly signed and
verified of CONTINENTAL HEALTH CARE, LTD. incorporated under the laws of the
State of ILLINOIS have been filed in the Office of the Secretary of State as
provided by The "Business Corporation Act" of Illinois, in force July 13, A.D.
1933.
Now Therefore I. Alan J. Dixon, Secretary of State of the State of Illinois by
virtue of the powers vested in me by law, do hereby issue this certificate and
attach thereto a copy of the Application of the aforesaid corporation.
IN TESTIMONY WHEREOF, Thereto set my hand and cause to be affixed the
Great Seal of the State of Illinois. Done at the City of
Springfield this 22nd day of December A.D. 1980 and of
(SEAL) the Independence of the United States the two hundred and
5th
/s/ Alan J. Dixon
--------------------------
SECRETARY OF STATE
<PAGE>
FORM BCA-55
----------------------------
(Do not write in this space)
Date Paid 12-22-80
License Fee $
Franchise Tax $
Filing Fee $ 25.00
(File in Duplicate) Clerk
----------------------------
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CONTINENTAL HEALTH CARE, LTD.
-----------------------------
(Exact Corporate Name)
To ALAN J. DIXON
Secretary of State
Springfield, Illinois
The undersigned corporation, for the purpose of amending its Articles of
Incorporation and pursuant to the provisions of Section 55 of "The Business
Corporation Act" of the State of Illinois, hereby executes the following
Articles of Amendment:
ARTICLE FIRST: The name of the corporation is:
CONTINENTAL HEALTH CARE, LTD.
ARTICLE SECOND: The following amendment or amendments were adopted in the
manner prescribed by "The Business Corporation Act" of the State of Illinois:
RESOLVED, that the following be added to the purpose clause stated in
Article Four of the Articles of Incorporation.
To act as a real estate broker; however, any officer of the Corporation who
actively participates in the brokerage business for the Corporation and all
salesmen employed by the Corporation will hold a current Certificate of
Registration issued by the Illinois Department of Registration and Education.
<PAGE>
(Disregard separation into ARTICLE THIRD: The number of shares of the
classes if class voting corporation outstanding at the time of the
does not apply to the adoption of said amendment or amendments
amendment voted on.) was 1,000; and the number of shares of each class
entitled to vote as a class on the adoption of
said amendment or amendments, and the designation
of each such class were as follows:
Class Number of Shares
NOTE: On the date of adoption of the amendment an
additional none shares were held in treasury and
not entitled to vote:
Class Number of Shares
(Disregard separation into ARTICLE FOURTH: The number of shares voted
classes if class voting for said amendment or amendments was 1,000; and
does not apply to the the number of shares voted against said
amendment voted on.) amendment or amendments was -0-. The number of
shares of each class entitled to vote as a class
voted for and against said amendment or
amendments, respectively, was:
Class Number of Shares Voted
For Against
(Disregard these items Item 1. On the date of the adoption of this
unless the amendment amendment restating the articles of
restores the articles incorporation, the corporation had _______ shares
of incorporation.) issued, itemized as follows:
Class Series Number of Par value per
(If Any) Shares share or statement
that shares are
without par value
Item 2. On the date of the adoption of this
amendment restating the articles of
incorporation, the corporation had a stated
capital of $_______ and a paid-in surplus of
$________ or a total of $________.
<PAGE>
(Disregard this Article where ARTICLE FIFTH: The manner in which the
this amendment contains no exchange, reclassification, or cancellation of
such provisions.) issued shares, or a reduction of the number of
authorized shares of any class below the number
of issued shares of that class, provided for
in, or effected by, this amendment, is as
follows:
(Disregard this Paragraph ARTICLE SIXTH: Paragraph 1: The manner in
where amendment does not which said said amendment or amendments
affect stated capital or effect a change in the amount of stated
paid-in surplus) capital or the amount of paid-in surplus, or
both, is as follows:
(Disregard this Paragraph Paragraph 2: The amounts of stated capital
where amendment does not and of paid-in surplus as changed by this
affect stated capital or amendment are as follows:
paid-in surplus.)
<TABLE>
<CAPTION>
BEFORE AMENDMENT AFTER AMENDMENT
<S> <C>
STATED CAPITAL.........$ $
PAID-IN SURPLUS........$ $
</TABLE>
<PAGE>
IN WITNESS WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be executed in its name by its _________________ President, and
its corporate seal to be hereto affixed, attested by its ___________ Secretary,
this 9th day of December, 1980.
CONTINENTAL HEALTH CARE, LTD.
--------------------------------
(Exact Corporate Name)
Place
(CORPORATE SEAL) By /s/ Harold S. Pascal
Here ------------------------------
Its President
ATTEST:
/s/ Douglas G. Mufuka
- ------------------------------
Its Secretary
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
I, Frederick Solar, a Notary Public, do hereby certify that on the 9th day
of December 1980, Harold S. Pascal personally appeared before me and, being
first duly sworn by me, acknowledged that he signed the foregoing document in
the capacity therein set forth and declared that the statements herein contained
are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
/s/ Frederick Solar
----------------------------
Notary Public
Place
(NOTARIAL SEAL)
Here
FORM BCA-55
BOX_______________ FILE_______________________
=========================================
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SECRETARY OF STATE
FILE IN DUPLICATE
FILING FEE $25.00
FILING FEE FOR RE-STATED ARTICLES $100.00
=================================
<PAGE>
<TABLE>
-------------------------------
JIM EDGAR This Space For Use By
Submit in Duplicate Secretary of State Secretary of State
State of Illinois
<S> <C> <C>
Remit payment in Check or Date 5-27-86
Money Order, payable to
"Secretary of State". STATEMENT OF CHANGE OF REGISTERED AGENT
DO NOT SEND CASH! AND/OR Filing Fee $5.00
REGISTERED OFFICE
Clerk /s/ PJ
-------------------------------
</TABLE>
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned corporation hereby submits the following statement.
1. The name of the corporation is CONTINENTAL HEALTH CARE, LTD.
--------------------------------------------
___________________________________________________________________________
2. The State or Country of incorporation is Illinois
----------------------------------
3. The name and address of its registered agent and its registered office as
they appear on the records of the office of the Secretary of State (Before
Change) are:
Registered Agent David J. Hochman
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 70 W. Madison, Suite 2200
----------------------------------------------------
Number Street Suite No. (A P.O. Box alone is
not acceptable)
Chicago, IL 60602 COOK
----------------------------------------------------
City Zip Code Country
4. The name and address of its registered agent and its registered office
shall be (After All Changes Herein Reported):
Registered Agent David J. Hochman
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 30 N. LaSalle Street
----------------------------------------------------
Number Street Suite No. (A P.O. Box alone is
not acceptable)
Chicago, IL 60602 COOK
----------------------------------------------------
City Zip Code Country
5. The address of the registered office and the address of the business
office of the registered agent, as changed, will be identical.
6. The above change was authorized by: ("X" one box only)
a. [_] By resolution duly adopted by the board of directors. (Note 5)
b. [X] By action of the registered agent. (Note 6)
(If authorized by the board of directors, sign here. See Note 5)
The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirm, under penalties of perjury, that
the facts stated herein are true.
Dated____________________________, 19____ ____________________________________
(Exact Name of Corporation)
attested by______________________________ by__________________________________
(Signature of Secretary or (Signature of President or
Assistant Secretary) vice president)
______________________________ ____________________________________
(Type or Print Name and Title) (Type or Print Name and Title)
(If change of registered office by registered agent, sign here. See Note 6)
The undersigned, under penalties of perjury, affirms that the facts stated
herein are true.
Dated May 23 , 1986 /s/ David J. Hochman
--------------------------- ------------------------------------
Signature of Registered Agent of
Record)
<PAGE>
NOTES
1. The registered office may, but need not be the same as the principal office
of the corporation. However, the registered office and the office address
by the registered agent must be the same.
2. The registered office must include a street or road address, a post office
box number alone is not acceptable.
3. A corporation cannot act as its own registered agent.
4. If the registered office in changed from one county to another, then the
corporation must file with the recorder of deeds of the new county a
certified copy of the articles of incorporation and a certified copy of the
statement of change of registered office. Such certified copies may be
obtained ONLY from the Secretary of State.
5. Any change of registered agent must be by resolution adopted by the board
of directors. This statement must then be signed by the President (or vice-
president) and by the Secretary (or an assistant secretary).
6. The registered agent may report a change of the registered office of the
corporation for which he or she is registered agent. When the agent reports
such a change, this statement must be signed by the registered agent.
FORM BCA-5.1B/5.20
FILE NO. D-5212-696-7
------------
==========================
STATEMENT OF CHANGE OF REGISTERED
AGENT AND/OR REGISTERED OFFICE
FILING FEE $5.00
Return to:
David J. Hochman, Esq.
Finger, Hochman & Delott, P.C.
30 North LaSalle Street
Chicago, IL 60602
RETURN TO:
CORPORATION DEPARTMENT
SECRETARY OF STATE
SPRINGFIELD, ILLINOIS 62756
TELEPHONE 217-782-7808
==========================
<PAGE>
EXPEDITED
SECRETARY OF STATE
APR 27 1998
EXP. FEES 25.00
COPY. CERT. 11.00
STATE OF ILLINOIS
Office of the Secretary of State
I hereby certify that this is a
true and correct copy,
consisting of twelve pages, as
taken from the original on file
in this office.
(SEAL) /s/ George H. Ryan
GEORGE H. RYAN
SECRETARY OF STATE
DATED: April 27, 1998.
---------------------
By: /s/ Julie Jaeger
------------------------
<PAGE>
EXHIBIT 3.8
CONTINENTAL HEALTH CARE, LTD.
BY-LAWS
ARTICLE I
---------
OFFICES
The corporation shall continuously maintain in the State of Illinois a
registered office and a registered agent whose office is identical with such
registered office, and may have other offices within or without the state.
ARTICLE II
----------
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders shall be
held on the second Monday in the month of August of each year for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called either by the president, by the board of directors or by the holders of
not less than one-fifth of all the outstanding shares of the corporation, for
the purpose or purposes stated in the call of the meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be at the registered office of the
corporation.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date, and
hour of the meeting, and in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than forty days before the date of the meeting, or in the case of a
merger or consolidation not less than twenty nor more than forty days before the
meeting, either personally or by mail, by or at the direction of the president,
or the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the records of the
corporation, with postage thereon prepaid. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken.
<PAGE>
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of shares, or for the purpose of determining shareholders
for any other lawful reason, the board of directors of the corporation may fix
in advance a record date which shall not be more than sixty days and, for a
meeting of shareholders, not less than ten days, or in the case of a merger or
consolidation not less than twenty days, before the date of such meeting. If no
record date is fixed, the record date for the determination of shareholders
shall be the date on which notice of the meeting is mailed, and the record date
for the determination of shareholders for any other purpose shall be the date on
which the board of directors adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of the shareholder,
which list, for a period of ten days prior to such meeting, shall be kept on
file at the registered office of the corporation and shall be open to inspection
by any shareholder for any purpose germane to the meeting, at any time during
usual business hours. Such list shall also be produced and kept open at the
time and place of the meeting and may be inspected by any shareholder during the
whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in this State, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share ledger or transfer
book or to vote at any meeting of shareholders.
SECTION 7. QUORUM. The holders of a majority of the outstanding shares of
the corporation, present in person or represented by proxy, shall constitute a
quorum at any meeting of shareholders; provided that if less than a majority of
the outstanding shares are represented at said meeting, a majority of the shares
so represented may adjourn the meeting at any time without further notice. If a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting shall be the act of the shareholders, unless the vote
of a greater number or voting by classes is required by The Business Corporation
Act, the articles of incorporation or these by-laws. At any adjourned meeting
at which a quorum shall be present, any business may be transacted which might
have been transacted at the original meeting. Withdrawal of shareholders from
any meeting shall not cause failure of a duly constituted quorum at that
meeting.
2
<PAGE>
SECTION 8. PROXIES. Each shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class,
shall be entitled to one vote upon each matter submitted to vote at a meeting of
shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian, or conservator, either in person or by proxy without a transfer of
such shares into the name of such administrator, executor, court appointed
guardian, or conservator. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, for a period not to exceed ten years, by entering into a written
voting trust agreement specifying the terms and conditions of the voting trust,
and by transferring their shares to such trustee or trustees for the purpose of
the agreement. Any such trust agreement shall not become effective until a
counterpart of the agreement is deposited with the corporation at its registered
office. The counterpart of the voting trust agreement so deposited with the
corporation shall be subject to the same right or examination by a shareholder
of the corporation, in person or by agent or attorney, as are the books and
records of the corporation, and shall be subject to examination by any holder of
a beneficial interest in the voting trust, either in person or by agent or
attorney, at any reasonable time for any proper purpose.
3
<PAGE>
Shares of its own stock belonging to this corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any given time, but shares of its own
stock held by it in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. CUMULATIVE VOTING. In all elections for directors, every
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him, for as many persons as there are directors to be elected,
or to cumulate said shares, and give one candidate as many votes as the number
of directors multiplied by the number of shares shall equal, or to distribute
them on the same principle among as many candidates as he shall see fit.
SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding
officer may, or upon the request of any shareholder shall, appoint one or more
persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented
at the meeting, based upon their determination of the validity and effect of
proxies; count all votes and report the results; and do such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the shareholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there be more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
facie evidence thereof.
SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
SECTION 14. VOTING BY BALLOT. Voting on any question or in any election
may be by voice unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
ARTICLE III
-----------
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the corporation shall be
managed by its board of directors.
4
<PAGE>
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the corporation shall be four (4).
Each director shall hold office until the next annual meeting of shareholders or
until his successor shall have been elected and qualified. Directors need not
be residents of Illinois or shareholders of the corporation. The number of
directors may be increased or decreased from time to time by the amendment of
this section, but no decrease shall have the effect of shortening the term of
any incumbent director.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this by-law, immediately after the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place as the place for holding any special meeting of the board of
directors called by them.
SECTION 5. NOTICE. Written notice of any special meeting shall be
delivered to each director at his business address at least three (3) days
previous to said meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegram company. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by these
by-laws shall constitute a quorum for transaction of business at any meeting of
the board of directors, provided that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting at any time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless the act of a greater number is required by statute, these
by-laws, or the articles of incorporation.
5
<PAGE>
SECTION 8. VACANCIES. Any vacancy occurring in the board of directors
arising by reason of an increase in the number of directors or otherwise, may be
filled by election at an annual meeting or a special meeting of shareholders
called for that purpose or as hereinafter provided, at any meeting of the board
of directors. If so provided in the Articles of Incorporation of this
corporation, a majority of the board of directors then in office may properly
fill one or more of such vacancies, provided however, that at no time may the
number of directors selected by the board of directors to fill such vacancies
exceed 33-1/3% of the total membership of the board of directors.
SECTION 9. ACTION WITHOUT A MEETING. Unless specifically prohibited by
the articles of incorporation or by-laws, any action required to be taken at a
meeting of the board of directors, or any other action which may be taken at a
meeting of the board of directors, or of any committee thereof; may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors entitled to vote with respect to the
subject matter thereof, or by all the members of such committee, as the case may
be. Any such consent signed by all the directors or all the members of the
committee shall have the same effect as a unanimous vote, and may be stated as
such in any document filed with the Secretary of State or with anyone else.
SECTION 10. COMPENSATION. The board of directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers, or otherwise. By resolution of the board of directors the directors
may be paid their expenses, if any, of attendance at each meeting of the board.
No such payment previously mentioned in this section shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
SECTION 12. ATTENDANCE BY CONFERENCE TELEPHONE. Members of the board of
directors or of any committees of the board of directors may participate in and
act at any meeting of such board or committee through the use of a conference
telephone or other communications equipment by means of which all persons
partici-
6
<PAGE>
pating in the meeting can hear each other, provided that a majority of such
members consent in writing to the recording of such communications and provided
that such recording is in fact made and becomes a part of the official corporate
records. Participation in such a meeting shall constitute attendance and
presence in person at the meeting of the person or persons so participating for
all purposes including fulfilling the requirement of Sections 6 and 7 hereof.
ARTICLE IV
----------
EXECUTIVE COMMITTEE
SECTION 1. APPOINTMENT. The Board of directors by resolution adopted by a
majority of the whole board may designate two or more directors to constitute an
Executive Committee. The designation of such committee and the delegation
thereto of authority shall not operate to relieve the board of directors or any
member thereof of any responsibility imposed upon it or him by law.
SECTION 2. POWERS. The Executive Committee, when the board of directors
is not in session, shall have and exercise all of the authority of the board of
directors in the management of the corporation except to the extent, if any,
that such authority shall be limited by the resolution appointing the Executive
Committee and except also that the Executive Committee shall not have the
authority of the board of directors in reference to amending the articles of
incorporation, adopting a plan of merger or adopting a plan of consolidation
with another corporation or corporations, recommending to the shareholders the
sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the property and assets of the corporation if not made in
the usual and regular course of its business, recommending to the shareholders a
voluntary dissolution of the corporation or a revocation thereof, amending,
altering or repealing the by-laws of the corporation, electing or removing
officers of the corporation or members of the Executive Committee, fixing the
compensation of any member of the Executive Committee, declaring dividends, or
amending, altering or repealing any resolution of the board of directors which
by its terms provides that it shall not be amended, altered or repealed by the
Executive Committee.
SECTION 3. TENURE AND QUALIFICATIONS. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the
directors following his designation and until his successor as a member of the
Executive Committee is elected and qualified. Members of the Executive
Committee must at all times be directors of the corporation.
7
<PAGE>
SECTION 4. MEETINGS. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may from
time to time by resolution fix. Special meetings of the Executive Committee may
be called by any member thereof upon not less than one day's notice stating the
place, date and hour of the meeting which notice may be written or oral and if
mailed, shall be deemed to be delivered when deposited in the United States mail
addressed to the member of the Executive Committee at his business address. Any
member of the Executive Committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the Executive Committee need not state the business
proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting thereof
and action of the Executive Committee must be authorized by the affirmative vote
of a majority of the members present at a meeting at which a quorum is present.
SECTION 6. VACANCIES. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the whole board of directors.
SECTION 7. RESIGNATIONS AND REMOVAL. Any member of the Executive
Committee may be removed at any time with or without cause by resolution adopted
by a majority of the whole board of directors. Any member of the Executive
Committee may resign from the Executive Committee at any time by given written
notice to the president or secretary of the corporation, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 8. PROCEDURE. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these by-laws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information
only at the meeting thereof held next after the proceedings shall have been
taken.
ARTICLE V
---------
OFFICERS
--------
SECTION 1. NUMBER. The officers of the corporation shall be a president,
one or more vice-presidents (the number thereof to be determined by the board
of directors), a treasurer, a secretary, and such assistant treasurers,
assistant secretaries or other officers as may be elected by the board of
directors. Any two (2) or more offices, other than those of President and
Secretary may be held by the same person, except that at such time as all of the
stock of the corporation is owned by one (1) person, that person may hold all
offices of the corporation.
8
<PAGE>
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently possible. Vacancies may be filled or
new offices created and filled at any meeting of the board of directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Election of an officer shall
not of itself create contract rights.
SECTION 3. REMOVAL. Any officer elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. PRESIDENT. The president shall be the principal executive
officer of the corporation. Subject to the direction and control of the board
of directors, he shall be in charge of the business of the corporation; he shall
be in charge of the business of the corporation; he shall see that the
resolutions and directions of the board of directors are carried into effect
except in those instances in which that responsibility is specifically assigned
to some other person by the board of directors; and, in general, he shall
discharge all duties incident to the office of president and such other duties
as may be prescribed by the board of directors from time to time. He shall
preside at all meetings of the shareholders and of the board of directors.
Except in those instances in which the authority to execute is expressly
delegated to another officer or agent of the corporation or a different mode of
execution is expressly prescribed by the board of directors or these by-laws,
he may execute for the corporation certificates for its shares, and any
contracts, deeds, mortgages, bonds, or other instruments which the board of
directors has authorized to be executed, and he may accomplish such execution
either under or without the seal of the corporation and either individually or
with the secretary, any assistant secretary, or any other officer thereunto
authorized by the board of directors, according to the requirements of the form
of the instrument. He may vote all securities which the corporation is entitled
to vote except as and to the extent such authority shall be vested in a
different officer or agent of the corporation by the board of directors.
SECTION 5. THE VICE-PRESIDENTS. The vice-president (or in the event there
be more than one vice-president, each of the vice-presidents) shall assist the
president in the discharge of his duties as the president may direct and shall
perform such other duties as from time to time may be assigned to him by
9
<PAGE>
president or by the board of directors. In the absence of the president or in
the event of his inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated by the board of directors, or by the president if the board of
directors has not made such designation, or in the absence of any designation,
then in the order of seniority of tenure as vice-president) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. Except in those instances
in which the authority to execute is expressly delegated to another officer or
agent of the corporation or a different mode of execution is expressly
prescribed by the board of directors or these by-laws, the vice-president (or
each of them if there are more than one) may execute for the corporation
certificates for its shares and any contracts, deeds, mortgages, bonds or other
instruments which the board of directors has authorized to be executed, and he
may accomplish such execution either under or without the seal of the
corporation and either individually or with the secretary, any assistant
secretary, or any other officer thereunto authorized by the board of directors,
according to the requirements of the form of the instrument.
SECTION 6. THE TREASURER. The treasurer shall be the principal accounting
and financial officer of the corporation. He shall: (a) have charge of and be
responsible for the maintenance of adequate books of account for the
corporation; (b) have charge and custody of all funds and securities of the
corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the president
or by the board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors may determine.
SECTION 7. THE SECRETARY. The secretary shall: (a) record the minutes of
the shareholders' and of the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation; (d) keep a register of
the post-office address of each shareholder which shall be furnished to the
secretary by such shareholder; (e) sign with the president, or a vice-president,
or any other officer thereunto authorized by the board of directors,
certificates for shares of the corporation, the issue of which shall have been
authorized by the board of directors, and any contracts, deeds, mortgages,
bonds, or other instruments which the board of directors has authorized to be
executed, according to the requirements of the form of the instrument, except
when a different mode of execution is expressly prescribed by the board of
directors or these by-laws; (f) have general charge of the stock transfer books
of the corporation; (g) perform all
10
<PAGE>
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the board of directors.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant
treasurers and assistant secretaries shall perform such duties as shall be
assigned to them by the treasurer or the secretary, respectively, or by the
president or the board of directors. The assistant secretaries may sign with
the president, or a vice-president, or any other officer thereunto authorized by
the board of directors, certificates for shares of the corporation, the issue of
which shall have been authorized by the board of directors, and any contracts,
deeds, mortgages, bonds, or other instruments which the board of directors has
authorized to be executed, according the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the board of directors or these by-laws.
The assistant treasurers shall respectively, if required by the board of
directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the board of directors shall determine.
SECTION 9. SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE VI
----------
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation
may, to the fullest extent to which it is empowered to do so by The Business
Corporation Act of Illinois or any other applicable laws, as may from time to
time be in effect, indemnify any person who was or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director or officer of the corporation, or is or was serving
at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding.
SECTION 2. CONTRACT WITH THE CORPORATION. The provisions of this Article
VI shall be deemed to be a contract between the corporation and each director or
officer who serves in any such capacity at any time while this Article VI and
the relevant pro-
11
<PAGE>
visions of The Business Corporation Act of Illinois or other applicable law, if
any, are in effect, and any repeal or modification of any such law or of this
Article VI shall not affect any rights or obligations then existing with respect
to any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or threatened based in whole or in
part upon such state of facts.
SECTION 3. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Persons who are not
covered by the foregoing provisions of this Article VI and who are or were
employees or agents of the corporation, or are or were serving at the request of
the corporation as employees or agents of another corporation, partnership,
joint venture, trust or other enterprise, may be indemnified to the extent
authorized at any time or from time to time by the board of directors.
SECTION 4. OTHER RIGHTS OF INDEMNIFICATION. The indemnification provided
or permitted by this Article VI shall not be deemed exclusive of any other
rights to which those indemnified may be entitled by law or otherwise, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
SECTION 5. LIABILITY INSURANCE. The corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article VI.
SECTION 6. CONSTITUENT CORPORATIONS. For purposes of this Article VI,
references to "the corporation" shall exclude, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of any corporation, partnership, joint venture, trust
or other enterprise, shall not stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corpora-
12
<PAGE>
tion as he would have with respect to such constituent corporation if its
separate existence had continued.
ARTICLE VII
-----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositaries as the board of directors may
select.
ARTICLE VIII
------------
CERTIFICATES FOR SHARES
AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the corporation shall be signed by the president or vice-president or by such
officer as shall be designated by resolution of the board of directors and by
the secretary or an assistant secretary, and shall be sealed with the seal or a
facsimile of the seal of the corporation. If both of the signatures of the
officers be by facsimile, the certificate shall be manually signed by or on
behalf of a duly authorized transfer agent or clerk. Each certificate
representing shares shall be consecutively numbered or otherwise identified,
and shall also state the name of the person to whom issued, the number and class
of shares (with designation of series, if any), the date of issue, the fact that
the corporation is organized under Illinois law, and the par value or a
statement that the shares are without par value. If the corporation is
authorized and does issue shares of more than one class or of a series within a
class,
13
<PAGE>
the certificate shall also contain such information or statement as may be
required by law.
The name and address of each shareholder, the number and class of shares
held and the date on which the certificates for the shares were issued shall be
entered on the books of the corporation. The person in whose name shares stand
on the books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation.
SECTION 2. LOST CERTIFICATES. If a certificate representing shares has
allegedly been lost or destroyed the board of directors may in its discretion,
except as may be required by law, direct that a new certificate be issued upon
such indemnification and other reasonable requirements as it may impose.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the corporation
shall be recorded on the books of the corporation and, except in the case of a
lost or destroyed certificate, on surrender for cancellation of the certificate
for such shares. A certificate presented for transfer must be duly endorsed and
accompanied by proper guaranty of signature and other appropriate assurances
that the endorsement is effective.
ARTICLE IX
----------
FISCAL YEAR
The fiscal year of the corporation shall end on the last day of July.
ARTICLE X
---------
DIVIDENDS
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its articles of incorporation.
ARTICLE XI
----------
SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, Illinois." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
14
<PAGE>
ARTICLE XII
-----------
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of these
by-laws or under the provisions of the articles of incorporation or under the
provisions of The Business Corporation Act of the State of Illinois, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XIII
------------
AMENDMENTS
The power to make, alter, amend, or repeal the by-laws of the corporation
shall be vested in the board of directors, unless reserved to the shareholders
by the articles of incorporation. The by-laws may contain any provisions for the
regulation and management of the affairs of the corporation not inconsistent
with law or the articles of incorporation.
15
<PAGE>
JOINT CONSENT OF THE SHAREHOLDERS
AND DIRECTORS OF
CONTINENTAL HEALTH CARE, LTD.
IN LIEU OF MEETING
The undersigned, being all of the shareholders and directors of the
above-captioned Illinois corporation (the "Corporation"), acting pursuant to the
provisions of Sections 147 and 147.1 of the Business Corporation Act of the
State of Illinois, do hereby authorize and consent in lieu of meeting to the
adoption of the following resolutions:
RESOLVED, that the first sentence of Section 2 of Article III of the
By-Laws of the Corporation be amended to read as follows:
The number of directors of the Corporation shall be five (5).
FURTHER RESOLVED, that until otherwise provided, Arthur M. Morris,
Robert C. Muehrcke, Paul Balter, Harold S. Pascal and Frederick C. Solar
are hereby elected directors of the Corporation to serve until their
successors shall have been elected and shall have qualified.
Dated: September 9, 1980 /s/ Arthur M. Morris
-------------------------------------
Arthur M. Morris
/s/ Robert C. Muehrcke /s/ Paul Balter
- ------------------------------------- -------------------------------------
Robert C. Muehrcke Paul Balter
/s/ Harold S. Pascal /s/ Frederick C. Solar
- ------------------------------------- -------------------------------------
Harold S. Pascal Frederick C. Solar
/s/ Michael J. Carbon /s/ George Dunea
- ------------------------------------- -------------------------------------
Michael J. Carbon George Dunea
/s/ Ashutosh Gupta /s/ Douglas G. Mufuka
- ------------------------------------- -------------------------------------
Ashutosh Gupta Douglas G. Mufuka
<PAGE>
CONSENT OF ALL OF THE DIRECTORS OF
CONTINENTAL HEALTH CARE, LTD.
IN LIEU OF MEETING
----------------------------------
The undersigned, being all of the Directors of the above-captioned
corporation (the "Corporation"), do hereby authorize and consent in lieu of
meeting to the adoption of the following resolutions:
RESOLVED, that Sections 1, 2 and 3 of Article VI of the
Corporation's By-Laws are hereby amended in their entirety
by substituting the following Sections 1, 2 and 3:
"Section 1. INDEMNIFICATION. To the extent permitted by law, the Board of
Directors of the corporation may by resolution indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (whether or not by or in the right of the corporation) by reason
of the fact that such person is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had not reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere of its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. PROCEDURE. Any indemnification under Subsection (a) hereby
(unless ordered by a court) shall be made by the Board of Directors only upon a
determination in the specific case that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Subsection (a). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a
<PAGE>
quorum is not obtainable, or, even if obtainable and a quorum of disinterested
directors so directs, by independent legal counsel (compensated by the
corporation) in a written opinion, or (3) by the stockholders.
Section 3. OTHER RIGHTS OF INDEMNIFICATION. The indemnification provided by
this Section shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any agreement, vote of stockholders,
disinterested directors, or otherwise, both as to the action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person."
FURTHER RESOLVED, that Section 4 of Article VI of the Corporation's
By-Laws is hereby deleted.
FURTHER RESOLVED, that Sections 5 and 6 of Article VI of the
Corporation's By-Laws are hereby re-numbered as Sections 4 and 5,
respectively.
Dated: February 24, 1986
---------------------------
/s/ Arthur M. Morris /s/ Paul Balter
- ---------------------------------- -----------------------------------
Arthur M. Morris Paul Balter
/s/ Harold S. Pascal /s/ Frederick C. Solar
- ---------------------------------- -----------------------------------
Harold S. Pascal Frederick C. Solar
/s/ Michael J. Carbon /s/ George Dunea
- ---------------------------------- -----------------------------------
Michael J. Carbon George Dunea
/s/ Ashutosh Gupta /s/ Douglas G. Mufuka
- ---------------------------------- -----------------------------------
Ashutosh Gupta Douglas G. Mufuka
<PAGE>
EXHIBIT 3.9
ARTICLES OF ORGANIZATION
OF
DIALYSIS SPECIALISTS OF CORPUS CHRISTI, L.L.C.
----------------------------------------------
ARTICLE ONE
The name of the limited liability company is
DIALYSIS SPECIALISTS OF CORPUS CHRISTI, L.L.C.
ARTICLE TWO
The period of duration of the company shall be perpetual or until the
termination of the company in accordance with regulations of the company.
ARTICLE THREE
The purpose for which the company is organized is the transaction of any
and all lawful business for which limited liability companies may be organized
under the Texas Limited Liability Company Act.
ARTICLE FOUR
The registered agent of the limited liability company is CT Corporation
System and the address of its registered office in the State is c/o CT
Corporation System, 350 N. St. Paul Street, Dallas, Texas 75201.
ARTICLE FIVE
The names and addresses of the members are as follows:
Name Address
---- -------
Martin Fox 6300 E. El Dorado Plaza, Suite 100
Tucson, Arizona 85715
Thomas Creel 1113 Furlong Drive,
Libertyville, Illinois 60048
The management of the Company will be vested in the members, the Company
will not have managers.
ARTICLE SIX
The name and addressee of the organizer is as follows:
Name Address
---- -------
Kimberley E. Bender 150 North Michigan Avenue
Suite 3100
Chicago, IL 60601
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of May, 1995.
/s/ Kimberley E. Bender
-----------------------
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF ORGANIZATION
OF
DIALYSIS SPECIALISTS OF CORPUS CHRISTI, L.L.C.
----------------------------------------------
Pursuant to the provisions of Article 3.06 of the Texas Limited
Liability Company Act (the "Act"), the undersigned company adopts the following
Articles of Amendment to its Articles of Organization:
ARTICLE I
The name of the limited liability company is:
DIALYSIS SPECIALISTS OF CORPUS CHRISTI, L.L.C.
ARTICLE II
ARTICLE FIVE of the Articles of Organization is hereby amended so as to read as
follows:
The name and address of the sole member are as follows:
HOME DIALYSIS OF AMERICA, INC.
6300 E. El Dorado Plaza, Suite 100
Tucson, AZ 85715
ARTICLE III
The amendment to the Articles of Organization set forth in Article II above was
approved and adopted by the members of the company pursuant Section D of Article
2.23 of the Act on May 24, 1995.
Dated: March 20, 1996.
DIALYSIS SPECIALISTS OF
CORPUS CHRISTI, L.L.C.
By: HOME DIALYSIS OF AMERICA, INC.
By: /s/ Martin Fox
------------------------------
Its: President
<PAGE>
[SEAL APPEARS HERE] ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited
partnership, or registered limited liability partnership as stated in its
articles of incorporation, articles of organization, certificate of limited
partnership, application or comparable document is Dialysis Specialists of
Corpus Christi, L.L.C.
2. The assumed name under which the business or professional service is or is
to be conducted or rendered is Dialysis Specialists of Riverside.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated, organized or associated is Texas, and the address of its
registered or similar office in that jurisdiction is 4300 South Padre
Island Drive, Corpus Christi 78415.
4. The period, not to exceed 10 years, during which the assumed name will be
used is 10 years.
5. The entity is a (circle one): business corporation, non-profit corporation,
professional corporation, professional association, limited liability
company, limited partnership, registered limited liability partnership or
some other type of incorporated business, professional or other association
(specify) Limited Liability, L.L.C.
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 350 North St. Paul Street, Dallas,
Texas 75201 and the name of its registered agent at such address is c/o CT
Corporation System. The address of the principal office (if not the same
as the registered office) is 4300 South Padre Island Drive, Corpus Christi
78415.
7. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is N/A and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is N/A and the office address elsewhere
is _______________________________________________________________________
__________________________________________________________________________.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "ALL" or "ALL EXCEPT"):
ALL
(Certificate must be executed and notarized on the back of this form.)
<PAGE>
/s/ Martin Fox
-------------------------------------
Signature of officer, general
partner, manager, representative or
attorney-in-fact of the entity
Before me on this 11th day of June, 1996, personally appeared Martin Fox and
acknowledged to me that ______ he executed the foregoing certificate for the
purposes therein expressed.
/s/ Deborah C. Chantler
(Notary Seal) -------------------------
Notary Public, State of
Illinois
INSTRUCTIONS FOR FILING ASSUMED NAME CERTIFICATE
1. A corporation, limited liability company, limited partnership or registered
limited liability partnership, which regularly conducts business or renders
a professional service in this state under a name other than the name
contained in its articles of incorporation, articles of organization,
certificate of limited partnership or application, must file an assumed
name certificate with the secretary of state and with the appropriate
county clerk in accordance with section 36.11 of the Texas Business and
Commerce Code.
2. The information provided in paragraph 6 as regards the registered agent and
registered office address in Texas must match the information on file in
this office. To verify the information on file with this office, you may
contact our corporate information unit at (512) 463-5555. Forms to change
the registered agent/office are available from this office should you
require to update this information.
3. A certificate executed and acknowledged by an attorney-in-fact shall
include a statement that the attorney-in-fact has been duly authorized in
writing by his principal to execute and acknowledge the same.
4. For purposes of filing with the secretary of state, the assumed name
registrant should submit an originally executed assumed name certificate
accompanied by the filing fee of $25 to the SECRETARY OF STATE, STATUTORY
FILINGS DIVISION, CORPORATIONS SECTION, P.O. BOX 13697, AUSTIN, TEXAS ????
3697. THE PHONE NUMBER IS (512) 463-5582, TDD: (800) 735-2989, FAX: (512)
463-5709.
5. All assumed name certificates to be filed with the county clerk must be
forwarded directly to the appropriate county clerk by the assumed name
registrant.
6. Whenever an event occurs that causes the information in the assumed name
certificate to become materially misleading (eg. change of registered
agent/office or a change of name), a new certificate must be filed within
60 days after the occurrence of the events which necessitate the filing.
7. A registrant that ceases to transact business or render professional
services under an assumed name for which a certificate has been filed may
file an abandonment of use pursuant to the ???? Business and Commerce Code,
(S)36.14. Forms for this purposes are available from this office
<PAGE>
STATEMENT OF ABANDONMENT OF ASSUMED NAME
1. The name of the corporation, limited liability company, limited
partnership, or registered limited liability partnership as stated in its
articles of incorporation, articles of organization, certificate of
organization, certificate of limited partnership, application or comparable
document is Dialysis Specialist of Corpus Christi, L.L.C. and the charter
number, certificate of authority number, or registration number if any, is
07012086.
2. The assumed name being abandoned is Dialysis Specialists of Riverside.
3. The date on which the assumed name certificate was filed in the office of
the Secretary of State is June 13, 1996: an assumed name certificate has
also been filed in the county clerk's office(s) in the following county or
counties:_________________________________________________________________
__________________________________________________________________________
4. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 350 North St. Paul St., Dallas Tx 75201
and the name of its registered agent at such address if CT Corporation
System. The address of the principal office (if not the same as the
registered office is ______________________________________________________
___________________________________________________________________________
5. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is N/A, and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is ______________________________________
___________________________________________________________, and the office
address elsewhere is _____________________________________________________.
HOME DIALYSIS OF AMERICA, INC.
/s/ John B Bourke
-----------------------------------
Managing Member
By: John Bourke
Its: Chief Financial Officer
Before me on ths 3 day of December 1996, personally appeared JOHN B. BOURKE and
acknowledged to me that ______ he executed the foregoing certificate for the
purposes therein expressed.
(Notary Seal) /s/ Patricia L'Odense
--------------------------------
Notary Public Cook County
(Please refer to the back of this form for additional instructions)
<PAGE>
EXHIBIT 3.10
REGULATIONS
OF
DIALYSIS SPECIALISTS OF CORPUS CHRISTI, L.L.C.
ARTICLE I
OFFICES AND COMPANY SEAL
------------------------
1. PRINCIPAL OFFICE. The principal office of the Company shall be located
----------------
in the Raintree Plaza Shopping Center, Corpus Christi, Texas.
2. OTHER OFFICES. The Company may also maintain offices at such other
-------------
place or places, within the State of Texas, as may be designated from time to
time by the Members, and the business of the Company may be transacted at such
other offices with the same effect as that conducted at the principal office.
3. COMPANY SEAL. A company seal shall not be requisite to the validity of
------------
any instrument executed by or on behalf of the Company, but may be used.
ARTICLE II
FISCAL YEAR AND TERM
--------------------
1. FISCAL YEAR. The fiscal year of the Company shall begin on the first
-----------
day of January and end on the last day of December.
2. TERM OF COMPANY. The Company shall commence its existence upon the
---------------
date the Articles of Organization are filed with the Texas Secretary of State
and shall continue until December 31, 2025, unless sooner dissolved pursuant to
Article X.
3. INTENT. It is the intent of the Members that the Company shall always
------
be operated in a manner consistent with its treatment as a "partnership" for
federal and state income tax purposes. However, it is the intent of the Members
that the Company not be operated or treated as a "partnership" for purposes of
Section 303 of the Federal Bankruptcy Code. No Member shall take any action
inconsistent with the express intent of the parties hereto.
<PAGE>
ARTICLE III
MEMBERS
-------
1. MEMBERS' MEETINGS. The business of the Company shall be managed by the
-----------------
Members. All meetings of the Members shall be held at such place as may be fixed
from time to time by the Members, or by the President or Secretary of the
Company, either within or without the State of Texas, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
2. ANNUAL MEETINGS. Annual meetings of Members shall be held on the 1st
---------------
Wednesday in March if not a legal holiday, and if a legal holiday, then on the
next secular day following, or at such other date and time as shall be
designated from time to time by the Members and stated in the notice of the
meeting. At the annual meeting, Members shall elect officers and transact such
other business as may properly be brought before the meeting.
3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting stating
------------------------
the place, date and hour of the meeting shall be given to each Member of record
entitled to vote at such meeting not less than ten (10) nor more than sixty (60)
days before the date of the meeting. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail, addressed to the Member
at its address as it appears on the records of the Company with postage thereon
paid. When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken.
4. FIXING OF RECORD DATE. For the purpose of determining the Members
---------------------
entitled to notice of or to vote at any meeting of Members, the date fixed for
the payment of any dividend or distribution, the date of allotment of rights or
the date for participation in the execution of written consents, waivers or
releases, the Company may fix in advance a record date which shall not be more
than sixty (60) days. If no record date is fixed, the record date for the
determination of Members entitled to notice of or to vote at a meeting of
Members shall be the date next preceding the day on which notice is given or the
date next preceding the day on which the meeting is held if no notice is
required and the record date for the determination of Members for any other
purpose shall be the date on which the board of directors adopts the resolution
relating thereto. A determination of Members of record entitled to notice of or
to vote at a meeting of Members shall apply to any adjournment of the meeting.
5. VOTING LISTS. The officer or agent having charge of the transfer books
------------
for shares of the Company shall make at least five (5) days before meeting of
Members, a complete list of the Members entitled to vote at such meeting,
arranged in alphabetical order, showing the address of and the number of shares
registered in the name of the Member, which list shall be kept on file at the
registered office of the Company and shall be open to
-2-
<PAGE>
inspection by any Member and subject to copying at the Member's expense at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and may be inspected by any Member during
the whole time of the meeting. The original share ledger of transfer book, or a
duplicate thereof kept this state, shall be prima facie evidence as to who are
the Members entitled to examine such list or share ledger or transfer book or to
vote any meeting of Members.
6. SPECIAL MEETINGS OF MEMBERS. Special meetings of the Members, for any
---------------------------
purpose or purposes, unless otherwise proscribed by statute or by the Articles
of Organization, may be called by the President or Secretary at the request in
writing of Members owning a majority in amount of the membership interests of
the Company issued, outstanding, and entitled to vote. Such request shall state
the purpose or purposes of the proposed meeting.
7. NOTICE OF SPECIAL MEETINGS. Written notice of a special meeting
--------------------------
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten (10) nor more than
fifty (50) days before the date of the meeting to each Member of record entitled
to vote at such meeting.
8. QUORUM AND ADJOURNMENT. The holders of a majority of the shares
----------------------
issued, outstanding, and entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the Members
for the transaction of business except as otherwise provided by statute or by
the Articles of Organization. If, however such quorum shall not be present or
represented at any meeting of the Members, the Members entitled to vote at the
meeting, present in person or represented by proxy, shall have power to adjourn
the meeting to another time or place, without notice other than announcement at
the meeting at which adjournment is taken, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Member of record entitled to vote at the meeting.
9. MAJORITY REQUIRED. When a quorum is present at any meeting, the vote
-----------------
of the holders of a majority of the voting power present, whether in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes, the
Articles of Organization or these Regulations, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
10. VOTING. At every meeting of the Members, each Member shall be entitled
------
to one vote in person or by proxy for each share of the capital stock having
voting power held by such Member, but no proxy shall be voted or acted upon
after eleven (11) months from its date, unless the proxy provides for a longer
period.
-3-
<PAGE>
11. ACTION WITHOUT MEETING. Any action required or permitted to be taken
----------------------
at any annual or special meeting of Members may be taken without a meeting,
without prior notice, and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of all of the outstanding
Membership Interests entitled to vote with respect to the subject matter of the
action.
12. WAIVER OF NOTICE. Attendance of a Member at a meeting shall constitute
----------------
waiver of notice of such meeting, except when such attendance at the meeting is
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Any Member may waive notice of
any annual or special meeting of Members by executing a written waiver of notice
either before or after the time of the meeting.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
------------------------------------------
1. INITIAL CAPITAL CONTRIBUTIONS OF MEMBERS: AUTHORIZED AND ISSUED
---------------------------------------------------------------
MEMBERSHIP INTERESTS.
- --------------------
Upon execution of this Agreement, each Member shall be credited with a
contribution to the capital of the Company in the amounts set forth opposite
their respective names under the heading "Initial Capital Contribution" on
attached Exhibit A (the "Initial Capital Contributions"). Each Member shall
contribute such Initial Capital Contribution in cash or other property as
described on attached Exhibit A, concurrently with the execution of the
Regulation. Initial Capital Contributions shall not include any amounts
representing loans, other indebtedness or guarantees made by a Member to the
Company pursuant to Section 4.2 or Section 4.3 hereof. The Company shall issue
up to 100 Membership Interests. The Company shall not authorize or issue
additional Membership Interests without the unanimous written consent of the
Members, which consent may be withheld for any reason or no reason at each
Member's sole discretion. Except as otherwise specifically set forth herein, the
Members shall not be obligated in any manner or to any extent whatsoever to
contribute any additional capital to the Company.
2. ADDITIONAL CAPITAL CONTRIBUTIONS. The Company's additional capital
--------------------------------
requirements in excess of the Members' Initial Capital Contributions may be met
by (i) requests for additional capital contributions from the Members in
proportion to each Member's relative Membership percentage in the Company
("Additional Capital Contributions"); provided that no Member shall be required
to make any such Additional Capital Contributions without such Member's prior
written consent, which consent may be granted or withheld for any reason or no
reason whatsoever; or (ii) loans to the Company from any third party lending
institution or from any Member or affiliate of a Member on such terms as the
Members and the lending Member agree; provided, however, all Members not a party
to the loan transaction must approve the loan and its terms. All such loans
shall
-4-
<PAGE>
be evidenced by a promissory note. Nothing contained herein shall require any
Member to loan any funds to the Company.
3. CAPITAL ACCOUNTS. A Capital Account shall be established and
----------------
maintained by the Company for each Member.
(a) In general, each Member's Capital Account shall be increased
by:
(i) the amount of money contributed by the Member;
(ii) the fair market value of property contributed by the Member
(net of liabilities secured by the property that the Company
is considered to assume or take subject to); and
(iii) allocations of net profits to such Member.
(b) In general, each Member's Capital Account shall be decreased
by:
(i) the amount of money distributed to such Member;
(ii) the fair market value of property distributed to such Member
(net of liabilities secured by the distributed property that
the Member assumes or takes subject to); and
(iii) allocations of net losses to such Member.
4. LIMITATIONS PERTAINING TO CAPITAL CONTRIBUTIONS.
-----------------------------------------------
(a) Except as otherwise provided in these Regulations, no Member
shall be entitled or permitted to demand, withdraw or receive the return of
that Member's Capital Contributions (or any part thereof) or any money or other
property from the Company without the unanimous written consent of the Members.
In the event a Member is to receive a return of any Capital Contribution, no
Member shall have the right to receive property in a form other than cash,
unless otherwise specifically agreed in writing by all Members at the time of
such distribution or at the time of the contribution of such property.
(b) No Member shall receive any interest with respect to such
Member's Capital Contributions or Capital Account.
(c) The Members shall not be liable for the debts, liabilities,
contracts or any other obligations of the Company (except to the extent
specifically assumed by such Member) beyond their Capital Contributions to the
Company. No Member or the Company shall have any personal liability for the
repayment of the Capital Contributions of any other Member.
-5-
<PAGE>
ARTICLE V
DISTRIBUTIONS AND ALLOCATIONS
-----------------------------
1. DETERMINATION OF COMPANY PROFITS AND LOSSES. The income, gains,
-------------------------------------------
losses, deductions and credits of the Company shall be determined for each
fiscal year in accordance with the accounting method followed by the Company for
federal income tax purposes and otherwise in accordance with generally accepted
accounting principles consistently applied.
2. DISTRIBUTIONS. Except as otherwise provided herein, distributions to
-------------
the Members may be authorized by the Members from time to time in their sole
discretion. Any such distributions shall be made on such dates designated by the
Members, shall be made in proportion to the Membership percentages at the time
of the distribution; provided that to the extent any distributions relate to
periods in which a Member did not hold all or any portion of such Member's
Membership Interests for the entire period, such distributions shall be adjusted
by the Members to take into account the actual period the Member owned such
Membership Interests.
3. ALLOCATION OF PROFITS AND LOSSES. The income, gains, losses,
--------------------------------
deductions, credits and any other items of the Company, including those items
not recognized in computing taxable income for income tax purposes, shall be
allocated to the Members based on Membership percentages.
4. SPECIAL ALLOCATIONS. Notwithstanding Section 3 above:
-------------------
(a) No allocations of loss, deduction and/or expenditures described
in Code Section 705(a)(2)(B) shall be made to a member if such allocation would
cause or increase a deficit balance in such Member's Capital Account. Any items
that would be allocated to a Member but for the limitations contained in this
Section shall be allocated to the other Members in accordance with their
interests in Company profits pursuant to Section 3 above.
(b) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4),
(5), or (6) of the Treasury Regulations, which create or increase a deficit
balance in such Member's Capital Account, then items of Company income and gain
(consisting of a pro rata portion of each item of Company income, and gain for
such year and, if necessary, for subsequent years) shall be specially credited
to the Capital Account of such Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the deficit
Capital Account so created as quickly as possible. It is the intent that this
4(b) be interpreted to comply with the alternate test for economic effect set
forth in Section 1.704-(b)(2)(ii)(d) of the Treasury Regulations.
-6-
<PAGE>
(c) Notwithstanding any other provision of this Section 4, if there
is a net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company, then,
the Capital Account of each Member shall be allocated items of income
(including gross income) and gain for such year (and if necessary for
subsequent years) equal to that Member's share of the net decrease in
Company minimum gain. This Section 4(c) is intended to comply with the
minimum gain chargeback requirement of Section 1.704-2 of the Treasury
Regulations and shall be interpreted consistently therewith.
(d) Items of Company loss, deduction and expenditures described in
Code Section 705(a)(2)(B) which are attributable to any nonrecourse debt of
the Company and are characterized as partner (Member) nonrecourse
deductions under Section 1.704-2(i) of the Treasury Regulations shall be
allocated to the Members' Capital Accounts in accordance with Section
1.704-2(i) of the Treasury Regulations.
(e) The income, gains, losses, deductions and credits of the Company
are allocable to a Member only if they are earned, paid or incurred by the
Company during the portion of the fiscal year that such Member is a Member
of the Company.
(f) The allocations set forth in Sections 4(a) through (d) hereof
(the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations Section 1.704-1.(b).
Notwithstanding any other provisions of this Article IV (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other profits, losses, and other items of income,
gain, loss and deduction among the Members so that, to the extent possible,
the net amount of such allocations of other profits, losses and other items
and the Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to each such Member if the Regulatory
Allocations had not occurred.
5. TAX MATTERS PARTNER. Home Dialysis of America, Inc. is designated the
-------------------
"Tax Matters Partner" (as defined in Code Section 6231), and is authorized and
required to represent the Company in connection with all examinations of the
Company's affairs by tax authorities, including, without limitation,
administrative and judicial proceedings, and is authorized to expend Company
funds for professional services and costs associated therewith to the extent
such expenditures are approved in advance in writing by the Members.
-7-
<PAGE>
ARTICLE VI
OFFICERS
--------
1. DESIGNATION OF TITLES. The officers of the Company shall be chosen by
---------------------
the Members and shall be a President, a Vice President, a Secretary, and a
Treasurer. The Members may also choose additional Vice Presidents, and one or
more Assistant Secretaries and Assistant Treasurers or other officers as the
Members deem necessary. Any number of offices, except the offices of President
and Secretary, may be held by the same person, unless the Articles of
Organization or these Regulations otherwise provide.
2. APPOINTMENT OF OFFICERS. The Members at their first meeting shall
-----------------------
choose a President, one or more Vice Presidents, a Secretary and a Treasurer,
each of whom shall serve at the pleasure of the Members. The President and
Secretary shall be different persons. The Members at any time may appoint such
other officers and agents as it shall deem necessary to hold offices at the
pleasure of the Members and to exercise sum and perform such duties as shall be
determined from time to time by the Board.
3. SALARIES. The salaries of the officers shall be fixed from time to
--------
time by the Members, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the Company. The
salaries of the officers or the rate by which salaries are fixed shall be set
forth in the minutes of the meetings of the Members.
4. VACANCIES. A vacancy in any office because of death, resignation,
---------
removal, disqualification or otherwise may be filled by the Members at any time.
6. PRESIDENT. The President shall preside at all meetings of Members. He
---------
or she shall sign all deeds and conveyances, all contracts and agreements, and
all other instruments requiring execution on behalf of the Company, and shall
act as operating and directing head of the Company, subject to policies
established by the Members.
7. VICE PRESIDENT. There shall be as many Vice Presidents as shall be
--------------
determined by the Members from time to time, and they shall perform such duties
as from time to time may be assigned to them. Any one of the Vice Presidents, as
authorized by the Members, shall have all the powers and perform all the duties
of the President in case of the temporary absence of the President or in case of
his or her temporary inability to act. In case of the permanent absence or
inability of the President to act, the office shall be declared vacant by the
Members and a successor chosen by the Members.
8. SECRETARY. The Secretary shall see that the minutes of all meetings of
---------
Members, and of any standing committees are kept. He or she shall be the
custodian of the company seal and shall affix it to all proper instruments when
deemed advisable by him or her. He or she shall give or cause to be given
required notices of all meetings of the Members. He or she shall have charge of
all the books and records of the Company except
-8-
<PAGE>
the books of account, and in general shall perform all the duties incident to
the office of Secretary of a Company and such other duties as may be assigned to
him or her.
9. TREASURER. The Treasurer shall have general custody of all the
---------
funds and securities of the Company except such as may be required by law to
be deposited with any state official. He or she shall see to the deposit of the
funds of the Company in such bank or banks as the Members may designate. Regular
books of account shall be kept under his or her direction and supervision, and
he or she shall render financial statements to the President and Members at
proper times. The Treasurer shall have charge of the preparation and filing of
such reports, financial statements, and returns as may be required by law. He
or she shall give to the Company such fidelity bond as may be required, and
the premium therefor shall be paid by the Company as an operating expense.
10. ASSISTANT SECRETARIES. There may be such number of Assistant
---------------------
Secretaries as from time to time the Members may fix, and such persons shall
perform such functions as from time to time may be assigned to them. No
Assistant Secretary shall have the power or authority to collect, account for,
or pay over any tax imposed by any federal, state or city government.
11. ASSISTANT TREASURERS. There may be such number of Assistant Treasurers
--------------------
as from time to time the Members may fix, and such persons shall perform such
functions as from time to time may be assigned to them. No Assistant Treasurer
shall have the power or authority to collect, account for, or pay over any tax
imposed by any federal, state or city government.
12. REMOVAL. Any officer elected or appointed by the Members may be
-------
removed by the Members whenever in its judgement the best interests of the
Company would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Election of an officer
shall not of itself create contract rights.
ARTICLE VII
LIABILITY
---------
No officer or Member shall be personally liable to the Company or to its
Members except to the extent that such limitation of liability is prohibited by
the provisions of Texas law, and except for liability resulting from (a) any
breach of the officers or Members duty of loyalty to the Company or to its
Members; (b) acts or omissions which are not in good faith or which involve
intentional misconduct or a knowing violation of law; (c) any transaction from
which the officer or Member derived an improper personal benefit; and (d)
authorizing the unlawful payment of a dividend or other distribution on the
Company's Membership Interest, or the unlawful purchase of its Membership
Interest.
-9-
<PAGE>
ARTICLE VIII
INDEMNIFICATION
---------------
1. POWER TO INDEMNIFY. The Company may indemnify a Member, officer,
------------------
employee or agent who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, if he or she acted, or failed to
act, in good faith and in a manner he or she reasonably believed and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In an action not by or in the right of the
Company, such indemnification may include expenses, attorney fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred. In an
action by or in the right of the Company, such indemnification may include
expenses, attorney fees and amounts paid in settlement actually and reasonable
incurred, but shall not include judgments and fines.
2. LIMITS ON INDEMNIFICATION. No person shall be indemnified if he or
-------------------------
she has been adjudged to be liable to the Company, unless otherwise ordered by
the court. The Company may refuse indemnification to any person who
unreasonably refuses to permit the Company, at its own expense and through
counsel of its own choosing, to defend him or her in the action.
3. DECISION-MAKING. A decision to indemnify a person shall be made by
---------------
one of the following: a majority vote of a quorum consisting of disinterested
Members; if such quorum is not obtainable, a written opinion of independent
legal counsel appointed by a majority of the disinterested Members; if there are
not disinterested Members, the court or other body before which the action was
brought, or any court of competent jurisdiction.
ARTICLE IX
REPEAL, ALTERATION OR AMENDMENT
-------------------------------
The Articles of Organization, and Regulations may be repealed, altered, or
amended only by a unanimous vote of all issued and outstanding Membership
Interests.
ARTICLE X
RESTRICTION ON TRANSFERS
------------------------
1. RESTRICTION ON TRANSFERS. No Member may sell, transfer, pledge,
------------------------
hypothecate, gift or otherwise dispose of or encumber all or any portion of its
Membership Interests without the prior unanimous written consent of the Members.
-10-
<PAGE>
2. ASSIGNEE OF A MEMBER'S MEMBERSHIP INTERESTS. If, notwithstanding the
-------------------------------------------
prohibitions in Article X, Section 1, a Member transfers all or any portion of
its Membership Interests (whether voluntarily, involuntarily or by operation of
law, including, but not limited to, the death, divorce, disability, or
bankruptcy of a Member,) and a person acquires such Membership Interests, (but
is not admitted as a substituted Member pursuant to the terms of this Agreement)
such person shall:
(a) be treated as an assignee of a Member's Membership Interests, as
provided in the Texas Limited Liability Company Act ("Act");
(b) have no right to participate in the business and affairs of the
Company or to exercise any rights of a Member under this Agreement or the Act;
and
(c) share in distributions from the Company with respect to the
transferred Membership Interests on the same basis as the transferring Member.
3. IRREPARABLE HARM. Each Member specifically acknowledges that a breach
----------------
of Section 1 would cause the Company and the Members to suffer immediate and
irreparable harm, which could not be remedied by the payment of money. In the
event of a breach or threatened breach by a Member of the provisions of Section
1, the Company or other Members shall be entitled to injunctive relief to
prevent or end such breach, without the requirement to post bond. Nothing
herein shall be construed to prevent the Company or other Members from pursuing
any other remedies available to it for such breach or such threatened breach,
including the recovery of damages.
4. ADMISSION OF TRANSFEREES. A transferee may be admitted to the Company
------------------------
as a substituted Member only with the prior unanimous written consent of the
Members.
5. OBLIGATIONS OF PERMITTED TRANSFEREES. In the case of any approved
------------------------------------
transfer or disposition of Membership Interests, the transferee shall execute
and deliver an appropriate instrument agreeing to be bound by these Regulations
as a Member and such additional agreements or instruments as the Members may
require. Any permitted transferee of Membership Interests shall receive and
hold such Membership Interests subject to these Regulations and all the
restrictions, obligations and rights created hereunder, and the Members and
each transferee shall be bound by their obligations under these Regulations with
respect to each subsequent transferee.
6. LEGEND. Each Certificate representing Membership Interests of the
------
Company shall include the following legend:
The Units of Membership Interest represented by this
Certificate are: (1) subject to transfer restrictions in
accordance with the terms of Regulations, a copy of which
may be obtained without
-11-
<PAGE>
charge by a Member on written request to the Company; and
(2) have not been registered under the federal or any
applicable state securities acts and cannot be transferred
without an opinion of counsel satisfactory to the Company's
legal counsel that such transfer will not violate any such
securities laws.
ARTICLE XI
DISSOLUTION, TERMINATION AND LIQUIDATION
----------------------------------------
1. EVENTS CAUSING DISSOLUTION OF THE COMPANY. The first to occur of the
-----------------------------------------
following events shall cause a dissolution of the Company:
(a) the consent of all the Members;
(b) the sale or other transfer of all or substantially all of the
Company Property;
(c) The bankruptcy, legal incapacity or dissolution of a Member, or
any other event that terminates a Member's membership in the Company (as
provided herein), unless the remaining Members, within the ninety (90) day
period following any such event, unanimously vote or consent to the continuation
of the Company. In the event the Company is continued after any such event, the
right of the affected Member to share in the profits and losses of the Company,
to receive distributions of Company funds and to assign its Membership Interests
shall, subject to the terms and conditions of this Agreement, devolve on its
personal representative or successor, as the case may be, and the Company shall
continue its existence. Such personal representative or successor, as the case
may be, shall be liable for all the obligations of the affected Member;
provided, however, in no event shall such Person become a Member without the
unanimous consent of Members; or
(d) expiration of the Company's term under Article II.
2. EFFECT OF DISSOLUTION. If the Company is dissolved, the Company shall
---------------------
be wound up and terminated in accordance with this Article XI.
3. FINAL ACCOUNTING. Upon dissolution of the Company, an accounting shall
----------------
be made of the accounts of each Member and of the Company property, liabilities
and operations, from the date of the last previous accounting to the date of
such dissolution.
4. LIQUIDATION. In the event of the dissolution of the Company, the
-----------
Members shall, in an orderly manner, commence to wind up the affairs of the
Company and liquidate its property.
-12-
<PAGE>
5. DISTRIBUTION. Following the payment of all debts and liabilities of
------------
the Company (other than loans or advances that have been made by any of the
Members) and all expenses of liquidation, and subject to the right of the
Members to set up cash reserves as it may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Company, the proceeds
of the liquidation and any other funds of the Company shall be distributed in
the following order of priority:
(a) First, to the repayment of any loans or advances that may have
been made by any of the Members to the Company, but if the amount available for
repayment of such loans or advances shall be insufficient, then to the Members
on account thereof in proportion to their respective advances; and
(b) Then, after allocation of all income, profits, losses and
deductions in accordance with Article V hereof and after adjustment to the
Capital Accounts required by Treasury Regulation (S)1.704-1(b), to the Members
in payment of the amount of their Capital Accounts, but if the amount available
for such repayment shall be insufficient, then to the Members on account thereof
in proportion to their respective Capital Accounts.
Each Member shall look solely to the Company property for all distributions
with respect to the Company and its Capital Contributions thereto and its share
of income, gains, losses and deductions thereof, and shall have no recourse
against any Members therefor. No member shall have any rights to demand or
receive property in a form other than cash upon distribution and liquidation of
the Company, but the Members may, in their discretion, distribute property in a
form other than cash to a Member.
6. TERMINATION. A reasonable time shall be allowed for the orderly
-----------
liquidation of the assets of the Company and the discharge of liabilities to
creditors so as to enable the Members to minimize the normal losses attendant
upon a liquidation. Each of the Members shall be furnished with a statement
prepared by the Company's accountants, which shall set forth the property and
liabilities of the Company as of the date of complete liquidation. Upon
compliance with the distribution plan set forth herein, the Members shall cease
to be such, and the Members shall execute, acknowledge and cause to be filed a
Certificate of Dissolution of the Company. Upon completion of the dissolution,
winding up, liquidation and distribution of the liquidation proceeds, the
Company and this Agreement shall terminate.
-13-
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that the foregoing copy of the Regulations is a true and
correct copy of the Regulations of the Company as the same were adopted at the
first meeting of the Members.
/s/ Thomas Creel
-----------------------------
SECRETARY
-14-
<PAGE>
EXHIBIT A
---------
MEMBERSHIP INTERESTS/MEMBERSHIP PERCENTAGES
-------------------------------------------
<TABLE>
<CAPTION>
Initial Capital Membership Membership
--------------- ---------- ----------
Name and Addresses of Contribution Interests Percentage
- --------------------- ------------ --------- ----------
<S> <C> <C> <C>
* Home Dialysis of America, Inc. $1,000.00 10 100%
6300 East El Dorado Plaza
Tucson, AZ 85715
</TABLE>
* Initial Members were Thomas Creel and Martin Fox, who transferred their shares
to Home Dialysis of America, Inc.
-15-
<PAGE>
EXHIBIT 3.11
ARTICLES OF ORGANIZATION
OF
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C
------------------------------------------
ARTICLE ONE
The name of the limited liability company is
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C
ARTICLE TWO
The period of duration of the Company shall be perpetual or until the
termination of the Company in accordance with regulations of the Company.
ARTICLE THREE
The purpose for which the Company is organized is the transaction of any
and all lawful business for which limited liability companies may be organized
under the Texas Limited Liability Company Act.
ARTICLE FOUR
The registered agent of the Limited Liability Company is CT Corporation
System and the address of its registered office in the State is c/o CT
Corporation System, 350 N. St. Paul Street, Dallas, Texas 75201.
ARTICLE FIVE
The names and addresses of the members are as follows:
Name Address
---- -------
Martin Fox 6300, E. El Dorado Plaza, Suite 100
Tucson, Arizona 85715
Thomas Creel 1113 Furlong Drive,
Libertyville, Illinois 60048
The management of the Company will be vested in the members, the Company
will not have managers.
ARTICLE SIX
The name and addressee of the organizer is as follows:
Name Address
---- -------
Kimberley E. Bender 150 North Michigan Avenue
Suite 3100
Chicago, IL 60601
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of May, 1995.
/s/ Kimberley E. Bender
-----------------------
<PAGE>
ARTICLES OF CORRECTION
The undersigned submits these articles pursuant to Texas Civil Statutes article
1302701 to correct a document which is an inaccurate record of the entry action,
contains an inaccurate or erroneous statement, or was defectively or erroneously
executed, sealed acknowledged, or verified.
ARTICLE ONE
The name of the entity is Dialysis Specialists of South Texas, L.L.C.
ARTICLE TWO
The document to be corrected is the Articles of Organization which was filed in
the Office of the Secretary of State on the 24th day of May, 1995.
ARTICLE THREE
The inaccuracy, error, or defect to be corrected is:
Article five incorrectly lists only 2 members, wherein 3 members should have
been listed at the time of organization.
ARTICLE FOUR
As corrected, the inaccurate, erroneous, or defective portion of the document
reads as follows:
See attached
By: /s/ Martin Fox
----------------------------------.
Martin Fox
Its Member
---------------------------------------.
An Authorized Corporate Officer or Director
or
Limited Liability Company Member or Manager
Forms Articles of Correction for Corporate
and Limited Liability Companies
<PAGE>
Attachment A to Article Four of the Statement of Correction
-----------------------------------------------------------
As corrected, the inaccurate, erroneous, or defective portion of the document
reads as follows:
ARTICLE FIVE
The names and addresses of the members are as follows:
Name Address
---- -------
Martin Fox 6300 E. El Dorado Plaza, Suite 100
Tucson, Arizona 85715
Thomas Creel 1113 Furlong Drive
Libertyville, Illinois 60048
William Shaffer 1521 S. Staples, Suite 401
Corpus Christi, Texas 78404
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF ORGANIZATION
OF
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C.
-------------------------------------------
Pursuant to the provisions of Article 3.06 of the Texas Limited
Liability Company Act (the "Act"), the undersigned company adopts the following
Articles of Amendment to its Articles of Organization:
ARTICLE I
The name of the limited liability company is:
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C.
ARTICLE II
ARTICLE FIVE of the Articles of Organization is hereby amended so as to read as
follows:
The names and addresses of the members are as follows:
Name Address
---- -------
HOME DIALYSIS OF AMERICA, INC. 6300 E. E1 Dorado Plaza
Suite 100
Tucson, AZ 85715
William L. Shaffer, M.D. 1521 S. Staples
Suite 401
Corpus Christi, TX 78404
ARTICLE III
The amendment to the Articles of Organization set forth in Article II above was
approved and adopted by the members of the company pursuant Section D of Article
2.23 of the Act on July 1, 1995.
Dated: March 20, 1996.
DIALYSIS SPECIALISTS OF
SOUTH TEXAS, L.L.C.
By: HOME DIALYSIS OF AMERICA, INC.
By: /s/ Martin Fox
-----------------------------------
Its: President
<PAGE>
OFFICE OF THE [SEAL] CORPORATIONS SECTION
SECRETARY OF STATE P.O. Box 13697
Austin, Texas 78711-3697
STATEMENT OF CHANGE OF REGISTERED OFFICE OR
REGISTERED AGENT OR BOTH BY A CORPORATION
LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP
1. The name of the entity is Dialysis Specialists of South Texas, L.L.C.
The entity's charter/certificate of authority/file number is 07012084.
2. The registered office address as PRESENTLY shown in the records of the
Texas secretary of state is: 350 N. St. Paul Street, Dallas, Taxes 75201.
3. A. X The address of the NEW registered office is: (Please provide street
---
address, city, state and zip code. The address must be in Texas.)
4606 FM 1960 W, Suite 400, Houston, Texas 77069.
OR B.___ The registered office address will not change.
4. The name of the registered agent as PRESENTLY shown in the records of the
Texas secretary of state is CT Corporation.
5. A. X The name of the NEW registered agent is Anthony Unruh.
---
OR B.___ The registered agent will not change.
6. Following the changes shown above, the address of the registered office and
the address of the office of the registered agent will continue to be
identical, as required by law.
7. The changes shown above were authorized by:
Business Corporations may select A or B Limited Liability Companies may
Non-Profit Corporations may select select D or E
A, B, or C Limited Partnerships select F
A.___ The board of directors; OR
B.___ An officer of the corporation so authorized by the board of
directors; OR
C.___ The members of the corporation in whom management of the corporation
is vested pursuant to article 2.14C of the Texas Non-Profit
Corporation Act.
D. X Its members
---
E.___ Its managers
F.___ The limited partnership HOME DIALYSIS OF AMERICA, INC.
By: /s/ John B. Bourke, C.F.O.
-----------------------------------
(Authorized Member of LLC)
(TEXAS - 2231 - 12/28/95)
<PAGE>
[SEAL] ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited
partnership, or registered limited liability partnership as stated in its
articles of incorporation, articles of organization, certificate of limited
partnership, application or comparable document is Dialysis Specialists of
South Texas, L.L.C.
2. The assumed name under which the business or professional service is or is
to be conducted or rendered is Beeville Dialysis Center.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated, organized or associated is Texas, and the address of its
registered or similar office in that jurisdiction is See Paragraph 6 below.
4. The period, not to exceed 10 years, during which the assumed name will be
used is 10 years.
5. The entity is a (circle one): business corporation, non-profit corporation,
professional corporation, professional association, limited liability
company, limited partnership, registered limited liability partnership or
some other type of incorporated business, professional or other association
(specify) Limited Liability Company.
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 4606 FM 1960 W, Suite 400, Houston,
Texas 77069 and the name of its registered agent at such address is
Anthony Unruh. The address of the principal office (if not the same as the
registered office) is 13434 Up River Road, Suite A-17, Corpus Christi,
Texas.
7. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is___________________________________
and if the entity is not incorporated, organized or associated under the
laws of Texas, the address of its place of business in Texas is ___________
___________________________ and the office address elsewhere is ___________
__________________________________________________________________________.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "ALL" or "ALL EXCEPT").
All.
(Certificate must be executed and notarized on the back of this form.)
<PAGE>
HOME DIALYSIS OF AMERICA
By: /s/ John B. Bourke
------------------------------
Signature of Member, Dialysis
Specialists of South Texas
Before me on this 11th day of October, 1996, personally appeared John B. Bourke
and acknowledged to me that ____ he executed the foregoing certificate for the
purposes therein expressed.
(Notary Seal) /s/ Patricia L'Odense
-----------------------------------------
Notary Public, STATE OF ILLINOIS
INSTRUCTIONS FOR FILING ASSUMED NAME CERTIFICATE
1. A corporation, limited liability company, limited partnership or registered
limited liability partnership, which regularly conducts business or renders
a professional service in this state under a name other than the name
contained in its articles of incorporation, articles of organization,
certificate of limited partnership or application, must file an assumed
name certificate with the secretary of state and with the appropriate
county clerk in accordance with section 36.11 of the Texas Business and
Commerce Code.
2. The information provided in paragraph 6 as regards the registered agent and
registered office address in Texas must match the information on file in
this office. To verify the information on file with this office, you may
contact our corporate information unit at (512) 463-5555. Forms to change
the registered agent/office are available from this office should you
require to update this information.
3. A certificate executed and acknowledged by an attorney-in-fact shall
include a statement that the attorney-in-fact has been duly authorized in
writing by his principal to execute and acknowledge the same.
4. For purposes of filing with the secretary of state, the assumed name
registrant should submit an originally executed assumed name certificate
accompanied by the filing fee of $25 to the Secretary of State, Statutory
Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas
78711-3697. The Phone number is (512) 463-5582, TDD: (800) 735-2989, FAX:
(512) 463-5709.
5. All assumed name certificates to be filed with the county clerk must be
forwarded directly to the appropriate county clerk by the assumed name
registrant.
6. Whenever an event occurs that causes the information in the assumed name
certificate to become materially misleading (eg. change of registered
agent/office or a change of name), a new certificate must be filed within
60 days after the occurrence of the events which necessitate the filing.
7. A registrant that ceases to transact business or render professional
services under an assumed name for which a certificate has been filed may
file an abandonment of use pursuant to the Texas Business and Commerce
Code, (S)36.14. Forms for this purposes are available from this office.
<PAGE>
[SEAL] ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited
partnership, or registered limited liability partnership as stated in its
articles of incorporation, articles of organization, certificate of limited
partnership, application or comparable document is DIALYSIS SPECIALISTS OF
SOUTH TEXAS, L.L.C.
2. The assumed name under which the business or professional service is or is
to be conducted or rendered is DIALYSIS SPECIALISTS OF RIVERSIDE.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated, organized or associated is TEXAS, and the address of its
registered or similar office in that jurisdiction is 4606 FM 1960 W, Suite
400, Houston, Texas 77069.
4. The period, not to exceed 10 years, during which the assumed name will be
used is 10 years.
5. The entity is a (circle one): business corporation, non-profit corporation,
professional corporation, professional association, limited liability
company, limited partnership, registered limited liability partnership or
some other type of incorporated business, professional or other association
(specify) Limited Liability Company.
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 4606 FM 1960 W, Suite 400, Houston,
Texas 77069 and the name of its registered agent at such address is
Anthony Unruh. The address of the principal office (if not the same as the
registered office) is 13434 Up River Road Suite A-17, Corpus Christi,
Texas.
7. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is N/A and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is ______________________________________
and the office address elsewhere is ______________________________________.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "ALL" or "ALL EXCEPT"):
All.
(Certificate must be executed and notarized on the back of this form.)
<PAGE>
/s/ William L. Shaffer
------------------------------------------------
Signature of officer, general partner, manager,
representative or attorney-in-fact of the entity
Before me on this 3 day of 12, 1996, personally appeared WILLIAM L. SHAFFER and
acknowledged to me that ____ he executed the foregoing certificate for the
purposes therein expressed.
[Notary Seal] /s/ Louisa M. Gomez
--------------------------------------------------
Notary Public, State of Texas
INSTRUCTIONS FOR FILING ASSUMED NAME CERTIFICATE
1. A corporation, limited liability company, limited partnership or registered
limited liability partnership, which regularly conducts business or renders
a professional service in this state under a name other than the name
contained in its articles of incorporation, articles of organization,
certificate of limited partnership or application, must file an assumed
name certificate with the secretary of state and with the appropriate
county clerk in accordance with section 36.11 of the Texas Business and
Commerce Code.
2. The information provided in paragraph 6 as regards the registered agent and
registered office address in Texas must match the information on file in
this office. To verify the information on file with this office, you may
contact our corporate information unit at (512) 463-5555. Forms to change
the registered agent/office are available from this office should you
require to update this information.
3. A certificate executed and acknowledged by an attorney-in-fact shall
include a statement that the attorney-in-fact has been duly authorized in
writing by his principal to execute and acknowledge the same.
4. For purposes of filing with the secretary of state, the assumed name
registrant should submit an originally executed assumed name certificate
accompanied by the filing fee of $25 to the Secretary of State, Statutory
Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas
78711-3697. The phone number is (512) 463-5582, TDD: (800) 735-2989, FAX:
(512) 463-5709.
5. All assumed name certificates to be filed with the county clerk must be
forwarded directly to the appropriate county clerk by the assumed name
registrant.
6. Whenever an event occurs that causes the information in the assumed name
certificate to become materially misleading (eg. change of registered
agent/office or a change of name), a new certificate must be filed within
60 days after the occurrence of the events which necessitate the filing.
7. A registrant that ceases to transact business or render professional
services under an assumed name for which a certificate has been filed may
file an abandonment of use pursuant to the Texas Business and Commerce
Code, (S)36.14. Forms for this purposes are available from this office.
<PAGE>
EXHIBIT 3.12
REGULATIONS
OF
DIALYSIS SPECIALISTS OF SOUTH TEXAS, LLC.
ARTICLE I
OFFICES AND COMPANY SEAL
------------------------
1. PRINCIPAL OFFICE. The principal office of the Company shall be
----------------
located at 4300 2-1 South Padre Island Drive, Corpus Christi, Texas.
2. OTHER OFFICES. The Company may also maintain offices at such other
-------------
place or places, within the State of Texas, as may be designated from time to
time by the Members of the Company, and the business of the Company may be
transacted at such other offices with the same effect as that conducted at the
principal office.
3. COMPANY SEAL. A company seal shall not be requisite to the validity
------------
of any instrument executed by or on behalf of the Company, but may be used.
ARTICLE II
FISCAL YEAR
-----------
1. FISCAL YEAR. The fiscal year of the Company shall begin on the first
-----------
day of January and end on the last day of December.
ARTICLE III
MEMBERS
-------
1. POWERS. The business and affairs of the Company shall be managed by
------
its Members.
2. PLACE OF MEETINGS. The Members of the Company may hold meetings, both
-----------------
regular and special, either within or without the State of Texas.
3. ANNUAL MEETINGS. The annual meeting of the members shall be held the
---------------
first Wednesday in March if not a legal holiday, and if a legal holiday, then on
the next secular day following, or at such other date and time as shall be
designated from time to time by the members and stated in the notice of the
meeting. At the annual meeting, members shall elect Officers and transact such
other business as may properly be brought before the meeting.
Limited Liability Company Regulations
1
<PAGE>
4. REGULAR MEETINGS. Regular meetings of the Members may be held without
----------------
notice at such time and at such place as shall from time to time be determined
by the Members.
5. SPECIAL MEETINGS. Special meetings of the Members may be called by the
----------------
President or the Secretary on one (1) day's notice to each Member, either
personally, by mail, by telegram, or by telephone; special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of a majority of Members.
6. QUORUM: ADJOURNMENT: MAJORITY REQUIRED. A majority of the Members of
--------------------------------------
the Company shall constitute a quorum. The concurrence of a majority of those
present shall be sufficient to conduct the business of the Company, except as
may be otherwise specifically provided by statute, the Articles of Organization
or these Regulations. If a quorum shall not be present at any meeting of the
Members, the Members then present may adjourn the meeting to another time or
place, without notice other than announcement at the meeting, until a quorum
shall be present.
7. ACTION WITHOUT MEETING. Unless otherwise restricted by the Articles of
----------------------
Organization or these Regulations, any action required or permitted to be taken
at any meeting of the Members or of any committee thereof may be taken without a
meeting, if all Members or members of the committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Members or committee.
8. COMPENSATION. The Members may be paid their expenses, if any, of
------------
attendance at each meeting of the Members and may be paid a fixed sum for
attendance at each meeting of the Members or a stated salary for a Member. No
such payment shall preclude any Member from serving the Company in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
The amount or rate of such compensation of Members or of Committees shall be
established by the Members and shall be set forth in the minutes of the meeting.
9. WAIVER OF NOTICE. Attendance of a Member at a meeting shall constitute
----------------
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Any Member may waive notice of any
annual, regular, or special meeting of Members by executing a written waiver of
notice either before or after the time of the meeting.
ARTICLE IV
OFFICERS
--------
1. DESIGNATION OF TITLES. The officers of the Company shall be chosen by
---------------------
the Members and shall be a President, a Vice President, a Secretary, and a
Treasurer. Any
2
<PAGE>
number of offices, except the offices of President and Secretary, may be held by
the same person, unless the Articles of Organization or these Regulations
otherwise provide.
2. APPOINTMENT OF OFFICERS. At their annual meeting, the Members shall
-----------------------
choose a President, one or more Vice Presidents, a Secretary and a Treasurer,
each of whom shall serve at the pleasure of the Members. The President and
Secretary shall be a different person. The Members at any time may appoint such
other officers and agents as they shall deem necessary to hold offices at the
pleasure of the Members and to exercise such powers and perform such duties as
shall be determined from time to time by the Members.
3. SALARIES. The salaries of the officers shall be fixed from time to time
--------
by the Members, and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a Member. The salaries of the officers or
the rate by which salaries are fixed shall be set forth in the minutes of the
meetings of the Members.
4. VACANCIES. A vacancy in any office because of death, resignation,
---------
removal, disqualification or otherwise may be filled by the Members at any time.
5. PRESIDENT. The President shall preside at all meetings of Members. He
---------
or she shall sign all deeds and conveyances, all contracts and agreements, and
all other instruments requiring execution on behalf of the Company, and shall
act as operating and directing head of the Company, subject to policies
established by the Members.
6. VICE PRESIDENT. There shall be as many Vice Presidents as shall be
--------------
determined by the Members from time to time, and they shall perform such duties
as from time to time may be assigned to them. Any one of the Vice Presidents, as
authorized by the Members, shall have all the powers and perform all the duties
of the President in case of the temporary absence of the President or in case of
his or her temporary inability to act. In case of the permanent absence or
inability of the President to act, the office shall be declared vacant by the
Members and a successor chosen by the Members.
7. SECRETARY. The Secretary shall see that the minutes of all meetings
---------
of the Members, and of any standing committees are kept. He or she shall be the
custodian of the company seal and shall affix it to all proper instruments
when deemed advisable by him or her. He or she shall give or cause to be given
required notices of all meetings of the Members. He or she shall have charge of
all the books and records of the Company except the books of account, and in
general shall perform all the duties incident to the office of Secretary of a
Company and such other duties as may be assigned to him or her.
8. TREASURER. The Treasurer shall have general custody of all the funds
---------
and securities of the Company except such as may be required by law to be
deposited with any state official. He or she shall see to the deposit of the
funds of the Company in such bank or banks as the Members may designate. Regular
books of account shall be kept under his or her direction and supervision, and
he or she shall render financial statements to the President, and Members at
proper times. The Treasurer shall have charge of the preparation and filing of
such reports, financial statements, and returns as may be required by law. He
or she shall give to the Company such fidelity bond as may be required, and the
premium therefore shall
3
<PAGE>
be paid by the Company as an operating expense.
9. ASSISTANT SECRETARIES. There may be such number of Assistant
---------------------
Secretaries as from time to time the Members may fix, and such persons shall
perform such functions as from time to time may be assigned to them. No
Assistant Secretary shall have the power or authority to collect, account for,
or pay over any tax imposed by any federal, state or city government.
10. ASSISTANT TREASURERS. There may be such number of Assistant Treasurers
--------------------
as from time to time the Members may fix, and such persons shall perform such
functions as from time to time may be assigned to them. No Assistant Treasurer
shall have the power or authority to collect, account for, or pay over any tax
imposed by any federal, state or city government.
11. REMOVAL. Any officer elected or appointed by the Members may be
-------
removed by the Members whenever in its judgement the best interests of the
Company would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Election of an officer
shall not of itself create contract rights.
ARTICLE V
MEMBER LIABILITY
----------------
No Member shall be personally liable to the Company or to its members
except to the extent that such limitation of liability is prohibited by the
provisions of Texas law, and except for Member liability resulting from (a) any
breach of the Member's duty of loyalty to the Company or to its members; (b)
acts or omissions which are not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) any transaction from which the
Member derived an improper personal benefit.
ARTICLE VI
INDEMNIFICATION
---------------
1. POWER TO INDEMNIFY. The Company may indemnify a Member, officer,
------------------
employee or agent who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative, if he or she acted, or failed
to act, in good faith and in a manner he or she reasonably believed and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In an action not by or in the right of the
Company, such indemnification may include expenses, attorney fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred. In an
action by or in the right of the Company, such indemnification may include
expenses, attorney fees and amounts paid in settlement actually and reasonably
incurred, but shall not include judgments and fines.
4
<PAGE>
2. LIMITS ON INDEMNIFICATION. No person shall be indemnified if he or she
-------------------------
has been adjudge to be liable to the Company, unless otherwise ordered by the
court. The Company may refuse indemnification to any person who unreasonably
refuses to permit the Company, at its own expense and through counsel of its
own choosing, to defend him or her in the action.
3. DECISION-MAKING. A decision to indemnify a person shall be made by one
---------------
of the following: a majority vote of a quorum consisting of disinterested
Members; if such quorum is not obtainable, a written opinion of independent
legal counsel appointed by a majority of the disinterested Members; if there are
not disinterested Members, the court or other body before which the action was
brought, or any court of competent jurisdiction.
ARTICLE VII
REPEAL, ALTERATION OR AMENDMENT
-------------------------------
The Articles of Organization, and Regulations may be repealed, altered, or
amended only by a two-thirds (2/3) vote of the Members.
ARTICLE VIII
CERTIFICATES OF OWNERSHIP AND
-----------------------------
THEIR TRANSFER
--------------
1. CERTIFICATES OF OWNERSHIP. Certificates representing ownership
-------------------------
interest in the Company shall be signed by the president or any vice president
and by the secretary or an assistant secretary, treasurer or assistant
treasurer of the Company. If both the signatures of the officers be by
facsimile, the certificate shall be manually signed by or on behalf of a duly
authorized transfer agent or clerk. Each certificate shall be consecutively
numbered or otherwise identified, and shall also state the name of the person to
whom issued, the ownership interest, the date of issue, that the Company is
organized under Texas law, and any express terms represented by such
certificate.
The name and address of each member, ownership interest, and the date on
which the certificates were issued shall be entered on the books of the Company.
The person in whose name the ownership interests stand on the books of the
Company shall be deemed the owner thereof for all purposes with regard to the
Company.
2. LOST CERTIFICATES. If a certificate has allegedly been lost or
-----------------
destroyed, the Members may in their discretion, except as may be required by
law, direct that a new certificate be issued upon such indemnification and other
reasonable requirements as it may impose.
5
<PAGE>
3. TRANSFERS OF CERTIFICATE. Transfers of Certificates of Ownership in
------------------------
the Company shall be recorded on the books of the Company and, except in the
case of a lost or destroyed certificate, shall be made on surrender for
cancellation of the certificate for such ownership. A certificate presented for
transfer must be duly endorsed and accompanied by proper guaranty of signature
and other appropriate assurances that the endorsement is effective.
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that the foregoing copy of the Regulations is a true and
correct copy of the Regulations of the Company as the same were adopted at the
first meeting of the Members.
Dated: 7/28/95 /s/ Martin Fox
------------------------------------
SECRETARY
6
<PAGE>
EXHIBIT 3.13
Certificate No. 6595
--------
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
[LOGO]
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
WHEREAS, ARTICLES OF INCORPORATION, duly signed and verified of DU PAGE
DIALYSIS, LTD. incorporated under the laws of the State of ILLINOIS have been
filed in the Office of the Secretary of State as provided by The "Business
Corporation Act" of Illinois, in force July 13, A.D. 1933.
Now Therefore, I, ALAN J. DIXON, Secretary of State of the State of Illinois by
virtue of the powers vested in me by law, do hereby issue this certificate and
attach thereto a copy of the Application of the aforesaid corporation.
IN TESTIMONY WHEREOF, Thereto set my hand and cause to be affixed the
Great Seal of the State of
Illinois, Done at the City of
Springfield, this 30th day of April
(SEAL) A.D. 1979 and of the Independence
of the United States the two
hundred and 3rd
/s/ Alan J. Dixon
-----------------------------------
SECRETARY OF STATE
<PAGE>
FORM B C A-47
BEFORE ATTEMPTING TO EXECUTE THESE BLANKS BE SURE TO READ CAREFULLY
THE INSTRUCTIONS ON THE BACK THEREOF.
(THESE ARTICLES MUST BE FILED IN DUPLICATE)
--------------------------------
(Do note write in this space)
STATE OF ILLINOIS, ) Date Paid 4/30/79
)ss. Initial License Fee $ .50
) Franchise Tax $31.25
COOK COUNTY _______________ ) Filing Fee $75.00
TO ALAN J. DIXON, Secretary of State Clerk /s/ JP $106.75
--------------------------------
The undersigned,
- --------------------------------------------------------------------------------
Address
Name Number Street City State
- --------------------------------------------------------------------------------
LUIS E. CESPEDES, M.D. 79 W. Monroe, Suite 700, Chicago, Il.60603
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
being one or more natural persons of the age of twenty-one years or more or a
corporation, and having subscribed to shares of the corporation to be organized
pursuant hereto, for the purpose of forming a corporation under "The Business
Corporation Act" of the State of Illinois, do hereby adopt the following
Articles of Incorporation:
ARTICLE ONE
The name of the corporation hereby incorporated is: DU PAGE DIALYSIS, LTD.
ARTICLE TWO
The address of its initial registered office in the State of Illinois is: Suite
700, 79 W. Monroe Street, in the City of Chicago (60603) County of Cook and the
(Zip Code)
name of its initial Registered Agent at said address is: Bernard Kleinman
ARTICLE THREE
The duration of the corporation is: perpetual
<PAGE>
ARTICLE FOUR
The purpose or purposes for which the corporation is organized are:
MEDICAL CORPORATION: To own, operate and maintain an establishment for the
study, diagnosis and treatment of human ailments and injuries, whether
physical or mental and to promote medical, surgical and scientific research
and knowledge, specializing in nephrology and dialysis; provided, that
medical or surgical treatment, consultation or advice may be given by
employees of the corporation only if they are licensed pursuant to the
Medical Practice Act.
ARTICLE FIVE
PARAGRAPH 1: The aggregate number of shares which the corporation is authorized
to issue is 100,000, divided into one classes. The designation of each class,
the number of shares of each class, and the par value, if any, of the shares of
each class, or a statement that the shares of any class are without par value,
are as follows:
<TABLE>
<CAPTION>
Series Number of Par value per share of statement that shares
Class (If any) Shares are without par value
<S> <C> <C> <C>
Common None 100,000 $1.00
</TABLE>
PARAGRAPH 2: The preferences, qualifications, limitations, restrictions, and the
special or relative rights in respect of the shares of each class are:
None
<PAGE>
ARTICLE SIX
The class and number of shares which the corporation proposes to issue
without further report to the Secretary of State, and the consideration
(expressed in dollars) to be received by the corporation therefor, are:
<TABLE>
<CAPTION>
Total consideration to be
Class of shares Number of shares received therefor:
<S> <C> <C>
Common 1,000 $ 1,000.00
$
</TABLE>
ARTICLE SEVEN
The corporation will not commence business until at least one thousand
dollars has been received as consideration for the issuance of shares.
ARTICLE EIGHT
The number of directors to be elected at the first meeting of the
shareholders is: Four (4)
ARTICLE NINE
PARAGRAPH 1: It is estimated that the value of all property to be owned by the
corporation for the following year wherever located will be $______
PARAGRAPH 2: It is estimated that the value of the property to be located within
the State of Illinois during the following year will be $_______
PARAGRAPH 3: It is estimated that the gross amount of business which will be
transacted by the corporation during the following year will be $______
PARAGRAPH 4: It is estimated that the gross amount of business which will be
transacted at or from places of business in the State of Illinois during the
following year will be $______
NOTE: If all the property of the corporation is to be located in this State
and all of its business is to be transacted at or from places of business in
this State, or if the incorporators elect to pay the initial franchise tax on,
the basis of its entire stated capital and paid-in surplus, then the information
called for in Article Nine need not be stated.
<PAGE>
/s/ Luis E. Cespedes, M.D.
--------------------------------
LUIS E. CESPEDES, M.D.
--------------------------------
--------------------------------
-------------------------------- } Incorporators
--------------------------------
--------------------------------
--------------------------------
NOTE: There may be one or more incorporators. Each incorporator shall be
either a corporation, domestic or foreign, or a natural person of the age of
twenty-one years or more. If a corporation acts as incorporator, the name of the
corporation and state of incorporation shall be shown and the execution must be
by its President or Vice-President and verified by him, and the corporate seal
shall be affixed and attested by its Secretary or an Assistant Secretary.
OATH AND ACKNOWLEDGMENT
STATE OF ILLINOIS )
) ss.
COOK County )
I, NANCY PATRICK, A Notary Public, do hereby certify that on the 22 day of
March 1979 LUIS E. CESPEDES, M.D. personally appeared before me and being first
duly sworn by me acknowledged the signing of the foregoing document in the
respective capacities therein set forth and declared that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
above written.
Place
(NOTARIAL SEAL /s/ Nancy Patrick
----------------------------
Here Notary Public
FORM B C A-47
================================================================================
ARTICLES OF INCORPORATION
________________________________________________________________________________
================================================================================
The following fees are required to be paid at the time of issuing Certificate of
Incorporation: Filing fee $75.00; Initial license fee of 50c per $1,000.00 or
1/20th of 1% of the amount of stated capital and paid-in surplus the corporation
proposes to issue without further report (Article Six): Initial franchise tax of
1/10th of 1% of the issued, as above noted. However, the minimum initial
franchise tax is $25.00 and varies monthly on $25,000, or less, as follows:
January, $37.50; February, $35.42; March, $33.33; April, $31.25; May, $29.17;
June, $27.08; July, $25.00; August, $22.92; September, $20.83; October, $18.75;
November, $16.67; December, $14.58; (See Sec. 133 BCA).
In excess of $25,000, the franchise tax per $1,000.00 is as follows: Jan.,
$1.50; Feb., 1,4167; March, 1.3334; April, 1.25; May, 1.1667; June, 1.0834;
July, 1.00; Aug., .9167; Sept., .8334; Oct., .75; Nov., .6667; Dec., .5834.
All shares issued in excess of the amount mentioned in article Six of this
application must be reported within 60 days from date of issuance thereof, and
franchise tax and license fee paid thereon; otherwise, the corporation is
subject to a penalty of 1% for each month on the amount until reported and
subject to a fine of not to exceed $500.00.
The same fees are required for a subsequent issue of shares except the filing
fee is $1.00 instead of $75.00.
/s/ Allan J. Dixon
Secretary of State
================================================================================
<PAGE>
File Number 5173-474-2
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
WHEREAS, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF DU PAGE
DIALYSIS, LTD. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN
FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS
CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984.
Now Therefore, I George H. Ryan, Secretary of State of the State of Illinois, by
virtue of the powers vested in me by law, do hereby issue this certificate and
attach a copy of the Application of the aforesaid corporation.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois at the City of
[SEAL] Springfield this 9TH day of APRIL A.D. 1996 and of the
Independence of the United States the two hundred and
20th.
/s/ George H. Ryan
Secretary of State
<PAGE>
Form BCA-10.30 ARTICLES OF AMENDMENT
(Rev. Jan. 1995) File # D5173-474-2
- --------------------------------------------------------------------------------
George H. Ryan SUBMIT IN DUPLICATE
Secretary of State
Department of Business Services This space for use by
Springfield, IL 62756 Secretary of State
Telephone (217) 782-1832
- ------------------------------- Date 4-9-96
Remit payment in check or money Franchise Tax $
order, payable to "Secretary of Filing Fee* $ 25.00
State." Penalty $
GEORGE H. RYAN
*The filing fee for articles of SECRETARY OF STATE Approved:
amendment - $25.00
- --------------------------------------------------------------------------------
1. CORPORATE NAME: DuPage Dialysis, Ltd.
------------------------------------------------------------
(Note 1)
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was adopted
on 3-23, 1995 in the manner indicated below. ("X" one box only)
[_] By a majority of the incorporators, provided no directors were named
in the articles of incorporation and no directors have been elected;
(Note 2)
[_] By a majority of the board of directors, in accordance with Section
10.10, the corporation having issued no shares as of the time of
adoption of this amendment;
(Note 2)
[_] By a majority of the board of directors, in accordance with Section
10.15, shares having been issued but shareholder action not being
required for the adoption of the amendment;
(Note 3)
[_] By the shareholders, in accordance with Section 10.20, a resolution of
the board of directors having been duly adopted and submitted to the
shareholders. At a meeting of shareholders, not less than the minimum
number of votes required by statute and by the articles of
incorporation were voted in favor of the amendment;
(Note 4)
[_] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed
by shareholders having not less than the minimum number of votes
required by statute and by the articles of incorporation.
Shareholders who have not consented in writing have been given notice
in accordance with Section 7.10;
(Notes 4 & 5)
[X] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed
by all the shareholders entitled to vote on this amendment.
(Note 5)
3. TEXT OF AMENDMENT:
a. When amendment effects a name change, insert the new corporate name
below. Use Page 2 for all other amendments.
Article 1: The name of the corporation is:
________________________________________________________________________________
(NEW NAME)
All changes other than name, include on page 2
(over)
<PAGE>
TEXT OF AMENDMENT
b. (If amendment affects the corporate purpose, the amended purpose is
required to be set forth in its entirety. If there is not sufficient
space to do so, add one or more sheets of this size.)
RESOLVED, that Article Four of the Articles of Incorporation is hereby amended
to read as follows:
"The purpose or purposes or which the corporation is organized are:
To maintain and conduct any and every kind of sales, distribution, leasing,
investment, and service business; to manufacture, process, fabricate,
rebuild, service, invest in, purchase, sell, lease or otherwise dispose of
and generally deal in and with raw materials, products, wares, goods,
merchandise and real and personal property, both tangible and intangible,
of every kind and description; to make investments of every kind and
nature; and to provide services of every kind and character. To aquire,
own, use, convey and otherwise dispose of and deal in real property."
The corporation elects to be governed by the Business Corporation Act and
will not engage in the practice of medicine.
PAGE 2
<PAGE>
4. The manner, if not set forth in Article 3b, in which any exchange,
reclassification or cancellation of issued shares, or a reduction of
the number of authorized shares of any class below the number of
issued shares of that class, provided for or effected by this
amendment, is as follows: (If not applicable, insert "No change")
No change
5. (a) The manner, if not set forth in Article 3b, in which said
amendment effects a change in the amount of paid-in capital (Paid-in
capital replaces the terms Stated Capital and Paid-in Surplus and is
equal to the total of these accounts) is as follows: (If not
applicable, insert "No change")
No change
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (If not
applicable, insert "No Change")
No change
Before Amendment After Amendment
Paid-in Capital $_________ $_________
(COMPLETE EITHER ITEM 6 OR 7 BELOW. ALL SIGNATURES MUST BE IN
BLACK INK.)
---------
6. The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirms, under penalties or perjury,
that the facts stated herein are true.
Dated 3-23 1996 DuPage Dialysis, Ltd.
------------------------, -- ------------------------------
(Exact Name of Corporation &
state of execution
attested by /s/ L E Cespedes MD by /s/ Paul Balter
-------------------------- ---------------------------
(Signature of Secretary or (Signature of President or
Assistant Secretary Vice President
Luis E. Cespedes, M.D., Secy. Paul Balter, M.D., President
------------------------------ ------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
7. If amendment is authorized pursuant to Section 10.10 and there are no
officers, then a majority of the directors or such directors as may be
designated by the board, must sign below, and type or print name and title.
OR
If amendment is authorized by the directors pursuant to Section 10.10 and
there are no officers, then a majority of the directors or such directors
as may be designated by the board, must sign below, and type or print name
and title.
The undersigned affirms, under the penalties of perjury, that the facts
stated herein are true.
Dated_________________________, 19__
____________________________________ __________________________________
____________________________________ __________________________________
____________________________________ __________________________________
____________________________________ __________________________________
Page 3
<PAGE>
NOTES AND INSTRUCTIONS
NOTE 1: State the true exact corporate name as it appears on the records of the
office of the Secretary of State, BEFORE any amendments herein reported.
NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares
have been issued and before any directors have been named or
elected. ((S) 10.10)
NOTE 3. Directors may adopt amendments without shareholder approval in only
seven instances, as follows:
(a) to remove the names and addresses of directors named in the articles
of incorporation;
(b) to remove the name and address of the initial registered agent and
registered office, provided a statement pursuant to (S) 5.10 is also
filed;
(c) to increase, decrease, create or eliminate the par value of the
shares of any class, so long as no class or series of shares is
adversely affected.
(d) to split the issued whole shares and unissued authorized shares by
multiplying them by a whole number, so long as no class or series
is adversely affected thereby;
(e) to change the corporate name by substituting the word "corporation",
"incorporated", "company", "limited", or the abbreviation "corp",
"inc.", "co.", or "ltd." for a similar word or abbreviation in the
name, or by adding a geographical attribution to the name;
(f) to reduce the authorized shares of any class pursuant to a
cancellation statement filed in accordance with (S) 9.05,
(g) to restate the articles of incorporation as currently
amended. ((S) 10.15)
NOTE 4: All amendments not adopted under (S) 10.10 or (S) 10.15 require (1) that
the board of directors adopt a resolution setting forth the proposed
amendment and (2) that the shareholders approve the amendment.
Shareholder approval may be (1) by vote at a shareholders' meeting
(either annual or special) or (2) by consent, in writing, without a
meeting.
To be adopted, the amendment must receive the affirmative vote or
consent of the holders of at least 2/3 of the outstanding shares
entitled to vote on the amendment (but if class voting applies, then
also at least a 2/3 vote within each class is required).
The articles of incorporation may supersede the 2/3 vote requirement
by specifying any smaller or larger vote requirement not less than
a majority of the outstanding shares entitled to vote and not less than
a majority within each class when class voting applies. ((S) 10.20)
NOTE 5: When shareholder approval is by consent, all shareholders must be given
notice of the proposed amendment at least 5 days before the consent is
signed. If the amendment is adopted, shareholders who have not signed
the consent must be promptly notified of the passage of the
amendment. ((S)(S)7.10 & 10.20)
Page 4
<PAGE>
<TABLE>
<S> <C> <C>
BCA 5.10/5.20 (Rev. Jul. 1984) File # D 5173-474-2
----------------------------
JIM EDGAR This Space For Use By
Submit in Duplicate Secretary of State Secretary of State
State of Illinois
Remit payment in Check or Money Date 6-25-86
Order, payable to "Secretary of
State", STATEMENT OF CHANGE OF REGISTERED AGENT Filing Fee $5.00
DO NOT SEND CASH! AND/OR
REGISTERED OFFICE Clerk
----------------------------
</TABLE>
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned corporation hereby submits the following statement.
1. The name of the corporation is DU PAGE DIALYSIS, LTD.
--------------------------------------------
___________________________________________________________________________
2. The State or Country of incorporation is Illinois
----------------------------------
3. The name and address of its registered agent and its registered office as
they appear on the records of the office of the Secretary of State (Before
Change) are:
Registered Agent David J. Hochman
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 70 W. Madison, Suite 2200
----------------------------------------------------
Number Street Suite No.(A P.O. Box alone is
not acceptable)
Chicago, IL 60602 Cook
----------------------------------------------------
City Zip Code County
4. The name and address of its registered agent and its registered office
shall be (After All Changes Herein Reported):
Registered Agent David J. Hochman
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 30 N. LaSalle Street
----------------------------------------------------
Number Street Suite No.(A P.O. Box alone is
not acceptable)
Chicago, IL 60602 Cook
----------------------------------------------------
City Zip Code County
5. The address of the registered office and the address of the business office
of the registered agent, as changed, will be identical.
6. The above change was authorized by: ("X" one box only)
a. [_] By resolution duly adopted by the board of directors. (Note 5)
b. [X] By action of the registered agent. (Note 6)
(IF AUTHORIZED BY THE BOARD OF DIRECTORS, SIGN HERE. SEE NOTE 5)
The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirm, under penalties of perjury, that
the facts stated herein are true.
<TABLE>
<S> <C>
Dated ________________________________, 19____ ______________________________________________________
(Exact Name of Corporation)
attested by __________________________________ by ___________________________________________________
(Signature of Secretary or (Signature of President or vice president)
Assistant Secretary)
__________________________________ ___________________________________________________
(Type or Print Name and Title) (Type or Print Name and Title)
</TABLE>
(IF CHANGE OF REGISTERED OFFICE BY REGISTERED AGENT, SIGN HERE. SEE NOTE 6)
The undersigned, under penalties of perjury, affirms that the facts stated
herein are true.
<TABLE>
<S> <C>
Dated June 6, 1986 /s/ David J. Hochman
------- ---- -------------------------------------------------
(Signature of Registered Agent of Record)
</TABLE>
<PAGE>
NOTES
1. The registered office may, but need not be the same as the principal office
of the corporation. However, the registered office and the office address
of the registered agent must be the same.
2. The registered office must include a street or road address, a post office
box number alone is not acceptable.
3. A corporation cannot act as its own registered agent.
4. If the registered office is changed from one county to another, then the
corporation must file with the recorder of deeds of the new county a
certified copy of the artilces of incorporation and a certified copy of the
statement of change of registered office. Such certified copies may be
obtained ONLY from the Secretary of State.
5. Any change of REGISTERED AGENT must be by resolution adopted by the board
of directors. This statement must then be signed by the President (or vice-
president) and by the Secretary (or an assistant secretary).
6. The registered agent may report a change of the REGISTERED OFFICE of the
corporation for which he or she is registered agent. When the agent reports
such a change, this statement must be signed by the registered agent.
FORM BCA-6.10/6.20
File No. D-5173-474-2
================================================================================
STATEMENT OF CHANGE OR REGISTERED
AGENT AND/OR REGISTERED OFFICE
FILING FEE $5.00
Return to:
David J. Hockman, Esq.
Finger, Hochman & Delott, P.C.
30 North LaSalle Street
Chicago, IL 60602
RETURN TO:
CORPORATION DEPARTMENT
SECRETARY OF STATE
SPRINGFIELD, ILLINOIS 62756
TELEPHONE 217 - 782-7808
================================================================================
<PAGE>
STATE OF ILLINOIS
Office of the Secretary of State
I hereby certify that this is a true and
correct copy, consisting of Twelve
pages, as taken from the original on file in
this office.
/s/ George H. Ryan EXPEDITED
SECRETARY OF STATE
[SEAL] GEORGE H. RYAN
SECRETARY OF STATE APR 27 1998
EXP. FEES 25.00
----------
DATED: APRIL 27, 1998 COPY - CERT. 11.00
------------------------ --------
BY: /s/ James P. Lesley, Jr.
--------------------------
<PAGE>
EXHIBIT 3.14
DU PAGE DIALYSIS, LTD.
----------------------
BY-LAWS
-------
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The corporation shall hold an annual
--------- ---------------
meeting of its stockholders for the election of directors and for the
transaction of general business at such place as may be designated by the Board
of Directors, at 3:00 p.m. on the second Saturday in November of each year, if
not a legal holiday, and if a legal holiday, then on the first day following
which is not a legal holiday. Such annual meetings shall be general meetings
open for the transaction of any business within the powers of the corporation
without special notice of such business, except in cases in which special notice
is required by statute, by the articles of incorporation or by these by-laws.
SECTION 2. Special Meetings. Unless otherwise prescribed by statute,
--------- ----------------
special meetings of the stockholders may be called at any time by the Board of
Directors or by the President and shall be called by the President or the
Secretary upon a written request of stockholders owning a twenty-five percent
(25%) interest in amount of entire outstanding shares of the corporation
entitled to vote. No business other than that stated in the notice described in
the next succeeding section shall be transacted at any special meeting without
the unanimous consent of all of the stockholders entitled to vote thereat.
SECTION 3. Notice of Meetings. Except as otherwise provided by law,
--------- ------------------
written or printed notice stating the place, date and hour of the meeting and,
in case of a special meeting, a brief statement of the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than forty (40) days before the date of every meeting of stockholders either
personally or by mail, by or at the direction of the President or the Secretary,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
corporation, with postage thereon prepaid. Whenever any notice is required to be
given under the provisions of Illinois law, the articles of incorporation or
these by-laws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether it be before or after the time stated therein,
shall be deemed equivalent to the giving of such notice. It shall not be
requisite to the validity of any meeting of stockholders that notice thereof,
whether prescribed by law, by the articles of incorporation or by these
by-laws, shall have been given to any stockholder who attends in person or
by proxy. No notice other than by verbal announcement need be given of any
adjourned meetings of stockholders.
<PAGE>
SECTION 4. Place of Meetings. Annual and special meetings of stockholders
--------- -----------------
shall be held at one of the corporation's offices or at such place or places as
shall be fixed by the Board of Directors.
SECTION 5. Quorum. Except as otherwise required by law, the articles of
--------- ------
incorporation or these by-laws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the corporation entitled to vote
shall constitute a quorum at all meetings of the stockholders. In case a quorum
shall not be present at any meeting, a majority in interest of the stockholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until the requisite amount of stock entitled to vote shall be
present. If upon the reconvening of any such adjourned meeting a majority of the
stock entitled to vote shall be represented, any business may be transacted
which might have been transacted at the meeting as originally noticed, but only
those stockholders entitled to vote at the meeting as originally noticed shall
be entitled to vote at such time as it is reconvened.
SECTION 6. Voting. Except when cumulative voting is required by law, each
--------- ------
outstanding share of the capital stock shall be entitled to one (1) vote on each
matter submitted to a vote at a meeting of stockholders. Shares of its own stock
belonging to the corporation shall not be voted, directly or indirectly, at any
meeting and shall not be counted in determining the total number of outstanding
shares at any given time, but shares of its own stock held it in a fiduciary
capacity may be voted and shall be counted in determining the total number of
outstanding shares at any given time. When a quorum is present or represented at
any meeting of stockholders, the vote of the holders of a majority of the shares
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which a different vote is
required by virtue of an express provision of law, the articles of incorporation
or another section of these by-laws.
SECTION 7. Proxies. Any stockholder entitled to vote at a meeting of
--------- -------
stockholders may vote either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact; provided, however, that
no proxy to vote any shares of the corporation shall issue to or be voted by any
person who is not licensed pursuant to the Illinois Medical Practice Act.
SECTION 8. Action Without Meeting. Whenever the vote of stockholders at a
--------- ----------------------
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of a statute, the articles of incorporation
or of these by-laws, the meeting and vote of stockholders may be dispensed with
if all the stockholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken.
2
<PAGE>
SECTION 9. List of Stockholders. At least ten (10) days prior to each
--------- --------------------
meeting of stockholders at which directors are to be elected, the Secretary
shall make or cause to be made a complete list of the stockholders entitled to
vote at the ensuing election, arranged in alphabetical order, showing the
mailing address of each according to the records of the corporation and the
number of voting shares held by each. Such list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
corporation, and shall at all times during the usual hours for business be open
to the examination of any stockholder, and shall also be produced and kept at
the time and place of such election for the inspection of any stockholder during
the whole time thereof.
The original stock ledger or transfer book, or a duplicate thereof, kept at
the principal office of the corporation, shall be prima facie evidence as to who
are the stockholders entitled to examine such list or stock ledger or transfer
book or to vote at any meeting of stockholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Powers. The business and affairs of the corporation shall
--------- ------
be managed by a Board of Directors, which may exercise all of the powers of the
corporation except such as are by statute, the articles of incorporation or
these by-laws conferred upon or reserved to the stockholders. Continuing and
exclusive authority to fix, supervise and control the professional, business and
other affairs of the corporation shall be wholly vested in the Board of
Directors.
SECTION 2. Number. The number of directors shall be four (4). The
--------- ------
number of directors may be increased or decreased from time to time by the
amendment of this section, but no decrease shall have the effect of shortening
the term of any incumbent director. The directors need not be stockholders but
must at all times be persons licensed pursuant to the Illinois Medical Practice
Act.
SECTION 3. Election and Term. The directors shall be elected at the
--------- -----------------
annual meeting of stockholders and each shall serve until his successor shall
have been elected and qualified.
SECTION 4. Meetings. The newly elected directors may hold their first
--------- --------
meeting without notice, for the purpose of organization and the transaction of
business, immediately after the annual meeting of the stockholders, or the time
and place of such meeting may be fixed by consent in writing of all the
directors.
3
<PAGE>
Regular meetings of the Board of Directors may be held without notice at
such places and times at shall be determined from time to time by resolution
of the directors. Unless otherwise determined as aforesaid, regular meetings
shall be held at the place of and immediately after the annual meeting of
stockholders.
Special meetings of the Board of Directors may be called by the President
or by the Secretary on the written request of any director and shall be held
at such place or places as may be determined by the directors, or shall be
stated in the call of the meeting.
SECTION 5. Notice of Meetings. No notice of regular meetings of the board
--------- ------------------
need be given. Notice of the place, day and hour of every special meeting shall
be given to each director at least one (1) day before the meeting, by delivering
the same to him personally, by sending the same to him by telegraph, or by
leaving the same at his residence or usual place of business or, in the
alternative, upon two (2) days' notice, by mailing it postage prepaid, and
addressed to him at his last known mailing address, as reflected in the
records of the corporation. It shall not be requisite to the validity of any
meeting of the Board of Directors that notice thereof shall have been given to
any director who attends, except where a director attends for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened. No notice of adjourned meetings of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting. All regular and special meetings of the Board of Directors shall
be open for the transaction of any business within the powers of the corporation
without special notice of such business, except in those cases in which special
notice is required by law, the articles of incorporation or by these by-laws.
SECTION 6. Quorum. At all meetings of he Board of Directors, a majority of
--------- ------
the Board of Directors shall constitute a quorum for the transaction of
business. The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless the
act of a greater number is required by law, the articles of incorporation or
these by-laws. In the absence of a quorum, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no notice
thereof need be given other than by announcement at the meeting which shall be
adjourned. Upon the reconvening of any such adjourned meeting, if a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting when originally convened.
SECTION 7. Informal Action. Unless otherwise restricted by the articles of
--------- ---------------
incorporation or these by-laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of the Executive Committee may be
taken without a meeting, if a written consent to such action is executed by all
members of the Board of Directors or of the Executive Committee, as the case may
be, and such written consent is filed with the minutes of proceedings of the
Board of Directors or the Executive Committee.
4
<PAGE>
SECTION 8. Compensation. Directors shall not receive any stated salary
--------- ------------
for their services as directors or as members of committees, but by resolution
of the Board of Directors a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 9. Indemnification. (a) To the extent permitted by law, the Board
--------- ---------------
of Directors of the corporation may by resolution indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (whether or not by or in the right of the corporation) by reason
of the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had not reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 9. (b) Any indemnification under Subsection (a) hereof (unless
---------
ordered by a court) shall be made by the Board of Directors only upon a
determination in the specific case that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Subsection (a). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable
and a quorum of disinterested directors so directs, by independent legal counsel
(compensated by the corporation) in a written opinion, or (3) by the
stockholders.
SECTION 9. (c) The indemnification provided by this Section shall not be
---------
deemed exclusive of any other rights to which those indemnified may be entitled
under any agreement, vote of stockholders, disinterested directors, or
otherwise, both as to the action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
5
<PAGE>
SECTION 10. Resignations. Any director, member of the Executive
---------- ------------
Committee or officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time is
specified, at the time of its actual receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 11. Vacancies. Vacancies occurring in the Board of Directors,
---------- ---------
through death, resignation or otherwise, and newly created directorships
resulting from an increase in the number of directors, may be filled by an
election at an annual meeting or at a special meeting of stockholders called for
that purpose. The directors so chosen shall hold office until their successors
are duly elected and shall qualify.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. Executive Committee. The Board of Directors by resolution
--------- -------------------
adopted by a majority of the whole Board of Directors may designate an Executive
Committee of two (2) directors. Except as otherwise provided by law, during the
intervals between the meetings of the Board of Directors, the Executive
Committee shall have and may exercise all of the powers of the Board of
Directors in the management of the corporation. The Executive Committee shall
keep full accounts of its transactions. All actions by the Executive Committee
shall be reported to the Board of Directors at its meeting next succeeding such
action.
SECTION 2. Meetings of Executive Committee. The Executive Committee
--------- ------------------------------
shall fix its own rules of procedure and shall meet as provided by such rules
and it shall also meet at the call of either member of the Committee. Both
members of the Executive Committee shall be necessary to constitute a quorum,
and the concurrence of both shall be required in all matters to constitute the
act of the Committee.
SECTION 3. Executive Committee Powers. For all purposes of these
--------- --------------------------
by-laws, the words "Board of Directors," "directors," "Board" or any equivalent
term shall be construed to include "Executive Committee," it being the intent
that such Committee shall except as otherwise provided by law, have and exercise
all of the powers conferred on the Board of Directors by law, the articles of
incorporation and these by-laws.
ARTICLE IV
OTHER COMMITTEES
To the extent that such action is not inconsistent with the provisions of
Article III hereof, the Board of Directors may designate one or more committees
in addition to the Executive Committee. Each
6
<PAGE>
committee shall consist of one (1) or more of the directors of the corporation,
and to the extent provided by the Board of Directors, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the corporation, and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be determined from time to time
by the Board of Directors. The committee shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
ARTICLE V
OFFICERS
SECTION 1. Officers. The officers of the corporation shall be a
--------- --------
President, a Vice President, a Secretary and a Treasurer. In addition, the Board
of Directors may elect such Vice Presidents, Assistant Secretaries and Assistant
Treasurers as the Board of Directors may deem proper. None of the officers need
be directors, but all must be persons licensed to practice pursuant to the
Illinois Medical Practice Act. The officers shall be elected at the first
meeting of the Board of Directors and at each annual meeting of directors. Any
two (2) or more offices, other than those of President and Secretary may be held
by the same person, except that at such times as all of the stock of the
corporation is owned by one (1) person, that person may hold all offices.
SECTION 2. Other Officers and Agents. The Board of Directors may appoint
--------- -------------------------
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. President. The President shall be the chief executive officer
--------- ---------
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of president of a corporation, and
subject to the powers of the Board of Directors, he shall have general
supervision, direction and control of the business of the corporation. He shall
preside at all meetings of the stockholders if present thereat. Except as the
Board of Directors shall authorize the execution thereof in some other manner,
he shall execute bonds, mortgages and other contracts on behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed, the seal shall be attested by the signature of the
Secretary or an Assistant Secretary.
SECTION 4. Vice President. Each Vice President shall have such powers and
--------- --------------
shall perform such duties as shall be assigned to him by the Board of Directors.
7
<PAGE>
SECTION 5. Secretary. The Secretary shall give, or cause to be given,
--------- ---------
notice of all meetings of stockholders and directors, and all other notices
required by law or by these by-laws, and in case of his absence or refusal to do
so, any such notice may be given by any person directed by the President, or by
the directors or stockholders, upon whose request the meeting is called as
provided in these by-laws. He shall record all the proceedings of the meetings
of the corporation and of the Board of Directors in a book to be kept for that
purpose, and shall perform such other duties as may be assigned to him by the
Board of Directors or the President. He shall have the custody of the seal of
the corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors or the President, and attest the same.
SECTION 6. Treasurer. The Treasurer shall have the custody of the
--------- ---------
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors or the President, taking proper vouchers for such
disbursements. He shall render to the President and the Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board of Directors prescribe.
SECTION 7. Assistant Secretaries and Assistant Treasurers. Assistant
--------- ----------------------------------------------
Secretaries and Assistant Treasurers, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the Board of Directors.
SECTION 8. Removal of Officers. Any officer of the corporation may be
--------- -------------------
removed, by the Board of Directors, whenever in its judgment, the best interests
of the corporation will be served thereby.
ARTICLE VI
MISCELLANEOUS
SECTION 1. Certificates of Stock. Certificates of stock, numbered and
--------- ---------------------
with the seal of the corporation affixed, signed by the President or Vice
President, and the Treasurer or an Assistant Treasurer, or Secretary or an
Assistant Secretary, shall be issued to each stockholder certifying the number
of shares owned by him in the corporation.
8
<PAGE>
SECTION 2. Lost Certificate. A new certificate of stock may be issued
--------- ----------------
in the place of any certificate theretofore issued by the corporation and
alleged to have been lost or destroyed. However, the Directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representative, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
the certificate, or the issuance of a new certificate.
SECTION 3. Transfer of Shares. The shares of stock of the corporation
--------- ------------------
shall be transferable only upon its books by the holders thereof in person or
by their duly authorized attorneys or legal representative, and upon such
transfer the old certificates shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, by whom they shall be cancelled, and new certificates shall thereupon
be issued.
SECTION 4. Dividends. Subject to the provisions of the articles of
--------- ---------
incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meetings, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend, there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors may from time to time in their
absolute discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 5. Seal. The corporate seal shall be circular in form and
--------- ----
shall contain the name of the corporation and the words "CORPORATE SEAL,
ILLINOIS." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced.
SECTION 6. Fiscal Year. The fiscal year of the corporation shall end
--------- -----------
on the last day of October.
SECTION 7. Checks. All checks, drafts or other orders for the
--------- ------
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation, in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 8. Notice and Waiver of Notice. Whenever any notice is
--------- ---------------------------
required to be given by these by-laws, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by certified or registered mail, return receipt requested, in a sealed
post-paid wrapper, addressed to the person entitled thereto at his last known
address. Such notice shall be deemed to have been given on the day of such
mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by law.
9
<PAGE>
Whenever any notice is required to be given under the provisions of any
law, the articles of incorporation or these by-laws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
SECTION 9. Closing the Transfer Books and Fixing the Record Date. For the
--------- -----------------------------------------------------
purpose of determining the right of stockholders to vote or receive dividends,
the directors may provide that the stock transfer books shall be closed for a
stated period not to exceed forty (40) days. In such event, the books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders for at least ten (10) days or in the case of a
merger or consolidation at least twenty (20) days immediately prior to a meeting
of the stockholders. In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of stockholders, such date not more than forty (40) days, and, for
a meeting of stockholders, not less than ten (10) days or in case of a merger or
consolidation, not less than twenty (20) days, immediately preceding such
meeting or payment of such dividend. If the directors shall not so provide for a
closing of the transfer books or the fixing of a record date, then the date on
which notice of the meeting of the stockholders was given or the date on which
the resolution of the Board of Directors declaring a dividend was adopted, as
the case may be, shall be the record date for determining the rights of
stockholders. When a determination of stockholders entitled to vote at a meeting
of stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
ARTICLE VII
AMENDMENTS
SECTION 1. By Stockholders. These by-laws may be amended or repealed and
--------- ---------------
new by-laws may be adopted at any annual or special meeting of the stockholders
by a two-thirds (2/3) vote of the stock issued and outstanding and entitled to
vote thereat. However, such action may be taken at a special meeting only if the
notice of meeting specifically designates the provisions of these by-laws
proposed for amendment or repeal and sets forth any new provisions proposed to
be adopted.
SECTION 2. By Directors. These by-laws may be amended or repealed and new
--------- ------------
by-laws may be adopted at any regular or special meeting of the Board of
Directors by a unanimous vote of the entire Board of Directors.
10
<PAGE>
EXHIBIT 3.15
PAGE 1
State of Delaware
Office of the Secretary of State
__________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "EVEREST MANAGEMENT, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FIFTH DAY OF NOVEMBER, A.D. 1996 AT 9 O'CLOCK A.M.
[SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2688115 8110 AUTHENTICATION: 9046124
981157554 DATE: 04-24-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/25/1996
960345781 - 2688115
CERTIFICATE OF INCORPORATION
OF
EVEREST MANAGEMENT, INC.
FIRST: The name of the corporation is Everest Management, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, Wilmington, Delaware 19805 in the county of New
Castle. The name of the Corporation's registered agent is Corporation Service
Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware (the "GCL").
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 1,000 shares of common stock, par value $.01
per share.
FIFTH: The name and mailing address of the Corporation's incorporator
is:
Name Mailing Address
---- ---------------
Suzanne M. Hoffman c/o Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
SIXTH: The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the by-laws of the Corporation (the "By-Laws").
SEVENTH: Elections of directors need not be by written ballot unless
otherwise provided in the By-Laws.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of Title 8 of
the GCL or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the
<PAGE>
provisions of Section 279 of Title 8 of the GCL order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on this
Corporation.
NINTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the GCL.
TENTH: The Corporation shall indemnify each director, officer, trustee,
employee or agent of the Corporation and each person who is or was serving at
the request of the Corporation as a director, officer, trustee, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise in the manner and to the fullest extent provided in Section 145 of
the GCL as the same now exists or may hereafter be amended.
The undersigned incorporator hereby acknowledges that the foregoing
certificate of incorporation is such incorporator's act and deed and that the
facts stated therein are true.
/s/ Suzanne M. Hoffman
--------------------------------
Dated: November 25, 1996 Suzanne M. Hoffman, Incorporator
c/o Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3683
-2-
<PAGE>
EXHIBIT 3.16
BY-LAWS
OF
EVEREST MANAGEMENT, INC.
------------------------
ARTICLE I
---------
IDENTIFICATION: OFFICES
------------------------
SECTION 1.1. Name. The name of the corporation is Everest Management,
----
Inc. (the "Corporation").
SECTION 1.2. Registered Offices: Other Offices. The registered office
---------------------------------
of the Corporation in the State of Delaware shall be in the City of Wilmington
and County of New Castle. The Corporation may have such other offices, either
within or outside of the State of Delaware, as the business of the Corporation
may require from time to time.
ARTICLE II
----------
STOCKHOLDERS
------------
SECTION 2.1. Annual Meeting. An annual meeting of the stockholders
--------------
shall be held on the first Monday in June of each year, or on such other date as
may be determined by resolution of the Board of Directors; provided, however,
that if in any year such date is a legal holiday, such meeting shall be held on
the next succeeding business day. At each annual meeting, the stockholders
shall elect directors to hold office for the term provided in Section 3.1 of
these By-laws.
SECTION 2.2. Special Meeting. A special meeting of the stockholders
---------------
may be called by the President of the Corporation, the Board of Directors, or by
such other officers or persons as the Board of Directors may designate.
SECTION 2.3. Place of Stockholder Meetings. The Board of Directors may
-----------------------------
designate any place, either within or without the State of Delaware, as the
place of meeting for any annual meeting or for any special meeting. If no such
place is designated by the Board of Directors, the place of meeting will be the
principal business office of the Corporation.
SECTION 2.4. Notice of Meetings. Unless waived as herein provided,
------------------
whenever stockholders are required or permitted to take any action at a meeting,
written notice of the meeting shall be given stating the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Such written notice shall be given not less than
ten (10) days nor
<PAGE>
more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at the meeting or in the event of a merger, consolidation,
share exchange, dissolution or sale, lease or exchange of all or substantially
all of the Corporation's property, business or assets not less than twenty (20)
days before the date of the meeting. If mailed, notice is given when deposited
in the United States mail, postage prepaid, directed to the stockholder at the
stockholder's address as it appears on the records of the Corporation.
When a meeting is adjourned to another time or place in accordance with
Section 2.5 of these By-laws, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting in which the
adjournment is taken. At the adjourned meeting the Corporation may conduct any
business which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 2.5. Quorum and Adjourned Meetings. Unless otherwise
-----------------------------
provided by law or the Corporation's Certificate of Incorporation, a majority of
the shares entitled to vote, present in person or represented by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
shares entitled to vote at a meeting of stockholders is present in person or
represented by proxy at such meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the original meeting. The stockholders
present at a meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of such number of stockholders as may leave less
than a quorum.
SECTION 2.6. Fixing of Record Date. (a) For the purpose of
---------------------
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) For the purpose of determining stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record
<PAGE>
date, which record date shall not precede the date upon which the resolution
fixing the record date is established by the Board of Directors, and which date
shall not be more than ten (10) days after the date on which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by law,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by delivery
to its registered office in the State of Delaware, its principal office, or an
officer or agent of the Corporation having custody of the book in which the
proceedings of meetings of stockholders are recorded. Delivery to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders' consent to corporate action in writing
without a meeting shall be the close of business on the day on which the Board
of Directors adopts the resolution taking such prior action.
(c) For the purpose of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect to any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix the record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty (60) days prior to such
action. If no record date is fixed, the record date for determining the
stockholders for any such purpose shall be the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
SECTION 2.7. Voting List. The officer who has charge of the stock
-----------
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.8. Voting. Unless otherwise provided by the Certificate
------
of Incorporation, each stockholder shall be entitled to one vote for each share
of capital stock held by each stockholder. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy
<PAGE>
at the meeting and entitled to vote on the subject matter shall be the act of
the stockholders. Directors shall be elected by plurality of the votes of the
shares present in person or represented by a proxy at the meeting entitled to
vote on the election of directors.
SECTION 2.9. Proxies. Each stockholder entitled to vote at a
-------
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for him
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may remain irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
SECTION 2.10. Ratification of Acts of Directors and Officers. Except
----------------------------------------------
as otherwise provided by law or by the Certificate of Incorporation of the
Corporation, any transaction or contract or act of the Corporation or of the
directors or the officers of the Corporation may be ratified by the affirmative
vote of the holders of the number of shares which would have been necessary to
approve such transaction, contract or act at a meeting of stockholders, or by
the written consent of stockholders in lieu of a meeting.
SECTION 2.11. Informal Action of Stockholders. Any action required
-------------------------------
to be taken at any annual or special meeting of stockholders of the Corporation,
or any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. In the event that the action which is consented
to is such as would have required the filing of a certificate with any
governmental body, if such action had been voted on by stockholders at a meeting
thereof, the certificate filed shall state, in lieu of any statement required
by law concerning any vote of stockholders, that written consent had been given
in accordance with the provisions of Section 228 of the Delaware General
Corporation Law, and that written notice has been given as provided in such
section.
SECTION 2.12. Organization. Such person as the Board of Directors
------------
may designate or, in the absence of such a designation, the president of the
Corporation or, in his or her absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of such
<PAGE>
meeting. In the absence of the secretary of the Corporation, the chairman of
the meeting shall appoint a person to serve as secretary at the meeting.
ARTICLES III
------------
DIRECTORS
---------
SECTION 3.1. Number and Tenure of Directors. The number of
------------------------------
directors of the Corporation shall consist of seven (7) members. Each director
shall hold office until such director's successor is elected and qualified or
until such director's earlier resignation or removal. Any director may resign
at any time upon written notice to the Corporation.
SECTION 3.2. Election of Directors. Directors shall be elected at
---------------------
the annual meeting of stockholders. In all elections for directors, every
stockholder shall have the right to vote the number of shares owned by such
stockholder for each director to be elected.
SECTION 3.3. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by or at the request of the Chairman of the Board, the
President or at least one-third of the number of directors constituting the
whole board. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 3.4. Notice of Special Meetings of the Board of Directors.
----------------------------------------------------
Notice of any special meeting of the Board of Directors shall be given at least
two (2) days previous thereto by written notice to each director at his or her
address. If mailed, such notice shall be deemed to be delivered when deposited
in the United States Mail so addressed, with first-class postage thereon
prepaid. If sent by any other means (including facsimile, courier, or express
mail, etc.), such notice shall be deemed to be delivered when actually delivered
to the home or business address of the director.
SECTION 3.5. Quorum. A majority of the total number of directors
------
fixed by these By-laws, or in the absence of a By-Law which fixes the number of
directors, the number stated in the Certificate of Incorporation or named by the
incorporators, shall constitute a quorum for the transaction of business. If
less than a majority of the directors are present at a meeting of the Board of
Directors, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 3.6. Voting. The vote of the majority of the directors present
------
at a meeting at which a quorum is present shall be the act of the Board of
<PAGE>
Directors, unless the Delaware General Corporation Law or the Certificate of
Incorporation requires a vote of a greater number.
SECTION 3.7. Vacancies. Vacancies in the Board of Directors may be
---------
filled by a majority vote of the Board of Directors or by an election either at
an annual meeting or at a special meeting of the stockholders called for that
purpose. Any director elected by the stockholders to fill a vacancy shall hold
office for the balance of the term for which he or she was elected. A director
appointed by the Board of Directors to fill a vacancy shall serve until the
next meeting of stockholders at which directors are elected.
SECTION 3.8. Removal of Directors. A director, or the entire Board
--------------------
of Directors, may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors;
provided, however, that if cumulative voting obtains and less than the entire
Board of Directors is to be removed, no director may be removed without cause if
the votes cast against such director's removal would be sufficient to elect him
if then cumulatively voted at an election of the entire Board of Directors.
SECTION 3.9. Informal Action of Directors. Unless otherwise
----------------------------
restricted by the Certificate of Incorporation or these By-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
SECTION 3.10. Participation by Conference Telephone. Members of the
-------------------------------------
Board of Directors, or any committee designated by such board, may participate
in a meeting of the Board of Directors, or committee thereof, by means of
conference telephone or similar communications equipment as long as all persons
participating in the meeting can speak with and hear each other, and
participation by a director pursuant to this Section 3.10 shall constitute
presence in person at such meeting.
ARTICLE IV
----------
WAIVER OF NOTICE
----------------
SECTION 4.1. Written Waiver of Notice. A written waiver of any
------------------------
required notice, signed by the person entitled to notice, whether before or
after the date stated therein, shall be deemed equivalent to notice. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of stockholders, directors or members of a committee of directors need
be specified in any written waiver of notice.
<PAGE>
SECTION 4.2. Attendance as Waiver of Notice. Attendance of a person
------------------------------
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, and objects
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
---------
COMMITTEES
----------
SECTION 5. General Provisions. The Board of Directors may, by
------------------
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member at any
meeting of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease, or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the By-laws of the Corporation; and, unless the
resolution so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger, pursuant to Section 253 of the Delaware General
Corporation Law.
ARTICLE VI
----------
OFFICERS
--------
SECTION 6.1. General Provisions. The Board of Directors shall elect
------------------
a President and a Secretary of the Corporation. The Board of Directors may also
elect a Chairman of the Board, one or more Vice Chairmen of the Board, one or
more Vice Presidents, a Treasurer, one or more Assistant Secretaries and
Assistant Treasurers and such additional officers as the Board of Directors may
deem necessary or appropriate from time to time. Any two or more offices may be
held by the same
<PAGE>
person. The officers elected by the Board of Directors shall have such duties
as are hereafter described and such additional duties as the Board of Directors
may from time to time prescribe.
SECTION 6.2. Election and Term of Office. The officers of the
---------------------------
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers is not held at such meeting, such
election shall be held as soon thereafter as may be convenient. New offices of
the Corporation may be created and filled and vacancies in offices may be filled
at any time, at a meeting or by the written consent of the Board of Directors.
Unless removed pursuant to Section 6.3 of these By-laws, each officer shall hold
office until his successor has been duly elected and qualified, or until his
earlier death or resignation. Election or appointment of an officer or agent
shall not of itself create contract rights.
SECTION 6.3. Removal of Officers. Any officer or agent elected or
-------------------
appointed by the Board of Directors may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person(s) so removed.
SECTION 6.4. The Chief Executive Officer. The Board of Directors
---------------------------
shall designate whether the Chairman of the Board, if one shall have been
chosen, or the President shall be the Chief Executive Officer of the
Corporation. If a Chairman of the Board has not been chosen, or if one has been
chosen but not designated Chief Executive Officer, then the President shall be
the Chief Executive Officer of the Corporation. The Chief Executive Officer
shall be the principal executive officer of the Corporation and shall in general
supervise and control all of the business and affairs of the Corporation, unless
otherwise provided by the Board of Directors. The Chief Executive Officer shall
preside at all meetings of the stockholders and of the Board of Directors and
shall see that orders and resolutions of the Board of Directors are carried into
effect. The Chief Executive Officer may sign bonds, mortgages, certificates for
shares and all other contracts and documents whether or not under the seal of
the Corporation except in cases where the signing and execution thereof shall be
expressly delegated by law, by the Board of Directors or by these By-laws to
some other officer or agent of the Corporation. The Chief Executive Officer
shall have general powers of supervision and shall be the final arbiter of all
differences between officers of the Corporation and his decision as to any
matter affecting the Corporation shall be final and binding as between the
officers of the Corporation subject only to the Board of Directors.
SECTION 6.5. The President. In the absence of the Chief Executive
-------------
Officer or in the event of his inability or refusal to act, if the Chairman of
the Board has been designated Chief Executive Officer, the President shall
perform the duties of the Chief Executive Officer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the Chief
Executive Officer. At all other times
<PAGE>
the President shall have the active management of the business of the
Corporation under the general supervision of the Chief Executive Officer. The
President shall have concurrent power with the Chief Executive Officer to sign
bonds, mortgages, certificates for shares and other contracts and documents,
whether or not under the seal of the Corporation except in cases where the
signing and execution thereof shall be expressly delegated by law, by the Board
of Directors, or by these By-laws to some other officer or agent of the
Corporation. In general, the President shall perform all duties incident to the
office of president and such other duties as the Chief Executive Officer or the
Board of Directors may from time to time prescribe.
SECTION 6.6. The Chairman of the Board. The Chairman of the Board,
-------------------------
if one is chosen, shall be chosen from among the members of the board. If the
Chairman of the Board has not been designated Chief Executive Officer, the
Chairman of the Board shall perform such duties as may be assigned to the
Chairman of the Board by the Chief Executive Officer or by the Board of
Directors.
SECTION 6.7. Vice Chairman of the Board. In the absence of the Chief
--------------------------
Executive Officer or in the event of his inability or refusal to act, if the
Chairman of the Board has been designated Chief Executive Officer, the Vice
Chairman, or if there be more than one, the Vice Chairmen, in the order
determined by the Board of Directors, shall perform the duties of the Chief
Executive Officer, and when so acting shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer. At all other
times, the Vice Chairman or Vice Chairmen shall perform such duties and have
such powers as the Chief Executive Officer or the Board of Directors may from
time to time prescribe.
SECTION 6.8. The Vice President. In the absence of the President or
------------------
in the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Executive Vice President and
then the other Vice President or Vice Presidents in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.9. The Secretary. The Secretary shall attend all meetings
-------------
of the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the Chief Executive Officer, under whose supervision
he shall be. The Secretary shall have custody of the corporate seal of the
Corporation and the Secretary, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring
<PAGE>
it and when so affixed, it may be attested by his signature or by the signature
of such Assistant Secretary. The Board of Directors may give general authority
to any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
SECTION 6.10 The Assistant Secretary. The Assistant Secretary, or if
-----------------------
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.11. The Treasurer. The Treasurer shall have the custody of
-------------
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the Corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
SECTION 6.12. The Assistant Treasurer. The Assistant Treasurer, or if
-----------------------
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.13. Duties of Officers May be Delegated. In the absence of
-----------------------------------
any officer of the Corporation, or for any other reason the Board of Directors
may deem sufficient, the Board of Directors may delegate the powers or duties,
or any of such powers or duties, of any officers or officer to any other officer
or to any director.
SECTION 6.14. Compensation. The Board of Directors shall have the
------------
authority to establish reasonable compensation of all officers for services to
the Corporation.
<PAGE>
ARTICLE VII
-----------
CERTIFICATES FOR SHARES
-----------------------
SECTION 7.1. Certificates of Shares. The shares of the Corporation
----------------------
shall be represented by certificates, provided that the Board of Directors of
the Corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, Chief Executive
Officer, or the President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all the signatures on the certificate may be a facsimile.
SECTION 7.2. Signatures of Former Officer, Transfer Agent or
-----------------------------------------------
Registrar. In case any officer, transfer agent, or registrar who has signed or
- ---------
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person or entity were such officer, transfer agent or registrar at the date of
issue.
SECTION 7.3. Transfer of Shares. Transfers of shares of the
------------------
Corporation shall be made only on the books of the Corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of certificate for such shares. Prior to due
presentment of a certificate for shares for registration of transfer, the
Corporation may treat a registered owner of such shares as the person
exclusively entitled to vote, to receive notifications and otherwise have and
exercise all of the right and powers of an owner of shares.
SECTION 7.4. Lost, Destroyed or Stolen Certificates. Whenever a
--------------------------------------
certificate representing shares of the Corporation has been lost, destroyed or
stolen, the holder thereof may file in the office of the Corporation an
affidavit setting forth, to the best of his knowledge and belief, the time,
place, and circumstance of such loss, destruction or theft together with a
statement of indemnity sufficient in the opinion of the Board of Directors to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss of any such certificate. Thereupon the Board may
cause to be issued to such person or such person's legal representative a new
certificate or a duplicate of the certificate alleged to have been
<PAGE>
lost, destroyed or stolen. In the exercise of its discretion, the Board of
Directors may waive the indemnification requirements provided herein.
ARTICLE VIII
------------
DIVIDENDS
---------
SECTION 8. Dividends. The Board of Directors of the Corporation
---------
may declare and pay dividends upon the shares of the Corporation's capital stock
in any form determined by the Board of Directors, in the manner and upon the
terms and conditions provided by law.
ARTICLE IX
----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
SECTION 9.1. Contracts. The Board of Directors may authorize any
---------
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 9.2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 9.3. Checks, Drafts, Etc. All checks, drafts or other orders
-------------------
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers or agents of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 9.4. Deposits. The funds of the Corporation may be deposited
--------
or invested in such bank account, in such investments or with such other
depositaries as determined by the Board of Directors.
<PAGE>
ARTICLE X
---------
AMENDMENTS
----------
SECTION 10. Amendments. These By-laws may be adopted, amended or
----------
repealed by either the Corporation's Board of Directors or its stockholders;
provided, however, regarding indemnification of directors, Article XI may only
be amended by the Corporation's stockholders.
ARTICLE XI
----------
SECTION 11.1 Indemnification. The Corporation shall indemnify, in
---------------
accordance with and to the full extent now or hereafter permitted by law, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without limitation, any
action by or in the right of the Corporation), by reason of his acting as a
director of the Corporation (and the Corporation, in the sole discretion of the
Board of Directors, may so indemnify a person by reason of the fact that he is
or was an officer or employee of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation) against any liability or expense actually and reasonably incurred
by such person in respect thereof; provided, however, that the Corporation shall
not be obligated to indemnify any such director (i) with respect to proceedings,
claims or actions initiated or brought voluntarily by such person and not by way
of defense or brought against such person in response to a proceeding, claim or
action by such person against the Corporation or (ii) for any amounts paid in
settlement of an action effected without the prior written consent of the
Corporation to such settlement or, (iii) if liability was incurred because the
director breached or failed to perform a duty he owes to the corporation and the
breach or failure to perform constitutes (a) a willful failure to deal fairly
with the corporation or its stockholders in connection with a matter in which
the director has a material conflict of interest, (b) a violation of criminal
law, unless the director had reasonable cause to believe his conduct was lawful
or no reasonable cause to believe his conduct was unlawful, (c) a transaction
from which the director derived an improper personal profit, or (d) willful
misconduct. The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea, shall not, by
itself, create a presumption that indemnification of the director or officer is
not required. A director or officer who seeks indemnification shall make a
written request to the Corporation. Such indemnification is not exclusive of any
other right to indemnification provided by law, agreement or otherwise.
SECTION 11.2 Determination of Right to Indemnification. Unless
-----------------------------------------
otherwise provided by the Corporation's Certificate of Incorporation, these
by-laws, or written agreement between the director or officer, the determination
as to right to
<PAGE>
indemnification shall be made by a majority vote of a quorum of the Board of
Directors consisting of directors not at the time parties to the same or related
proceedings. If a quorum of disinterested directors cannot be obtained, the
determination will be made by majority vote of a committee duly appointed by the
Board of Directors and consisting solely of two or more directors not at the
time parties to the same or related proceedings. Directors who are parties to
the same or related proceedings may participate in the designation of members of
the committee.
<PAGE>
EXHIBIT 3.17
ARTICLES OF ORGANIZATION [STAMP]
OF
HEMO DIALYSIS OF AMARILLO, L.L.C.
The undersigned, acting as the sole organizer of a limited liability
company under the Texas Limited Liability Company Act (the "Act"), does
hereby adopt the following Articles of Organization of HEMO DIALYSIS OF
AMARILLO, L.L.C. (the "Company"):
ARTICLE ONE
The name of the Company is HEMO DIALYSIS OF AMARILLO, L.L.C.
ARTICLE TWO
The period of duration of the Company is until the close of Company
business thirty years from the date of filing of these Articles of
Organization with the Texas Secretary of State or until the earlier dissolution
of the Company in accordance with the provisions of its regulations.
ARTICLE THREE
The Company is a limited liability company and is organized for the
purposes the transaction of any and all lawful business for which limited
liability companies may be organized and more specifically, the delivery
and administration of HEMO DIALYSIS, the referral of patients to appropriate
medical doctors.
1
<PAGE>
ARTICLE FOUR
The principal place of business of the Company in the State of Texas is
1900 S. Coulter, Suite E, Amarillo, Texas 79106.
ARTICLE FIVE
The name of the initial registered agent of the Company in the State of
Texas is George Maliha, M. D., and the address of such initial registered agent
is 1900 S. Coulter, Suite E, Amarillo, Texas 79106.
ARTICLE SIX
The name and address of each organizer is as follows:
NAME ADDRESS
---- -------
Georges M. Maliha, M.D 1900 S. Coulter, Suite E, Amarillo
Texas 79106
ARTICLE SEVEN
The Company is to be managed by one or more managers. The number of initial
managers, who shall serve as managers until the first annual meeting of members
of the Company or until their successors are duly elected, shall be one. The
names and addresses of such initial managers shall be as follows:
Georges M. Maliha, M. D., 1900 S. Coulter, Suite E, Amarillo, Texas 79106.
ARTICLE EIGHT
Any action required by the Act or the Texas Business Corporation Act to be taken
at any annual or special meeting of members, or any action which may be taken
at any annual or special meeting of members, may be taken without a meeting,
without prior notice, and
2
<PAGE>
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holder or holders of membership interests having
not less than the minimum number of votes that would be necessary to take such
action at a meeting at which the holders of all membership interests entitled to
vote on the action were present and voted. Prompt notice of the taking of any
action by the members without a meeting be less than unanimous written consent
shall be given to those members who did not consent in writing to the action.
ARTICLE NINE
No member shall have a preemptive right to acquire any membership interests
or securities of any class that may at any time be issued, sold or offered for
sale by the Company.
ARTICLE TEN
The right of members to cumulative voting in the election of managers is
expressly prohibited.
ARTICLE ELEVEN
A manager of the Company shall not be liable to the Company or its members
for monetary damages for an act or omission in the manager's capacity as a
manager, except that this Article Nine does not eliminate or limit the liability
of a manager to the extent the manager is found liable for (i) a breach of the
manager's duty of loyalty to the Company or its members; (ii) an act or omission
not in good faith that constitutes a breach of duty of the manager to the
Company or an act or omission that involves intentional
3
<PAGE>
misconduct or a knowing violation of the law; (iii) a transaction from which the
manager received an improper benefit, whether or not the benefit resulted from
an action taken within the scope of the manager's office; or (iv) an act or
omission for which the liability of a manager is expressly provided by an
applicable statute. Any repeal or amendment of this Article Ten by the members
of the Company shall be prospective only and shall not adversely affect any
limitation on the liability of a manager of the Company existing at the time of
such repeal or amendment. In addition to the circumstances in which the manager
of the Company is not liable as set forth in the preceding sentences, the
manager shall not be liable to the fullest extent permitted by any provision of
the statutes of Texas hereafter enacted that further limits the liability of a
manager or of a director of a corporation.
IN WITNESS WHEREOF, these Articles of Organization have been executed on
26th October, 1994 by the undersigned.
SOLE ORGANIZER
/s/ Georges Maliha, M.D.
-----------------------------
GEORGES M. MALIHA, M.D.
SUSCRIBED AND ACKNOWLEDGED BEFORE ME on 26th day of October 1994, by the
said GEORGES M. MALIHA, M.D.
[STAMP OF NOTARY PUBLIC APPEARS HERE] /s/ Cindy Hudspeth
--------------------------------
Notary Public; State of Texas
4
<PAGE>
[SEAL] ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited
partnership, or registered limited liability partnership as stated in its
articles of incorporation, articles of organization, certificate of limited
partnership, application or comparable document is Hemo Dialysis of
Amarillo, L.L.C.
2. The assumed name under which the business or professional service is or is
to be conducted or rendered is Dialysis Specialists of Amarillo.
3. The state, country, or other jurisdiction under laws of which it was
incorporated, organized or associated is Texas, and the address of its
registered or similar office is that jurisdiction is 1900 S. Coulter, Suite
E. Amarillo, Texas 79106.
4. The period, not to exceed 10 years, during which the assumed name will be
used is 10 years.
5. The entity is a (circle one): business corporation, non-profit corporation,
professional corporation, professional association, limited liability
company, limited partnership, registered limited liability partnership or
some other type of incorporated business, professional or other association
(specify) Limited Liability Company.
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 1900 S. Coulter, Suite E, Amarillo,
Texas 79106 and the name of its registered agent at such address if George
Maliha, M.D. The address of the principal office (if not the same as the
registered office) is 1900 S. Coulter, Suite E, Amarillo, Texas 79106.
7. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is N/A and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is N/A and the office address elsewhere
is ________________________________________________________________________
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "ALL" or "ALL EXCEPT"):
All
(Certificate must be executed and notarized on the back of this form.)
<PAGE>
/s/ Martin Fox
---------------------------------------
Signature of officer, general partner,
manager, representative or attorney-in-
fact of the entity
Before me on this 23rd day of May, 1995, personally appeared Martin Fox and
acknowledged to me that ____ he executed the foregoing certificate for the
purposes therein expressed.
(Notary Seal) /s/ Sharon L. Soucy
---------------------------------------
Notary Public, State of Texas
INSTRUCTIONS FOR FILING ASSUMED NAME CERTIFICATE
1. A corporation, limited liability company, limited partnership or registered
limited liability partnership, which regularly conducts business or renders
a professional service in this state under a name other than the name
contained in its articles of incorporation, articles or organization,
certificate of limited partnership or application, must file an assumed
name certificate with the secretary of state and with the appropriate
county clerk in accordance with section 36.11 of the Texas Business and
Commerce Code.
2. The information provided in paragraph 6 as regards the registered agent and
registered office address in Texas must match the information on file in
this office. To verify the information on file with this office, you may
contact our corporate information unit at (512) 463-5555. Forms to change
the registered agent/office are available from this office should you
require to update this information.
3. A certificate executed and acknowledged by an attorney-in-fact shall
include a statement that the attorney-in-fact has been duly authorized in
writing by his principal to execute and acknowledge the same.
4. For purposes of filing with the secretary of state, the assumed name
registrant should submit in originally executed assumed name certificate
accompanied by the filing fee of $25 to the Secretary of State, Statutory
Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas
78711-3697. The phone number is (512) 463-5582, TDD: (800) 735-2989, FAX:
(512) 463-5709.
5. All assumed name certificates to be filed with the county clerk must be
forwarded directly to the appropriate county clerk by the assumed name
registrant.
6. Whenever an event occurs that cause the information in the assumed name
certificate to become materially misleading (eg. change of registered
agent/office or a change of name), a new certificate must be filed within
60 days after the occurrence of the events which necessitate the filing.
7. A registrant that ceases to transact business or render professional
services under an assumed name for which a certificate has been filed may
file an abandonment of use pursuant to the Texas Business and Commerce
Code, (S) 36.14. Forms for this purpose are available from this office.
<PAGE>
[SEAL]
ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited partnership
or registered limited liability partnership as stated in its articles of
incorporation, articles of organization, certificate of limited
partnership, application or comparable document is Hemo Dialysis of
Amarillo, L.L.C.
2. The assumed name under which the business or professional service is or is
to be conducted or rendered is Dialysis Specialists of Childress.
3. The state, country, or other jurisdiction under laws of which it was
incorporated, organized or associated is Texas, and the address of its
registered or similar office is that jurisdiction is 7025 1-40 West,
Amarillo 79106.
4. The period, not to exceed 10 years, during which the assumed name will be
used is 10 years.
5. The entity is a (circle one): business corporation, non-profit corporation,
professional corporation, professional association, limited liability
-----------------
company, limited partnership, registered limited liability partnership or
-------
some other type of incorporated business, professional or other associated
(specify) Limited Liability Company.
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 1900 S. Coulter, Suite E, Amarillo,
Texas 79106 and the name of its registered agent at such address if George
Maliha, M.D. The address of the principal office (if not the same as the
registered office) is ____________________________________________________.
7. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is N/A and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is N/A and the office address elsewhere
is ________________________________________________________________________
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "ALL" or "ALL EXCEPT"):
All
(Certificate must be executed and notarized on the back of this form.)
<PAGE>
/s/ Martin Fox
---------------------------------------
Signature of officer, general partner,
manager, representative or attorney-in-
fact of the entity
Before me on this 11th day of June, 1996, personally appeared Martin Fox and
acknowledged to me that ____ he executed the foregoing certificate for the
purposes therein expressed.
(Notary Seal) /s/ Deborah C. Chantler
---------------------------------------
Notary Public, State of Illinois
INSTRUCTIONS FOR FILING ASSUMED NAME CERTIFICATE
1. A corporation, limited liability company, limited partnership or registered
limited liability partnership, which regularly conducts business or renders
a professional service in this state under a name other than the name
contained in its articles of incorporation, articles or organization,
certificate of limited partnership or application, must file an assumed
name certificate with the secretary of state and with the appropriate
county clerk in accordance with section 36.11 of the Texas Business and
Commerce Code.
2. The information provided in paragraph 6 as regards the registered agent and
registered office address in Texas must match the information on file in
this office. To verify the information on file with this office, you may
contact our corporate information unit at (512) 463-5555. Forms to change
the registered agent/office are available from this office should you
require to update this information.
3. A certificate executed and acknowledged by an attorney-in-fact shall
include a statement that the attorney-in-fact has been duly authorized in
writing by his principal to execute and acknowledge the same.
4. For purposes of filing with the secretary of state, the assumed name
registrant should submit in originally executed assumed name certificate
accompanied by the filing fee of $25 to the Secretary of State, Statutory
Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas
78711-3697. The phone number is (512) 463-5582, TDD: (800) 735-2989, FAX:
(512) 463-5709.
5. All assumed name certificates to be filed with the county clerk must be
forwarded directly to the appropriate county clerk by the assumed name
registrant.
6. Whenever an event occurs that cause the information in the assumed name
certificate to become materially misleading (eg. change of registered
agent office or a change of name), a new certificate must be filed within
60 days after the occurrence of the events which necessitate the filing.
7. A registrant that ceases to transact business or render professional
services under an assumed name for which a certificate has been filed may
file an abandonment of use pursuant to the Texas Business and Commerce
Code, (S) 36.14. Forms for this purpose are available from this office.
<PAGE>
[STAMP APPEARS HERE]
OFFICE OF THE CORPORATIONS SECTION
SECRETARY OF STATE P.O. Box 13697
Austin, Texas 78711-3697
STATEMENT OF CHANGE OF REGISTERED OFFICE OR
REGISTERED AGENT OR BOTH BY A CORPORATION
LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP
1. The name of the entity is Hemo Dialysis of Amarillo L.L.C.
The entity's charter/certificate of authority/file number is 7009101-22
2. The registered office address as PRESENTLY shown in the records of the
Texas secretary of state is: 1900 S. Coulter, Suite E, Amarillo, TX 79106.
3. A. X The address of the NEW registered office is: (Please provide street
---
address, city, state and zip code. The address must be in Texas.)
c/o C T CORPORATION SYSTEM 350 N. St. Paul St. Dallas TX 75201.
OR B.___ The registered office address will not change.
4. The name of the registered agent as PRESENTLY shown in the records of the
Texas secretary of state is George Maliha, M.D.
5. A. X The name of the NEW registered agent is C T CORPORATION SYSTEM.
---
OR B.___ The registered agent will not change.
6. Following the changes shown above, the address of the registered office and
the address of the office of the registered agent will continue to be
identical, as required by law.
7. The changes shown above were authorized by:
Business Corporations may select A or B Limited Liability Companies
may select D or E
Non-Profit Corporations may select A, B, Limited Partnerships select F
or C
A.___ The board of directors; OR
B.___ An officer of the corporation so authorized by the board of
directors; OR
C.___ The members of the corporation in whom management of the corporation
is vested pursuant to article 2.14C of the Texas Non-Profit
Corporation Act.
D. X Its members
---
E.___ Its managers
F.___ The limited partnership
/s/ John B. Bourke
--------------------------------------
(Authorized Officer of Corporation)
(Authorized Member or Manager of LLC)
(General Partner of Limited
Partnership)
<PAGE>
EXHIBIT 3.18
REGULATIONS
OF
HEMO DIALYSIS OF AMARILLO, L.L.C.
A Texas Limited Liability Company
Dated as of December 5, 1994
<PAGE>
REGULATIONS
OF
HEMO DIALYSIS OF AMARILLO, L.L.C.
A Texas Limited Liability Company
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C>
1.01 Definitions
1.02 Construction
ARTICLE II
ORGANIZATION
2.01 Formation
2.02 Name
2.03 Registered Office; Registered Agent; Principal Office in the United
States; Other Officer
2.04 Purposes
2.05 Foreign Qualification
2.06 Term
2.07 Mergers and Exchanges
2.08 No State-Law Partnership
ARTICLE III
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 Initial Members
3.02 Representations and Warranties
3.03 Restrictions on the Disposition of an Interest
3.04 Additional Members
3.05 Interests in a Member
3.06 Information
3.07 Liability to Third Parties
3.08 Withdrawal
3.09 Lack of Authority
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.01 Initial Contributions
4.02 Subsequent Contributions
4.03 Failure to Contribute
4.04 Return of Contributions
4.05 Advances by Members
4.06 Capital Accounts
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.01 Allocations
5.02 Distributions
ARTICLE VI
MANAGERS
6.01 Management by Managers;
6.02 Actions by Managers; Committees; Delegation of Authority and Duties
6.03 Number and Term of Office
6.04 Vacancies; removal; Resignation
6.05 Meetings
6.06 Approval or Ratification of Acts or Contracts by Members
6.07 Action by Written Consent or Telephone Conference
6.08 Compensation
6.09 Conflicts of Interest
6.10 Officers
ARTICLE VII
MEETINGS OF MEMBERS
7.01 Meetings
7.02 Voting List
7.03 Proxies
7.04 Conduct of Meeting
7.05 Action by Written Consent or Telephone Conference
ARTICLE VIII
INDEMNIFICATION
8.01 Right to Indemnification
8.02 Advance Payment
8.03 Indemnification of Officers, Employees and Agents
8.04 Appearance as a Witness
8.05 Nonexclusivity of Rights
8.06 Insurance
8.07 Member Notification
8.08 Savings Clause
ARTICLE IX
TAXES
9.01 Tax Returns
9.02 Tax Elections
9.03 "Tax Matters Partner"
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE X
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
10.01 Maintenance of Books
10.02 Reports
10.03 Accounts
ARTICLE XI
BANKRUPTCY OF A MEMBER
11.01 Bankrupt Members
ARTICLE XII
DISSOLUTION, LIQUIDATION, AND TERMINATION
12.01 Dissolution
12.02 Liquidation and Termination
12.03 Deficit Capital Accounts
12.04 Articles of Dissolution
ARTICLE XIII
GENERAL PROVISIONS
13.01 Offset
13.02 Notices
13.03 Entire Agreement; Supersedure
13.04 Effect of Waiver or Consent
13.05 Amendment or Modification
13.06 Binding Effect
13.07 Governing Law; Severability
13.08 Further Assurances
13.09 Waiver of Certain Rights
13.10 Indemnification
13.11 Notice to Members of Provisions of this Agreement
13.12 Counterparts
</TABLE>
EXHIBIT A
Names, Addresses, Commitments and Sharing Ratios of Initial Members
<PAGE>
REGULATIONS
OF
HEMO DIALYSIS AMARILLO, L.L.C.
A Texas Limited Liability Company
These REGULATIONS OF HEMO DIALYSIS OF AMARILLO, L.L.C., (these
"Regulations"), dated as of December 5, 1994, are (a) adopted by the Members (as
defined below) and (b) executed and agreed to, for good and valuable
consideration, by the Members (as defined below).
ARTICLE I
DEFINITIONS
1.01 Definitions. As used in these Regulations, the following terms have
the following meanings:
"Act" means the Texas Limited Liability Company Act and any successor
statute, as amended from time to time.
"Articles" has the meaning given that term in Section 2.01.
"Bankrupt Member" means (except to the extent a Required Interest
consents otherwise) any Member (a) that (i) makes a general assignment
for the benefit of creditors; (ii) files a voluntary bankruptcy
petition; (iii) becomes the subject of an order for relief or is
declared insolvent in any federal or state bankruptcy or insolvency
proceedings; (iv) files a petition or answer seeking for the Member a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law; (v) files an answer or
other pleading admitting or failing to contest the material allegations
of a petition filed against the Member in a proceeding of the type
described in subclauses (i) through (iv) of this clause (a); or (vi)
seeks, consents to, or acquiesces in the appointment of a trustee,
receiver, or liquidator of the Member's or of all or any substantial
part of the Member's properties; or (b) against which, a proceeding
seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any law has been
commenced and 120 days have expired without dismissal thereof or with
respect to which, without the Member's consent or acquiescence, a
trustee, receiver, or liquidator of the Member or of all or any
substantial part of the Member's properties has been appointed and 90
days have expired without the appointment's having been vacated or
stayed, or 90 days have expired after the date
1
<PAGE>
of expiration of a stay, if the appointment has not previously been
vacated.
"Business day" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the State of Texas are
closed.
"Capital contribution" means any contribution by a Member to the
capital of the Company.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Commitment" means, subject in each case to adjustments on account of
Dispositions of Membership Interests permitted by these Regulations, (a) in
the case of a Member executing these Regulations as of the date of these
Regulations or a Person acquiring that Membership Interest, the amount
specified for that Member as its Commitment on Exhibit A, and (b) in the
case of a Membership Interest issued pursuant to Section 3.04, the
Commitment established pursuant thereto.
"Company" means HEMO DIALYSIS OF AMARILLO, L.L.C., a Texas limited
liability company.
"Default interest rate" means a rate per annum equal to the lesser of
(a) 10% plus a varying rate per annum that is equal to the interest rate
publicly quoted by Amarillo National Bank, Amarillo, Texas, from time to
time as its prime commercial or similar reference interest rate, with
adjustments in that varying rate to be made on the same date as any change
in that rate, or (b) the maximum rate permitted by applicable law.
"Delinquent Member" has the meaning given that term in Section
4.03(a).
"Dispose," "Disposing," or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or
other disposition or encumbrance (including, without limitation, by
operation of law), or the acts thereof.
"General interest rate" means a rate per annum equal to the lesser of
(a) varying rate per annum that is equal to the interest rate publicly
quoted by Amarillo National Bank, Amarillo, Texas, from time to time as its
prime commercial or similar reference interest rate, with adjustments in
that varying rate to be made on the same date as any change in that rate,
or (b) the maximum rate permitted by applicable law.
2
<PAGE>
"Lending Member" has the meaning given that term in Section
4.03(a)(ii).
"Manager" means any Person named in the Articles as an initial manager
of the Company and any Person hereafter elected as a manager of the Company
as provided in these Regulations, but does not include any Person who has
ceased to be a manager of the Company.
"Member" means any Person or corporation executing these Regulations
as of the date of these Regulations as a member or hereafter admitted to
the Company as a member as provided in these Regulations, but does not
include any Person who has ceased to be a member in the Company.
"Membership interest" means the interest of a Member in the Company,
including, without limitation, rights to distributions (liquidating or
otherwise), allocations, information, and to consent or approve.
"Permitted transferee" has the meaning given that term in Section
3.03(b).
"Person" has the meaning given that term in Article 1.02(A)(4) of the
Act.
"Proceeding" has the meaning given that term in Section 8.01.
"Professional service" means any type of personal service that
requires as a condition precedent to the rendering of the service the
obtaining of a license, permit, certificate of registration rendered by a
doctor, physician, or surgeon.
"Limited Liability Company" means a limited liability company that is
organized under this Act for the sole and specific purpose of rendering
service.
"Regulations" has the meaning given that term in the introductory
paragraph.
"Required Interest" means one or more Members having among them more
than 75% of the Sharing Ratios of all Members.
"Sharing Ratio" with respect to any Member means a fraction (expressed
as a percentage), the numerator of which is that Member's Commitment and
the denominator of which is the sum of the Commitments of all Members.
3
<PAGE>
"TBCA" means the Texas Business Corporation Act and any successor
statute, as amended from time to time.
Other terms defined herein have the meanings so given them.
1.02 Construction. Whenever the context requires, the gender of all
words used in these Regulations includes the masculine, feminine, and neuter.
All reference to Articles and Sections refer to articles and sections of these
Regulations, and all references to Exhibits are to Exhibits attached hereto,
each of which is made a part hereof for all purposes.
ARTICLE II
ORGANIZATION
2.01 Formation. The Company has been organized as Texas limited
liability company by the filing of Articles of Organization (the "Articles")
under and pursuant to the Act and the issuance of a certificate of organization
for the Company by the Secretary of State of Texas.
2.02 Name. The name of the Company is "HEMO DIALYSIS OF AMARILLO,
L.L.C." and all Company business must be conducted in that name or such other
names that comply with applicable law as the Managers may select from time to
time.
2.03 Registered Office; Registered Agent; Principal Office in the
United States; Other Offices. The registered office of the Company required by
the Act to be maintained in the State of Texas shall be the office of the
initial registered agent named in the Articles or such other office (which need
not be a place of business of the Company) as the Members may designate from
time to time in the manner provided by law. The registered agent of the Company
in the State of Texas shall be the initial registered agent named in the
Articles or such other Person or Persons as the Managers may designate from time
to time in the manner provided by law. The principal office of the Company in
the United States shall be at such place as the Managers may designate from time
to time, which need not be in the State of Texas, and the Company shall maintain
records there as required by Article 2.22 of the Act and shall keep the street
address of such principal office at the registered office of the Company in the
State of Texas. The Company may have such other offices as the Managers may
designate from time to time.
2.04 Purposes. The purposes of the Company are those set forth in the
Articles.
4
<PAGE>
2.05 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than Texas, the Managers shall cause the Company to
comply, to the extent procedures are available and those matters are reasonably
within the control of the Managers, with all requirements necessary to qualify
the Company as a foreign limited liability company in that jurisdiction. At the
request of the Managers, each Member shall execute, acknowledge, swear to, and
deliver all certificates and other instruments conforming with these Regulations
that are necessary or appropriate to qualify, continue, and terminate the
Company as a foreign limited liability company in all such jurisdictions in
which the Company may conduct business.
2.06 Term. The Company commenced on the date the Secretary of State of
Texas issued a certificate of organization for the Company and shall continue in
existence for the period fixed in the Articles for the duration of the Company,
or such earlier time as these Regulations may specify.
2.07 No State-Law Partnership. The Members intend that the Company not
be a partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member or Manager be a partner or joint venturer of any
other Member or Manager, for any purposes other than federal and state tax
purposes, and these Regulations may not be construed to suggest otherwise.
ARTICLE III
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 Initial Members. The initial members of the Company are the Persons
executing these Regulations as of the date of these Regulations as members, each
of which is admitted to the Company as a member effective contemporaneously with
the execution by such Person of these Regulations.
3.02 Representations and Warranties. Each Member hereby represents and
warrants to the Company and each other Member that (a) if that Member is a
corporation, it is duly organized, validly existing, and in good standing under
the law of the state of its incorporation and is duly qualified and in good
standing as a foreign corporation in the jurisdiction of its principal place of
business (if not incorporated therein); (b) if that Member is a limited
liability company, it is duly organized, validly existing, and (if applicable)
in good standing under the law of the state of its organization and is duly
qualified and (if applicable) in good standing as a foreign limited liability
company in the jurisdiction of its principal place of business (if not organized
therein); (c) if that Member is a partnership, trust, or other entity, it is
duly formed, validly existing, and (if applicable) in good standing under the
law of the state of its formation, and if required by law
5
<PAGE>
is duly qualified to do business and (if applicable) in good standing in the
jurisdiction of its principal place of business (if not formed therein), and the
representations and warranties in clause (a), (b) or (c), as applicable, are
true and correct with respect to each partner (other than limited partners),
trustee, or other member thereof; (d) that Member has full corporate, limited
liability company, partnership, trust, or other applicable power and authority
to execute and agree to these Regulations and to perform its obligations
hereunder and all necessary actions by the board of directors, shareholders,
managers, members, partners, trustees, beneficiaries, or other Persons necessary
for the due authorization, execution, delivery, and performance of these
Regulations by that Member have been duly taken; (e) that Member has duly
executed and delivered these Regulations; and (f) that Member's authorization,
execution, delivery, and performance of these Regulations do not conflict with
any other agreement or arrangement to which that Member is a party or by which
it is bound.
3.02(a) Restrictions on the Disposition of an Interest. (a) Except as
specifically provided in this Section 3.02, a Disposition of an interest in the
Company may not be effected without the consent of a Required Interest. Any
attempted Disposition by a Person of an interest or right, or any part thereof,
in or in respect of the Company other than in accordance with this Section 3.02
shall be, and is hereby declared, null and void ab initio.
(b) Notwithstanding the provisions of Section 3.02(a), the interest of
any Member in the Company may be transferred without the consent of the Members
if (i) the transfer occurs by reason of or incident to the death, dissolution,
divorce, liquidation, merger or termination of the transferor Member, and (ii)
the transferee is a Permitted Transferee. A "Permitted Transferee" is any member
of such Member's immediate family, or a trust, corporation, limited liability
company, or partnership controlled by such Member or members of such Member's
immediate family, or another Person controlling, controlled by, or under common
control with such Member.
(c) Subject to the provisions of Section 3.02(d) and (e), (i) a Person
to whom an interest in the Company is transferred has the right to be admitted
to the Company as a Member with the Sharing Ratio and the Commitment so
transferred to such Person, If (A) the Member making such transfer grants the
transferee the right to be so admitted, and (b) such transfer is consented to in
accordance with Section 3.02(a); (ii) a Permitted Transferee under the
circumstances described in Section 3.02(b) has the right to be admitted to the
Company as a Member with the Sharing Ratio and the Commitment so transferred to
the Permitted Transferee; and (iii) the Company or (with the permission of the
Company, which may be withheld in its sole discretion) a Lending Member may
grant the purchaser of a Delinquent Member's interest in the Company at a
6
<PAGE>
foreclosure of the security interest therein granted pursuant to Section 4.03(b)
the right to be admitted to the Company as a Member with such Sharing Ratio and
such Commitment (no greater than the Sharing Ratio and the Commitment of the
Member effecting such Disposition prior thereto) as they may agree.
(d) The Company may not recognize for any purpose any purported
Disposition of all or part of a Membership Interest unless and until the other
applicable provisions of this Section 3.02 have been satisfied and the Managers
have received, on behalf of the Company, a document (i) executed by both the
Member effecting the Disposition (or if the transfer is on account of the death,
incapacity, or liquidation of the transferor, its representative) and the Person
to which the Membership Interest or part thereof is Disposed, (ii) including the
notice address of any Person to be admitted to the Company as a Member and its
agreement to be bound by these Regulations in respect of the Membership Interest
or part thereof being obtained, (iii) setting forth the Sharing Ratios and the
Commitments after the Disposition of the Member effecting the Disposition and
the Person to which the Membership Interest or part thereof is Disposed (which
together must total the Sharing Ratio and the Commitment of the Member effecting
the Disposition before the Disposition), and (iv) containing a representation
and warranty that the Disposition was made in accordance with all applicable
laws and regulations (including securities laws) and, if the Person to which the
Membership Interest or part thereof is Disposed is to be admitted to the
Company, its representation and warranty that the representations and warranties
in Section 3.02 are true and correct with respect to that Person. Each
Disposition and, if applicable, admission complying with the provisions of this
Section 3.02(d) is effective as of the first day of the calendar month
immediately succeeding the month in which the Managers receive the notification
of Disposition and the other requirements of this Section 3.02 have been met.
(e) For the right of a Member to dispose Interest or any part thereof or
of any Person admitted to the Company in connection therewith to exist or be
exercised, (i) either (A) the Membership Interest or part thereof subject to the
Disposition or admission must be registered under the Securities Act of 1933, as
amended, and any applicable state securities laws or, (B) the Company must
receive a favorable opinion of the Company's legal counsel or of other legal
counsel acceptable to the Managers to the effect that the Disposition or
admission is exempt from registration under those laws and (ii) the Company must
receive a favorable opinion of the Company's legal counsel or of other legal
counsel acceptable to the Managers to the effect that the Disposition or
admission, when added to the total of allother sales, assignments, or other
Dispositions within the preceding 12 months, would not result in the Company's
being considered to have terminated within the
7
<PAGE>
meaning of the Code. The Managers, however, may waive the requirements of this
Section 302(e).
(f) Contemporaneous with this execution of these Regulations, these
members have executed an Agreement including Interim Transfer Restriction and
BUY-OUT AGREEMENT and to the extent that these Regulations are inconsistent with
such Agreement, the provisions of such Agreement will govern and override these
Regulations.
3.03 Additional Members. Additional Persons may be admitted to the
Company as Members and Membership Interests may be created and issued to those
Persons and to existing Members at the direction of a Required Interest, on such
terms and conditions as the Managers may determine at the time of admission.
The terms of admission or issuance must specify the Sharing Ratios and the
Commitments applicable thereto and may provide for the creation of different
classes or groups of Members and having different rights, powers, and duties.
The Managers shall reflect the creation of any new class or group in an
amendment to these Regulations indicating the different rights, powers, and
duties, and such an amendment need be executed only by the Managers. Any such
admission also must comply with the provisions of Section 3.02(d)(i) and (ii)
and is effective only after the new Member has executed and delivered to the
Managers a document including the new Member's notice address, its agreement to
be bound by these Regulations, and its representation and warranty that the
representation and warranties in Section 3.02 are true and correct with respect
to the new Member. The provisions of this Section 3.03 shall not apply to
Dispositions of Membership Interests.
3.04 Information. (a) In addition to the other rights specifically set
forth in these Regulations, each Member is entitled to all information to which
that Member is entitled to have access pursuant to Article 2.22 of the Act under
the circumstances and subject to the conditions therein stated. The Members
agree, however, that the Managers from time to time may determine, due to
contractual obligations, business concerns, or other considerations, that
certain information regarding the business, affairs, properties, and financial
condition of the business, affairs, properties, and financial condition of the
Company should be kept confidential and not provided to some or all other
Members, and that it is not just or reasonable for those Members or assignees or
representatives thereof to examine or copy that information.
(b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is confidential, the release of which may be damaging to the Company
or Persons with which it does business. Each Member shall hold in strict
confidence any information it receives regarding the Company that is identified
as being confidential (and if that information is
8
<PAGE>
provided in writing, that is so marked) and may not disclose it to any Person
other than another Member or a Manager, except for disclosures (i) compelled by
law (but the Member must notify the Managers promptly of any request for that
information, before disclosing it if practicable), (ii) to advisers or
representatives of the Member or Persons to which that Member's Membership
Interest may be Disposed as permitted by these Regulations, but only if the
recipients have agreed to be bound by the provisions of this Section 3.04(b), or
(iii) of information that Member also has received from a source independent of
the Company that the Member reasonably believes obtained that information
without breach of any obligation of confidentiality. The Members acknowledge
that breach of the provisions of this Section 3.04(b) may cause irreparable
injury to the Company for which monetary damages are inadequate, difficult to
compute, or both. Accordingly, the Members agree that the provisions of this
Section 3.04(b) may be enforced by specific performance.
3.05 Liability to Third Parties. No Member or Manager shall be liable for
the debts, obligations or liabilities of the Company, including under a judgment
decree or order of a court.
3.06 Withdrawal. A Member has the right or power to withdraw from the
Company as a member.
3.07 Lack of Authority. No Member (other than a Manager or an officer) has
the authority or power to act for or on behalf of the Company to do any act that
would be binding on the Company, or to incur any expenditures on behalf of the
Company.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.01 Initial Contributions. Contemporaneously with the execution by such
Member of these Regulations, each Member shall make the Capital Contributions
described for that Member in Exhibit A.
4.02 Subsequent Contributions. Without creating any rights in favor of any
third party, each Member shall contribute to the Company, in cash, on or before
the date specified as hereinafter described, that Member's Sharing Ratio of all
monies that in the judgment of the Managers are necessary to enable the Company
to cause the Assets of the Company to be properly operated and maintained and to
discharge its costs, expenses, obligations, and liabilities. The Managers shall
notify each Member of the need for Capital Contributions pursuant to this
Section 4.02 when appropriate, which notice must include a statement in
reasonable detail of the proposed uses of the Capital Contributions and a date
(which date may be no earlier than the fifth Business Day following each
Member's receipt of its notice) before which the Capital
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Contributions must be made. Notices for Capital Contributions must be made to
all Members in accordance with their Sharing Ratios.
4.03 Failure to Contribute. (a) If a Member does not contribute by the
time required, all or any portion of a Capital Contribution that Member is
required to make as provided in these Regulations, the Company may exercise, on
notice to that Member (the "Delinquent Member"), one or more of the following
remedies:
(i) taking such action (including, without limitation, court
proceedings) as the Managers may deem appropriate to obtain payment by the
Delinquent Member of the portion of the Delinquent Member's Capital
Contribution that is in default, together with interest thereon at the
Default Interest Rate from the date that the Capital Contribution was due
until the date that it is made, all at the cost and expense of the
Delinquent Member;
(ii) permitting the other Members in proportion to their Sharing
Ratios or in such other percentages as they may agree (the "Lending
Member," whether one or more), to advance the portion of the Delinquent
Member's Capital Contribution that is in default, with the following
results:
(A) the sum advanced constitutes a loan from the Lending Member
to the Delinquent Member and a Capital Contribution of that sum to the
Company by the Delinquent Member pursuant to the applicable provisions
of these Regulations,
(B) the principal balance of the loan and all accrued unpaid
interest thereon is due and payable in whole on the tenth day after
written demand therefor by the Lending Member to the Delinquent
Member,
(C) the amount lent bears interest at the Default Interest Rate
from the day that the advance is deemed made until the date that the
loan, together with all interest accrued on it, is repaid to the
Lending Member,
(D) all distributions from the Company that otherwise would be
made to the Delinquent Member (whether before or after dissolution of
the Company) instead shall be paid to the Lending Member until the
loan and all interest accrued on it have been paid in full to the
Lending Member (with payments being applied first to accrued and
unpaid interest and then to principal),
(E) the payment of the loan and interest accrued on it is
secured by a security interest in the Delinquent Member's Membership
Interest, as more fully set forth in Section 4.03(b), and
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(F) the Lending Member has the right, in addition to the other
rights and remedies granted to it pursuant to these Regulations or
available to it at law or in equity, to take any action (including,
without limitation, court proceedings) that the Lending Member may
deem appropriate to obtain payment by the Delinquent Member of the
loan and all accrued and unpaid interest on it, at the cost and
expense of the Delinquent Member;
(iii) exercising the rights of a secured party under the Uniform
Commercial Code of the State of Texas, as more fully set forth in Section
4.03(b); or
(iv) exercising any other rights and remedies available at law or in
equity.
(b) Each Member grants to the Company, and to each Lending Member with
respect to any loans made by the Lending Member to that Member as a Delinquent
Member pursuant to Section 4.03(a)(ii), as security, equally and ratably, for
the payment of all Capital Contributions that Member has agreed to made and the
payment of all loans and interest accrued on them made by Lending Members to
that Member as a Delinquent Member pursuant to Section 4.03(a) (ii), a security
interest in and a general lien on its Membership Interest and the proceeds
thereof, all under the Uniform Commercial Code of the State of Texas. On any
default in the payment of a Capital Contribution or in the payment of such a
loan or interest accrued on it, the Company or the Lending Member, as
applicable, is entitled to all the rights and remedies of a secured party under
the Uniform Commercial Code of the State of Texas with respect to the security
interest granted in this Section 4.03(b). Each Member shall execute and deliver
to the Company and the other Members all financing statements and other
instruments that the Managers or the Lending Member, as applicable, may request
to effectuate and carry out the preceding provisions of this Section 4.03(b). At
the option of the Managers or a Lending Member, these Regulations or a carbon,
photographic, or other copy hereof may serve as a financing statement.
4.04 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is
not required to contribute or to lend any cash or property to the Company to
enable the Company to return any Member's Capital Contributions.
4.05. Advances by Members. If the Company does not have sufficient cash to
pay its obligations, any Member(s) that may agree to do so with the Managers'
consent may advance all or part of the needed funds to or on behalf of the
Company. An advance
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described in this Section 4.05 constitutes a loan from the Member to the
Company, bears interest at the General Interest Rate from the date of the
advance until the date of payment, and is not a Capital Contribution.
4.06 Capital Accounts. A capital account shall be established and
maintained for each Member. Each Member's capital account (a) shall be
increased by (i) the amount of money contributed by that Member to the Company,
(ii) the fair market value of property contributed by that Member to the Company
(net of liabilities secured by the contributed property that the Company is
considered to assume or take subject to under Section 752 of the Code), and
(iii) allocations to that Member of Company income and gain (or items thereof),
including income and gain exempt from tax and income and gain described in
Treas. Reg. (S) 1.704-1(b)(2)(iv)(g), but excluding income and gain described
in TReas. Reg. (S) 1.704-1(b)(4)(i), and (b) shall be decreased by (i) the
amount of money distributed to that Member by the Company, (ii) the fair market
value of property distributed to that Member by the Company (net of liabilities
secured by the distributed property that the Member is considered to assume or
take subject to under Section 752 of the Code), (iii) allocations to that Member
of expenditures of the Company described in Section 705(a)(2)(B) of the Code,
and (iv) allocations of Company loss and deduction (or items thereof), including
loss and deduction described in Treas. Reg. (S) 1.704-1(b)(2)(iv)(g), but
excluding items described in clause (b)(iii) above and loss or deduction
described in Treas. Reg. (S) 1.704-1(b)(4)(i) or (S) 1.704-1(b)(4)(iii). The
Members' capital accounts also shall be maintained and adjusted as permitted by
the provisions of Treas. Reg. (S) 1.704-1(b)(2)(iv)(f) and as required by the
other provisions of Treas. Reg. (S)(S) 1.704-1(b)(2)(iv) and 1.704-1(b)(4),
including adjustments to reflect the allocations to the Members of depreciation,
depletion, amortization, and gain or loss as computed for book purposes rather
than the allocation of the corresponding items as computed for tax purposes, as
required by Treas. Reg. (S) 1.704-1(b)(2)(iv)(g). A Member that has more than
one Membership Interest shall have a single capital account that reflects all
its Membership Interests, regardless of the class of Membership Interests owned
by that Member and regardless of the time or manner in which those Membership
Interests were acquired. On the transfer of all or part of a Membership
Interest, the capital account of the transferor that is attributable to the
transferred Membership Interest or part thereof shall carry over to the
transferee Member in accordance with the provisions of Treas. Reg. (S) 1.704-
1(b)(2)(iv)(1).
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ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.01 Allocations. (a) Except as may be required by Section 704(c) of the
Code and Treas. Reg. (S) 1.704-1(b)(2)(iv)(f)(4), all items of income, gain,
loss deduction, and credit of the Company shall be allocated among the Members
in accordance with their Sharing Ratios.
(b) All items of income, gain, loss, deduction, and credit allocable to
any Membership Interest that may have been transferred shall be allocated
between the transferor and the transferee based on the portion of the calendar
year during which each was recognized as owning that Membership Interest,
without regard to the results of Company operations during any particular
portion of that calendar year and without regard to whether cash distributions
were made to the transferor or the transferee during that calendar year;
provided, however, that this allocation must be made in accordance with a method
permissible under Section 706 of the Code and the regulations thereunder.
5.02 Distributions. (a) From time to time (but at least once each
calendar quarter) the Managers shall determine in their reasonable judgment to
what extent (if any) the Company's cash on hand exceeds its current and
anticipated needs, including, without limitation, for operating expenses, debt
service, acquisitions, and a reasonable contingency reserve. If such an excess
exists, the Managers shall cause the Company to distribute to the Members, in
accordance with their Sharing Ratios, an amount in cash equal to that excess.
(b) From time to time, the Managers also may cause property of the
Company other than cash to be distributed to the Members, which distribution
must be made in accordance with their Sharing Ratios and may be made subject to
existing liabilities and obligations. Immediately prior to such a distribution,
the capital accounts of the Members shall be adjusted as provided in Treas. Reg.
(S) 1.704-1(b)(2)(iv)(f).
ARTICLE VI
MANAGERS
6.01 Management by Managers. (a) Except for situations in which the
approval of the Members is required by these Regulations or by non-waivable
provisions of applicable law, and subject to the provisions of Section 6.02, (i)
the powers of the Company shall be exercised by or under the authority of, and
the business and affairs of the Company shall be managed under the direction of,
the Managers; and (ii) the Managers may make all decisions and take all actions
for the Company not otherwise provided for in these Regulations, including,
without limitation, the following:
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(i) entering into, making, and performing contracts, agreements,
and other undertakings binding the Company that may be necessary,
appropriate, or advisable in furtherance of the purposes of the Company and
making all decisions and waivers thereunder;
(ii) opening and maintaining bank and investment accounts and
arrangements, drawing checks and other orders for the payment of money, and
designating individuals with authority to sign or give instructions with
respect to those accounts and arrangements;
(iii) maintaining the assets of the Company in good order;
(iv) collecting sums due the Company;
(v) to the extent that funds of the Company are available therefor,
paying debts and obligations of the Company;
(vi) acquiring, utilizing for Company purposes, and Disposing of any
asset of the Company;
(vii) borrowing money or otherwise committing the credit of the
Company for Company activities and voluntary prepayments or extensions of
debt;
(viii) selecting, removing, and changing the authority and
responsibility of lawyers, accountants, and other advisers and consultants;
(ix) obtaining insurance for the Company;
(x) determining distributions of Company cash and other property as
provided in Section 5.02;
(xi) establishing a seal for the Company; and
(b) Notwithstanding the provisions of Section 6.01(a), the Managers may
not cause the Company to do any of the following without complying with the
applicable requirements set forth below:
(i) sell, lease, exchange or otherwise dispose of (other than by
way of a pledge, mortgage, deed of trust or trust indenture) all or
substantially all the Company's property and assets (with or without good
will), other than in the usual and regular course of the Company's
business, without complying with the applicable procedures set forth in the
Act and the TBCA, including, without limitation, the requirement in Article
5.10 of the TBCA regarding approval
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by the Members (unless such provision is rendered inapplicable by another
provision of applicable law);
(ii) amend or restate the Articles, without complying with the
applicable procedures set forth in the Act and the TBCA, including, without
limitation, the requirement in Article 4.02 of the TBCA regarding approval
by the Members (unless such provision is rendered inapplicable by another
provision of applicable law); and
6.02 Actions by Managers; Committees; Delegation of Authority and Duties.
(a) In managing the business and affairs of the Company and exercising its
powers, the Managers shall act (i) collectively through meetings and written
consents pursuant to Sections 6.05 and 6.07; (ii) through committees pursuant to
Section 6.02(b); and (iii) through Managers to whom authority and duties have
been delegated pursuant to Section 6.02(c).
(b) The Managers may, from time to time, designate one or more committees,
each of which shall be comprised of one or more Managers, any such committee, to
the extent provided in such resolution or in the Articles or these Regulations,
shall have and may exercise all of the authority of the Managers, subject to the
limitations set forth in the Act and the TBCA. At every meeting of any such
committee, the presence of a majority of all the members thereof shall
constitute a quorum, and the affirmative vote of a majority of the members
present shall be necessary for the adoption of any resolution. The Managers may
dissolve any committee at any time, unless otherwise provided in the Articles or
these Regulations.
(c) The Managers may, from time to time, delegate to one or more Managers
such authority and duties as the Managers may deem advisable. In addition, the
Managers may assign titles (including, without limitation, president, vice
president, secretary, assistant secretary, treasurer and assistant treasurer) to
any such Manager. Unless the Managers decide otherwise, if the title is one
commonly used for officers of a business corporation formed under the TBCA, the
assignment of such title shall constitute the delegation to such Manager of the
authority and duties that are normally associated with that office, subject to
any specific delegation of authority and duties made pursuant to the first
sentence of this Section 6.02(c). Any number of titles may be held by the same
Manager. Any delegation pursuant to this Section 6.02(c) may be revoked at any
time by the Managers.
(d) Any Person dealing with the Company, other than a Member, may rely on
the authority of any Manager or officer in taking any action in the name of the
Company without inquiry into the provisions of these Regulations or compliance
herewith, regardless of whether that action actually is taken in accordance with
the provisions of these Regulations.
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6.03 Number and Term of Office. The number of Managers of the Company shall
be determined from time to time by resolution of the Members; provided, however,
that no decrease in the number of Managers that would have the effect of
shortening the term of an incumbent Manager may be made by the Managers. If the
Managers make no such determination, the number of Managers shall be the number
set forth in the Articles as the number of Managers constituting the initial
Managers. Each Manager shall hold office for the term for which he is elected
and thereafter until his successor shall have been elected and qualified, or
until his earlier death, resignation or removal. Unless otherwise provided in
the Articles, Managers need not be Members or residents of the State of Texas.
6.04 Vacancies; Removal; Resignation. Any Manager position to be filled by
reason of an increase in the number of Managers may be filled by election at an
annual or special meeting of Members called for that purpose. Any vacancy
occurring in the Managers other than by reason of an increase in the number of
Managers may be filled (a) by election at an annual or special meeting of the
Members called for that purpose or (b) by the affirmative vote of a majority of
the remaining Managers though less than a quorum of the Managers. A Manager
elected to fill a vacancy occurring other than by reason of an increase in the
number of Managers shall be elected for the unexpired term of his predecessor
in office. At any meeting of Members at which a quorum of Members is present
called expressly for that purpose, or pursuant to a written consent adopted
pursuant to these Regulations, any Manager may be removed, with or without
cause, by a Required Interest. Any Manager may resign at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or if no time be specified, at the time of its receipt by the remaining
Managers. The acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
6.05 Meetings. (a) Unless otherwise required by law or provided in the
Articles or these Regulations, a majority of the total number of Managers fixed
by, or in the manner provided in, the Articles or these Regulations shall
constitute a quorum for the transaction of business of the Managers, and the act
of a majority of the Managers present at a meeting at which a quorum is present
shall be the act of the Managers. A Manager who is present at a meeting of the
Managers at which action on any Company matter is taken shall be presumed to
have assented to the action unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the Person acting as secretary of the meeting before the adjournment thereof or
shall deliver such dissent to the Company immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Manager who voted in
favor of such action.
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(b) Meetings of the Managers may be held at such place or places as
shall be determined from time to time by resolution of the Managers. At all
meetings of the Managers, business shall be transacted in such order as shall
from time to time be determined by resolution of the Managers. Attendance of a
Manager at a meeting shall constitute a waiver of notice of such meeting, except
where a Manager attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
(c) In connection with any annual meeting of Members at which Managers
were elected, the Managers may, if a quorum is present, hold its first meeting
for the transaction of business immediately after and at the same place as such
annual meeting of the Members. Notice of such meeting at such time and place
shall not be required.
(d) Regular meetings of the Managers shall be held at such times and
places as shall be designated from time to time by resolution of the Managers.
Notice of such regular meetings shall not be required.
(e) Special meetings of the Managers may be called by any Manager on at
least 24 hours notice to each other Manager. Such notice need not state the
purpose or purposes of, nor the business to be transacted at, such meeting,
except as may otherwise be required by law or provided for by the Articles or
these Regulations.
6.06 Approval or Ratification of Acts or Contracts by Members. The
Managers in their discretion may submit any act or contract for approval or
ratification at any annual meeting of the Members, or at any special meeting of
the Members called for the purpose of considering any such act or contract, and
any act or contract that shall be approved or be ratified by a Required Interest
shall be as valid and as biding upon the Company and upon all the Members as if
it shall have been approved or ratified by every Member of the Company.
6.07 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the TBCA, the Articles or these Regulations to
be taken at a meeting of the Managers or any committee designated by the
Managers may be taken without a meeting if a consent in writing, setting forth
the action to be taken, is signed by all the Managers or members of such
committee, as the case may be. Such consent shall have the same force and effect
as a unanimous vote at a meeting and may be stated as such in any document or
instrument filed with the Secretary of State of Texas, and the execution of such
consent shall constitute attendance or presence in person at a meeting of the
Managers or any such committee, as the case may be. Subject to the requirements
of the Act, the TBCA, the Articles or these
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Regulations for notice of meetings, unless otherwise restricted by the Articles,
Managers, or members of any committee designated by the Managers, may
participate in and hold a meeting of the Managers or any committee of Managers,
as the case may be, by means of a conference telephone or similar communications
equipment by means of which all Persons participating in the meeting can hear
each other, and participation in such meeting shall constitute attendance and
presence in person at such meeting, except where a Person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
6.08 Compensation. The Managers shall receive such compensation, if any,
for their services as may be designated from time to time by the Managers. In
addition, the Managers shall be entitled to be reimbursed for out-of-pocket
costs and expenses incurred in the course of their service hereunder, including
the portion of their overhead reasonably allocable to Company activities.
6.09 Conflicts of Interest. Subject to the other express provisions of
these Regulations, each Manager, Member and officer of the Company at any time
and from time to time may engage in and possess interests in other business
ventures of any and every type and description, independently or with others,
including ones in competition with the Company, with no obligation to offer to
the Company or any other Member, Manager or officer the right to participate
therein. The Company may transact business with any Manager, Member, officer or
Affiliate thereof, provided the terms of those transactions are no less
favorable than those the Company could obtain from unrelated third parties.
6.10 Officers. (a) The Managers may, from time to time, designate one or
more Persons to be officers of the Company. No officer need be a resident of the
State of Texas, a Member or a Manager. Any officers so designated shall have
such authority and perform such duties as the Managers may, from time to time,
delegate to them. The Managers may assign titles to particular officers. Unless
the Managers decide otherwise, if the title is one commonly used for officers of
a business corporation formed under the TBCA, the assignment of such title shall
constitute the delegation to such officer of the authority and duties that are
normally associated with that office, subject to (i) any specific delegation of
authority and duties made to such officer by the Managers pursuant to the third
sentence of this Section 6.10(b), or (ii) any delegation of authority and duties
made to one or more Managers pursuant to Section 6.02(a). Each officer shall
hold office until his successor shall be duly designated and shall qualify or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided. Any number of offices may be held by the same
Person. The salaries or other
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compensation, if any, of the officers and agents of the Company shall be fixed
from time to time by the Managers.
(b) Any officer may resign as such at any time. Such resignation shall be
made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Managers. The acceptance of
a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any officer may be removed as such, either with or
without cause, by the Managers whenever in their judgment the best interests of
the Company will be served thereby; provided, however, that such removal shall
be without prejudice to the contract rights, if any, of the Person so removed.
Designation of an officer shall not of itself crate contract rights. Any vacancy
occurring in any office of the Company (other than Manager) may be filled by the
Managers.
ARTICLE VII
MEETINGS OF MEMBERS
7.01 Meetings. (a) A quorum shall be present at a meeting of Members if the
holders of a Required Interest are represented at the meeting in person or by
proxy. With respect to any matter, other than a matter for which the
affirmative vote of the holders of a specified portion of the Sharing Ratios of
all Members entitled to vote is required by the Act, the affirmative vote of a
Required interest at a meeting of Members at which a quorum is present shall be
the act of the Members.
(b) All meetings of the Members shall be held at the principal place of
business of the Company or at such other place within or without the State of
Texas as shall be specified or fixed in the notices or waivers of notice
thereof; provided that any or all Members may participate in any such meeting by
means of conference telephone or similar communications equipment pursuant to
Section 7.05.
(c) Notwithstanding the other provisions of the Articles or these
Regulations, the chairman of the meeting or the holders of a Required Interest
shall have the power to adjourn such meeting from time to time, without any
notice other than announcement at the meeting of the time and place of the
holding of the adjourned meeting. If such meeting is adjourned by the Members,
such time and place shall be determined by a vote of the holders of a Required
Interest. Upon the resumption of such adjourned meeting, any business may be
transacted that might have been transacted at the meeting as originally called.
(d) An annual meeting of the Members, for the election of the Managers and
for the transaction of such other business as may properly come before the
meeting, shall be held at such place,
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within or without the State of Texas, on such date and at such time as the
Managers shall fix and set forth in the notice of the meeting, which date shall
be within 13 months subsequent to the date of organization of the Company or the
last annual meeting of Members, whichever most recently occurred.
(e) Special meetings of the Members for any proper purpose or purposes
may be called at any time by the Managers or the holders of at least ten percent
of the Sharing Ratios of all Members. If not otherwise stated in or fixed in
accordance with the remaining provisions hereof, the record date for determining
Members entitled to call a special meeting is the date any Member first signs
the notice of that meeting. Only business within the purpose or purposes
described in the notice (or waiver thereof) required by these Regulations may be
conducted at a special meeting of the Members.
(f) Written or printed notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than 60
days before the date of the meeting, either personally or by mail, by or at the
direction of the Managers or Person calling the meeting, to each Member entitled
to vote at such meeting. If mailed, any such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the Member at
this address provided for in Section 13.02, with postage thereon prepaid.
(g) The date on which notice of a meeting of Members is mailed or the date
on which the resolution of the Managers declaring a distribution is adopted, as
the case may be, shall be the record date for the determination of the Members
entitled to notice of or to vote at such meeting, including any adjournment
thereof, or the Members entitled to receive such distribution.
(h) The right of Members to cumulative voting in the election of Managers
is expressly prohibited.
7.02 Voting List. The Managers shall make, at least ten days before each
meeting of Members, a complete list of the Members entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the Sharing Ratios held by each, which list, for a period of ten
days prior to such meeting, shall be kept on file at the registered office or
principal place of business of the Company and shall be subject to inspection by
any Member at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Member during the whole time of the meeting. The
original membership records shall be prima-facie evidence as to who are the
Members entitled to examine such list or transfer records or to vote at any
meeting of Members. Failure to comply with the
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requirements of this Section shall not affect the validity of any action taken
at the meeting.
7.03 Proxies. A Member may vote either in person or by proxy executed in
writing by the Member. A telegram, telex, cablegram or similar transmission by
the Member, or a photographic, photostatic, facsimile or similar reproduction
of a writing executed by the Member shall be treated as an execution in writing
for purposes of this Section. Proxies for use at any meeting of Members or in
connection with the taking of any action by written consent shall be filed with
the Managers, before or at the time of the meeting or execution of the written
consent, as the case may be. All proxies shall be received and taken charge of
and all ballots shall be received and canvassed by the Managers, who shall
decide all questions touching upon the qualification of voters, the validity of
the proxies, and the acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the meeting, in which
event such inspector or inspectors shall decide all such questions. No proxy
shall be valid after 11 months from the date of its execution unless otherwise
provided in the proxy. A proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable and the proxy is coupled with
an interest. Should a proxy designate two or more persons to act as proxies,
unless that instrument shall provide to the contrary, a majority of such Persons
present at any meeting at which their powers thereunder are to be exercised
shall have and may exercise all the powers of voting or giving consents thereby
conferred, or if only one be present, then such powers may be exercised by that
one; or, if an even number attend and a majority do not agree on any particular
issue, the Company shall not be required to recognize such proxy with respect to
such issue if such proxy does not specify how the Sharing Ratios that are the
subject of such proxy are to be voted with respect to such issue.
7.04 Conduct of Meetings. All meetings of the Members shall be presided
over by the chairman of the meeting, who shall be a Manager (or representative
thereof) designated by a majority of the Managers. The chairman of any meeting
of Members shall determine the order of business and the procedure at the
meeting including such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
7.05 Action by Written Consent or Telephone Conference. (a) Any action
required or permitted to be taken at any annual or special meeting of Members
may be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holder or holders of not less than the minimum Sharing Ratios that
would be necessary to take such action at a meeting at which the holders of all
Sharing Ratios entitled to vote on the action were present and voted. Every
written consent shall bear the date of
21
<PAGE>
signature of each Member who signs the consent. No written consent shall be
effective to take the action that is the subject to the consent unless, within
60 days after the date of the earliest dated consent delivered to the Company in
the manner required by this Section, a consent or consents signed by the holder
or holders of not less than the minimum Sharing Ratios that would be necessary
to take the action that is the subject of the consent are delivered to the
Company by delivery to its registered office, its principal place of business,
or the Managers. Delivery shall be by hand or certified or registered mail,
return receipt requested. Delivery to the Company's principal place of business
shall be addressed to the Managers. A telegram, telex, cablegram or similar
transmission by a Member, or a photographic, photostatic, facsimile or similar
reproduction of a writing signed by a Member, shall be regarded as signed by the
Member for purposes of this Section. Prompt notice of the taking of any action
by Members without a meeting by less than unanimous written consent shall be
given to those Members who did not consent in writing to the action.
(b) The record date for determining Members entitled to consent to action
in writing without a meeting shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Company by delivery to its registered office, its principal place of
business, or the Managers. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Company's principal
place of business shall be addressed to the Managers.
(c) If any action by Members is taken by written consent, any articles or
documents filed with the Secretary of State of Texas as a result of the taking
of the action shall state, in lieu of any statement required by the Act or the
TBCA concerning any vote of Members, that written consent has been given in
accordance with the provisions of the Act and TBCA and that any written notice
required by the Act and the TBCA has been given.
(d) Members may participate in and hold a meeting by means of conference
telephone or similar communications equipment by means of which all Persons
participating in the meeting can hear each other, and participation in such
meeting shall constitute attendance and presence in person at such meeting,
except where a Person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
22
<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.01 Right of Indemnification. Subject to the limitations and
conditions as provided in this Article VIII, each Person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a "Proceeding"), or
any appeal in such a Proceeding or any inquiry or investigation that could lead
to such a Proceeding, by reason of the fact that he or she, or a Person of whom
he or she is the legal representative, is or was a Manager of the Company or
while a Manager of the Company is or was serving at the request of the Company
as a Manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise shall be indemnified by the
Company to the fullest extent permitted by the Act and the TBCA, as the same
exist or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar taxes
and punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred by such Person in
connection with such Proceeding, and indemnification under this Article VIII
shall continue as to a Person who has ceased to serve in the capacity which
initially entitled such Person to indemnity hereunder. The rights granted
pursuant to this Article VIII shall be deemed contract rights, and no amendment,
modification or repeal of this Article VIII shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal. It is expressly
acknowledged that the indemnification provided in this Article VIII could
involve indemnification for negligence or under theories of strict liability.
8.02 Advance Payment. The right to indemnification conferred in this
Article VIII shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a Person of the type entitled to be indemnified
under Section 8.01 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such Person in advance of the final disposition of a Proceeding, shall be
made only upon delivery to the Company of a written affirmation by such Manager
of his or her good faith belief that he has met the standard of
23
<PAGE>
conduct necessary for indemnification under this Article VIII and a written
undertaking, by or on behalf of such Person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified Person is not entitled
to be indemnified under this Article VIII or otherwise.
8.03 Indemnification of Officers, Employees and Agents. The Company, by
adoption of a resolution of the Managers, may indemnify and advance expenses to
an officer, employee or agent of the Company to the same extent and subject to
the same conditions under which it may indemnify and advance expenses to
Managers under this Article VIII; and, the Company may indemnify and advance
expenses to Persons who are not or were not Managers, officers, employees or
agents of the Company but who are or were serving at the request of the Company
as a Manager, director, officer, partner venturer, proprietor, trustee, employee
agent or similar functionary of another foreign or domestic limited liability
company, corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise against any liability asserted against
him and incurred by him in such a capacity or arising out of his status as such
a Person to the same extent that it may indemnify and advance expenses to
Managers under this Article VIII.
8.04 Appearance as a Witness. Notwithstanding any other provision of
this Article VIII, the Company may pay or reimburse expenses incurred by a
Manager in connection with his appearance as a witness or other participation in
a Proceeding at a time when he is not a named defendant or respondent in the
Proceeding.
8.05 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Article VIII shall not be
exclusive of any other right which a Manager or other Person indemnified
pursuant to Section 8.03 may have or hereafter acquire under any law (common or
statutory), provision of the Articles or these Regulations, agreement, vote of
Members or disinterested Managers or otherwise.
8.06 Insurance. The Company may purchase and maintain insurance, at its
expense, to protect itself and any Person who is or was serving as a Manager,
officer, employee or agent of the Company or is or was serving at the request of
the Company as a Manager, director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise against any
expense, liability or loss, whether or not the Company would have the power to
indemnify such Person against such expense, liability or loss under this Article
VIII.
24
<PAGE>
8.07 Member Notification. To the extent required by law, any
indemnification of or advance of expenses to a Manager in accordance with this
Article VIII shall be reported in writing to the Members with or before the
notice or waiver of notice of the next Members' meeting or with or before the
next submission to Members of a consent to action without a meeting and, in any
case, within the 12-month period immediately following the date of the
indemnification or advance.
8.08 Saving Clause. If the Article VIII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Manager or any other
Person indemnified pursuant to this Article VIII as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by any
applicable portion of this Article VIII that shall not have been invalidated and
to the fullest extent permitted by applicable law.
ARTICLE IX
TAXES
9.01 Tax Returns. The Managers shall cause to be prepared and filed
all necessary federal and state income tax returns for the Company, including
making the elections described in Section 9.02. Each Member shall furnish to the
Managers all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed.
9.02 Tax Elections. The Company shall make the following elections on
the appropriate tax returns;
(a) to adopt the calender year as the Company's fiscal year;
(b) if a distribution of Company property as described in Section 734
of the Code occurs or if a transfer of a Membership Interest as described
in Section 743 of the Code occurs, on written request of any Member, to
elect, pursuant to Section 754 of the Code, to adjust the basis of Company
properties;
(c) to elect to amortize the organizational expenses of the Company
and the startup expenditures of the Company under Section 195 of the Code
ratably over a period of 60 months as permitted by Section 709(b) of the
Code; and
25
<PAGE>
(d) any other election the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Manager or Member may make an election for the
Company to be excluded from the application of the provisions of Subchapter K of
Chapter 1 of Subtitle A of the Code or any similar provisions of applicable
state law, and no provision of these Regulations (including, without limitation,
Section 2.08) shall be construed to sanction or approve such an election.
9.03 "Tax Matters Partner." A majority of the Managers who are Members
shall designate one Manager that is a Member to be the "tax matters partner" of
the Company pursuant to Section 6231(a)(7) of the Code; or, if there is no
Manager that is a Member, the "tax matters partner" shall be a Member that is
designated as such by a Required Interest. Any Member who is designated "tax
matters partner" shall take such action as may be necessary to cause each other
Member to become a "notice partner" within the meaning of Section 6223 of the
Code. Any Member who is designated "tax matters partner" shall inform each other
Member of all significant matters that may come to its attention in its capacity
as "tax matters partner" by giving notice thereof on or before the fifth
Business Day after becoming aware thereof and, within that time, shall forward
to each other Member copies of all significant written communications it may
receive in that capacity. Any Member who is designated "tax matters partner" may
not take any action contemplated by Sections 6222 through 6232 of the Code
without the consent of a Required Interest, but his sentence does not authorize
such Manager (or any other Manager) to take any action left to the determination
of an individual Member under Sections 6222 through 6232 of the Code.
ARTICLE X
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
10.01 Maintenance of Books. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members, its Managers
and each committee of the Managers. The books of account for the Company shall
be maintained on a cash basis in accordance with the terms of these Regulations,
except that the capital accounts of the Members shall be maintained in
accordance with Section 4.06. The calendar year shall be the accounting year of
the Company.
10.02 Reports. On or before the 120th day following the end of each fiscal
year during the term of the Company, the Managers shall cause each Member to be
furnished with a balance sheet, an income statement, and a statement of changes
in Members' capital of the Company for, or as of the end of, that year. These
financial statements must be prepared in accordance with accounting
26
<PAGE>
principles consistently applied (except as therein noted.)
10.03 Accounts. The Managers shall establish and maintain one or more
separate bank and investment accounts and arrangements for Company funds in the
Company name with financial institutions and firms that the Managers determine.
The Managers may not commingle the Company's funds with the funds of any Member;
however, Company funds may be invested in a manner the same as or similar to the
Managers' investment of their own funds or investments by their Affiliates.
ARTICLE XI
BANKRUPTCY OF A MEMBER
11.01 Bankrupt Members. Subject to Section 12.01(c), if any Member
becomes a Bankrupt Member, the Company shall have the option, exercisable by
notice from the Managers to the Bankrupt Member (or its representative) at any
time prior to the 180th day after receipt of notice of the occurrence of the
event causing it to become a Bankrupt Member, to buy, and on the exercise of
this option the Bankrupt Member or its representative shall sell, its Membership
Interest. The purchase price shall be an amount equal to the fair market value
thereof determined by agreement by the Bankrupt Member (or its representative)
and the Managers; however, if those Persons do not agree on the fair market
value on or before the 30th day following the exercise of the option, either
such Person, by notice to the other, may require the determination of fair
market value to be made by an independent appraiser specified in that notice.
If the Person receiving that notice objects on or before the tenth day
following receipt to the independent appraiser designated in that notice, and
those Persons otherwise fail to agree on an independent appraiser, either such
Person may petition the United States District Judge for the Northern District
of Texas (Amarillo Division) then senior in service to designate an independent
appraiser. The determination of the independent appraiser, however designated,
is final and binding on all parties. The Bankrupt Member and the Company each
shall pay one-half of the costs of the appraisal. The purchaser shall pay the
fair market value as so determined in four equal cash installments, the first
due on closing and the remainder (together with accumulated interest on the
amount unpaid at the General Interest Rate) due on each of the first three
anniversaries thereof. The payment to be made to the Bankrupt Member or its
representative pursuant to this Section 11.01 is in complete liquidation and
satisfaction of all the rights and interest of the Bankrupt Member and its
representative (and of all Persons claiming by, through, or under the Bankrupt
Member and its representative) in and in respect of the Company, including
without limitation, any Membership Interest, any rights in specific Company
property, and any rights against the Company and (insofar as the affairs of the
Company are concerned)
27
<PAGE>
against the Members, and constitutes a compromise to which all Members have
agreed pursuant to Article 5.02(D) of the Act.
ARTICLE XII
DISSOLUTION, LIQUIDATION, AND TERMINATION
12.01 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the written consent of a Required Interest;
(b) the expiration of the period fixed for the duration of the
Company set forth in the Articles;
(c) any Manager who is a Member (or, if there is no Manager who is a
Member, any Member) shall become a Bankrupt Member (with or without the
consent of a Required Interest); provided, however, that if the event
described in this Section 12.01(c) shall occur and there shall be at least
one other Member remaining, the Company shall to be dissolved, and the
business of the Company shall be continued, if all Members so agree; and
(d) entry of a decree of judicial dissolution of the Company under
Article 6.02 of the Act.
Except as provided in Section 12.01(c), the death, retirement, resignation,
expulsion, bankruptcy or dissolution of a Member, or the occurrence of any
other event that terminates the continued membership of a Member in the Company,
shall not cause a dissolution of the Company.
12.02 Liquidation and Termination. On dissolution of the Company, the
Managers shall act as liquidator or may appoint one or more Members as
liquidator. The liquidator shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
costs of liquidation shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties
with all of the power and authority of the Managers. The steps to be
accomplished by the liquidator are as follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the liquidator shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in
which the dissolution occurs or the final liquidation is completed, as
applicable;
28
<PAGE>
(b) the liquidator shall cause the notice described in Article
6.05(A)(2) of the Act to be mailed to each known creditor of the claimant
against the Company in the manner described in such Article 6.05(A)(2);
(c) the liquidator shall pay, satisfy or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including,
without limitation, all expenses incurred in liquidation and any advances
described in Section 4.05) or otherwise make adequate provision for payment
and discharge thereof (including, without limitation, the establishment of
a cash escrow fund for contingent liabilities in such amount and for such
term as the liquidator may reasonably determine); and
(d) all remaining assets of the Company shall be distributed to the
Members as follows:
(i) the liquidator may sell any or all Company property,
including to Members, and any resulting gain or loss from each sale
shall be computed and allocated to the capital accounts of the
Members;
(ii) with respect to all Company property that has not been
sold, the fair market value of that property shall be determined and
the capital accounts of the Members shall be adjusted to reflect the
manner in which the unrealized income, gain, loss, and deduction
inherent in property that has not been reflected in the capital
accounts previously would be allocated among the Members if there were
a taxable disposition of that property for the fair market value of
that property on the date of distribution; and
(iii) Company property shall be distributed among the Members in
accordance with the positive capital account balances of the Members,
as determined after taking into account all capital account
adjustments for the taxable year of the Company during which the
liquidation of the partnership occurs (other than those made by reason
of this clause (iii)); and those distributions shall be made by the
end of the taxable year of the Company during which the liquidation of
the Company occurs (or, if later, 90 days after the date of the
liquidation).
All distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses, and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination and those
costs, expenses, and liabilities shall be allocated to the distributee pursuant
to this Section 12.02. The distribution of cash and/or
29
<PAGE>
property to a Member in accordance with the provisions of this Section 12.02
constitutes a complete return to the Member of its Capital Contributions and a
complete distribution to the Member of its Membership Interest and all the
Company's property and constitutes a compromise to which all Members have
consented within the meaning of Article 5.02(D) of the Act. To the extent that
a Member returns funds to the Company, it has no claim against any other Member
for those funds.
12.03 Deficit Capital Accounts. Notwithstanding anything to the contrary
contained in these Regulations, and notwithstanding any custom or rule of law
to the contrary, to the extent that the deficit, if any, in the capital account
of any Member results from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or distributions of
money pursuant to these Regulations to all Members in proportion to their
respective Sharing Ratios, upon dissolution of the Company such deficit shall
not be an asset of the Company and such Members shall not be obligated to
contribute such amount to the Company to bring the balance of such Member's
capital account to zero.
12.04 Articles of Dissolution. On completion of the distribution of
Company assets as provided herein, the Company is terminated, and the Managers
(or such other Person or Persons as the Act may require or permit) shall file
Articles of Dissolution with the Secretary of State of Texas, cancel any other
filings made pursuant to Section 2.05, and take such other actions as any be
necessary to terminate the Company.
ARTICLE XIII
GENERAL PROVISIONS
13.01 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment.
13.02 Notices. Except as expressly set forth to the contrary in these
Regulations, all notices, requests, or consents provided for or permitted to be
given under these Regulations must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under these Regulations is
effective on receipt by the Person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the addresses given
for that Member on Exhibit A or in the instrument described in Section 3.03(d)
or 3.04, or such other address as that Member may specify
30
<PAGE>
by notice to the other Members. Any notice, request, or consent to the Company
or the Members must be given to the Members at the following address: 1900 S.
Coulter, Suite E, Amarillo, Texas 79106. Whenever any notice is required to be
given by law, the Articles or these Regulations, a written waiver thereof,
signed by the Person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
13.03 Entire Agreement; Supersedure. These Regulations constitute the
entire agreement of the Members and their Affiliates relating to the Company and
supersedes all prior contracts or agreements with respect to the Company,
whether oral or written.
13.04 Effect of Waiver of Consent. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that Person of the
same or any other obligations of that Person with respect to the Company.
Failure on the part of a Person to complain of any act of any
Person or to declare any Person in default with respect to the Company,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of its rights with respect to that default until the applicable
statute-of-limitations period has run.
13.05 Amendment or Modification. These Regulations may be amended or
modified from time to time only by a written instrument adopted by the Managers
and executed and agreed to by a Required Interest; provided, however, that (a)
an amendment or modification reducing a Member's Sharing Ratio or increasing its
Commitment (other than to reflect changes otherwise provided by these
Regulations) is effective only with that Member's consent, (b) an amendment or
modification reducing the required Sharing Ratio or other measure for any
consent or vote in these Regulations is effective only with the consent or vote
of Members having the Sharing Ratio or other measure theretofore required, and
(c) amendments of the type described in Section 3.04 may be adopted a therein
provided.
13.06 Binding Effect. Subject to the restrictions on Dispositions set
forth in these Regulations, these Regulations are binding on and inure to the
benefit of the Members and their respective heirs, legal representatives,
successors, and assigns.
13.07 Governing Law; Severability. THESE REGULATIONS ARE GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS, EXCLUDING
ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THESE REGULATIONS TO THE LAW OF ANOTHER JURISDICTION. In the
event of a direct conflict betweeen the provisions of these Regulations.
31
<PAGE>
and (a) any provision of the Articles, of (b) any mandatory provision of the Act
or (to the extent such statutes are incorporated into the Act) the TBCA or the
Texas Miscellaneous Corporation Laws Act, the application provision of the
Articles, the Act, the TBCA or the Texas Miscellaneous Corporation Laws Act
shall control. If any provision of these Regulations or the application thereof
to any Person or circumstance is held invalid or unenforceable to any extent,
the remainder of these Regulations and the application of that provision to
other Persons or circumstances is not affected thereby and that provision shall
be enforced to the greatest extent permitted by law.
13.08 Further Assurances. In connection with these Regulations and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of these
Regulations and those transactions.
13.09 Waiver of Certain Rights. Each Member irrevocably waives any right
it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
13.10 Indemnification. To the fullest extent permitted by law, each Member
shall indemnify the Company, each Manager and each other Member and hold them
harmless from and against all losses, costs, liabilities, damages, and expenses
including, without limitation, costs of suit and attorney's fees) they may
incur on account of any breach by that Member of these Regulations.
13.11 Notice to Members of Provisions of this Agreement. By executing
these Regulations, each Member acknowledges that it has actual notice of (a) all
of the provisions of this Agreement, including, without limitation, the
restrictions on the transfer of Membership Interest set forth in Article III,
and (b) all of the provisions of the Articles, [including, without limitation,
the fact that the Articles provide that no Member shall have the preemptive
right to acquire any Membership Interest or securities of any class that may at
any time be issued, sold or offered for sale by the Company]. Each Member hereby
agrees that these Regulations constitute adequate notice of all such provisions,
including, without limitation, any notice requirement under Article 2.19(D) of
the TBCA and Chapter 8 of the Texas Uniform Commercial Code, and each Member
hereby waives any requirement that any further notice thereunder be given.
13.12 Counterparts. These Regulations may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
32
<PAGE>
IN WITNESS WHEREOF, following adoption of these Regulations by the Manager,
the Members have executed these Regulations as of the date first set forth
above.
MEMBERS
HOME DIALYSIS OF AMERICA, INC.
By: /s/ Martin Fox
---------------------------------
Martin Fox
Title: President
------------------------------
Date of Execution: 12-27-94
------------------
By: /s/ Georges Maliha, M. D.
---------------------------------
Georges Maliha, M. D.
Date: 10.14.94
-------------------------------
By: /s/ Milton Giron
---------------------------------
Milton Giron, M. D.
Date: 12/14/94
-------------------------------
By: /s/ William C. Biggs
----------------------------------
William C. Biggs, M. D.
Date: 12-13-94
--------------------------------
33
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Name, Address and Initial Capital
Contribution of Each Member Commitment Sharing Ratio
- --------------------------------- ---------- -------------
<S> <C> <C>
Georges Maliha, M.D.
1900 S. Coulter, Suite E
Amarillo, Texas 79106 $_________ 30%
Milton Giron, M.D.
1900 S. Coulter, Suite E
Amarillo, Texas 79106 $_________ 30%
Home Dialysis of America, Inc.
6420 East Broadway, Suite B-103
Tucson, Arizona 85710 $_________ 30%
William Biggs, M. D.
1900 S. Coulter, Suite O
Amarillo, Texas 79106 $_________ 30%
</TABLE>
34
<PAGE>
ARIZONA CORPORATION COMMISSION
CORPORATIONS DIVISION
Phoenix Address 1300 West Washington Tucson Address 402 West Congress
Phoenix Arizona 85007 Tucson, Arizona 85701
CERTIFICATE OF DISCLOSURE
-----------------------------
A.R.?. Sections ?0-12? & 10-10?4
PLEASE SEE REVERSE SIDE HOME DIALYSIS OF AMERICA, INC.
- ----------------------- --------------------------------
EXACT CORPORATION NAME
CHECK APPROPRIATE BOX(ES) A OR B
- ------------------------- --
ANSWER "C"
- ---------
THE UNDERSIGNED CERTIFY THAT
A. No persons serving either by elections or appointment as officers,
directors, incorporators and persons controlling, or holding more than 10%
of the issued and outstanding common shares or ?? of any other proprietary,
beneficial or membership interest in the corporation
[X] 1. Have been convicted of a felony involving a transaction in securities
consumer fraud or antitrust or any state or federal jurisdiction within
the seven-year period incred???? preceding the execution of the
certificate.
2. Have been convicted of a felony, the eventual elements of which
convicted of fraud, misrepresentation, then by false pretenses, or ????
the trade or ???? in any state or federal jurisdiction within the seven-
year period incredi???? preceding the execution of this Certificate.
3. Have been or are subject to an injuction, ??? ??? ??? ??? ??? or federal
court entered within the seven-year period immediately preceding the
execution of this Certificate where such injunction, judgment, decree or
permanent order;
(a) Involved the violation of fraud or regulation prevention of the
securities laws of that jurisdiction; or
(b) Involved the violation of the consumer fraud laws of ????
jurisdiction or
(c) Involved the violation of the annual or retirement of trade laws of
that jurisdiction.
B. For any person or persons who have been or are subject to one or more of
the ???? in ???? A.1 through A.3 above, the following information MUST be
---------------------------------
attached.
--------
[_] 1. Full name and prior name(s) used
2. Full birth name.
3. Present home address.
4. Prior addresses (for immediate preceding 7-year period)
5. Date and ???? of birth
6. ???? ???? ???? number
7. ???? and description of each conviction or judicial action, ???? ????
location, the court and public agency involved and ???? or cour??
number of case.
- --------------------------------------------------------------------------------
STATEMENT OF BANKRUPTCY RECEIVERS ?? OR REVOCATION
---------------------------------------------------------
A.R.S. Section ???? ???? and 10-????
C. ???? any person serving (?) ???? by election or appointment as an officer,
director, trustee or incorporator of the corporation or, (b) major
stockholder (possessing or controlling any proprietary, beneficial or
membership interest in the corporation, served in any such capacity or held
such interest in any corporation which has been placed in bankruptcy or
receivership or had no charter ???? YES ____ NO X
---
IF YOUR ANSWER TO THE ABOVE QUESTION IS "YES", YOU MUST ATTACH THE FOLLOWING
- ----------------------------------------------------------------------------
INFORMATION FOR EACH CORPORATION:
- --------------------------------
1. Name and address of the corporation.
2. Full name, including ???? and address of each person involved.
3. State(s) in which the corporation
(a) Was Incorporated.
(b) Has transacted business.
4. Date of corporate operation.
5. A description of the bankruptcy, receivership or ???? ????, including
the date, court or agency involved and the ???? or ???? number of the
case.
- --------------------------------------------------------------------------------
Under penalties of law, the undersigned incorporators Officers ???? ???? that
???? ???? ????, including any attachments, and to the best of our knowledge and
belief its true, correct and complete.
BY /s/ Martin Fox DATE 7/06/92 BY _______________ DATE _______
------------------- --------
TITLE President TITLE___________________________
------------------------------
BY /s/ Maureen Fox DATE 7/06/92 BY _______________ DATE _______
------------------- --------
TITLE Secretary TITLE___________________________
------------------------------
FISCAL DATE 12/31
------------
<PAGE>
ARTICLES OF INCORPORATION
OF
HOME DIALYSIS OF AMERICA, INC.
ARTICLE I
The name of the corporation shall be HOME DIALYSIS OF AMERICA, INC.
ARTICLE II
The purpose for which this corporation is organized is the transaction of
any or all lawful business for which corporations may be incorporated under the
laws of the State of Arizona.
ARTICLE III
The Corporation initially intends to provide medical services and products.
ARTICLE IV
The Corporation shall have the authority to issue Ten Million (10,000,000)
shares of common stock having a par value of One Dollar ($1.00) per share.
ARTICLE V
The name and address of the initial statutory agent of the Corporation is:
MARTIN FOX
6420 East Broadway Blvd., Suite B-102
Tucson, Arizona 85710
<PAGE>
ARTICLE VI
The affairs of the Corporation shall be conducted by the Board of Directors
of the Corporation. The number and qualifications of persons to serve on the
Board of Directors shall be as provided by the By-Laws of the Corporation,
except that the Board of Directors shall always consist of no fewer than two (2)
nor more than ten (10) persons. Directors shall be elected at the Annual Meeting
of members on the date and at the time and place as provided in the By-Laws of
the Corporation.
ARTICLE VII
The initial Board of Directors shall consist of the Incorporators. They
shall serve as directors until their successors are elected and qualified.
ARTICLE VIII
The registered holders of the shares of the capital stock of the
Corporation shall have the preemptive right to purchase additional stock on such
equitable terms, prices, and conditions as shall be fixed by the Board of
Directors for the issuance of any stock in the Corporation from time to time.
Such preemptive right shall be exercised in the ratio that the number of shares
held by each stockholder bears to the total number of shares outstanding.
<PAGE>
ARTICLE IX
INCORPORATORS
The names and addresses of the Incorporators are:
FOX, MARTIN
6420 East Broadway, Suite B-102
Tucson, Arisona 85720
FOX, MAUREEN
4660 N. Banyon Tree, ??
Tucson, Arizona 85749
<PAGE>
ARTICLE I
No director shall be personally liable to the Corporation or to its
shareholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that such limitation of liability is prohibited by law.
DATED this 6 day of July, 1998.
/s/ Martin Fox
- --------------
MARTIN FOX
/s/ Maureen Fox
- ---------------
MAUREEN FOX
I Martin P. Fox, having been designated to act as Statutory Agent, hereby
consent to act in that capacity until removed or resignation is submitted in
accordance with the Arizona Revised Statutes.
/s/ Martin Fox
------------------------------
(signature of Statutory Agent)
<PAGE>
[SEAL] STATE OF ARIZONA
CORPORATION COMMISSION
I hereby certify this to be a true
and complete copy of the document filed
in this office and admitted to record in
File No. 05270738
--------------------------
/s/ Jack Rose
Executive Secretary
Dated: 4-28-98 By: /s/ Jolene M. Muillo
--------- ----------------------------
<PAGE>
EXHIBIT A
BYLAWS
OF
HOME DIALYSIS OF AMERICA, INC.
ARTICLE I
OFFICES AND CORPORATE SEAL
--------------------------
1. PRINCIPAL OFFICE. The principal office of the corporation shall be
----------------
located at 6420 East Broadway, Suite B-103, Tucson, Arizona 85710.
2. OTHER OFFICES. The corporation may also maintain offices at such other
-------------
place or places as may be designated from time to time by the Board of
Directors, and the business of the corporation may be transacted at such other
offices with the same effect as that conducted at the principal office.
3. CORPORATE SEAL. A corporate seal shall not be requisite to the
--------------
validity of any instrument executed by or on behalf of the corporation, but may
be used.
ARTICLE II
FISCAL YEAR
-----------
1. FISCAL YEAR. The fiscal year of the Corporation shall begin on the
-----------
first day of January and end on the last day of December.
ARTICLE III
SHAREHOLDERS
------------
1. SHAREHOLDERS' MEETING. All meetings of the shareholders shall be held
---------------------
at such place as may be fixed from time to time by the Board of Directors, or in
the absence of direction by the Board of Directors, by the President or
Secretary of the corporation, either within or without the State of Arizona, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
2. ANNUAL MEETINGS. Annual meetings of shareholders shall be held on the
---------------
1st Wednesday in March if not a legal holiday, and if a legal holiday, then on
the next
<PAGE>
secular day following, or at such other date and time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. At the annual meeting, shareholders shall elect a Board of Directors
and transact such other business as may properly be brought before the meeting.
3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting stating
------------------------
the place, date and hour of the meeting shall be given to each shareholder of
record entitled to vote at such meeting not less than ten (10) nor more than
fifty (50) days before the date of the meeting.
4. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the
--------------------------------
shareholders, for any purpose or purposes, unless otherwise proscribed by
statute or by the Articles of Incorporation, may be called by the President or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of shareholders owning a majority in amount of the
entire capital stock of the corporation issued, outstanding, and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
5. NOTICE OF SPECIAL MEETINGS. Written notice of a special meeting
--------------------------
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten (10) nor more than
fifty (50) days before the date of the meeting to each shareholder of record
entitled to vote at such meeting.
6. QUORUM AND ADJOURNMENT. The holders of a majority of the shares
----------------------
issued, outstanding, and entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote at the meeting, present in person or represented by proxy,
shall have power to adjourn the meeting to another time or place, without notice
other than announcement at the meeting at which adjournment is taken, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting.
<PAGE>
7. MAJORITY REQUIRED. When a quorum is present at any meeting, the vote
-----------------
of the holders of a majority of the voting power present, whether in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes, the
Articles of Incorporation or these Bylaws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
8. VOTING. At every meeting of the shareholders, each shareholders shall
------
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such shareholder, but not proxy shall be voted
or acted upon after eleven (11) months from its date, unless the proxy provides
for a longer period.
9. ACTION WITHOUT MEETING. Any action required or permitted to be taken
----------------------
at any annual or special meeting of shareholders may be taken without a meeting,
without prior notice, and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of all of the outstanding
shares entitled to vote with respect to the subject matter of the action.
10. WAIVER OF NOTICE. Attendance of a shareholder at a meeting shall
----------------
constitute waiver of notice of such meeting, except when such attendance at the
meeting is for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Any shareholder
may waive notice of any annual or special meeting of shareholders by executing a
written waiver of notice either before or after the time of the meeting.
ARTICLE IV
DIRECTORS
---------
1. NUMBER. The Board of Directors shall consist of two (2) persons or
------
such other number, but no less than two (2) and no more than ten (10) as may be
designated from time to time by resolution of a majority of the entire Board of
Directors. The Directors shall be elected at the annual meeting of the
shareholders, except as provided in section 2 of this Article, and each Director
elected shall hold office until his or her successor is elected and qualified.
2. VACANCIES. Vacancies may be filled by the affirmative vote of a
---------
majority of the remaining directors then in office, though not less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
<PAGE>
office until the next annual election, and until their successors are duly
elected and qualified, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
3. POWERS. The business and affairs of the corporation shall be managed
------
by its Board of Directors, which may exercise all such powers of the corporation
and do all such lawful acts as are not by statute, the Articles of
Incorporation, or these Bylaws directed or required to be exercised or done by
the shareholders.
4. PLACE OF MEETINGS. The Board of Directors of the corporation may hold
-----------------
meetings, both regular and special, either within or without the State of
Arizona.
5. ANNUAL MEETINGS. The annual meeting of each newly elected Board of
---------------
Directors shall be held immediately following the annual meeting of shareholders
and in the same place as the annual meeting of shareholders, and no notice to
the newly elected directors of such meeting shall be necessary in order legally
to hold the meeting, providing a quorum shall be present. In the event such
meeting is not held, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver by all of the
directors.
6. REGULAR MEETINGS. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and at such place as shall from time to time be
determined by the Board.
7. SPECIAL MEETINGS. Special meetings of the Board may be called by the
----------------
President or the Secretary on one (1) day's notice to each director, either
personally, by mail, by telegram, or by telephone; special meetings shall be
called by the President or Secretary in like manner an on like notice on the
written request of a majority of directors.
8. QUORUM; ADJOURNMENT; MAJORITY REQUIRED. A majority of the membership
--------------------------------------
of the Board of Directors shall constitute a quorum. The concurrence of a
majority of those present shall be sufficient to conduct the business of the
Board, except as may be otherwise specifically provided by statute, the Articles
of Incorporation or these Bylaws. If a quorum shall not be present at any
meeting of the Board of Directors, the Directors then present may adjourn the
meeting to another time or place, without notice other than announcement at the
meeting, until a quorum shall be present.
<PAGE>
9. ACTION WITHOUT MEETING. Unless otherwise restricted by the Articles of
----------------------
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
10. EXECUTIVE COMMITTEE. The Board of Directors may appoint an Executive
-------------------
Committee to which the directors may delegate general or special authority to
act on behalf of the Board. Members of the Executive Committee shall serve at
the pleasure of the Board of Directors and any member may be removed with or
without cause at any time by the Board of Directors acting at a meeting or by
unanimous consent. In the event any vacancy occurs in the Executive Committee,
the vacancy shall be filled by the Board of Directors.
11. COMPENSATION. The directors may be paid their expenses, if any, of
------------
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings. The amount or rate of such compensation of members of the
Board of Directors or of Committees shall be established by the Board of
Directors and shall be set forth in the minutes of the Board.
12. WAIVER OF NOTICE. Attendance of a director at a meeting shall
----------------
constitute waiver of notice of such meeting, except when the person attends the
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Any director may waive
notice of any annual, regular, or special meeting of directors by executing a
written waiver of notice either before or after the time of the meeting.
ARTICLE V
OFFICERS
--------
1. DESIGNATION OF TITLES. The officers of the corporation shall be chosen
---------------------
by the Board of Directors and shall be a President, a Vice President, a
Secretary, and a Treasurer. The Board of Directors may also choose a Chairman of
the Board, additional Vice President, and one or
<PAGE>
more Assistant Secretaries and Assistant Treasurers. Any number of offices,
except the offices of President and Secretary, may be held by the same person,
unless the Articles of Incorporation or these ByLaws otherwise provide.
2. APPOINTMENT OF OFFICERS. The Board of Directors at its first meeting
-----------------------
after each annual meeting of shareholders shall choose a President, one or more
Vice Presidents, a Secretary and a Treasurer, and may choose a Chairman of the
Board, each of whom shall serve at the pleasure of the Board of Directors. The
President and Secretary shall be different person. The Board of Directors at any
time may appoint such other officers and agents as it shall deem necessary to
hold offices at the pleasure of the Board of Directors and to exercise such
powers and perform such duties as shall be determined from time to time by the
Board.
3. SALARIES. The salaries of the officers shall be fixed from time to
--------
time by the Board of Directors, and no officer shall be prevented from receiving
such salary by reason of the fact that he is also a director of the corporation.
The salaries of the officers or the rate by which salaries are fixed shall be
set forth in the minutes of the meetings of the Board of Directors.
4. VACANCIES. A vacancy in any office because of death, resignation,
---------
removal, disqualification or otherwise may be filled by the Board of Directors
at any time.
5. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall have
---------------------
been appointed and be serving, shall preside at all meetings of the Board of
Directors and shall perform such other duties as from time to time may be
assigned to him or her.
6. PRESIDENT. The President shall preside at all meetings of
---------
shareholders, and if a Chairman of the Board shall not have been appointed or,
having been appointed, shall not be serving or be absent, the President shall
preside at all meetings of the Board of Directors. He or she shall sign all
deeds and conveyances, all contracts and agreements, and all other instruments
requiring execution on behalf of the corporation, and shall act as operating and
directing head of the corporation, subject to policies established by the Board
of Directors.
7. VICE PRESIDENT. There shall be as many Vice Presidents as shall be
--------------
determined by the Board of Directors from time to time, and they shall perform
such duties as from time to time may be assigned to them. Any one of the Vice
Presidents, as authorized by the Board, shall have all the powers and perform
all the duties of the President in case of the temporary absence of the
President or in case
<PAGE>
of his or her temporary inability to act. In case of the permanent absence or
inability of the President to act, the office shall be declared vacant by the
Board of directors and a successor chosen by the Board.
8. SECRETARY. The Secretary shall see that the minutes of all meetings of
---------
shareholders, of the Board of Directors, and of any standing committees are
kept. He or she shall be the custodian of the corporate seal and shall affix it
to all proper instruments when deemed advisable by him or her. He or she shall
give or cause to be given required notices of all meetings of the shareholders
and of the Board of Directors. He or she shall have charge of all the books and
records of the corporation except the books of account, and in general shall
perform all the duties incident to the office of Secretary of a corporation and
such other duties as may be assigned to him or her.
9. TREASURER. The Treasurer shall have general custody of all the funds
---------
and securities of the corporation except such as may be required by law to be
deposited with any state official. He or she shall see to the deposit of the
funds of the corporation in such bank or banks as the Board of Directors may
designate. Regular books of account shall be kept under his or her direction and
supervision, and he or she shall render financial statements to the President,
directors, and shareholders at proper times. The Treasurer shall have charge of
the preparation and filing of such reports, financial statements, and returns as
may be required by law. He or she shall give to the corporation such fidelity
bond as may be required, and the premium therefor shall be paid by the
corporation as an operating expense.
10. ASSISTANT SECRETARIES. There may be such number of Assistant
---------------------
Secretaries as from time to time the Board of Directors may fix, and such
persons shall perform such functions as from time to time may be assigned to
them. No Assistant Secretary shall have the power or authority to collect,
account for, or pay over any tax imposed by any federal, state or city
government.
11. ASSISTANT TREASURERS. There may be such number of Assistant Treasurers
--------------------
as from time to time the Board of Directors may fix, and such persons shall
perform such functions as from time to time may be assigned to them. No
Assistant Treasurer shall have the power or authority to collect, account for,
or pay over any tax imposed by any federal, state or city government.
<PAGE>
ARTICLE VI
DIRECTOR LIABILITY
------------------
No director shall be personally liable to the corporation or to its
shareholders except to the extent that such limitation of liability is
prohibited by the provisions of Arizona law, including but not limited to A.R.S.
SS10-054, prohibiting limitation of director liability for (a) any breach of the
director's duty of loyalty to the corporation or to its shareholders; (b) acts
or omissions which are not in good faith or which involve intentional misconduct
or a knowing violation of law; (c) any transaction from which the director
derived an improper personal benefit; (d) authorizing the unlawful payment of a
dividend or other distribution on the corporation's capital stock or the
unlawful purchase of its capital stock; (e) any transaction from which the
director derived an improper personal benefit; (f) a violation of SS10-041.
ARTICLE VII
INDEMNIFICATION
---------------
1. POWER TO INDEMNIFY. The corporation may indemnify a director, officer,
------------------
employee or agent who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, if he or she acted, or failed to
act, in good faith and in a manner he or she reasonably believed and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In an action not by or in the right of the
corporation, such indemnification may include expenses, attorney fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred. In an action by or in the right of the corporation, such
indemnification may include expenses, attorney fees and amounts paid in
settlement actually and reasonable incurred, but shall not include judgments and
fines.
2. LIMITS ON INDEMNIFICATION. No person shall be indemnified if he or she
-------------------------
has been adjudged to be liable to the corporation, unless otherwise ordered by
the court. The corporation may refuse indemnification to any person who
unreasonable refuses to permit the corporation, at its own expense and through
counsel of its own choosing, to defend him or her in the action.
3. DECISION-MAKING. A decision to indemnify a person shall be made by one
---------------
of the following: a majority vote of a quorum consisting of disinterested
directors; if such quorum is not obtainable, a written opinion of independent
legal counsel appointed by a majority of the disinterested directors; if there
are not disinterested directors, the court or other body before which the action
was brought, or any court of competent jurisdiction; or an act of the
shareholders.
<PAGE>
ARTICLE VIII
REPEAL, ALTERATION OR AMENDMENT
-------------------------------
The Articles of Incorporation, and Bylaws may be repealed, altered, or
amended only by a two-thirds (2/3) vote of all issued and outstanding common
stock of the Corporation.
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that the foregoing copy of the Bylaws is a true and
correct copy of the Bylaws of the Corporation as the same were adopted at the
first meeting of the Board of Directors.
Dated: 1-2-93 /s/ Maureen Fox
----------------------------- ------------------------------
SECRETARY
<PAGE>
EXHIBIT 3.21
[SEAL] Prescribed by ------------------------
Bob Taft, Secretary of State Approved /s/ VD
30 East Broad Street, 14th Floor --------------
Columbus, Ohio 43266-0418 Date 12/23/1994
Form ARF (December 1990) -----------------
Fee $ 85.00
------------------------
ARTICLES OF INCORPORATION
(Under Chapter 1701 of the Ohio Revised Code)
Profit Corporation
The undersigned, desiring to form a corporation, for profit, under Sections
1701.01 et seq, of the Ohio Revised Code, do hereby state the following:
FIRST. The name of said corporation shall be HOME DIALYSIS OF DAYTON, INC.
-----------------------------
_____________________________________________________________ _________________.
SECOND. The place in Ohio where its principal office is to be located is
5470 N. Main Street, Dayton Montgomery ___________ County, Ohio.
- -----------------------------------, -----------------
(City, village or township)
THIRD. The purpose(s) for which this corporation is formed is:
To engage in any lawful activity or act for which corporations may
be formed under the Ohio General Corporation Law.
<PAGE>
FOURTH. The number of shares which the corporation is authorized to have
outstanding is: (Please state whether shares are common or preferred, and their
par value, if any. Shares will be recorded as common with no par value unless
otherwise indicated.)
The Corporation is authorized to issue 750 shares of no par value
common stock.
IN WITNESS WHEREOF, we have hereunto subscribed our names, this 20th day of
December 1994.
By: /s/ James B. Riley, Jr., Incorporator
------------------------
James B. Riley, Jr.
By:________________________, Incorporator
By:________________________, Incorporator
PRINT OR TYPE INCORPORATORS' NAMES BELOW THEIR SIGNATURES.
INSTRUCTIONS
1. The minimum fee for filing Articles of Incorporation for a profit corporation
is $85.00. If Article Fourth indicates more than 750 shares of stock authorized,
please see Section 111.15 (A) of the Ohio Revised Code or contact the Secretary
of State's office (614-488-3910) to determine the correct fee.
2. Articles will be returned unless accompanied by an Original Appointment of
Statutory Agent. Please see Section 1701.07 of the Ohio Revised Code.
<PAGE>
30 East Broad Street, 14th Floor
[SEAL] Columbus, Ohio 43266-0418
ORIGINAL APPOINTMENT OF STATUTORY AGENT
The undersigned, being at least a majority of the incorporators of
Home Dialysis of Dayton, Inc., hereby appoint Joseph Premanandan to be
- ------------------------------- --------------------
(name of incorporation) (name of agent)
statutory agent upon whom any process, notice or demand required or permitted by
statute to be served upon the corporation may be served. The complete address of
the agent is:
5740 N. Main Street
- --------------------------------------------------------------------------------
(street address)
Dayton 45415
- ---------------------------------------------------------, Ohio-----------------
(city) (zip code)
NOTE: P.O. BOX ADDRESSES ARE NOT ACCEPTABLE.
/s/ James B. Riley, Jr.
----------------------------------
James B. Riley, Jr. (Incorporator)
__________________________________
(Incorporator)
__________________________________
(Incorporator)
ACCEPTANCE OF APPOINTMENT
The undersigned, Joseph Premanandan, named herein as the statutory agent for
------------------
Home Dialysis of Dayton, Inc., hereby acknowledges and accepts the
- ------------------------------
(name of corporation)
appointment of statutory agent for said corporation.
/s/ Joseph Premanandan
------------------------------
Statutory Agent
INSTRUCTIONS
1) Profit and non-profit articles of incorporation must be accompanied by an
original appointment of agent R.C. 170107(B), 170206(B).
2) The statutory agent for a corporation may be (a) a natural person who is
resident of Ohio, or (b) an Ohio corporation or a foreign profit
corporation licensed in Ohio which has a business address in this state and
is explicitly authorized by its articles of incorporation to act as a
statutory agent R.C. 170107(A), 170206(A).
3) An original appointment of agent form must be signed by at least a majority
of the incorporators of the corporation R.C 170107(B), 170207(B) These
signatures must be the same as the signatures on the articles of
incorporation
<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES OF AMERICA,
STATE OF OHIO,
OFFICE OF THE SECRETARY OF STATE
I, BOB TAFT, Secretary of State of the State of Ohio, do hereby certify that the
foregoing is a true and correct copy, consisting of 3 pages, as taken from the
original record now in my offical custody as Secretary of State.
WITNESS my hand and offical seal at
Columbus, Ohio, this 27th day of
April A.D, 1998
/s/ Bob Taft
------------------------------
[SEAL] BOB TAFT
Secretary of State
BY: /s/ C. Cence
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.22
BYLAWS
OF
HOME DIALYSIS OF DAYTON, INC.
ARTICLE I
OFFICES AND CORPORATE SEAL
--------------------------
1. PRINCIPAL OFFICE. The principal office of the Corporation shall be
----------------
located at 6850 N. Main Street, Dayton, Ohio 45415
2. OTHER OFFICES. The Corporation may also maintain offices at such
-------------
other place or places, within the State of Ohio, as may be designated from
time to time by the Board of Directors, and the business of the Corporation
may be transacted at such other offices with the same effect as that conducted
at the principal office.
3. CORPORATE SEAL. A corporate seal shall not be requisite to the
--------------
validity of any instrument executed by or on behalf of the Corporation, but
may be used.
ARTICLE II
FISCAL YEAR
-----------
1. FISCAL YEAR. The fiscal year of the Corporation shall begin on the
-----------
first day of January and end on the last day of December.
ARTICLE III
SHAREHOLDERS
------------
1. SHAREHOLDER'S MEETINGS. All meetings of the shareholders shall be held
----------------------
at such place as may be fixed from time to time by the Board of Directors, or in
the absence of direction by the Board of Directors, by the President or
Secretary of the Corporation, either within or without the State of Ohio, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
2. ANNUAL MEETINGS. Annual meetings of shareholders shall be held on the
---------------
1st Wednesday in March if not a legal holiday, and if a legal holiday, then on
the next secular day following, or at such other date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. At the annual meeting, shareholders shall elect a Board of
Directors and transact such other business as may properly be brought before the
meeting.
<PAGE>
3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting
------------------------
stating the place, date and hour of the meeting shall be given to each
shareholder of record entitled to vote at such meeting not less than ten (10)
nor more than sixty (60) days before the date of the meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the records of the
Corporation with postage thereon paid. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
4. FIXING OF RECORD DATE. For the purpose of determining the
---------------------
shareholders entitled to notice of or to vote at any meeting of shareholders,
the date fixed for the payment of any dividend or distribution, the date of
allotment of rights or the date for participation in the execution of written
consents, waivers or releases, the board of directors of the Corporation may fix
in advance a record date which shall not be more than sixty (60) days. If no
record date is fixed, the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall be the date
next preceding the day on which notice is given or the date next preceding the
day on which the meeting is held if no notice is required and the record date
for the determination of shareholders for any other purpose shall be the date on
which the board of directors adopts the resolution relating thereto. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting.
5. VOTING LISTS. The officer or agent having charge of the transfer
------------
books for shares of the corporation shall make at least five (5) days before
meeting of shareholders, a complete list of the shareholders entitled to vote at
such meeting, arranged in alphabetical order, showing the address of and the
number of shares registered in the name of the shareholder, which list shall be
kept on file at the registered office of the Corporation and shall be open to
inspection by any shareholder and subject to copying at the shareholder's
expense at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and may be inspected
by any shareholder during the whole time of the meeting. The original share
ledger or transfer book, or a duplicate thereof kept this state, shall be prima
facie evidence as to who are the shareholders entitled to examine such list or
share ledger or transfer book or to vote any meeting of shareholders.
6. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the
--------------------------------
shareholders, for any purpose or purposes, unless otherwise proscribed by
statute or by the Articles of Incorporation, may be called by the President or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of shareholders owning a majority in amount of the
entire capital stock of the Corporation issued,
2
<PAGE>
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
7. NOTICE OF SPECIAL MEETINGS. Written notice of a special meeting
--------------------------
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten (10) nor more than
fifty (50) days before the date of the meeting to each shareholder of record
entitled to vote at such meeting.
8. QUORUM AND ADJOURNMENT. The holders of a majority of the shares
----------------------
issued, outstanding, and entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote at the meeting, present in person or represented by proxy,
shall have power to adjourn the meeting to another time or place, without notice
other than announcement at the meeting at which adjournment is taken, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting.
9. MAJORITY REQUIRED. When a quorum is present at any meeting, the vote
-----------------
of the holders of a majority of the voting power present, whether in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes, the
Articles of Incorporation or these Bylaws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
10. VOTING. At every meeting of the shareholders, each shareholder shall
------
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such shareholder, but no proxy shall be voted
or acted upon after eleven (11) months from its date, unless the proxy provides
for a longer period. No shareholder shall be permitted to cumulate his votes in
any election of the Board of Directors of the Corporation.
11. ACTION WITHOUT MEETING. Any action required or permitted to be taken
----------------------
at any annual or special meeting of shareholders may be taken without a meeting,
without prior notice, and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of all of the outstanding
shares entitled to vote with respect to the subject matter of the action.
3
<PAGE>
12. WAIVER OF NOTICE. Attendance of a shareholder at a meeting shall
----------------
constitute waiver of notice of such meeting, except when such attendance at the
meeting is for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Any shareholder
may waive notice of any annual or special meeting of shareholders by executing a
written waiver of notice either before or after the time of the meeting.
ARTICLE IV
DIRECTORS
---------
1. NUMBER. The Board of Directors shall consist of three (3) persons or
------
such other number, but no less than three (3) and no more than ten (10) as may
be designated from time to time by resolution of a majority of the entire Board
of Directors. The Directors shall be elected at the annual meeting of the
shareholders, except as provided in section 2 of this Article, and each Director
elected shall hold office until his or her successor is elected and qualified.
2. VACANCIES. Vacancies may be filled by the affirmative vote of a
---------
majority of the remaining directors then in office, though not less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election, and until their successors are duly
elected and qualified, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
3. POWERS. The business and affairs of the Corporation shall be managed
------
by its Board of Directors, which may exercise all such powers of the Corporation
and do all such lawful acts as are not by statute, the Articles of
Incorporation, or these Bylaws directed or required to be exercised or done by
the shareholders. The Board of Directors is responsible for ensuring the
organization provides a high standard of care.
4. PLACE OF MEETINGS. The Board of Directors of the Corporation may hold
-----------------
meetings, both regular and special, either within or without the State of Ohio.
5. ANNUAL MEETINGS. The annual meeting of each newly elected Board of
---------------
Directors shall be held immediately following the annual meeting of shareholders
and in the same place as the annual meeting of shareholders, and no notice to
the newly elected directors of such meeting shall be necessary in order legally
to hold the meeting, providing a quorum shall be present. In the event such
meeting is not held, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver by all of the
directors.
4
<PAGE>
6. REGULAR MEETINGS. Regular meetings of the Board of Directors
----------------
may be held without notice at such time and at such place as shall from
time to time be determined by the Board.
7. SPECIAL MEETINGS. Special meetings of the Board may be called
----------------
by the President or the Secretary on one (1) day's notice to each director,
either personally, by mail, by telegram, or by telephone; special meetings
shall be called by the President or Secretary in like manner an on like
notice on the written request of a majority of directors.
8. QUORUM; ADJOURNMENT; MAJORITY REQUIRED. A majority of the
----------------------------------------
membership of the Board of Directors shall constitute a quorum. The
concurrence of a majority of those present shall be sufficient to conduct
the business of the Board, except as may be otherwise specifically provided
by statute, the Articles of Incorporation or these Bylaws. If a quorum
shall not be present at any meeting of the Board of Directors, the
Directors then present may adjourn the meeting to another time or place,
without notice other than announcement at the meeting, until a quorum shall
be present.
9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
----------------------
Articles of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or
committee.
10. EXECUTIVE COMMITTEE. The Board of Directors may appoint an
-------------------
Executive Committee to which the directors may delegate general or special
authority to act on behalf of the Board. Members of the Executive
Committee shall serve at the pleasure of the Board of Directors and any
member may be removed with or without cause at any time by the Board of
Directors acting at a meeting or by unanimous consent. In the event any
vacancy occurs in the Executive Committee, the vacancy shall be filled by
the Board of Directors.
11. COMPENSATION. The directors may be paid their expenses, if any,
------------
of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings. The amount or
rate of such compensation of members of the Board of Directors or of
Committees shall be established by the Board of Directors and shall be set
forth in the minutes of the Board.
5
<PAGE>
12. WAIVER OF NOTICE. Attendance of a director at a meeting shall
----------------
constitute waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Any
director may waive notice of any annual, regular, or special meeting of
directors by executing a written waiver of notice either before or after
the time of the meeting.
ARTICLE V
OFFICERS
--------
1. DESIGNATION OF TITLES. The officers of the Corporation shall be
---------------------
chosen by the Board of Directors and shall be a President, a Vice
President, a Secretary, and a Treasurer. The Board of Directors may also
choose a Chairman of the Board, additional Vice Presidents, and one or more
Assistant Secretaries and Assistant Treasurers. Any number of offices,
except the offices of President and Secretary, may be held by the same
person, unless the Articles of Incorporation or these ByLaws otherwise
provide.
2. APPOINTMENT OF OFFICERS. The Board of Directors at its first
-----------------------
meeting after each annual meeting of shareholders shall choose a President,
one or more Vice Presidents, a Secretary and a Treasurer, and may choose a
Chairman of the Board, each of whom shall serve at the pleasure of the
Board of Directors. The President and Secretary shall be different person.
The Board of Directors at any time may appoint such other officers and
agents as it shall deem necessary to hold offices at the pleasure of the
Board of Directors and to exercise such powers and perform such duties as
shall be determined from time to time by the Board.
3. SALARIES. The salaries of the officers shall be fixed from
--------
time to time by the Board of Directors, and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director
of the Corporation. The salaries of the officers or the rate by which
salaries are fixed shall be set forth in the minutes of the meetings of the
Board of Directors.
4. VACANCIES. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise may be filled by the
Board of Directors at any time.
5. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall
---------------------
have been appointed and be serving, shall preside at all meetings of the
Board of Directors and shall perform such other duties as from time to time
may be assigned to him or her.
6. PRESIDENT. The President shall preside at all meetings of
---------
shareholders, and if a Chairman of the Board shall not have been appointed
or, having been appointed, shall not be
6
<PAGE>
serving or be absent, the President shall preside at all meetings of the
Board of Directors. He or she shall sign all deeds and conveyances, all
contracts and agreements, and all other instruments requiring execution on
behalf of the Corporation, and shall act as operating and directing head of
the Corporation, subject to policies established by the Board of Directors.
7. VICE PRESIDENT. There shall be as many Vice Presidents as shall
--------------
be determined by the Board of Directors from time to time, and they shall
perform such duties as from time to time may be assigned to them. Any one
of the Vice Presidents, as authorized by the Board, shall have all the
powers and perform all the duties of the President in case of the temporary
absence of the President or in case of his or her temporary inability to
act. In case of the permanent absence or inability of the President to act,
the office shall be declared vacant by the Board of directors and a
successor chosen by the Board.
8. SECRETARY. The Secretary shall see that the minutes of all
---------
meetings of shareholders, of the Board of Directors, and of any standing
committees are kept. He or she shall be the custodian of the corporate seal
and shall affix it to all proper instruments when deemed advisable by him
or her. He or she shall give or cause to be given required notices of all
meetings of the shareholders and of the Board of Directors. He or she shall
have charge of all the books and records of the Corporation except the
books of account, and in general shall perform all the duties incident to
the office of Secretary of a Corporation and such other duties as may be
assigned to him or her.
9. TREASURER. The Treasurer shall have general custody of all the
---------
funds and securities of the Corporation except such as may be required by
law to be deposited with any state official. He or she shall see to the
deposit of the funds of the Corporation in such bank or banks as the Board
of Directors may designate. Regular books of account shall be kept under
his or her direction and supervision, and he or she shall render financial
statements to the President, directors, and shareholders at proper times.
The Treasurer shall have charge of the preparation and filing of such
reports, financial statements, and returns as may be required by law. He or
she shall give to the Corporation such fidelity bond as may be required,
and the premium therefor shall be paid by the Corporation as an operating
expense.
10. ASSISTANT SECRETARIES. There may be such number of Assistant
---------------------
Secretaries as from time to time the Board of Directors may fix, and such
persons shall perform such functions as from time to time may be assigned
to them. No Assistant Secretary shall have the power or authority to
collect, account for, or pay over any tax imposed by any federal, state or
city government.
11. ASSISTANT TREASURERS. There may be such number of Assistant
--------------------
Treasurers as from time to time the Board of Directors may fix, and such
persons shall perform such functions as from
7
<PAGE>
time to time may be assigned to them. No Assistant Treasurer shall have the
power or authority to collect, account for, or pay over any tax imposed by any
federal, state or city government.
12. REMOVAL. Any officer elected or appointed by the board of directors
-------
may be removed by the board of directors whenever in its judgement the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election of an officer shall not of itself create contract rights.
ARTICLE VI
DIRECTOR LIABILITY
------------------
No director shall be personally liable to the Corporation or to its
shareholders except to the extent that such limitation of liability is
prohibited by the provisions of Ohio law, and except for director liability
resulting from (a) any breach of the director's duty of loyalty to the
Corporation or to its shareholders; (b) acts or omissions which are not in good
faith or which involve intentional misconduct or a knowing violation of law; (c)
any transaction from which the director derived an improper personal benefit;
(d) authorizing the unlawful payment of a dividend or other distribution on the
Corporation's capital stock or the unlawful purchase of its capital stock; (e)
any transaction from which the director derived an improper personal benefit.
ARTICLE VII
INDEMNIFICATION
---------------
1. POWER TO INDEMNIFY. The Corporation may indemnify a director, officer,
------------------
employee or agent who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, if he or she acted, or failed to
act, in good faith and in a manner he or she reasonably believed and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In an action not by or in the right of the
Corporation, such indemnification may include expenses, attorney fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred. In an action by or in the right of the Corporation, such
indemnification may include expenses, attorney fees and amounts paid in
settlement actually and reasonable incurred, but shall not include judgments and
fines.
2. LIMITS ON INDEMNIFICATION. No person shall be indemnified if he or she
-------------------------
has been adjudged to be liable to
8
<PAGE>
the Corporation, unless otherwise ordered by the court. The Corporation may
refuse indemnification to any person who unreasonable refuses to permit the
Corporation, at its own expense and through counsel of its own choosing, to
defend him or her in the action.
3. DECISION-MAKING. A decision to indemnify a person shall be made by
---------------
one of the following: a majority vote of a quorum consisting of disinterested
directors; if such quorum is not obtainable, a written opinion of independent
legal counsel appointed by a majority of the disinterested directors; if there
are not disinterested directors, the court or other body before which the action
was brought, or any court of competent jurisdiction; or an act of the
shareholders.
ARTICLE VIII
REPEAL, ALTERATION OR AMENDMENT
-------------------------------
The Articles of Incorporation, and Bylaws may be repealed, altered, or
amended only by a two-thirds (2/3) vote of all issued and outstanding common
stock of the Corporation.
ARTICLE IX
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
1. CERTIFICATES FOR SHARES. Certificates representing shares of the
-----------------------
Corporation shall be signed by the chairman of the board of directors, the
president or any vice president and by the secretary or an assistant secretary,
treasurer or assistant treasurer of the Corporation and shall be sealed with the
seal or facsimile of the seal of the Corporation. If both the signatures of the
officers be by facsimile, the certificate shall be manually signed by or on
behalf of a duly authorized transfer agent or clerk. Each certificate
representing shares shall be consecutively numbered or otherwise identified, and
shall also state the name of the person to whom issued, the number and class of
shares (with designation of series, if any) the date of issue, that the
Corporation is organized under Ohio law, the par value or a statement that the
shares are without par value and any express terms of the shares represented by
such certificate. If the Corporation is authorized and does issue shares of more
than one class or of series within a class, the certificate shall also contain
such information or statement as may be required by law.
The name and address of each shareholder, the number and class of shares
held and the date on which the certificates for the shares were issued shall be
entered on the books of
9
<PAGE>
the Corporation. The person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes with regard to
the Corporation.
2. LOST CERTIFICATES. If a certificate representing shares has allegedly
-----------------
been lost or destroyed, the board of directors may in its discretion, except as
may be required by law, direct that a new certificate be issued upon such
indemnification and other reasonable requirements as it may impose.
3. TRANSFERS OF SHARES. Transfers of shares of the Corporation shall be
-------------------
recorded on the books of the Corporation and, except in the case of a lost or
destroyed certificate, shall be made on surrender for cancellation of the
certificate for such shares. A certificate presented for transfer must be duly
endorsed and accompanied by proper guaranty of signature and other appropriate
assurances that the endorsement is effective.
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that the foregoing copy of the Bylaws is a true and
correct copy of the Bylaws of the Corporation as the same were adopted at the
first meeting of the Board of Directors.
Dated: 1/19/95 /s/ Thomas Creel
------------------------ ---------------------------------
SECRETARY
10
<PAGE>
EXHIBIT 3.23
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
LAKE AVENUE DIALYSIS CENTER, P.C.
I, EVAN BAYH, Secretary of State of Indiana, hereby certify that Articles
of Incorporation of the above Corporation, in the form prescribed by my office,
prepared and signed in duplicate by the incorporator(s), and acknowledged and
verified by the same, have been presented to me at my office accompanied by the
fees prescribed by law; that I have found such Articles conform to law; that I
have endorsed my approval upon the duplicate copies of such Articles; that all
fees have been paid as required by law; that one copy of such Articles has been
filed in my office; and that the remaining copy of such Articles bearing the
endorsement of my approval and filing has been returned by me to the
incorporator(s) or his (their) representatives; all as prescribed by the
provisions of the INDIANA PROFESSIONAL, CORPORATION ACT OF 1983, as amended.
NOW, THEREFORE, I hereby issue to such Corporation this Certificate of
Incorporation, and further certify that its corporate existence has begun.
In Witness Whereof, I have hereunto set my hand and affixed
the seal of the State of Indiana, at the City of
Indianapolis, this 19th day of December 1986
[SEAL]
___________________________________________________________
EVAN BAYH, Secretary of State
By_________________________________________________________
Deputy
<PAGE>
ARTICLES OF INCORPORATION
OF
LAKE AVENUE DIALYSIS CENTER, P.C.
The undersigned incorporator, desiring to form a corporation (hereinafter
referred to as the "Corporation"), under the provisions of the Professional
Corporation Act of 1983, as amended (hereinafter referred to as the "Act"),
executes the following Articles of Incorporation:
ARTICLE I
---------
Name
----
The name of the Corporation is Lake Avenue Dialysis Center, P.C.
ARTICLE II
---------
Purpose
-------
The purposes for which the Corporation are formed are, and include, to
render professional medical services, and it shall not engage in any business
other than the rendering of professional medical services; provided, however, it
may invest its funds in real estate, mortgages, stocks, bonds, or any other type
of investment and may own real or personal property necessary or appropriate for
rendering its professional medical services, and it shall have the capacity to
act possessed by natural persons in dealing with its investments and its real
and personal property used in rendering professional medical services.
<PAGE>
<TABLE>
<S> <C> <C>
[SEAL] NOTICE OF CHANGE OF REGISTERED Provided by: EVAN BAYH
OFFICE OR REGISTERED AGENT
ALL CORPORATIONS Indiana Secretary of State
State Form 26276(R/ 1-88)
Indiana Code 23-1-24-2 (for profits corporations)
Indiana Code 23-7-1.1-53 (non-profit corporations)
Present original and 2 copies NO FILING FEE
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Corporation Date of incorporation
LAKE AVENUE DIALYSIS CENTER, P.C. DECEMBER 19, 1986
- ------------------------------------------------------------------------------------------------------------------------------------
Current Registered Office Address ZIP Code
ONE NORTH CAPITOL AVENUE, INDIANAPOLIS, INDIANA 46204
- ------------------------------------------------------------------------------------------------------------------------------------
New Registered Office Address c/o The Prentice-Hall Corporation System, Inc.
50 South Meridian Street, Suite 700, Indianapolis, Indiana 46204-3542
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current Registered Agent (Type or Print Name)
C T CORPORATION SYSTEM
- ------------------------------------------------------------------------------------------------------------------------------------
New Registered Agent (Type or Print Name)
The Prentice-Hall Corporation System, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS BY REGISTERED AGENT OR CORPORATION
- --------------------------------------------------------------------------------
This statement is a representation that the new registered agent has
consented to the appointment as registered agent, or statement attached
signed by registered agent giving consent to act as the new registered
agent.
After the change or changes are made, the street address of this
corporation's registered agent and the address of its registered office
will be identical.
The registered agent filing this statement of change of this registered
agent's business street address has notified the represented corporation
in writing of the change, and the notification was manually signed or
signed in facsimile.
The Prentice-Hall Corporation System, Inc.
By:
---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned being the (Title of Officer)
Secretary of said corporation executes this notice and verifies,
subject to penalties of perjury, that the statements contained herein
are true, this ________________ day of ________________, 1994.
- --------------------------------------------------------------------------------
Signature Printed Name
(pb) /s/ Paul Balter Paul Balter, M.D.
- --------------------------------------------------------------------------------
<PAGE>
ARTICLE III
-----------
Term of Existence
-----------------
The period during which the Corporation shall continue as a corporation is
perpetual.
ARTICLE IV
----------
Principal Office And Resident Agent
-----------------------------------
The post office address of the principal office of the Corporation is 3515
Lake Avenue, Fort Wayne, Indiana 46805; and the name and post office address of
its resident agent in charge of such office is Dr. Claudia C. Cabaluna, 3515
Lake Avenue, Fort Wayne, Indiana 46805.
ARTICLE V
---------
Number of Authorized Shares
---------------------------
The total number of shares which the Corporation shall have authority to
issue is 1,000 shares, consisting of 1,000 shares of common, capital stock
without par value.
ARTICLE VI
----------
Terms of Shares
---------------
Section 1. Designation and Issuance of Shares. The authorized shares of
--------- ----------------------------------
the Corporation shall be of one class and kind. The shares may be issued by the
Corporation, and such shares as are reacquired by the Corporation from time to
time and not cancelled may be sold or otherwise disposed of, for such
consideration and upon such terms and conditions as may from time to time be
determined and fixed by the Board of Directors. The consideration received by
the Corporation for authorized shares shall be allocated to stated capital and
to capital surplus by resolution of the Board of Directors prior to, or within a
period
-2-
<PAGE>
of sixty (60) days after, the issuance of such shares. The stated capital of the
Corporation may be increased from time to time by resolution of the Board of
Directors directing a transfer from capital or earned surplus.
Section 2. Dividends. Such cash or property distributions with respect to
--------- ---------
shares of the common, capital stock as may be determined by the Board of
Directors may be declared from time to time out of the unreserved and
unrestricted capital or earned surplus of the Corporation, but no dividend
payable in cash or property shall be paid out of capital surplus attributable
to unrealized appreciation in value or revaluation of assets. Such share
dividends as may be determined by the Board of Directors may from time to time
be declared and paid in its own authorized but unissued shares out of any
unreserved and unrestricted capital or earned surplus, including revaluation
surplus, or in its own shares out of any treasury shares that have been
reacquired out of surplus available for dividends, as deduction need be made for
the depletion by sale or lapse of time of wasting assets intended for sale in
the ordinary course of business or property having a limited, life.
Section 3. Preemptive Rights. The holders of shares of the Corporation
--------- -----------------
shall have no preemptive rights.
Section 4. Restrictions on Issue and Transfer of Common, Capital Stock.
--------- -----------------------------------------------------------
The common, capital stock issued hereunder may be issued only to individuals who
hold an unlimited license to practice medicine in the State of Indiana, and no
shares of stock in this Corporation may be transferred to an individual who does
not hold an unlimited license to practice medicine in the State of Indiana.
ARTICLE VII
-----------
Voting Rights of Shares
-----------------------
Except as otherwise provided in the Act, every shareholder of the
Corporation shall have the right, at every shareholders' meeting, to one vote
for each share of stock standing in his name on the books of the Corporation.
-3-
<PAGE>
ARTICLE VIII
------------
Initial Stated Capital
----------------------
The Corporation will not commence business until consideration of the value
of at least One Thousand Dollars ($1,000.00) has been received for the issuance
of shares.
ARTICLE IX
----------
Data Respecting Directors
-------------------------
Section 1. Number. The number of directors constituting the initial Board
--------- ------
of Directors of the Corporation shall be seven (7). The number of directors may
from time to time be fixed by the By-Laws of the Corporation at any number not
less than one (1) nor more than fifteen (15). If and whenever the Code of By-
Laws does not contain a provision specifying the number of directors of the
Corporation, the number shall be one (1).
Section 2. Qualifications. Directors need not be shareholders of the
--------- --------------
Corporation. A majority of the directors at any time shall be citizens of the
United States. All directors shall be of lawful age and shall hold unlimited
license to practice medicine in the State of Indiana.
ARTICLE X
---------
Further Data Respecting Directors
---------------------------------
Section 1. Names and Post Office Addresses. The names and post office
--------- -------------------------------
addresses of the first Board of Directors of the Corporation are as follows:
Number, Street
Name or Building City & State
---- -------------- ------------
Dr. Claudia C. Cabaluna 2414 Lake Ave. Ft. Wayne, IN
Dr. Arthur M. Morris 101 N. Scoville Oak Park, IL
Dr. Michael J. Carbon 101 N. Scoville Oak Park, IL
Dr. Paul Balter 101 N. Scoville Oak Park, IL
Dr. Douglas G. Mufuka 101 N. Scoville Oak Park, IL
Dr. George Dunea 101 N. Scoville Oak Park, IL
Dr. Ashutosh Gupta 101 N. Scoville Oak Park, IL
-4-
<PAGE>
Section 2. Unlimited Licenses. All of such directors hold an unlimited
--------- ------------------
license to practice medicine in the State of Indiana.
ARTICLE XI
----------
Data Respecting Incorporator
----------------------------
The name and post office address of the incorporator is Norman R. Garvin,
1301 Merchants Plaza, Indianapolis, Indiana 46204.
ARTICLE XII
-----------
Provisions For Regulation Of Business
-------------------------------------
And Conduct of Affairs of Corporation
-------------------------------------
Section 1. Professional Regulation. The Corporation and all of its
--------- -----------------------
shareholders, officers, employees and agents rendering medical services or
engaged in the practice of medicine on behalf of the Corporation shall be
subject to all the laws, rules, and regulations applicable to an individual
engaged in the practice of medicine in the State of Indiana.
Section 2. Prohibited Acts. The Corporation may not do any act which is
--------- ---------------
prohibited to be done by an individual licensed to practice medicine in the
State of Indiana.
Section 3. Professional Relationship. The Corporation and its employees
--------- -------------------------
shall not engage in any activity which would modify the relationship between a
person furnishing professional medical services and a person receiving such
medical services.
Section 4. Professional Services. The professional medical services to be
--------- ---------------------
rendered by the Corporation shall be rendered only through officers, employees
and agents who are individuals and who hold an unlimited license to practice
medicine in the State of Indiana.
Section 5. Termination of Relationship with Corporation. If any officer,
--------- --------------------------------------------
shareholder, agent or employee of the Corporation becomes legally disqualified
to render professional medical services within the State of Indiana, or if he
engages in any activity which under existing law is a restriction or limitation
upon his rendering of medical professional service, the Corporation shall cause
such individual to sever all employment with it and to terminate all financial
interest in the Corporation.
Section 6. Meetings of Shareholders. Meetings of the shareholders of the
--------- ------------------------
Corporation shall be held at such place,
-5-
<PAGE>
within or without the State of Indiana, as may be specified in the respective
notices, or waivers of notice, thereof. Any action which may be taken at a
meeting of the shareholders may be taken without a meeting if, prior to such
action, a consent in writing, setting forth the action so taken, shall be signed
by all of the shareholders entitled to vote with respect to the subject matter
thereof, and such written consent is filed with the minutes of the proceedings
of the shareholders.
Section 7. Meetings of Directors. Meetings of the directors of the
--------- ---------------------
Corporation shall be held at such place, within or without the State of Indiana,
as may be specified in the respective notices, or waivers of notice, thereof.
Any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if prior
to such action a written consent thereto is signed by all members of the Board
or of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of such Board or committee.
Section 8. Code of By-Laws. The Board of Directors of the Corporation
--------- ---------------
shall have power, without the assent or vote of the shareholders, to make,
alter, amend or repeal the Code of By-Laws of the Corporation, but the
affirmative vote of a majority of the members of the Board of Directors, for the
time being, shall be necessary to effect any alteration, amendment or repeal.
If the Code of By-Laws for the time being in force so provides, the Board of
Directors may designate two or more of its number to constitute an Executive
Committee, which Committee, to the extent provided in the Code of By-Laws, shall
have and exercise all the authority of the Board of Directors in the management
of the Corporation, and have power to authorize the execution of all papers or
documents which may require it.
Section 9. Interest of Directors in Contracts. Any contract or other
--------- ----------------------------------
transaction between the Corporation and one or more of its directors, or between
the Corporation and any firm of which one or more of its directors are members
of employees, or in which they are interested, or between the Corporation and
any corporation or association of which one or more of its directors are stock
holders, members, directors, officers or employees, or in which they are
interested, shall be valid for all purposes, notwithstanding the presence of
such director or directors at the meeting of the Board of Directors which acts
upon, or in reference to, such contract or transaction and notwithstanding his
or their participation in such action, if the fact of such interest shall be
disclosed or known to the Board of Directors and the Board of Directors shall
authorize, approve and ratify such contract or transaction by a vote of a
majority of the directors present, such interested director or directors to be
counted in determining whether a quorum is present and to be counted in
calculating the majority of such quorum necessary to carry such
-6-
<PAGE>
vote. This Section of this Article shall not be construed to invalidate any
contract or other transaction which would otherwise be valid under the common
and statutory law applicable thereto.
Section 10. Limitation of Liability and Indemnification of Officers and
---------- -----------------------------------------------------------
Directors. No officer or director of the Corporation shall be liable to the
- ---------
Corporation for any loss or damage suffered; by it on account of any action
taken or omitted to be taken by him as a Director, officer or employee of the
Corporation in good faith if such person:
i) exercised or used the same degree of care and skill as a prudent
man would have excercised or used under the circumstances in the conduct of
his own affairs; or
ii) took or omitted to take such action in reliance upon advise of
counsel for the Corporation or upon statements made or information
furnished by officers of employees of the Corporation which he had
reasonable grounds to believe, or upon financial statement of the
Corporation prepared by an officer or employee of the Corporation in charge
of its accounts, or certified by a public accountant or firm of public
accountants; or
iii) in good faith considered the assets to be of their book value or
followed what he believed to be sound accounting and business practice.
The Corporation shall indemnify any person against whom there is instituted
or threatened any claim, action, suit or proceeding, whether civil or criminal,
by reason of the fact that he, his testator or intestate is or was a Director,
member of the Executive Commission or officer of the Corporation, or of any
corporation which he served as such at the request of the Corporation, against
any and all liability, reasonable expenses and costs of any nature (excluding
only accounts paid in settlement and including without limitation any and all
attorneys' fees, judgments, fines, penalties and court costs) actually incurred
by him in connection with the defense of such claim, action, suit or proceeding,
or in connection with any appeal therein, except in relation to matters as to
which it shall be finally adjudged in such action, suit or proceeding that such
person, his testator or intestate is liable for gross negligence or wilful
misconduct in the performance of his duties. The Corporation may also reimburse
to any such person any amount paid in settlement of any such claim, action, suit
or proceeding, if it shall be found by a majority of a committee composed of the
Directors not involved in the matter of controversy (whether or not a quorum)
that it is in the interests of the Corporation that such settlement be made and
that such person, his testator or interstate was not guilty of gross negligence
or wilful misconduct.
-7-
<PAGE>
If several claims, issues or matters of action are involved, any such
person may be entitled to indemnification as to some matters even though he is
not so entitled as to others. The Corporation may advance expenses to, or where
appropriate may at its expense undertake the defense of, any such person upon
receipt of an undertaking by or on behalf of such person to repay such expenses
if it should ultimately be determined that he is not entitled to indemnification
under this Article.
The provisions of this Section shall be in addition to and not in
limitation of any other right of indemnification and reimbursement or
limitations of liability to which any Director, member of the Executive
Committee or officer may be entitled as a matter of law. The provisions of this
Section shall apply whether or not at the time of reimbursement the person
reimbursed is then a Director, member of the Executive Committee or officer of
the Corporation. Notwithstanding any repeal of this Section, or other amendment
thereof, its provisions shall be binding upon the Corporation (subject only to
the exceptions hereinabove set forth) as to all actions, suits or proceedings
and expenses connected therewith, judgments and settlements thereof, as above
provided, arising out of matters which occur during or are referable to the
period prior to any such repeal or amendment of this Section.
By vote of the Board of Directors, the Corporation may assent to the
adoption of a by-law or charter provision, having substantially the provisions
of this Section, by any subsidiary, whether or not wholly owned.
Section 11. Additional Powers of Directors. In addition to the powers and
---------- ------------------------------
authorities hereinabove or by statute expressly conferred, the Board of
Directors is hereby authorized to exercise all such powers and do all such acts
and things as may be exercised or done by a corporation organized and existing
under the provisions of the Indiana Professional Corporation Act of 1983, as
amended.
Section 12. Amendment of Articles of Incorporation. Subject to the
---------- --------------------------------------
express provisions of these Articles of Incorporation, the Corporation reserves
the right to amend, alter, change or repeal any provisions contained in these
Articles of Incorporation in the manner now or hereafter prescribed by the
provisions of the Indiana Professional Corporation Act of 1983, as amended, or
any other pertinent enactment of the General Assembly of the State of Indiana;
and all rights and powers conferred hereby on shareholders, directors or
officers are subject to this reserved power.
-8-
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the incorporator designated in
Article XI, executes the foregoing Articles of Incorporation and certifies to
the truth of the facts therein stated.
/s/ Norman R. Garvin
-----------------------------------
Norman R. Garvin
STATE OF INDIANA )
) SS:
COUNTY OF MARION )
I, the undersigned, a Notary Public duly commissioned to take
acknowledgements and administer oaths in the State of Indiana, certify that
Norman R. Garvin, the incorporator executing the foregoing Articles of
Incorporation, personally, before me, acknowledged the execution thereof and
swore to the truth of the facts therein stated.
WITNESS MY HAND and Notarial Seal this 19th day of December, 1986.
/s/ Mary Jane Linton
-----------------------------------
Notary Public
My Commission Expires:
9-25-89
- ----------------------
County of Residence:
Marion
- ----------------------
This instrument prepared by Norman R. Garvin, attorney-at-law.
-9-
<PAGE>
[LETTERHEAD OF STATE OF INDIANA APPEARS HERE]
CERTIFICATE OF REGISTRATION
---------------------------
On 12-12-86, the Health Professions Bureau received an application for
certificate of registration from the proposed corporation Lake Avenue Dialysis
Center, P.C.. In accordance with I.C.23-1.5-2-9(c), the Indiana Medical Board
reviewed the application and found that the directors and shareholders of the
proposed corporation are properly licensed in compliance with the statute and
regulations of the licensing authority and that the corporation will be
organized in compliance with the statute and regulations of the licensing
authority. The___________________ Indiana Medical Board certified those facts
to the Bureau and requested that a certificate of registration be issued. The
Lake Avenue Dialysis Center, P.C. has remitted $25.00 to the Health Professions
Bureau according to I.C. 23-1.5-2-9(c) (2). The Health Professions Bureau has
issued this certificate of registration to the proposed corporation____________
Lake Avenue Dialysisi Center, P.C. and certifies that it has complied with I.C.
23-1.5-2-9(b) and (c).
Certificate No. 50002911
----------
/s/ William S. Keorer
-----------------------------------
Executive Director
Board of Chiropractic Examiners . Dental Examiners . Health Facility
Administration . Medical Licensing . Nursing. Optometry . Pharmacy .
Professional Sanitarians . Speech Pathology & Audiology . Psychology .
Veterinary Medical . Hearing Aid Dealer Advisory Committee . Committee of
Podiatric Medicine . Physical Therapy Committee
<PAGE>
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
ARTICLES OF AMENDMENT
To Whom These Presents Come, Greeting:
WHEREAS, there has been presented to me at this office, Articles of Amendment
for:
LAKE AVENUE DIALYSIS CENTER PC
and said Articles of Amendment have been prepared and signed in accordance
with the provisions of the Indiana Business Corporation Law, as amended.
The name of the corporation is amended as follows:
LAKE AVENUE DIALYSIS CENTER, INC.
Now, THEREFORE, I, SUE ANNE GILROY, Secretary of State of Indiana, hereby
certify that I have this day filed said articles in this office.
The effective date of these Articles of Amendment is April 24, 1996.
In Witness Whereof, I have hereunto
set my hand affixed the seal of the
State of Indiana, at the city of
Indianapolis, this Twenty-forth
day of April, 1996.
<PAGE>
[LOGO] ARTICLES OF AMENDMENT OF THE Provided by: JOSEPH H. HOGSETT
ARTICLES OF INCORPORATION SECRETARY OF STATE OF INDIANA
State Form 38333 (A5/9-91) CORPORATIONS DIVISION
State Board of Accounts Approved 1988 302 W. WASHINGTON ST RM E018
INDIANAPOLIS IN 46204
TELEPHONE: (317) 232-6576
INSTRUCTIONS: Use 8 1/2 x 11 inch white paper Indiana Code 23-1-38-1 et seg.
for inserts. Filling requirements - Present FILING FEE $30.00
original and one copy to address in upper right
corner of this form.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Lake Avenue Dialysis Center, P.C.
- ----------------------------------------------------------------------------------------------------------------------------------
The undersigned officers of
Lake Avenue Dialysis Center, P.C.
- ----------------------------------------------------------------------------------------------------------------------------------
(hereinafter referred to as the "Corporation") existing pursuant to the provisions of:
(indicate appropriate act)
[_] Indiana Business Corporation Law [X] Indiana Professional Corporation Act of 1983 ??
---
as amended (hereinafter referred to as the "Act"), desiring to give notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the following facts:
</TABLE>
- -------------------------------------------------------------------------------
ARTICLE 1 AMENDMENT(S)
- -------------------------------------------------------------------------------
SECTION 1 The date of incorporation of the corporation is:
December 19, 1986
- -------------------------------------------------------------------------------
SECTION 2 The name of the corporation following this amendment to the Articles
of incorporation is: Lake Avenue Dialysis Center, Inc.
- -------------------------------------------------------------------------------
SECTION 3
The exact text of Article(s) I and II of the Articles of incorporation is
------------
now as follows:
* The Corporation is now organized under the provisions of the Indiana
Business Corporation Law rather than the Indiana Professional Corporation
Act of 1983.
ARTICLE I
---------
Name
----
The name of the Corporation is Lake Avenue Dialysis Center, Inc.
ARTICLE II
----------
Purpose
-------
The purposes for which the Corporation are formed are, and include, to
maintain and conduct any and every kind of sales, distribution, leasing,
investment, and service business; to manufacture, process, fabricate,
rebuild, service, invest in, purchase, sell, lease or otherwise dispose of
and generally deal in and with raw materials, products, wares, goods,
merchandise and real personal property, both tangible and intangible, of
every kind and description; to make investments of every kind and nature;
and to provide services of every kind and character. To acquire, own, use,
convey and otherwise dispose of and deal in real property.
- --------------------------------------------------------------------------------
SECTION 4 Date of each amendment's adoption:
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE II Manner of Adoption and Vote
- --------------------------------------------------------------------------------
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a resolution
proposing to amend the terms and provisions of Article(s) I and II of the
Articles of Incorporation and proposed such resolution to the Shareholders,
allowing such Shareholders to vote on the proposed amendment.
The resolution was adopted by: (Select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on __________________,
19 ______, at which a quorum of such Board was present.
(b) Written consent executed on _____________________, 1995, and signed by
all members of the Board of Directors.
- --------------------------------------------------------------------------------
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in respect of the
Articles of Amendment adopted the proposed amendment. The amendment was adopted
by: (Select appropriate paragraph)
(a) Vote of such Shareholders during the meeting called by the Board of
Directors. The result of such vote is as follows:
TOTAL
______________________________
SHAREHOLDERS ENTITLED TO VOTE:
______________________________
SHAREHOLDERS VOTED IN FAVOR:
______________________________
SHAREHOLDERS VOTED AGAINST:
______________________________
(b) Written consent executed on __________________________, 1995, and
signed by all such Shareholders.
- --------------------------------------------------------------------------------
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and the vote by
which they were adopted constitute full legal compliance with the provisions of
the Act, the Articles of Incorporation, and the By-Laws of the Corporation.
- --------------------------------------------------------------------------------
I hereby verify to the penalties of perjury that the statements contained are
true this 21st day of March, 1995.
- --------------------------------------------------------------------------------
Current Officer's Signature Officer's Name Printed
(ccc) Claudia C. Cabaluna Claudia C. Cabaluna, M.D.
- --------------------------------------------------------------------------------
Officer's Title
President
- --------------------------------------------------------------------------------
RETURN TO:
David J. Hochman, Esq,
Finger, Hochman & Delott, P.C.
30 North LaSalle Street, Suite 4300
Chicago, IL 60602
<PAGE>
JOINT CONSENT OF SHAREHOLDERS AND DIRECTORS OF
LAKE AVENUE DIALYSIS CENTER, P.C.
IN LIEU OF MEETING
------------------
The undersigned, being all of the Directors and Shareholders of the
above-captioned corporation (the "Corporation"), do hereby authorize and consent
in lieu of meeting to the adoption of the following resolutions:
RESOLVED, that Article One of the Articles of Incorporation is hereby
amended to read as follows: "The name of the Corporation is "Lake Avenue
Dialysis Center, Inc."
RESOLVED, that the proper officers of the Corporation are hereby authorized
and directed to take the necessary steps to change the Corporation's name in
accordance with the foregoing resolution.
RESOLVED, that Article II of the Corporation's Articles of Incorporation is
hereby amended to read as follows:
"The purpose or purposes for which the corporation is organized are:
To maintain and conduct any and every kind of sales, distribution, leasing,
investment, and service business; to manufacture, process, fabricate, rebuild,
service, invest in, purchase, sell, lease or otherwise dispose of and generally
deal in and with raw materials, products, wares, goods, merchandise and real and
personal property, both tangible and intangible, of every kind and description;
to make investments of every kind and nature; and to provide services of every
kind and character. To acquire, own, use, convey and otherwise dispose of and
deal in real property."
RESOLVED, that Section 1.01 of Article I of the Corporation's By-Laws is
hereby amended to read as follows:
<PAGE>
"Section 1.01. Name. the Name of the Corporation is Lake Avenue Dialysis
------------ ----
Center, Inc. (hereinafter referred to as the "Corporation")."
Date: September 29, 1995
------------
/s/ Claudia C. Cabaluna /s/ Paul Balter
- ----------------------------- -------------------------
Claudia C. Cabaluna, M.D. Paul Balter, M.D.
/s/ Arthur M. Morris
- -----------------------------
Arthur M. Morris, M.D.
BEING ALL OF THE DIRECTORS OF THE CORPORATION
/s/ Arthur M. Morris
-------------------------
_____________________________ Arthur M. Morris, M.D.
Claudia C. Cabaluna, M.D.
/s/ George Dunea /s/ Ashutosh Gupta
- ----------------------------- -------------------------
George Dunea, M.D. Ashutosh Gupta, M.D.
/s/ Michael J. Carbon /s/ Paul Balter
- ----------------------------- -------------------------
Michael J. Carbon, M.D. Paul Balter, M.D.
/s/ Douglas G. Mufuka, M.D.
- -----------------------------
Douglas G. Mufuka, M.D. _________________________
Edward Lelonek, M.D.
BEING ALL OF THE SHAREHOLDERS OF THE CORPORATION
2
<PAGE>
"Section 1.01. Name. The Name of the Corporation is Lake Avenue Dialysis
------------ ----
Center, Inc. (hereinafter referred to as the "Corporation")."
Date: September 29, 1995
------------
_____________________________ _________________________
Claudia C. Cabaluna, M.D. Paul Balter, M.D.
____________________________
Arthur M. Morris, M.D.
BEING ALL OF THE DIRECTORS OF THE CORPORATION
_____________________________ _________________________
Claudia C. Cabaluna, M.D. Arthur M. Morris, M.D.
_____________________________ _________________________
George Dunea, M.D. Ashutosh Gupta, M.D.
_____________________________ _________________________
Michael J. Carbon, M.D. Paul Balter, M.D.
/s/ Edward Lelonek
-------------------------
_____________________________ Edward Lelonek, M.D.
Douglas G. Mufuka, M.D.
BEING ALL OF THE SHAREHOLDERS OF THE CORPORATION
2
<PAGE>
"Section 1.01. Name. The Name of the Corporation is Lake Avenue Dialysis
------------ ----
Center, Inc. (hereinafter referred to as the "Corporation")."
Date: September 29, 1995
------------
/s/ Claudia C. Cabaluna
- -----------------------------
Claudia C. Cabaluna, M.D. _________________________
Paul Balter, M.D.
_____________________________
Arthur M. Morris, M.D.
BEING ALL OF THE DIRECTORS OF THE CORPORATION
_____________________________ _________________________
Claudia C. Cabaluna, M.D. Arthur M. Morris, M.D.
_____________________________ _________________________
George Dunea, M.D. Ashutosh Gupta, M.D.
_____________________________ _________________________
Michael J. Carbon, M.D. Paul Balter, M.D.
_____________________________ _________________________
Douglas G. Mufuka, M.D. Edward Lelonek, M.D.
BEING ALL OF THE SHAREHOLDERS OF THE CORPORATION
2
<PAGE>
EXHIBIT 3.24
CODE OF BY-LAWS
OF
LAKE AVENUE DIALYSIS CENTER, P.C.
ARTICLE I
---------
Identification
--------------
Section 1.01. Name. The name of the Corporation is Lake Avenue Dialysis
------------ ----
Center, P.C. (hereinafter referred to as the "Corporation").
Section 1.02. Principal Office and Resident Agent. The post office
------------ -----------------------------------
address of the principal office of the Corporation is 3515 Lake Avenue, Fort
Wayne, Indiana 46805, and the name and post office address of its resident agent
in charge of such office is Dr. Claudia C. Cabaluna, 3515 Lake Avenue, Fort
Wayne, Indiana 46805.
Section 1.03. Fiscal Year. The fiscal year of the Corporation shall be
------------ -----------
determined by the Board of Directors in consultation with the accountant for the
Corporation based upon the most beneficial tax treatment to be accorded to the
Corporation.
ARTICLE II
----------
Shares of Stock
---------------
Section 2.01. Consideration for Shares. The Board of Directors shall
------------ ------------------------
cause the Corporation to issue the shares of stock of the Corporation for such
consideration as has been fixed by such Board pursuant to the provisions of the
Articles of Incorporation.
Section 2.02. Payment for Shares. Subject to the provisions of the
------------ ------------------
Articles of Incorporation, the consideration for the issuance of shares of stock
of the Corporation may be paid, in whole or in part, in money, in other
property, tangible or intangible, or in labor actually performed for, or
services actually rendered to, the Corporation; provided, however, that the part
of the surplus of a corporation which is transferred to stated capital upon the
issuance of shares as a share dividend shall be deemed to be the consideration
for the issuance of such shares. When payment of the consideration for which a
share was authorized to be issued shall have been received by the Corporation,
or when surplus shall have been transferred to stated capital upon the issuance
of a share dividend, such share shall be declared and taken to be fully paid and
not liable to any further call or assessment, and the holder thereof shall not
be liable for any further payments thereon. In the absence of
<PAGE>
actual fraud in the transaction, the judgment of the Board of Directors as to
the value of such property, labor or services received as the consideration, or
the value placed by the Board of Directors upon the corporate assets in the
event of a share dividend shall be conclusive. Promissory notes, uncertified
checks or future services shall not be accepted in payment or par payment of any
of the shares of the Corporation except as authorized by The Indiana General
Corporation Act, as amended (hereinafter referred to as the "Act").
Section 2.03. Certificates for Shares. As from time to time provided in
------------ -----------------------
the Act, each shareholder shall be entitled to a certificate certifying the
number of shares owned by such shareholder in the Corporation.
Section 2.04. Transfer of Shares. The shares of the Corporation shall be
------------ ------------------
transferrable on the books of the Corporation upon compliance with the Act and
any other applicable state of federal law; upon the surrender of any certificate
or certificates representing such shares, properly endorsed or otherwise
transferred by the registered holder or by a duly authorized attorney or other
personal representative; and upon any such verification of signatures or
authority to transfer as may be legally and reasonably required by the Board of
Directors or the President.
Section 2.05. Equitable Interests in Shares Need Not be Recognized. The
------------ ----------------------------------------------------
Corporation and its officers shall be entitled to treat the holder of record of
any share or shares of stock of the Corporation as the holder in fact thereof,
and accordingly shall not be required to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person or
persons, whether or not express notice thereof shall have been given the
Corporation, save as expressly provided to the contrary by the laws of Indiana,
the Articles of Incorporation of the Corporation and these By-Laws.
ARTICLE III
-----------
Meetings of Shareholders
------------------------
Section 3.01. Place of Meetings. All meetings of the shareholders of the
------------ -----------------
Corporation shall be held at such place within or without the State of Indiana,
as may be specified in the respective notices or waivers of notice thereof, or
proxies to represent the shareholders thereat.
Section 3.02. Annual Meetings. The annual meeting of the shareholders for
------------ ---------------
the election of directors, and for the transaction of such other business as may
properly come before the meeting shall be held within five (5) months after the
close of each fiscal year of the Corporation. Failure to hold the
-2-
<PAGE>
annual meeting at the designated time shall not work any forfeiture or a
dissolution of the Corporation.
Section 3.03. Special Meetings. Special meetings of the shareholders may be
------------ ----------------
called by the President, by the Board of Directors, or by shareholders holding
not less than one-fourth of all the shares of stock outstanding.
Section 3.04. Notice of Meetings. A written or printed notice, stating the
------------ ------------------
place, day and hour of the meeting, and in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary or by the officers or persons calling the meeting, to
each holder of the capital stock of the Corporation at the time entitled to
vote, at such address as appears upon the records of the Corporation, at least
ten (10) days before the date of the meeting. Notice of any such meeting may be
waived in writing by any shareholder if the waiver sets forth in reasonable
detail the purpose or purposes for which the meeting is called and the time and
place thereof. Attendance at any meeting, in person or by proxy shall constitute
a waiver of notice of such meeting unless the shareholder states his objection
to such lack of notice to the chairman of the meeting before a vote is taken on
any matter during which such shareholder is present, and in such event the
objection shall be entered by the secretary of the meeting in the minutes of the
meeting. The objecting shareholder must reduce to writing his objection to such
lack of notice and forward copies of same to the Secretary and President of the
Corporation within twenty-four (24) hours after the meeting is adjourned.
Section 3.05. Voting at Meetings.
------------ ------------------
Clause 3.051. Voting Rights. Except as otherwise provided by law or by
------------ -------------
the provisions of the Articles of Incorporation, every holder of shares of stock
of the Corporation shall have the right at all meetings of the shareholders of
the Corporation to one (1) vote for each share of stock standing in his name on
the books of the Corporation.
Clause 3.052. Proxies. A shareholder may vote, either in person or by
------------ -------
proxy executed in writing by the shareholder or a duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from the date
of its execution, unless a longer time is expressly provided therein.
Clause 3.053. Quorum. Unless otherwise provided by the Articles of
------------ ------
Incorporation, at any meeting of the shareholders, a majority of the shares of
the stock outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum.
-3-
<PAGE>
ARTICLE IV
----------
The Board of Directors
----------------------
Section 4.01. Annual Meeting. The Board of Directors shall meet each year
------------ --------------
immediately after the annual meeting of the shareholders, at the place where
such meeting of the shareholders has been held, for the purpose of organization,
election of officers and consideration of any other business that may be brought
before the meeting. No notice shall be necessary for the holding of this annual
meeting. If such meeting is not held as above provided, the election of officers
may be had at any subsequent meeting of the Board specifically called in the
manner provided in Section 4.02 of this Article and such officers of the
Corporation shall hold office until their successors are elected and qualified
at such subsequent meeting.
Section 4.02. Other Meetings. Other meetings of the Board of Directors may
------------ --------------
be held upon the call of the President, or of two or more members of the Board
of Directors, at any place within or without the State of Indiana, upon
forty-eight (48) hours notice, specifying the time, place, and general purposes
of the meeting, given to each director, either personally, by mailing or by
telegram. At any meeting at which all directors are present, notice of the time,
place and purpose thereof shall be deemed waived; and similar notice may
likewise be waived by absent directors, either by written instrument or by
telegram.
Section 4.03. Quorum. At any meeting of the Board of Directors, the
------------ ------
presence of a majority of the members of the Board of Directors then qualified
and acting shall constitute a quorum for the transaction of any business except
the filing of vacancies in the Board of Directors.
Section 4.04. Removal. Any director may be removed, either for or without
------------ -------
cause, at any special meeting of shareholders called for that purpose by the
affirmative vote of a majority in number of shares of the shareholders of record
present in person or by proxy and entitled to vote for the election of such
director, if notice of the intention to act upon such matter shall have been
given in the notice calling such meeting. If the notice calling such meeting
shall so provide, the vacancy caused by such removal may be filled at such
meeting by vote of a majority of the shareholders present and entitled to vote
for the election of directors.
Section 4.05. Compensation of Directors. The Board of Directors is
------------ -------------------------
empowered and authorized to fix and determine the compensation of directors for
attendance at meetings of the Board and additional compensation for such
additional services any of such directors may perform for the Corporation.
-4-
<PAGE>
ARTICLE V
---------
The Officers of the Corporation
-------------------------------
Section 5.01. Officers. The officers of the Corporation shall consist of
------------ --------
a President, a Secretary and a Treasurer. In addition, the Corporation may have
as officers one or more Vice Presidents, Assistant Secretaries or Assistant
Treasurers. Any two or more offices may be held by the same person. The Board
of Directors by resolution may create and define the duties of other offices in
the Corporation, and may elect or appoint persons to fill such offices.
Section 5.02. Vacancies. Whenever any vacancies shall occur in any office
------------ ---------
by death, resignation, increase in the number of offices of the Corporation or
otherwise, the same shall be filled by the Board of Directors, and the officer
so elected shall hold office until his successor is chosen and qualified.
Section 5.03. The President. The President shall be chosen from among the
------------ -------------
Board of Directors and shall be responsible for the active executive management
of the operations of the Corporation subject to the control of the Board of
Directors; shall preside at all meetings of the shareholders and the directors;
shall discharge all the duties which devolve upon a presiding officer; and
shall perform such other duties as this Code of By-Laws provides or the Board of
Directors may prescribe.
The President shall have full authority to execute proxies on behalf of the
Corporation, vote stock owned by it in any other corporation and execute, with
the Secretary, powers of attorney appointing other corporation, partnerships or
individuals the agent of the Corporation, all subject to the provisions of The
Indiana General Corporation Act of 1929, as amended, the Articles of
Incorporation of the Corporation, and this Code of By-Laws.
Section 5.04. Vice President. A Vice President shall perform all duties
------------ --------------
incumbent upon the President during any absence or disability of the President,
and perform such other duties as this Code of By-Laws may require or the Board
of Directors may prescribe.
Section 5.05. The Secretary and Assistant Secretary. The Secretary shall
------------ -------------------------------------
have the custody and care of the corporate seal, records, minutes and stock
books of the Corporation. He shall attend all meetings of the shareholders and
of the Board of Directors, and shall keep, or cause to be kept in a book
provided for the purpose, a true and complete record of the proceedings of such
meetings, and shall perform a like duty for all standing committees appointed by
the Board of Directors, when required. He shall attend to the giving and serving
of all notices of the Corporation, shall file and take charge of all papers and
documents belonging to the Corporation, and shall perform such
-5-
<PAGE>
other duties as this Code of By-Laws may require or the Board of Directors may
prescribe.
The Assistant Secretary shall perform all duties incumbent upon the
Secretary during any absence or disability of the Secretary, and perform such
other duties as this Code of By-Laws may require or the Board of Directors may
prescribe.
Section 5.06. The Treasurer and Assistant Treasurer. The Treasurer shall
------------ -------------------------------------
keep correct and complete records of account, showing accurately at all times
the financial condition of the Corporation. He shall be the legal custodian of
all moneys, notes, securities and other valuables which may from time to time
come into the possession of the Corporation. He shall immediately deposit all
funds of the Corporation coming into his hands in some reliable bank or other
depositary to be designated by the Board of Directors, and shall keep such bank
account in the name of the Corporation. He shall furnish at meetings of the
Board of Directors, or whenever requested, a statement of the financial
condition of the Corporation, and shall perform such other duties as this Code
of By-Laws may require or the Board of Directors may prescribe. The Treasurer
may be required to furnish bond in such amount as shall be determined by the
Board of Directors.
The Assistant Treasurer shall perform all duties incumbent upon the
Treasurer during any absence or disability of the Treasurer, and perform such
other duties as this Code of By-Laws may require or the Board of Directors may
prescribe.
Section 5.07. Delegation of Authority. In case of the absence of any
------------ -----------------------
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may delegate the powers or duties of
such officer to any other officer or to any director, for the time being,
provided a majority of the entire Board of Directors concurs therein.
ARTICLE VI
----------
Corporate Books
---------------
Section 6.01. Place of Keeping, in General. Except as otherwise provided
------------ ----------------------------
by the laws of the State of Indiana, by the Articles of Incorporation of the
Corporation or by these By-Laws, the books and records of the Corporation may be
kept at such place of places, within or without the State of Indiana, as the
Board of Directors may from time to time by resolution determine.
Section 6.02. Stock Register or Transfer Book. The Corporation shall keep
------------ -------------------------------
at its principal office an original or duplicate stock register or transfer
book, or, in case the
-6-
<PAGE>
Corporation employs a stock registrar or transfer agent in this or any other
state, the Corporation shall keep at its principal office a complete and
accurate shareholders' list, alphabetically arranged, giving the names and
addresses of all shareholders and the number and classes of shares held by each.
ARTICLE VII
-----------
Contracts, Checks, Notes, Etc.
------------------------------
Section 7.01. In General. All contracts and agreements authorized by the
------------ ----------
Board of Directors, and all checks, drafts, notes, bonds, bills of exchange and
orders for the payment of money, shall, unless otherwise directed by the Board
of Directors or unless otherwise required by law, be signed by any two of the
following officers who are different persons: President, Vice President,
Treasurer or Secretary. The Board of Directors may, however, authorize any one
of such officers to sign checks, drafts and orders for the payment of money
singly and without necessity of countersignature, and may designate employees of
the Corporation, other than those named above who may, in the name of the
Corporation, execute drafts, checks and orders for the payment of money in its
behalf.
ARTICLE VIII
------------
Amendments
----------
Section 8.01. In General. The powers to make, alter, amend or repeal this
------------ ----------
Code of By-laws is vested in the Board of Directors but such action shall be
taken only at a meeting of the Board of Directors specifically called for that
purpose.
-7-
<PAGE>
CODE OF BY-LAWS
OF
LAKE AVENUE DIALYSIS CENTER, P.C.
ARTICLE I
---------
Identification
--------------
Section 1.01. Name. The name of the Corporation is Lake Avenue Dialysis
------------ ----
Center, P.C. (hereinafter referred to as the "Corporation").
Section 1.02. Principal Office and Resident Agent. The post office address
------------ -----------------------------------
of the principal office of the Corporation is 3515 Lake Avenue, Fort Wayne,
Indiana 46805, and the name and post office address of its resident agent in
charge of such office is Dr. Claudia C. Cabaluna, 3515 Lake Avenue, Fort Wayne,
Indiana 46805.
Section 1.03. Fiscal Year. The fiscal year of the Corporation shall be
------------ -----------
determined by the Board of Directors in consultation with the accountant for the
Corporation based upon the most beneficial tax treatment to be accorded to the
Corporation.
ARTICLE II
----------
Shares of Stock
---------------
Section 2.01. Consideration for Shares. The Board of Directors shall cause
------------ ------------------------
the Corporation to issue the shares of stock of the Corporation for such
consideration as has been fixed by such Board pursuant to the provisions of the
Articles of Incorporation.
Section 2.02. Payment for Shares. Subject to the provisions of the Articles
------------ ------------------
of Incorporation, the consideration for the issuance of shares of stock of the
Corporation may be paid, in whole or in part, in money, in other property,
tangible or intangible, or in labor actually performed for, or services actually
rendered to, the Corporation; provided, however, that the part of the surplus of
a corporation which is transferred to stated capital upon the issuance of shares
as a share dividend shall be deemed to be the consideration for the issuance of
such shares. When payment of the consideration for which a share was authorized
to be issued shall have been received by the Corporation, or when surplus shall
have been transferred to stated capital upon the issuance of a share dividend,
such share shall be declared and taken to be fully paid and not liable to any
further call or assessment, and the holder thereof shall not be liable for any
further payments thereon. In the absence of
<PAGE>
actual fraud in the transaction, the judgement of the Board of Directors as to
the value of such property, labor or services received as the consideration, or
the value placed by the Board of Directors upon the corporate assets in the
event of a share dividend shall be conclusive. Promissory notes, uncertified
checks or future services shall not be accepted in payment or par payment of any
of the shares of the Corporation except as authorized by The Indiana General
Corporation Act, as amended (hereinafter referred to as the "Act").
Section 2.03. Certificates for Shares. As from time to time provided in
------------ -----------------------
the Act, each shareholder shall be entitled to a certificate certifying the
number of shares owned by such shareholder in the Corporation.
Section 2.04. Transfer of Shares. The shares of the Corporation shall be
------------ ------------------
transferrable on the books of the Corporation upon compliance with the Act and
any other applicable state of federal law; upon the surrender of any certificate
or certificates representing such shares, properly endorsed or otherwise
transferred by the registered holder or by a duly authorized attorney or other
personal representative; and upon any such verification of signatures or
authority to transfer as may be legally and reasonably required by the Board of
Directors or the President.
Section 2.05. Equitable Interests in Shares Need Not be Recognized. The
------------ ----------------------------------------------------
Corporation and its officers shall be entitled to treat the holder of record of
any share or shares of stock of the Corporation as the holder in fact thereof,
and accordingly shall not be required to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person or
persons, whether or not express notice thereof shall have been given the
Corporation, save as expressly provided to the contrary by the laws of Indiana,
the Articles of Incorporation of the Corporation and these By-Laws.
ARTICLE III
-----------
Meetings of Shareholders
------------------------
Section 3.01. Place of Meetings. All meetings of the shareholders of the
------------ -----------------
Corporation shall be held at such place within or without the State of Indiana,
as may be specified in the respective notices or waivers of notice thereof, or
proxies to represent the shareholders thereat.
Section 3.02. Annual Meetings. The annual meeting of the shareholders for
------------ ---------------
the election of directors, and for the transaction of such other business as may
properly come before the meeting shall be held within five (5) months after the
close of each fiscal year of the Corporation. Failure to hold the
-2-
<PAGE>
annual meeting at the designated time shall not work any forfeiture or a
dissolution of the Corporation.
Section 3.03. Special Meetings. Special meetings of the shareholders may
------------ ----------------
be called by the President, by the Board of Directors, or by shareholders
holding not less than one-fourth of all the shares of stock outstanding.
Section 3.04. Notice of Meetings. A written or printed notice, stating
------------ ------------------
the place, day and hour of the meeting, and in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary or by the officers or persons calling the meeting, to
each holder of the capital stock of the Corporation at the time entitled to
vote, at such address as appears upon the records of the Corporation, at least
ten (10) days before the date of the meeting. Notice of any such meeting may be
waived in writing by any shareholder if the waiver sets forth in reasonable
detail the purpose or purposes for which the meeting is called and the time and
place thereof. Attendance at any meeting, in person or by proxy shall constitute
a waiver of notice of such meeting unless the shareholder states his objection
to such lack of notice to the chairman of the meeting before a vote is taken on
any matter during which such shareholder is present, and in such event the
objection shall be entered by the secretary of the meeting in the minutes of the
meeting. The objecting shareholder must reduce to writing his objection to such
lack of notice and forward copies of same to the Secretary and President of the
Corporation within twenty-four (24) hours after the meeting is adjourned.
Section 3.05. Voting at Meetings.
------------ ------------------
Clause 3.051. Voting Rights. Except as otherwise provided by law or
------------ -------------
by the provisions of the Articles of Incorporation, every holder of shares of
stock of the Corporation shall have the right at all meetings of the
shareholders of the Corporation to one (1) vote for each share of stock standing
in his name on the books of the Corporation.
Clause 3.052. Proxies. A shareholder may vote, either in person or
------------ -------
by proxy executed in writing by the shareholder or a duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from the date
of its execution, unless a longer time is expressly provided therein.
Clause 3.053. Quorum. Unless otherwise provided by the Articles of
------------ ------
Incorporation, at any meeting of the shareholders, a majority of the shares of
the stock outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum.
-3-
<PAGE>
ARTICLE IV
----------
The Board of Directors
----------------------
Section 4.01. Annual Meeting. The Board of Directors shall meet each year
------------ --------------
immediately after the annual meeting of the shareholders, at the place where
such meeting of the shareholders has been held, for the purpose of
organization, election of officers and consideration of any other business that
may be brought before the meeting. No notice shall be necessary for the holding
of this annual meeting. If such meeting is not held as above provided, the
election of officers may be had at any subsequent meeting of the Board
specifically called in the manner provided in Section 4.02 of this Article and
such officers of the Corporation shall hold office until their successors are
elected and qualified at such subsequent meeting.
Section 4.02. Other Meetings. Other meetings of the Board of Directors
------------ --------------
may be held upon the call of the President, or of two or more members of the
Board of Directors, at any place within or without the State of Indiana, upon
forty-eight (48) hours notice, specifying the time, place, and general purposes
of the meeting, given to each director, either personally, by mailing or by
telegram. At any meeting at which all directors are present, notice of the time,
place and purpose thereof shall be deemed waived; and similar notice may
likewise be waived by absent directors, either by written instrument or by
telegram.
Section 4.03. Quorum. At any meeting of the Board of Directors, the
------------ ------
presence of a majority of the members of the Board of Directors then qualified
and acting shall constitute a quorum for the transaction of any business except
the filling of vacancies in the Board of Directors.
Section 4.04. Removal. Any director may be removed, either for or without
------------ -------
cause, at any special meeting of shareholders called for that purpose by the
affirmative vote of a majority in number of shares of the shareholders of record
present in person or by proxy and entitled to vote for the election of such
director, if notice of the intention to act upon such matter shall have been
given in the notice calling such meeting. If the notice calling such meeting
shall so provide, the vacancy caused by such removal may be filled at such
meeting by vote of a majority of the shareholders present and entitled to vote
for the election of directors.
Section 4.05. Compensation of Directors. The Board of Directors is
------------ -------------------------
empowered and authorized to fix and determine the compensation of directors for
attendance at meetings of the Board and additional compensation for such
additional services any of such directors may perform for the Corporation.
-4-
<PAGE>
ARTICLE V
---------
The Officers of the Corporation
-------------------------------
Section 5.01. Officers. The officers of the Corporation shall consist of
------------ --------
a President, a Secretary and a Treasurer. In addition, the Corporation may have
as officers one or more Vice Presidents, Assistant Secretaries or Assistant
Treasurers. Any two or more offices may be held by the same person. The Board of
Directors by resolution may create and define the duties of other offices in the
Corporation, and may elect or appoint persons to fill such offices.
Section 5.02. Vacancies. Whenever any vacancies shall occur in any office
------------ ---------
by death, resignation, increase in the number of offices of the Corporation or
otherwise, the same shall be filled by the Board of Directors, and the officer
so elected shall hold office until his successor is chosen and qualified.
Section 5.03. The President. The President shall be chosen from among the
------------ -------------
Board of Directors and shall be responsible for the active executive management
of the operations of the Corporation subject to the control of the Board of
Directors; shall preside at all meetings of the shareholders and the directors;
shall discharge all the duties which devolve upon a presiding officer; and shall
perform such other duties as this Code of By-Laws provides or the Board of
Directors may prescribe.
The President shall have full authority to execute proxies on behalf of the
Corporation, vote stock owned by it in any other corporation and execute, with
the Secretary, powers of attorney appointing other corporations, partnerships or
individuals the agent of the Corporation, all subject to the provisions of The
Indiana General Corporation Act of 1929, as amended, the Articles of
Incorporation of the Corporation, and this Code of By-Laws.
Section 5.04. Vice President. A Vice President shall perform all duties
------------ --------------
incumbent upon the President during any absence or disability of the President,
and perform such other duties as this Code of By-Laws may require or the Board
of Directors may prescribe.
Section 5.05. The Secretary and Assistant Secretary. The Secretary shall
------------ -------------------------------------
have the custody and care of the corporate seal, records, minutes and stock
books of the Corporation. He shall attend all meetings of the shareholders and
of the Board of Directors, and shall keep, or cause to be kept in a book
provided for the purpose, a true and complete record of the proceedings of such
meetings, and shall perform a like duty for all standing committees appointed by
the Board of Directors, when required. He shall attend to the giving and serving
of all notices of the Corporation, shall file and take charge of all papers and
documents belonging to the Corporation, and shall perform such
-5-
<PAGE>
other duties as this Code of By-Laws may require or the Board of Directors may
prescribe.
The Assistant Secretary shall perform all duties incumbent upon the
Secretary during any absence or disability of the Secretary, and perform such
other duties as this Code of By-Laws may require or the Board of Directors may
prescribe.
SECTION 5.06. The Treasurer and Assistant Treasurer. The Treasurer shall
------------ -------------------------------------
keep correct and complete records of account, showing accurately at all times
the financial condition of the Corporation. He shall be the legal custodian of
all moneys, notes, securities and other valuables which may from time to time
come into the possession of the Corporation. He shall immediately deposit all
funds of the Corporation coming into his hands in some reliable bank or other
depositary to be designated by the Board of Directors, and shall keep such bank
account in the name of the Corporation. He shall furnish at meetings of the
Board of Directors, or whenever requested, a statement of the financial
condition of the Corporation, and shall perform such other duties as this Code
of By-Laws may require or the Board of Directors may prescribe. The Treasurer
may be required to furnish bond in such amount as shall be determined by the
Board of Directors.
The Assistant Treasurer shall perform all duties incumbent upon the
Treasurer during any absence or disability of the Treasurer, and perform such
other duties as this Code of By-Laws may require or the Board of Directors may
prescribe.
Section 5.07. Delegation of Authority. In case of the absence of any
------------ -----------------------
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may delegate the powers duties of
such officer to any other officer or to any director, for the time being,
provided a majority of the entire Board of Directors concurs therein.
ARTICLE VI
----------
Corporate Books
---------------
Section 6.01. Place of Keeping, in General. Except as otherwise provided
------------ ----------------------------
by the laws of the State of Indiana, by the Articles of Incorporation of the
Corporation or by these By-Laws, the books and records of the Corporation may be
kept at such place or places, within or without the State of Indiana, as the
Board of Directors may from time to time by resolution determine.
Section 6.02. Stock Register or Transfer Book. The Corporation shall keep
------------ -------------------------------
at its principal office an original or duplicate stock register or transfer
book, or, in case the
-6-
<PAGE>
Corporation employs a stock registrar or transfer agent in this or any other
state, the Corporation shall keep at its principal office a complete and
accurate shareholders' list, alphabetically arranged, giving the names and
addresses of all shareholders and the number and classes of shares held by each.
ARTICLE VII
-----------
Contracts, Checks, Notes, Etc.
------------------------------
Section 7.01. In General. All contracts and agreements authorized by the
------------ ----------
Board of Directors, and all checks, drafts, notes, bonds, bills of exchange and
orders for the payment of money, shall, unless otherwise directed by the Board
of Directors or unless otherwise required by law, be signed by any two of the
following officers who are different persons: President, Vice President,
Treasurer or Secretary. The Board of Directors may, however, authorize any one
of such officers to sign checks, drafts and orders for the payment of money
singly and without necessity of countersignature, and may designate employees of
the Corporation, other than those named above who may, in the name of the
Corporation, execute drafts, checks and orders for the payment of money in its
behalf.
ARTICLE VIII
------------
Amendments
----------
Section 8.01. In General. The powers to make, alter, amend or repeal this
------------ ----------
Code of By-Laws is vested in the Board of Directors but such action shall be
taken only at a meeting of the Board of Directors specifically called for that
purpose.
-7-
<PAGE>
EXHIBIT 3.25
FOR EXAMINATION
DATE: 8-14-87
----------
DATE: __________
ARTICLES OF INCORPORATION
-------------------------
OF
--
MERCY DIALYSIS CENTER, INC.
---------------------------
The undersigned natural person over the age of eighteen (18) years, for the
purpose of forming a corporation under the Wisconsin Business Corporation Law,
Chapter 180 of the Wisconsin Statutes, does hereby adopt the following Articles
of Incorporation for such corporation.
ARTICLE I - NAME
----------------
The name of the corporation shall be:
MERCY DIALYSIS CENTER, INC.
---------------------------
ARTICLE II - PERIOD OF EXISTENCE
--------------------------------
The period of existence of the corporation shall be perpetual.
ARTICLE III - PURPOSES
----------------------
The purposes for which this corporation is organized are to engage in any
lawful activity permitted by the Wisconsin Business Corporation Law, Chapter 180
of the Wisconsin Statutes.
ARTICLE IV - CAPITAL STOCK
--------------------------
The aggregate number of shares of capital stock which this corporation
shall have authority to issue is two thousand eight hundred (2,800) shares,
consisting of one (1) class only, designated as "Common Stock," without par
value. Each authorized, issued, and outstanding share shall be entitled to one
vote.
ARTICLE V - PREEMPTIVE RIGHTS
-----------------------------
No holder of Common Stock shall be entitled as a matter of right to
subscribe for, purchase or receive any part of any issue of additional stock or
shall have any preemptive right to subscribe for or purchase the same.
<PAGE>
ARTICLE VI - DIRECTORS
----------------------
The number of directors constituting the initial Board of Directors shall
be five (5). Thereafter, the number of directors constituting the Board of
Directors shall be such number as fixed by or in the manner provided in the
Bylaws of this corporation.
The initial members of the Board of Directors shall be:
Ram Rao, M.D.
Paul Balter, M.D.
Michael J. Carbon, M.D.
Arthur M. Morris, M.D.
Craig W. Moore
The directors shall hold office until the first annual meeting of
shareholders at which time successors shall be elected as provided in the
Bylaws.
ARTICLE VII - OFFICERS
----------------------
The officers of the corporation, the number thereof, duties and manner of
election shall be as provided in the Bylaws of this corporation.
ARTICLE VIII - AMENDMENT
------------------------
The Articles of Incorporation of this corporation may be amended in the
manner authorized by law at the time of such amendment.
ARTICLE IX - REGISTERED OFFICE AND AGENT
----------------------------------------
The address of the initial registered office of the corporation is:
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
and the name of the initial registered agent at such address is:
Paul W. Seidenstricker
<PAGE>
ARTICLE X - INCORPORATOR
------------------------
The name and address of the incorporator is:
Paul W. Seidenstricker
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Executed in duplicate this 10th day of August, 1987.
/s/ Paul W. Seidenstricker
---------------------------------------
Paul W. Seidenstricker
STATE OF WISCONSIN )
) SS
MILWAUKEE COUNTY )
Personally came before me this 10th day of August, 1987, the above-named,
Paul W. Seidenstricker, to me known to be the person who executed the foregoing
instrument and acknowledged the same.
/s/ Lynn F. McCauseland
---------------------------------------
Notary Public State of Wisconsin
My Commission: Expires 8-21-88
------------------------
This Instrument Was Drafted By:
Paul W. Seidenstricker, Attorney at Law
von Briesen & Purtell, S.C.
411 East Wisconsin Avenue
Suite 700
Milwaukee, Wisconsin 53202
(414) 276-1122
-3-
<PAGE>
Return to:
von Briesen & Purtell, S.C.
411 East Wisconsin Avenue
Suite 700
Milwaukee, WI 53202
[STAMP APPEARS HERE]
<PAGE>
JOINT CONSENT OF SHAREHOLDERS AND DIRECTORS OF
WEST SUBURBAN KIDNEY CENTER, S.C.
IN LIEU OF MEETING
------------------
The undersigned, being all of the Directors and Shareholders of the
above-captioned corporation (the "Corporation"), do hereby authorize and consent
in lieu of meeting to the adoption of the following resolutions:
RESOLVED, that Article One of the Articles of Incorporation is hereby
amended to read as follows: The name of the Corporation is WSKC Dialysis
Services, Inc.
RESOLVED, that the proper officers of the Corporation are hereby authorized
and directed to take the necessary steps to change the Corporation's name in
accordance with the foregoing resolution.
RESOLVED, that Article Four of the Corporation's Articles of Incorporation
is hereby amended to read as follows;
"The purpose or purposes for which the corporation is organized are:
To maintain and conduct any and every kind of sales, distribution, leasing,
investment, and service business; to manufacture, process, fabricate, rebuild,
service, invest in, purchase, sell, lease or otherwise dispose of and generally
deal in and with raw materials, products, wares, goods, merchandise and real and
personal property, both tangible and intangible, of every kind and description;
to make investments of every kind and nature; and to provide services of every
kind and character. To acquire, own, use, convey and otherwise dispose of and
deal in real property."
RESOLVED, that the first sentence of Section 1 of Article I of the
Corporation's By-Laws is hereby amended to read as follows:
"The corporation shall hold an annual meeting of its stockholders for the
election of directors and for the transaction of general business at such place
as may be designated by the Board of Directors at 3:00 p.m., on the second
Saturday in October of each year, if not a legal holiday, and if a legal
holiday, then on the first day following which is not a legal holiday."
RESOLVED, that Section 7 of Article I of the Corporation's By-Laws shall be
revised to read as follows:
"SECTION 7. Proxies. Any stockholder entitled to vote at a meeting of
---------- -------
stockholders may vote either in person or by proxy
<PAGE>
executed in writing by the stockholder or by his duly authorized
attorney-in-fact."
RESOLVED, that Section 2 of Article II of the Corporation's By-Laws shall
be revised to read as follows:
"SECTION 2. Number. The number of directors shall be six (6). The number
---------- ------
of directors may be increased or decreased from time to time by the amendment of
this section, but no decrease shall have the effect of shortening the term of
any incumbent director. The directors need not be stockholders."
RESOLVED, that the third sentence of Section 1 of Article V of the
Corporation's By-Laws shall be revised to read as follows: "None of the officers
need be directors."
RESOLVED, that Section 6 of Article VI of the Corporation's By-Laws is
hereby amended to read as follows: "The fiscal year of the corporation shall end
on the last day of September."
RESOLVED, that the agreement between the Corporation and its shareholders
entitled "Termination of Stock Purchase Agreement and Amendment of Agreement for
Sale of Stock" is hereby approved and the proper officers of the Corporation are
hereby authorized and directed to execute such agreement on behalf of the
Corporation and to take such actions as shall be necessary and appropriate for
the Corporation to perform its obligations thereunder.
Dated: September 29 , 1995
--------------------
/s/ Paul Balter /s/ Michael J. Carbon
- ------------------------------ ------------------------------
Paul Balter, M.D. Michael J. Carbon, M.D.
/s/ G. Dunea /s/ A. Gupta
- ------------------------------ ------------------------------
George Dunea, M.D. Ashutosh Gupta, M.D.
/s/ Arthur M Morris /s/ Douglas G. Mufuka
- ------------------------------ ------------------------------
Arthur Morris, M.D. Douglas G. Mufuka, M.D.
2
<PAGE>
EXHIBIT 3.26
BYLAWS
------
OF
MERCY DIALYSIS CENTER, INC.
---------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. GENERAL
1.01 Name..................................................... 1
1.02 Principal and Business Office............................ 1
1.03 Registered Office........................................ 1
1.04 Statutory Reference...................................... 1
ARTICLE II. SHAREHOLDERS
2.01 Qualifications........................................... 1
2.02 Voting of Shares......................................... 1
2.03 Informal Action by Shareholders.......................... 1
ARTICLE III. MEETINGS OF SHAREHOLDERS
3.01 Annual Meetings.......................................... 2
3.02 Special Meetings......................................... 2
3.03 Place of Meeting......................................... 2
3.04 Notice of Meeting........................................ 2
3.05 Waiver of Notice......................................... 3
3.06 Closing of Transfer Books or Fixing of Record Date....... 3
3.07 Voting Records........................................... 3
3.08 Quorum................................................... 4
3.09 Manner of Acting......................................... 4
3.10 Conduct of Meetings...................................... 4
3.11 Proxies.................................................. 4
ARTICLE IV. BOARD OF DIRECTORS
4.01 General Powers........................................... 5
4.02 Number of Directors...................................... 5
4.03 Qualifications........................................... 5
4.04 Tenure................................................... 5
4.05 Resignation and Removal.................................. 5
4.06 Vacancies................................................ 5
4.07 Compensation............................................. 5
4.08 Voting Rights............................................ 6
4.09 Informal Action by Directors............................. 6
</TABLE>
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ARTICLE V. MEETINGS OF BOARD OF DIRECTORS
5.01 Regular Meetings.......................................... 6
5.02 Special Meetings.......................................... 6
5.03 Notice.................................................... 6
5.04 Waiver of Notice.......................................... 7
5.05 Quorum.................................................... 7
5.06 Manner of Acting.......................................... 7
5.07 Conduct of Meetings....................................... 7
5.08 Tie Vote at Directors' Meetings........................... 7
5.09 Presumption of Assent..................................... 7
ARTICLE VI. OFFICERS
6.01 Number.................................................... 8
6.02 Election and Term of Office............................... 8
6.03 Resignation and Removal................................... 8
6.04 Vacancies................................................. 8
6.05 President................................................. 8
6.06 The Vice-President........................................ 9
6.07 The Secretary............................................. 9
6.08 The Treasurer............................................. 10
6.09 Assistant Secretaries and Assistant Treasurers............ 10
6.10 Other Assistants and Acting Officers...................... 10
6.11 Compensation.............................................. 10
ARTICLE VII. COMMITTEES
7.01 Committees................................................ 10
ARTICLE VIII. CONTRACTS, LOANS, CHECKS AND DEPOSITS: SPECIAL
CORPORATE ACTS
8.01 Contracts................................................. 11
8.02 Loans..................................................... 11
8.03 Checks, Drafts, etc....................................... 11
8.04 Deposits.................................................. 12
8.05 Voting of Securities Owned by This Corporation............ 12
ARTICLE IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER
9.01 Certificates for Shares................................... 12
9.02 Records................................................... 12
9.03 Ownership................................................. 13
9.04 Transfer of Shares........................................ 13
9.05 Restrictions on Transfer.................................. 13
9.06 Lost, Destroyed or Stolen
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Certificates................................................ 13
9.07 Consideration for Shares.................................... 13
9.08 Stock Regulations........................................... 14
ARTICLE X. OFFICERS AND DIRECTORS: LIABILITY
AND INDEMNITY: TRANSACTIONS WITH CORPORATION
10.01 Indemnification and Liability of Directors and Officers..... 14
10.02 Determination of Right to Indemnification................... 14
10.03 Transactions with the Corporation........................... 14
10.04 Reimbursement of Disallowed Expense......................... 15
ARTICLE XI. FISCAL YEAR
11.01 Fiscal Year................................................. 15
ARTICLE XII. SEAL
12.01 Seal........................................................ 15
ARTICLE XIII. AMENDMENTS
13.01 Amendment of Articles of Incorporation...................... 15
13.02 Amendment of Bylaws......................................... 15
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BYLAWS
------
OF
--
MERCY DIALYSIS CENTER, INC.
--------------------------
ARTICLE I. GENERAL
1.01 Name. The name of the corporation is:
----
MERCY DIALYSIS CENTER, INC.
1.02 Principal and Business Offices. The principal and business
------------------------------
office of the corporation shall initially be located at 1000 Mineral Point
Avenue, Janesville, Wisconsin, 53545. The corporation may have such other
offices, either within or without the State of Wisconsin, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.
1.03. Registered Office. The registered office of the corporation
-----------------
required by the Wisconsin Business Corporation Law to be maintained in the State
of Wisconsin shall initially be von Briesen & Purtell, S.C., 411 East Wisconsin
Avenue, Suite 700, Milwaukee, Wisconsin 53202.
1.04. Statutory Reference. This corporation is organized under the
-------------------
Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes.
ARTICLE II. SHAREHOLDERS
2.01. Qualifications. There are no qualifications to becoming a
--------------
shareholder.
2.02. Voting of Shares. Each outstanding share shall be entitled to one
----------------
voter upon each matter submitted to a vote at a meeting of shareholders or
otherwise.
2.03. Informal Action By Shareholders. Any action required or permitted
-------------------------------
by the articles of incorporation or bylaws or any provision of law to be taken
at a meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
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ARTICLE III. MEETINGS OF SHAREHOLDERS
3.01. Annual Meetings. The annual meeting of the shareholders shall be
---------------
held at the call of the President each year during the month of January or at
such other time and date within thirty days before or after said date as may be
fixed by or under the authority of the Board of Directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Wisconsin, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein, or fixed as herein provided, for any annual meeting of
the shareholders, or at any adjournment there of, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as convenient.
3.02. Special Meetings. Special meetings of the shareholders, for any
----------------
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or the Board of Directors or by the holders of not less than one-
tenth of all shares of the corporation entitled to vote at the meeting.
3.03. Place of Meeting. The Board of Directors may designate any place,
----------------
either within or without the State of Wisconsin, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Wisconsin, as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
business office of the corporation in the State of Wisconsin or such other
suitable place in the county of such principal office as may be designated by
the person calling such meeting, but any meeting may be adjourned to reconvene
at any place designated by vote of a majority of the shares represented
thereat.
3.04. Notice of Meeting. Written notice stating the place, day and hour of
-----------------
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten days (unless a
longer period is required by law) nor more than fifty days before the date of
the meeting, either personally or by mail, by or at the direction of the
President, or the Secretary, or other officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock record
books of the corporation, with postage thereon prepaid.
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3.05 Waiver of Notice. Whenever any notice is required to be given to any
----------------
shareholder of the corporation under the articles of incorporation or bylaws or
any provision of law, a waiver thereof in writing, signed at any time, whether
before or after the time of meeting, by the shareholder entitled to such notice,
shall be deemed equivalent to the giving of such notice; provided that such
waiver in respect to any matter of which notice is required under any provision
of the Wisconsin Business Corporation Law, shall contain the same information as
would have been required to be included in such notice, except the time and
place of meeting.
3.06. Closing of Transfer Books or Fixing of Record Date. For the purpose
--------------------------------------------------
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purposes, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, fifty days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall be applied to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
3.07. Voting Records. The officer or agent having charge of the stock
--------------
transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
such meeting, or any adjournment thereof, with the address of and the number of
shares held by each. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection
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of any shareholder during the whole time of the meeting for the purposes of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such record or transfer books or to
vote at any meeting of shareholders. Failure to comply with the requirements of
this section shall not affect the validity of any action taken at such meeting.
3.08. Quorum. Except as otherwise provided in the articles of
------
incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. If a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on the subject matter shall be the act of the
shareholders unless the vote of a greater number or voting by classes is
required by law or the articles of incorporation. Though less than a quorum of
the outstanding shares are represented at a meeting, from time to time without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed.
3.09. Manner of Acting. The act of a majority of the shares entitled
----------------
to vote and present at a meeting at which a quorum is present shall be the act
of the shareholders, unless the act by a greater number is required by law or by
the articles of incorporation or these bylaws.
3.10 Conduct of Meetings. Except to the extent the Board of
-------------------
Directors may otherwise provide, the President, and in his absence, the Vice-
President, and in their absence, any person chosen by the shareholders present
shall call the meeting of the shareholders to order and shall act as chairman of
the meeting, and the Secretary of the corporation shall act as secretary of all
meetings of the shareholders, but, in the absence of the Secretary, the
presiding officer may appoint any other person to act as secretary of the
meeting.
3.11 Proxies. At all meetings of shareholders, a share holder
-------
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his duly authorized attorney in fact (except as restricted by
law). Such proxy shall be filed with the Secretary of the corporation before or
at the time of the meeting. Unless otherwise provided in the proxy, a proxy may
be revoked at any time before it is voted, either by written notice filed with
the Secretary or the acting secretary of the meeting or by oral notice given by
the shareholder to the presiding officer during the meeting. The presence of a
shareholder who has filed his proxy shall not of itself constitute a revocation.
No proxy shall be valid after eleven months from the date
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of its execution, unless otherwise provided in the proxy. The Board of Directors
shall have the power and authority to make rules establishing presumptions as to
the validity and sufficiency of proxies.
ARTICLE IV. BOARD OF DIRECTORS
4.01. General Powers. The business and affairs of the corporation
--------------
shall be managed by its Boards of Directors.
4.02. Number of Directors. The number of directors of the corporation
-------------------
initially shall be five (5). The shareholders may, by resolution, change the
number of directors. Such changes in the number of directors shall take place
upon an affirmative vote by a majority of the shares entitled to vote taken at a
meeting called for that purpose.
4.03. Qualifications. There are no qualifications to becoming a
--------------
director. Directors need not be residents of the State of Wisconsin or
shareholders of the corporation.
4.04. Tenure. Each director shall hold office until the next annual
------
meeting of shareholders and until his successor shall have been elected, or
until his prior death, resignation or removal.
4.05. Resignation and Removal. A director may resign at any time by
-----------------------
submitting his written resignation to the President or Secretary of the
corporation. Any director may be removed from office at any time by the
affirmative vote of the number of shares required for the election of directors
taken at a meeting of the shareholder(s) called for that purpose.
4.06. Vacancies. Any vacancy occurring in the Board of Directors,
---------
including a vacancy created by an increase in number of directors, may be filled
until the next succeeding annual election by the affirmative vote of the number
of votes required for election of directors.
4.07. Compensation. The Board of Directors, by affirmative vote of a
------------
majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors, officers and employes
and to their estates, families, dependents or beneficiaries on account of prior
services rendered by such directors, officers, and employes to the corporation.
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<PAGE>
4.08. Voting Rights. Any reference in these Bylaws or the Articles of
-------------
Incorporation to directors shall, unless otherwise stated, refer to the
directors with voting rights.
4.09. Informal Action by Directors. Any action required or permitted by
----------------------------
the articles of incorporation or bylaws or any provision of law to be taken by
the Board of Directors at a meeting or by resolution may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors then in office.
ARTICLE V. MEETINGS OF BOARD OF DIRECTORS
5.01. Regular Meetings. A regular meeting of the Board of Directors
----------------
shall be held without other notice than this bylaw immediately after the annual
meeting of shareholders, and each adjourned session thereof. The place of
such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the state of Wisconsin,
for the holding of additional regular meetings without other notice than such
resolution.
5.02. Special Meetings. Special meetings of the Board of Directors may be
----------------
called by or at the request of the President, Secretary or any director. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the State of Wisconsin, as the place
for holding any special meeting of the Board of Directors called by them, and if
no other place is fixed the place of meeting shall be the principal business
office of the corporation in the State of Wisconsin.
5.03. Notice. Notice of each meeting of the Board of Directors (unless
------
otherwise provided in or pursuant to section 5.01) shall be given to each
director. Such notice may be given: (i) by written notice delivered personally
or mailed or given by telegram, cable or radiogram to such director at his
business address or at such other address as such director shall have designated
in writing filed with the Secretary, or (ii by word of mouth, telephone or
radiophone personally to such director. Such notice shall be: (a) not less
than 72 hours prior thereto if by mail, and (b) not less than 48 hours prior
thereto if by telegram, cable, radiogram, personal delivery, telephone, radio
phone, or word of mouth. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail so addressed, with postage thereon
prepaid. If notice be given by telegram, cable or radiogram, such notice shall
be deemed to be delivered when the telegram, cable or radiogram is delivered to
the transmitting agency. Such notice shall state the time,
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date, and place of the meeting and the purpose or general nature of the business
to be transacted.
5.04. Waiver of Notice. Whenever any notice is required to be given to
----------------
any director of the corporation under the articles of incorporation or bylaws or
any provision of law, a waiver thereof in writing, signed at any time, whether
before or after the time of meeting, by the director entitled to such notice,
shall be deemed equivalent to the giving of such notice. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting and objects there at to the
transaction of any business because the meeting is not lawfully called or
convened.
5.05. Quorum. Except as otherwise provided by law or by the articles of
------
incorporation or these bylaws, a majority of the number of directors as provided
in Section 4.02 shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but a majority of the directors present
(though less than such quorum) may adjourn the meeting from time to time without
further notice.
5.06. Manner of Acting. The act of the majority of the directors present
----------------
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or by the
articles of incorporation or these bylaws.
5.07. Conduct of Meetings. The President, and in his absence, the Vice-
-------------------
President, and in their absence, any director chosen by the directors present,
shall call meetings of the Board of Directors to order and shall act as chairman
of the meeting. The Secretary of the corporation shall act as secretary of all
meetings of the Board of Directors, but in the absence of the Secretary, the
presiding officer may appoint any Assistant Secretary or any director or other
person present to act as secretary of the meeting.
5.08. Tie Vote at Directors' Meetings. At all meetings of the Board of
-------------------------------
Directors all questions shall be decided by a majority of votes, but, in case of
an equality of votes, the president shall have a second or deciding vote.
5.09. Presumption of Assent. A director of the corporation who is present
---------------------
at a meeting of the Board of Directors or a committee thereof of which he is a
member at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such
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<PAGE>
dissent by registered mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
ARTICLE VI. OFFICERS
6.01. Number. The principal officers of the corporation shall be a
------
President, a Vice-President, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two or more offices may be held by the same person, except the offices of
President and Secretary and the offices of President and Vice-President.
6.02. Election and Term of Office. The officers of the corporation to be
---------------------------
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his successor shall have been duly
elected or until his prior death, resignation or removal.
6.03. Resignation and Removal. An officer may resign at any time by
-----------------------
submitting his written resignation to the President or Secretary of the
corporation. Any officer or agent may be removed by the Board of Directors
whenever in its judgment the best interests of the corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment shall not of itself
create contract rights.
6.04. Vacancies. A vacancy in any principal office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
6.05. President. The President shall be the chief executive officer of
---------
the corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
corporation. He shall, when present, preside at all meetings of the shareholders
and of the Board of Directors. He shall have authority, subject to such rules as
may be prescribed by the Board of Directors, to appoint such agents and
employees of the corporation as he shall deem necessary, to prescribe their
powers, duties and compensation, and to delegate authority to them. Such agents
and employees shall hold office at the discretion of the President. He shall
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have authority to sign, execute and acknowledge, on behalf of the corporation,
all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and
all other documents or instruments necessary or proper to be executed in the
course of the corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by law
or the Board of Directors, he may authorize any Vice-President or other officer
or agent of the corporation to sign, execute and acknowledge such documents or
instruments in his place and stead. In general he shall perform all duties
incident to the office of President and such other duties as may be prescribed
by the Board of Directors from time to time.
6.06. The Vice-President. In the absence of the President or in the event
------------------
of his death, inability or refusal to act, or in the event for any reason it
shall be impracticable for the President to act personally, the Vice-President
(or in the event there be more than one Vice-President, the Vice-Presidents in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their election) shall perform powers of and be
subject to all the restrictions upon the President. Any Vice-President may sign,
with the Secretary or Assistant Secretary, certificates for shares of the
corporation and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him by the President or by the
Board of Directors. The execution of any instrument of the corporation by any
Vice-President shall be conclusive evidence, as to third parties, of his
authority to act in the stead of the President.
6.07. The Secretary. The Secretary shall: (a) keep the minutes of the
-------------
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; (c) be custodian of
the corporate records and, if the corporation has a seal, of the seal of the
corporation and see that the seal of the corporation, if any, affixed to all
documents the execution of which on behalf of the corporation under its seal is
duly authorized; (d) keep or arrange for the keeping of a register of the post
office address of each shareholder which shall be furnished to the Secretary by
such shareholder; (e) sign with the President, or a Vice-President, certificates
for shares of the corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and exercise such
authority as from time to time may be delegated or assigned to him by the
President or by the Board of Directors.
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6.08. The Treasurer. The Treasurer shall: (a) have charge and custody of
-------------
and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositaries as shall be selected in
accordance with the provisions of Section 8.04; and (c) in general perform all
of the duties incident to the office of Treasurer and have such other duties and
exercise such other authority as from time to time may be delegated or assigned
to him by the President or by the Board of Directors. If required by the Board
of Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
6.09. Assistant Secretaries and Assistant Treasurers. There shall be such
----------------------------------------------
number of Assistants Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Secretaries may sign
with the President or a Vice-President certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Treasurers shall respectively, if required
by the Board of Directors , give bonds for the faithful discharge of their
duties in such sums and with such sureties as the Board of Directors shall
determine. The Assistant Secretaries and Assistant Treasurers, in general ,
shall perform such duties and have such authority as shall from time to time be
delegated or assigned to them by the Secretary or the Treasurer, respectively,
or by the President or by the Board of Directors.
6.10. Other Assistants and Acting Officers. The Board of Directors shall
------------------------------------
have the power to appoint any person to act as assistant to any officer, or as
agent for the corporation in his stead, or to perform the duties of such officer
whenever for any reason it is impracticable for such officer to act personally,
and such assistant or acting officer or other agent so appointed by the Board of
Directors shall have the power to perform all the duties of the office to which
he is so appointed to be assistant, or as to which he is so appointed to act,
except as such power may be otherwise defined or restricted by the Board of
Directors.
6.11. Compensation. The salaries of the principal officers shall be fixed
------------
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the corporation.
ARTICLE VII. COMMITTEES
7.01. Committees. The Board of Directors by resolution adopted by the
----------
affirmative vote of the directors, as required by section 5.06 of Article V, may
designate one or more committees,
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each committee to consist of two (2) or more directors elected by the Board of
Directors, which to the extent provided in said resolution as initially adopted,
and as thereafter supplemented or ammended by further resolution adopted by a
like vote, shall have and may exercise, when the Board of Directors is not in
session, the powers of the Board of Directors in the management of the business
and affairs of the corporation, except action in respect to dividends to
shareholders, election of officers or the filling of vacancies in the Board of
Directors or committees created pursuant to this section. The Board of
Directors may elect one or more of its members as alternate members of any such
committee who may take the place of any absent member or members at any meeting
of such committee, upon request by the President or upon request by the chairman
of such meeting. Each such committee shall fix its own rules governing the
conduct of its activities and shall make such reports to the Board of Directors
of its activities as the Board of Directors may request.
ARTICLE VIII. CONTRACTS, LOANS, CHECKS
AND DEPOSITS: SPECIAL CORPORATE ACTS
8.01. Contracts. The Board of Directors may authorize any officer or
---------
officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages and instruments of assignment or
pledge made by the corporation shall be executed in the name of the corporation
by the President or one of the Vice-Presidents and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or
an Assistant Secretary, when necessary or required, shall affix the corporate
seal, if any, thereto; and when so executed no other party to such instrument or
any third party shall be required to make any inquiry into the authority of the
signing officer or officers.
8.02. Loans. No indebtedness for borrowed money shall be contracted on
-----
behalf of the corporation and no evidences of such indebtedness shall be
issued in its name unless authorized by or under the authority of a resolution
of the Board of Directors. Such authorization may be general or confined to
specific instances.
8.03. Checks, Drafts, etc. All checks, drafts or other orders for the
-------------------
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.
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8.04. Deposits. All funds of the corporation not otherwise employed shall
--------
be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
8.05. Voting of Securities Owned by This Corporation. Subject always to
----------------------------------------------
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this cor-
poration may be voted at any meeting of security holders of such other
corporation by the President of this corporation if he be present, or in his
absence by any Vice-President of this corporation who may be present, and (b)
whenever, in the judgment of the President, or in his absence, of any
Vice-President, it is desirable for this corporation to execute a proxy or
written consent in respect to any shares or other securities issued by any other
corporation and owned by this corporation, such proxy or consent shall be
executed in the name of this corporation by the President or one of the
Vice-Presidents of this corporation, without necessity of any authorization by
the Board of Directors, countersignature or attestation by another officer. Any
person or persons designated in the manner above stated as the proxy or proxies
of this corporation shall have full right, power and authority to vote the
shares or other securities issued by such other corporation and owned by this
corporation the same as such shares or other securities might be voted by this
corporation.
ARTICLE IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER
9.01. Certificates for Shares. Certificates representing shares of the
-----------------------
corporation shall be in such form, consistent with law, as shall be determined
by the Board of Directors. Such certificates shall be signed by the President
or Vice-President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except as provided in Section 6.06.
9.02. Records. The Secretary of the corporation shall keep or cause to
-------
be kept a stock record in which shall be registered the name and address of all
persons to whom shares are issued, with the number of shares and date of issue,
and with the name and address of any transferee and the date of transfer.
-12-
<PAGE>
9.03. Ownership. Prior to due presentment of a certificate for shares
---------
for registration of transfer, the corporation may treat the registered owner of
such shares as the person exclusively entitled to vote, to receive notifications
and otherwise to have and exercise all the rights and power of an owner and
shall not be bound to recognize any equitable or other claim to or interest in
any such share or shares on the part of any other person whether or not it shall
have express notice thereof, except as expressly provided by law.
9.04. Transfer of Shares. Where a certificate for shares is presented to
------------------
the corporation with a request to register for transfer by the registered owner
thereof, or by his attorney duly appointed in writing or by his duly appointed
legal representative, the corporation shall not be liable to the owner or any
other person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements, and (b) the
corporation had no duty to inquire into adverse claims or has discharged any
such duty. The corporation may require reasonable assurance that said
endorsements are genuine and effective and compliance with such other
regulations as may be prescribed by or under the authority of the Board of
Directors.
9.05. Restrictions on Transfer. Transfer of shares of the corporation
------------------------
may be restricted by agreement between the shareholder(s) and the corporation.
The face or reverse side of each certificate representing shares shall bear a
conspicuous notation of any restriction imposed by the corporation upon the
transfer of such shares.
9.06. Lost, Destroyed or Stolen Certificates. Where the owner claims
--------------------------------------
that his certificate for shares has been lost, destroyed or wrongfully taken,
a new certificate shall be issued in place thereof if the owner (a) so requests
before the corporation has notice that such shares have been acquired by a bona
fide purchaser, and (b) files with the corporation a sufficient indemnity bond,
and (c) satisfies such other reasonable requirements as may be prescribed by or
under the authority of the Board of Directors.
9.07. Consideration for Shares. The shares of the corporation may be
------------------------
issued for such consideration as shall be fixed from time to time by the Board
of Directors, provided that any shares having a par value shall not be issued
for a consideration less than the par value thereof. The consideration to be
paid for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
corporation. When payment of the consideration for which shares are to be
issued shall have been received by the corporation, such shares shall be deemed
to be fully paid and
-13-
<PAGE>
nonassessable by the corporation. No certificate shall be issued for any share
until such share is fully paid.
9.08. Stock Regulations. The Board of Directors shall have the power and
-----------------
authority to make all such further rules and regulations not inconsistent with
the statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
corporation.
ARTICLE X. OFFICERS AND DIRECTORS: LIABILITY
AND INDEMNITY: TRANSACTIONS WITH CORPORATION
10.01. Indemnification and Liability of Directors and Officers. The
-------------------------------------------------------
liability and indemnification of officers and directors for acts and/or
omissions of such individuals in their roles as officers or directors shall be
determined according to Chapter 180 of the Wisconsin Statutes provided that the
Directors may, by a majority vote, extend the indemnification protections in
Chapter 180 of the Wisconsin Statutes to other agents or employees of the
corporation.
10.02. Determination of Right to Indemnification. The right of an officer
-----------------------------------------
or director to indemnification hereunder shall be determined by the Board of
Directors of the corporation at a meeting properly held under these Bylaws. The
decision to extend or withhold indemnification shall be made by a majority of
the Board members with voting rights. The officer or director seeking
indemnification shall not have a right to vote on the matter. The officer or
director seeking indemnification must request such indemnification from the
corporation in writing.
10.03. Transactions with the Corporation. The Board of Directors may
---------------------------------
from time to time authorize transactions by directors, officers, and employees
with the corporation, and may authorize lending money and granting credit of the
corporation to or for the use of such directors, officers, and employees,
providing that the directors who vote for or assent to the making of a loan to a
director or officer of the corporation shall be jointly and severally liable to
the corporation for the amount of such loan until the repayment thereof, unless
such directors shall sustain the burden of proof that such loan was made for a
proper business purpose.
Any contract or other transaction between the corporation and one or more
of its directors, or between the corporation and any firm of which one or more
of its directors are members or employees, or in which they are interested, or
between the corporation and any corporation or association of which one or more
of its directors are shareholders, members, directors, officers, or employees,
or in which they are interested, shall be valid for
-14-
<PAGE>
all purposes, notwithstanding the presence of such director or directors at the
meeting of the Board of Directors of the corporation, which acts upon, or in
reference to, such contract or transaction, and notwithstanding his or their
participation in such action, if the fact of such interest shall be disclosed or
known to the Board of Directors and the Board of Directors shall, nevertheless,
authorize, approve and ratify such contract or transaction by a vote of a
majority of the directors present, such interested director or directors to be
counted in determining whether a quorum is present, but not to be counted in
calculating the majority of such quorum necessary to carry such vote. This
Section shall not be construed to invalidate any contract or other transaction
which would otherwise be valid under the common and statutory law applicable
thereto.
10.04. Reimbursement of Disallowed Expense. In the event any payment
-----------------------------------
(either as compensation, interest, rent, expense reimbursement or otherwise) to
any officer, director or share holder which is claimed as a deduction by this
corporation for federal income tax purposes shall subsequently be determined not
to be deductible in whole or in part by this corporation, such officer,
director, or shareholder as the case may be, shall reimburse the corporation for
the amount of such payment so disallowed provided that this provision shall not
apply to any expense where the Board, in its sole discretion, determines such
disallowance (including any concession of such issue by the corporation in
connection with the settlement of other issues in a disputed case) manifestly
unfair and contrary to the facts. For purposes of this provision, any such
payment shall be determined not to be deductible when and only when either (a)
the same may have been determined by a court of competent jurisdiction and
either the corporation shall not have appealed from such determination or the
time for perfecting an appeal shall have expired or (b) such disallowed
deduction shall constitute or be contained in a settlement with the Internal
Revenue Service which settlement may have been authorized by the Board of
Directors.
ARTICLE XI. FISCAL YEAR
11.01. Fiscal Year. The fiscal year of the corporation shall be the
-----------
calendar year.
ARTICLE XII. SEAL
12.01. Seal. The corporation shall not have a corporate seal.
----
ARTICLE XIII. AMENDMENTS
13.01. Amendment of Articles of Incorporation. The Articles of
--------------------------------------
Incorporation of this corporation may be altered or
-15-
<PAGE>
amended in the manner authorized by law at the time of such amendment.
13.02. Amendment of Bylaws. These Bylaws may be altered, amended, or
-------------------
repealed and new Bylaws may be adopted only by the shareholders by affirmative
vote of not less than a majority of the shares present or represented by proxy
at any annual meeting or at any special meeting of the shareholders duly called
for the purpose of amending these Bylaws at which there is a quorum present as
provided in these Bylaws.
_____________________________________
These Bylaws were adopted by consent resolution signed by all of the
shareholders and dated the 30th day of October, 1987
/s/ Michael J. Carbon
______________________________
Secretary
-16-
<PAGE>
CONSENT OF ALL OF THE SHAREHOLDERS OF
NEW YORK DIALYSIS MANAGEMENT, INC.
IN LIEU OF MEETING
-------------------------------------
The undersigned, being all of the Shareholders of the above-captioned
corporation (the "Corporation"), do hereby authorize and consent in lieu of
meeting to the adoption of the following resolutions:
RESOLVED, that the first sentence of Section 1 of Article V of the
Corporation's By-Laws is hereby amended to read as follows:
"The number of directors shall be five."
RESOLVED, that the following named persons are hereby elected as directors
of the Corporation to serve until their successors shall be elected and
shall qualify.
Paul Balter, M.D.
Michael J. Carbon, M.D.
Robert M. Dodge
Craig W. Moore
Arthur M. Morris, M.D.
The undersigned hereby waive notice of the amendment of the By-laws of the
corporation.
Dated: May 1, 1991
/s/ Arthur M. Morris, M.D. /s/ Michael J. Carbon, M.D.
- -------------------------------------- -----------------------------------
Arthur M. Morris, M.D. Michael J. Carbon, M.D.
/s/ Paul Balter, M.D. /s/ Ashutosh Gupta
- --------------------------------------- -----------------------------------
Paul Balter, M.D. Ashutosh Gupta
<PAGE>
/s/ Douglas G. Mufuka /s/ G. Dunea
- ------------------------------- -----------------------------------
Douglas G. Mufuka, M.D. George Dunea, M.D.
/s/ Craig W. Moore /s/ Robert M. Dodge
- ------------------------------- -----------------------------------
Craig W. Moore Robert M. Dodge
/s/ Thomas Golubski, M.D. /s/ Arthur G. Lawrence
- ------------------------------- ------------------------------------
Thomas Golubski, M.D. Arthur G. Lawrence, M.D.
/s/ Naresh Julka /s/ Robert C. Muehrcke
- ------------------------------- ------------------------------------
Naresh Julka, M.D. Robert C. Muehrcke, M.D.
/s/ Sandra L. Gadson, M.D. /s/ Martin Finn, M.D.
- ------------------------------- -----------------------------------
Sandra L. Gadson, M.D. Martin Finn, M.D.
<PAGE>
EXHIBIT 3.27
CERTIFICATE OF INCORPORATION
OF
NEW YORK DIALYSIS
MANAGEMENT, INC.
(New York Domestic)
UNDER SECTION 402
OF THE BUSINESS STATE OF NEW YORK
DEPARTMENT OF STATE
CORPORATION LAW
FILED MAR 15 1990
AMT OF CHECK $280
FILING FEE $100
COUNSEL: David S. Hochman TAX $160
FINGER, HOCHMAN & DELOTT. COUNTY FEE $________
P.C. COPY $10
30 N. LaSalle Street REFUND $________
Chicago, IL 60602 SPEC HANDLE 10
BY: D Y
----------------------
<PAGE>
CERTIFICATE OF INCORPORATION
OF
NEW YORK DIALYSIS MANAGEMENT, INC.
==================================
Under Section 402 of the Business Corporation Law
WE, THE UNDERSIGNED, all of the age of eighteen years or over, for the
purpose__ of forming a corporation pursuant to Section 402 of the Business
Corporation Law of New York, do hereby certify:
FIRST: The name of the corporation is:
New York Dialysis Management, Inc.
SECOND: The purposes for which it is formed are: To engage in any lawful
act or activity for which corporations may be organized under the Business
Corporation Law; provided that the corporation is not formed to engage in any
act or activity which requires the consent or approval of any state official,
department, board, agency or other body, without such consent or approval first
being obtained; and provided further that the corporation is not formed to
engage in the ownership and/or operation of a diagnostic and treatment center
under Article 28 of the Public Health Law.
THIRD: The office of the corporation is to be located at 1200 Van Nest
Avenue, County of Bronx, State of New York.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is Three Thousand Two Hundred (3,200) without par value.
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against the corporation may be served. The post
office address to which the Secretary of State shall mail a copy of any process
against the corporation served upon him is: c/o C T Corporation System, 1633
Broadway, New York, New York 10019.
SIXTH: The name and address of the registered agent which is to be the
agent of the corporation upon whom process against it may be served are C T
Corporation System, 1633 Broadway, New York, New York 10019.
IN WITNESS WHEREOF, I, have made and signed this certificate this 28th day
of February, 1990 and I affirm the statements contained therein as true under
penalties of perjury.
(rmd) /s/ Robert Dodge
----------------------------
(Signature)
Robert M. Dodge
----------------------------
(Name of Incorporator)
101, North Scoville
Oak Park, IL 60302
----------------------------
(Address)
<PAGE>
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
NEW YORK DIALYSIS MANAGEMENT, INC.
----------------------------------
Under Section 805 of the Business Corporation Law
* * * * * *
WE, THE UNDERSIGNED, Craig W. Moore and Paul Balter, M.D., being
respectively the President and the Secretary of New York Dialysis Management,
Inc. do hereby certify:
1. The name of the corporation is New York Dialysis Management, Inc.
2. The certificate of incorporation of said corporation was filed by the
Department of State on March 15, 1990.
3. (a) The certificate of incorporation is amended to increase the
aggregate number shares which the Corporation has authority to issue from 3,200
to 7,000.
(b) To effect the foregoing, Article Fourth of the Certificate of
Incorporation is hereby amended to read as follows:
"FOURTH: The aggregate number of shares which the corporation
shall have authority to issue is Seven Thousand (7,000), without par
value."
4. The amendment was authorized in the following manner: By unanimous
written consent of the Board of Directors, followed by the unanimous written
consent of all of the shareholders.
IN WITNESS WHEREOF, we have made and signed this certificate this 1st day
of October, 1991 and we affirm the statements contained therein as true under
penalties of perjury.
NEW YORK DIALYSIS MANAGEMENT, INC:
By: (cwm) /s/ Craig W. Moore
--------------------------------------
Craig W. Moore, President
By: (pb) /s/ Paul Balter
--------------------------------------
Paul Balter, M.D., Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
NEW YORK DIALYSIS MANAGEMENT INC.
UNDER SECTION 805 OF THE
BUSINESS CORPORATION LAW
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED APR 09 1992
TAX $ 190
-------------
BY: SAC
---------------
BRONX
Finger Hochman & Delott, P C
30 North LaSalle Street, Ste. 4300
Chicago, IL 60602
<PAGE>
CERTIFICATE OF CHANGE
OF
NEW YORK DIALYSIS MANAGEMENT, INC.
(Under Section 805-A of the Business Corporation Law)
FIRST: The name of the corporation is: NEW YORK DIALYSIS MANAGEMENT, INC.
SECOND: The Certificate of Incorporation of the corporation was filed by
the Department of State on March 15, 1990.
THIRD: The Certificate of Incorporation of the corporation is hereby
changed, pursuant to the authorization of the Board of Directors of the
Corporation, so as to change the post office address to which the Secretary of
State shall mail a copy of any process against the corporation served upon him
and to change designation of registered agent. To accomplish said changes:
(a) The following statement of said post office address to which the Secretary
of State shall mail a copy of process is substituted:
"The post office address within the State of New York to which the
Secretary of State shall mail a copy of any process against the
corporation served upon him is c/o The Prentice-Hall Corporation
System, Inc., 15 Columbus Circle, New York, New York 10023-7773."
(b) The following statement of designation of registered agent is substituted:
"The name and the address of the registered agent of the corporation
are The Prentice-Hall Corporation System, Inc., 15 Columbus Circle,
New York, New York 10023-7773. Said registered agent is to be the
agent upon which process against the corporation may be served."
<PAGE>
IN WITNESS WHEREOF, we have subscribed this document on the date hereinafter set
forth and do hereby affirm, under the penalties of perjury, that the statements
contained therein have been examined by us and are true and correct.
Dated: 3-25-94
Name of
Signers /s/ Craig W. Moore
-----------------------------------------
Craig W. Moore President
Name of
Signer /s/ Paul Balter M.D.
-----------------------------------------
Paul Balter, M.D. Secretary
<PAGE>
CERTIFICATE OF CHANGE
OF
NEW YORK DIALYSIS MANAGEMENT, INC.
(Under Section 805-A of the Business Corporation Law)
STATE OF NEW YORK Filed By:
DEPARTMENT OF STATE FINGER, HOCHMAN & DELOTT P.C.
FILED APR 18,1994 30 N. LaSalle Street, Suite 4306
TAX $________________ Chicago, IL 60602
BY: Att: Becky Eytcheson
------------------
BRONX
<PAGE>
CERTIFICATE OF CHANGE
OF
NEW YORK DIALYSIS MANAGEMENT, INC.
(Under Section 805-A of the Business Corporation Law)
FIRST: The name of the corporation (the "corporation") is
NEW YORK DIALYSIS MANAGEMENT, INC.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of State on 03-15-90
THIRD: The certificate of incorporation of the corporation is hereby
changed, so as to change the post office address to which the Secretary of State
of New York shall mail a copy of process against the corporation served upon him
and to change the address of the registered agent; and to accomplish said
changes, the statements in the certificate of incorporation relating to said
post-office address and the designation of registered agent are hereby stricken
and the following statements are substituted in lieu thereof;
"The post office address within the State of New York to
which the Secretary of State of New York shall mail a copy
of any process against the corporation served upon him is
c/o THE PRENTICE-HALL CORPORATION SYSTEM, INC. 500 Central
Avenue Albany, New York 12206-2290"
"The name and the address of the registered agent of the
corporation are THE PRENTICE-HALL CORPORATION SYSTEM, INC.
500 Central Avenue Albany, New York 12206-2290. Said
registered agent is to be the agent upon which process
against the corporation may be served."
FOURTH: A notice of the proposed changes was mailed by the undersigned to
the corporation not less than 30 days prior to the date of the delivery of this
certificate to the of Department of State and the corporation has not objected
thereto. The person signing this certificate is the agent of the corporation to
whose address the Secretary of State of New York is required to mail copies of
process and the registered agent of the corporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained therein have been examined by us and are true and correct.
Date: February 1, 1995
THE PRENTICE-HALL CORPORATION SYSTEM, INC.
/s/ Dennis Howarth
-----------------------------------
Dennis Howarth, Vice President
/s/ Richard L. Kushay
-----------------------------------
Richard L. Kushay, Asst. Secretary
<PAGE>
CERTIFICATE OF CHANGE
of
NEW YORK DIALYSIS MANAGEMENT, INC.
(Under Section 805-A of the Business Corporation Law)
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED MARCH 13 1995
TAX $________________
BY: R J C
------------------
Margaret Timmins
THE PRENTICE-HALL, CORPORATION SYSTEM, INC.
375 Hudson Street, 11th Floor
New York, New York 10014-3660
<PAGE>
Certificate of Change
of
NEW YORK DIALYSIS MANAGEMENT, INC.
(Under Section 805-A of the Business Corporation Law)
FIRST: The name of the corporation (the "corporation") is
NEW YORK DIALYSIS MANAGEMENT, INC.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of State on
03-15-1990
THIRD: The certificate of incorporation of the corporation is hereby
changed, so as to change the post office address to which the Secretary of State
of New York shall mail a copy of any process against the corporation served upon
said Secretary of State and to change the address of the registered agent; and
to accomplish said changes, the statements in the certificate of incorporation
relating to said post office address and the designation of registered agent are
hereby stricken and the following statements are substituted in thereof;
"The post office address within the State of New York to
which the Secretary of State of New York shall mail a copy
of any process against the corporation served upon him is
c/o THE PRENTICE-HALL CORPORATION SYSTEM, INC. 80 State
Street, Albany, New York 12207"
"The name and the address of the registered agent of the
corporation are THE PRENTICE-HALL CORPORATION SYSTEM, INC.
80 State Street, Albany, New York 12207. Said registered
agent is to be the agent upon which process against the
corporation may be served."
FOURTH: A notice of the proposed changes was mailed by the undersigned to
the corporation not less than 30 days prior to the date of the delivery of this
certificate to the Department of State and the corporation has not objected
thereto. The person signing this certificate is the agent of the corporation to
whose address the Secretary of State of New York is required to mail copies of
process and the registered agent of the corporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained therein have been examined by us and are true and correct.
Date: March 3, 1997
THE PRENTICE-HALL CORPORATION SYSTEM, INC.
/s/ William G. Popeo
------------------------------------
William G. Popeo, Vice President
/s/ John H. Pelletier
------------------------------------
John H. Pelletier, Asst. Secretary
<PAGE>
CERTIFICATE OF CHANGE
of
NEW YORK DIALYSIS MANAGEMENT, INC.
(Under Section 805-A of the Business Corporation Law)
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED APRIL 14, 1997
TAX $_______________
BY: Neil
-----------------
Bronx
Anne Grigorakos
THE PRENTICE-HALL CORPORATION SYSTEM, INC.
375 Hudson Street, 11th Floor
New York, New York 10014
<PAGE>
EXHIBIT 3.28
BY - LAWS
OF
NEW YORK DIALYSIS MANAGEMENT, INC.
ARTICLE I
OFFICES
Section 1. The office of the corporation shall be located in Bronx County,
State of New York.
Section 2. The corporation may also have offices at such other places both
within and without the State of New York as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in Oak Park, State of Illinois, at such place as may be fixed from
time to time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year 1990,
shall be held on the second Monday in December of each year if not a legal
holiday, and if a legal holiday, then on the next secular day following, at 3:00
p.m., at which they shall elect by a plurality vote, a board of directors, and
transact such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the
place, date and hour of the meeting shall be delivered not less than five nor
more than fifty days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the secretary, or the officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders may be held at such time and
place within or without the State of New York as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
<PAGE>
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president, the board of directors, or the
holders of not less than 50 percent of all the shares entitled to vote at the
meeting.
Section 3. Written or printed notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than five nor more than fifty
days before the date of the meeting, either personally or by mail, by, or at the
direction of, the president, the secretary, or the officer of persons calling
the meeting, to each shareholder of record entitled to vote at such meeting. The
notice should also indicate that it is being issued by, or at the direction of,
the person calling the meeting.
Section 4. The business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority of
the shares of stock represented at the meeting shall be the act of the
shareholders, unless the vote of a greater or lesser number of shares of stock
is required by law or the certificate of incorporation.
Section 3. Except as hereinafter provided, each outstanding share of stock
having voting power shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or by his duly authorized attorney-
in-fact.
-2-
<PAGE>
In all elections of directors each shareholder shall be entitled to as many
votes as shall equal the number of votes which he would be entitled to cast in
the election of directors with respect to his shares multiplied by the number of
directors to be elected, and he may cast all of such votes for a single director
or may distribute them among the number of directors to be voted for, or any two
or more of them, as he may see fit, which right when exercised shall be termed
cumulative voting.
Section 4. The board of directors in advance of any shareholders' meeting
may appoint one or more inspectors to act at the meeting or any adjournment
thereof. If inspectors are not so appointed, the person presiding at a
shareholders' meeting may, and, on the request of any shareholder entitled to
vote thereat, shall appoint one or more inspectors. In case any person appointed
as inspector fails to appear or act, the vacancy may be filled by the board in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability.
Section 5. Whenever shareholders are required or permitted to take any
action by vote, such action may be taken without a meeting on written consent,
setting forth the action so taken, signed by the holders of all outstanding
shares entitled to vote thereon.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be four. Directors shall be at
least eighteen years of age and need not be residents of the State of New York
nor shareholders of the corporation. The directors, other than the first board
of directors, shall be elected at the annual meeting of the shareholders, except
as hereinafter provided, and each director elected shall serve until the next
succeeding annual meeting and until his successor shall have been elected and
qualified. The first board of directors shall hold office until the first annual
meeting of shareholders.
Section 2. Any or all the directors may be removed, with or without cause,
at any time by the vote of the shareholders at a special meeting called for that
purpose.
Any director may be removed for cause by the action of the directors at a
special meeting called for that purpose.
If elected by cumulative voting, a director may be removed only by the
shareholders and then only when the votes cast against his removal would not be
sufficient to elect him if voted
-3-
<PAGE>
cumulatively at an election at which the same total number of votes were cast
and the entire board or the entire class of directors of which he is a member
were then being elected.
If the director being removed was elected by the holders of the shares of
any class or series he cannot be removed by the directors and may be removed
only by the applicable vote of the holders of shares of that class or series,
voting as a class.
Section 3. Unless otherwise provided in the certificate of incorporation,
newly created directorships resulting from an increase in the board of directors
and all vacancies occurring in the board of directors, including vacancies
caused by removal without cause, may be filled by the affirmative vote of a
majority of the board of directors, however, if the number of directors then in
office is less than a quorum, then such newly created directorships and
vacancies may be filled by a vote of a majority of the directors then in office.
A director elected to fill a vacancy shall hold office until the next meeting of
shareholders at which election of directors is the regular order of business,
and until his successor shall have been elected and qualified. A director
elected to fill a newly created directorship shall serve until the next
succeeding annual meeting of shareholders and until his successor shall have
been elected and qualified.
Section 4. The business affairs of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the shareholders.
Section 5. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside the State of
New York, at such place or places as they may from time to time determine.
Section 6. The board of directors, by the affirmative vote of a majority
of the directors then in office, and irrespective of any personal interest of
any of its members, shall have authority to establish reasonable compensation of
all directors for services to the corporation as directors, officers or
otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be
held either within or without the State of New York.
-4-
<PAGE>
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by the
president on three days' notice to each director, either personally or by mail
or by telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of two directors.
Section 5. Notice of a meeting need not be given to any director who
submits a signed waiver of notice whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the board of directors need be specified
in the notice or waiver of notice of such meeting.
Section 6. A majority of the directors shall constitute a quorum for the
transaction of business unless a greater or lesser number is required by law or
by the certificate of incorporation. The vote of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
board of directors, unless the vote of a greater number is required by law or by
the certificate or incorporation. If a quorum shall not be present at any
meeting of directors, the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 7. Unless otherwise restricted by the certificate of incorporation
or these by-laws, members of the board of directors, or any committee designated
by the board of directors, may participate in a meeting of the board of
directors, or any committee, by means of conference telephone or similar
communications equipment by means of wich all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 8. Unless the certificate or incorporation provides otherwise, any
action required or permitted to be taken at a meeting or the directors or a
committee thereof may be taken without a meeting if a consent in writing to the
adoption of a
-5-
<PAGE>
resolution authorizing the action so taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter thereof.
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The board of directors, by resolution adopted by a majority of
of the entire board, may designate, from among its members, an executive
committee and other committees, each consisting of three or more directors, and
each of which, to the extent provided in the resolution, shall have all the
authority of the board, except as otherwise required by law. Vacancies in the
membership of the committee shall be filled by the board of directors at a
regular or special meeting of the board of directors. The executive committee
shall keep regular minutes of its proceedings and report the same to the board
when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, at his address as it appears on the records of the
corporation, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice of a meeting is required to be given under
the provisions of the statutes or under the provisions of the certificate of
incorporation or these by-laws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers.
-6-
<PAGE>
Section 2. The board of directors at its first meeting after each annual
meeting of shareholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer, none of whom need be a member of the board.
Any two or more offices may be held by the same person, except the
offices of president an secretary. When all the issued and outstanding stock of
the corporation is owned by one person, such person may hold all or any
combination of offices.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president or, if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
-7-
<PAGE>
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and, when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary or, if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
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<PAGE>
Section 14. The assistant treasurer, or, if there shall be more than one,
the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE X
CERTIFICATE FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates or shall be uncertified. Certificates shall be signed by the
chairman or vice-chairman of the board or the president or a vice-president and
the secretary or an assistant secretary or the treasurer or an assistant
treasurer of the corporation and may be sealed with the seal of the corporation
or a facsimile thereof.
When the corporation is authorized to issue shares of more than one class,
there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designation, relative rights, preferences, and limitations of the shares of each
class authorized to be issued and, if the corporation is authorized to issue any
class of preferred shares in series, the designation, relative rights,
preferences and limitations of each such series so far as the same have been
fixed and the authority of the board of directors to designate and fix the
relative rights, preferences and limitations of other series.
Within a reasonable time after the issuance or transfer of any
uncertificated shares there shall be sent to the registered owner thereof a
written notice containing the information required to be set forth or stated on
certificates pursuant to paragraphs (b) and (c) of Section 508 of the New York
Business Corporation Law.
Section 2. The signatures of the officers of the corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have cease to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed.
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<PAGE>
When authorizing such issue of a new certificate, the board of directors, in its
discretion and as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require such
indemnities as it deems adequate, to protect the corporation from any claim that
may be made against it with respect to any such certificate alleged to have been
lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate cancelled and the transaction recorded upon the books of the
corporation.
FIXING RECORD DATE
Section 5. For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any dividend
or the allotment of any rights, or for the purpose of any other action, the
board of directors may fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than fifty nor less
than ten days before the date of any meeting nor more than fifty days prior to
any other action. When a determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders has been as provided in this
section, such determination shall apply to any adjournment thereof, unless the
board fixes a new record date for the adjourned meeting.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of New
York.
LIST OF SHAREHOLDERS
Section 7. A list of shareholders as of the record date, certified by the
corporate officer responsible for its preparation or by a transfer agent, shall
be produced at any
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<PAGE>
meeting upon the request thereat or prior thereto of any shareholder. If the
right to vote at any meeting is challenged, the inspectors of election, or
person presiding thereat, shall require such list of shareholders to be produced
as evidence of the right of the persons challenged to vote at such meeting and
all persons who appear from such list to be shareholders entitled to vote
thereat may vote at such meeting.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the certificate of incorporation
relating thereto, if any, dividends may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in shares of the capital stock or in the corporation's bonds or its property,
including the shares or bonds of other corporations subject to any provisions of
law and of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall end on the last day of
December.
SEAL
Section 5. The corporation seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporation Seal,
New York". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
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<PAGE>
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be amended or repealed or new by-laws may be
adopted at any regular or special meeting of shareholders at which a quorum is
present or represented, by the vote of the holders of shares entitled to vote in
the election of any directors, provided notice of the proposed alteration,
amendment or repeal be contained in the notice of such meeting. These by-laws
may also be amended or repealed or new by-laws may be adopted by the affirmative
vote of a majority of the board of directors at any regular or special meeting
of the board. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the board, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with precise statement of the
changes made. By-laws adopted by the board of directors may be amended or
repealed by the shareholders.
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<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:00 PM 12/22/1997
971442572 - 2833936
CERTIFICATE OF INCORPORATION
OF
NORTH BUCKNER ACQUISITION CORP.
FIRST: The name of the corporation is North Buckner Acquisition Corp.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, Wilmington, Delaware 19805 in the county of
New Castle. The name of the Corporation's registered agent is Corporation
Service Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware (the "GCL").
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 1,000 shares of common stock, par value $.01
per share.
FIFTH: The name and mailing address of the Corporation's incorporator
is:
Name Mailing Address
---- ---------------
Keith A. Sigale c/o Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
SIXTH: The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the by-laws of the Corporation (the"By-Laws").
SEVENTH: Elections of directors need not be by written ballot unless
otherwise provided in the By-Laws.
EIGHTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the GCL.
NINTH: The Corporation shall indemnify each director, officer, trustee,
employee or agent of the Corporation and each person who is or was serving at
the request of the Corporation as a director, officer, trustee, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise in the manner and to
-1-
<PAGE>
the fullest extent provided in Section 145 of the GCL as the same now exists or
may hereafter be amended.
The undersigned incorporator hereby acknowledges that the foregoing
certificate of incorporation is such incorporator's act deed and that the facts
stated therein are true.
Dated: December 22, 1997 /s/ Keith A. Sigale
---------------------------
Keith A. Sigale, Incorporator
c/o Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
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<PAGE>
State of Delaware
Office of the Secretary of State PAGE 1
________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER,
WHICH MERGES:
"NORTH BUCKNER DIALYSIS CENTER, INC.", A TEXAS CORPORATION, WITH AND INTO
"NORTH BUCKNER ACQUISITION CORP." UNDER THE NAME OF "NORTH BUCKNER DIALYSIS
CENTER, INC.", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE
OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE THIRTY-FIRST DAY OF MARCH.
A.D. 1998, AT 3 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
-----------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9046123
DATE: 04-24-98
<PAGE>
[LETTERHEAD OF THE STATE OF DELAWARE APPEARS HERE]
CERTIFICATE OF MERGER
OF
NORTH BUCKNER DIALYSIS CENTER, INC.,
a Texas corporation
INTO
NORTH BUCKNER ACQUISITION CORP.,
a Delaware corporation
* * * * * * * * *
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
NORTH BUCKNER DIALYSIS CENTER, INC. Texas
NORTH BUCKNER ACQUISITION CORP. Delaware
SECOND: That an AGREEMENT AND PLAN OF MERGER between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of
Section 252 of the General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation of the merger is NORTH
BUCKNER ACQUISITION CORP., a Delaware corporation.
FOURTH: That once the merger is effective, the Certificate of Incorporation
of NORTH BUCKNER ACQUISITION CORP., a Delaware corporation, which is surviving
the
<PAGE>
merger, will be amended to read as follows: "Article First: The name of the
Corporation is North Buckner Dialysis Center, Inc."
FIFTH: That the effective date and time of the merger shall be April 1,
1998 at 12:01 a.m. Central time.
SIXTH: That the AGREEMENT AND PLAN OF MERGER is on file at the principal
place of business of the surviving corporation, the address of which is 3650
North Buckner Boulevard, Suite 108, Dallas, Texas 75228.
SEVENTH: That a copy of the AGREEMENT AND PLAN OF MERGER will be furnished
by the surviving corporation, on request and without cost, to any stockholder of
any constituent corporation.
EIGHTH: The authorized capital stock of each foreign corporation which is
a party to the merger is as follows:
<TABLE>
<CAPTION>
NUMBER OF
AUTHORIZED PAR VALUE
CORPORATION CLASS SHARES PER SHARE
----------- ----- ---------- ---------
<S> <C> <C> <C>
North Buckner Dialysis Center, Inc. Common 1,000 $.01
</TABLE>
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
Dated as of March 31, 1998
NORTH BUCKNER ACQUISITION CORP., a Delaware
corporation
By: /s/ John B. Bourke
---------------------------
Chief Financial Officer, an authorized
-----------------------
signatory John B. Bourke
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<PAGE>
EXHIBIT 3.30
BY-LAWS
OF
NORTH BUCKNER ACQUISITION CORP.
-------------------------------
ARTICLE I
---------
IDENTIFICATION; OFFICES
-----------------------
SECTION 1.1. NAME. The name of the corporation is North Buckner
----
Acquisition Corp. (the "Corporation").
SECTION 1.2. REGISTERED OFFICES, OTHER OFFICES. The registered office
---------------------------------
of the Corporation in the State of Delaware shall be in the City of Wilmington
and County of New Castle. The Corporation may have such other offices, either
within or outside of the State of Delaware, as the business of the Corporation
may require from time to time.
ARTICLE II
----------
STOCKHOLDERS
------------
SECTION 2.1. ANNUAL MEETING. An annual meeting of the stockholders
--------------
shall be held on the first Monday in June of each year, or on such other date as
may be determined by resolution of the Board of Directors; provided, however,
that if in any year such date is a legal holiday, such meeting shall be held on
the next succeeding business day. At each annual meeting, the stockholders shall
elect directors to hold office for the term provided in Section 3.1 of these
By-laws.
SECTION 2.2. SPECIAL MEETING. A special meeting of the stockholders
---------------
may be called by the President of the Corporation, the Board of Directors, or by
such other officers or persons as the Board of Directors may designate.
SECTION 2.3. PLACE OF STOCKHOLDER MEETINGS. The Board of Directors
-----------------------------
may designate any place, either within or without the State of Delaware, as the
place of meeting for any annual meeting or for any special meeting. If no such
place is designated by the Board of Directors, the place of meeting will be the
principal business office of the Corporation.
SECTION 2.4. NOTICE OF MEETINGS. Unless waived as herein provided,
------------------
whenever stockholders are required or permitted to take any action at a meeting,
written notice of the meeting shall be given stating the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose of purposes for
which the meeting is called. Such written notice shall be given not less than
ten (10) days nor
<PAGE>
more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at the meeting or in the event of a merger, consolidation,
share exchange, dissolution or sale, lease or exchange of all or substantially
all of the Corporation's property, business or assets not less than twenty (20)
days before the date of the meeting. If mailed, notice is given when deposited
in the United States mail, postage prepaid, directed to the stockholder at the
stockholder's address as it appears on the records of the Corporation.
When a meeting is adjourned to another time or place in accordance with
Section 2.5 of these By-laws, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting in which the
adjournment is taken. At the adjourned meeting the Corporation may conduct any
business which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 2.5. QUORUM AND ADJOURNED MEETINGS. Unless otherwise provided
-----------------------------
by law or the Corporation's Certificate of Incorporation, a majority of the
shares entitled to vote, present in person or represented by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
shares entitled to vote at a meeting of stockholders is present in person or
represented by proxy at such meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the original meeting. The stockholders
present at a meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of such number of stockholders as may leave less
than a quorum.
SECTION 2.6. FIXING OF RECORD DATE. (a) For the purpose of
---------------------
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) For the purpose of determining stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing
<PAGE>
the record date is established by the Board of Directors, and which date shall
not be more than ten (10) days after the date on which the resolution fixing the
record date is adopted by the Board of Directors. If no record date has been
fixed by the Board of Directors, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by law, shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal office, or an officer
or agent of the Corporation having custody of the book in which the proceedings
of meetings of stockholders are recorded. Delivery of the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by law, the record date
for determining stockholders' consent to corporate action in writing without a
meeting shall be the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) For the purpose of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect to any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix the record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty (60) days prior to such
action. If no record date is fixed, the record date for determining the
stockholders for any such purpose shall be the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
SECTION 2.7. VOTING LIST. The officer who has charge of the stock
-----------
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.8. VOTING. Unless otherwise provided by the Certificate of
------
Incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by each stockholder. In all matters other than the election
of directors, the affirmative vote of the majority of shares present in person
or represented by proxy at the meeting and entitled to vote on the subject
matter shall be the act of the
<PAGE>
stockholders. Directors shall be elected by plurality of the votes of the shares
present in person or represented by a proxy at the meeting entitled to vote on
the election of directors.
SECTION 2.9. PROXIES. Each stockholder entitled to vote at a meeting
-------
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may remain irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
Corporation generally.
SECTION 2.10. RATIFICATION OF ACTS OF DIRECTORS AND OFFICERS. Except
----------------------------------------------
as otherwise provided by law or by the Certificate of Incorporation of the
Corporation, any transaction or contract or act of the Corporation or of the
directors or the officers of the Corporation may be ratified by the affirmative
vote of the holders of the number of shares which would have been necessary to
approve such transaction, contract or act at a meeting of stockholders, or by
the written consent of stockholders in lieu of a meeting.
SECTION 2.11. INFORMAL ACTION OF STOCKHOLDERS. Any action required to
-------------------------------
be taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent of consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. In the event that the action which is consented
to is such as would have required the filing of a certificate with any
governmental body, if such action had been voted on by stockholders at a meeting
thereof, the certificate filed shall state, in lieu of any statement required by
law concerning any vote of stockholders, that written consent had been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law, and that written notice has been given as provided in such
section.
SECTION 2.12. ORGANIZATION. Such person as the Board of Directors may
------------
designate or, in the absence of such a designation, the president of the
Corporation or, in his or her absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of such meeting. In the absence of the secretary of the Corporation,
the chairman of the meeting shall appoint a person to serve as secretary at the
meeting.
<PAGE>
ARTICLE III
-----------
DIRECTORS
---------
SECTION 3.1. NUMBER AND TENURE OF DIRECTORS. The number of directors
------------------------------
of the Corporation shall be no less than three (3) or more than seven (7)
members. Each director shall hold office until such director's successor is
elected and qualified or until such director's earlier resignation or removal.
Any director may resign at any time upon written notice to the Corporation.
SECTION 3.2. ELECTION OF DIRECTORS. Directors shall be elected at the
---------------------
annual meeting of stockholders. In all elections for directors, every
stockholder shall have the right to vote the number of shares owned by such
stockholder for each director to be elected.
SECTION 3.3. SPECIAL MEETING. Special meetings of the Board of
---------------
Directors may be called by or at the request of the Chairman of the Board, the
President or at least one-third of the number of directors constituting the
whole board. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 3.4. NOTICE OF SPECIAL MEETINGS OF THE BOARD OF DIRECTORS.
----------------------------------------------------
Notice of any special meeting of the Board of Directors shall be given at least
two (2) days previous thereto by written notice to each director at his or her
address. If mailed, such notice shall be deemed to be delivered when deposited
in the United States Mail so addressed, with fist-class postage thereon prepaid.
If sent by any other means (including facsimile, courier, or express mail,
etc.), such notice shall be deemed to be delivered when actually delivered to
the home or business address of the director.
SECTION 3.5. QUORUM. A majority of the total number of directors
------
fixed by these By-laws, or in the absence of a By-Law which fixes the number of
directors, the number stated in the Certificate of Incorporation or named by the
incorporators, shall constitute a quorum for the transaction of business. If
less than a majority of the directors are present at a meeting of the Board of
Directors, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 3.6. VOTING. The vote of the majority of the directors
------
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the Delaware General Corporation Law or the Certificate of
Incorporation requires a vote of a greater number.
<PAGE>
SECTION 3.7. VACANCIES. Vacancies in the Board of Directors may be
---------
filled by a majority vote of the Board of Directors or by an election either at
an annual meeting or at a special meeting of the stockholders called for that
purpose. Any directors elected by the stockholders to fill a vacancy shall hold
office for the balance of the term for which he or she was elected. A director
appointed by the Board of Directors to fill a vacancy shall serve until the next
meeting of stockholders at which directors are elected.
SECTION 3.8. REMOVAL OF DIRECTORS. A director, or the entire Board of
--------------------
Directors, may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors; provided,
however, that if cumulative voting obtains and less than the entire Board of
Directors is to be removed, no director may be removed without cause if the
votes cast against such director's removal would be sufficient to elect him if
then cumulatively voted at an election of the entire Board of Directors.
SECTION 3.9. INFORMAL ACTION OF DIRECTORS. Unless otherwise
----------------------------
restricted by the Certificate of Incorporation or these By-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings, are filed with the minutes of proceedings of the
Board of Directors or committee.
SECTION 2.10. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the
-------------------------------------
Board of Directors, or any committee designated by such board, may participate
in a meeting of the Board of Directors, or committee thereof, by means of
conference telephone or similar communications equipment as long as all persons
participating in the meeting can speak with and hear each other, and
participation by a director pursuant to this Section 3.10 shall constitute
presence in person at such meeting.
ARTICLE IV
----------
WAIVER OF NOTICE
----------------
SECTION 4.1. WRITTEN WAIVER OF NOTICE. A written waiver of any
------------------------
required notice, signed by the person entitled to notice, whether before or
after the date stated therein, shall be deemed equivalent to notice. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice.
SECTION 4.2. ATTENDANCE AS WAIVER OF NOTICE. Attendance of a person
------------------------------
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, and objects
at the
<PAGE>
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE V
---------
COMMITTEES
----------
SECTION 5. GENERAL PROVISIONS. The Board of Directors may, by
------------------
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member at any
meeting of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease, or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of
a dissolution, or amending the By-laws of the Corporation; and, unless the
resolution so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger, pursuant to Section 253 of the Delaware General
Corporation Law.
ARTICLE VI
----------
OFFICERS
--------
SECTION 6.1. GENERAL PROVISIONS. The Board of Directors shall elect a
------------------
President and a Secretary of the Corporation. The Board of Directors may also
elect a Chairman of the Board, one or more Vice Chairmen of the Board, one or
more Vice Presidents, a Treasurer, one or more Assistant Secretaries and
Assistant Treasurers and such additional officers as the Board of Directors may
deem necessary or appropriate from time to time. Any two or more offices may be
held by the same person. The offices elected by the Board of Directors shall
have such duties as are hereafter described and such additional duties as the
Board of Directors may from time to time prescribe.
<PAGE>
SECTION 6.2. ELECTION AND TERM OF OFFICE. The officers of the
---------------------------
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers is not held at such meeting, such
election shall be held as soon thereafter as may be convenient. New offices of
the Corporation may be created and filled and vacancies in offices may be filled
at any time, at a meeting or by the written consent of the Board of Directors.
Unless removed pursuant to Section 6.3 of these By-laws, each officer shall hold
office until his successor has been duly elected and qualified, or until his
earlier death or resignation. Election or appointment of an officer or agent
shall not of itself create contract rights.
SECTION 6.3. REMOVAL OF OFFICERS. Any officer or agent elected or
-------------------
appointed by the Board of Directors may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person(s) so removed.
SECTION 6.4. THE CHIEF EXECUTIVE OFFICER. The Board of Directors
---------------------------
shall designate whether the Chairman of the Board, if one shall have been
chosen, or the President shall be the Chief Executive Officer of the
Corporation. If a Chairman of the Board has not been chosen, or if one has been
chosen but not designated Chief Executive Officer, then the President shall be
the Chief Executive Officer of the Corporation. The Chief Executive Officer
shall be the principal executive officer of the Corporation and shall in general
supervise and control all of the business and affairs of the Corporation, unless
otherwise provided by the Board of Directors. The Chief Executive Officer shall
preside at all meetings of the stockholders and of the Board of Directors and
shall see that orders and resolutions of the Board of Directors are carried into
effect. The Chief Executive Officer may sign bonds, mortgages, certificates for
shares and all other contracts and documents whether or not under the seal of
the Corporation except in cases where the signing and execution thereof shall be
expressly delegated by law, by the Board of Directors or by these By-laws to
some other officer or agent of the Corporation. The Chief Executive Officer
shall have general powers of supervision and shall be the final arbiter of all
differences between officers of the Corporation and his decision as to any
matter affecting the Corporation shall be final and binding as between the
officers of the Corporation subject only to the Board of Directors.
SECTION 6.5. THE PRESIDENT. In the absence of the Chief Executive
-------------
Officer or in the event of his inability or refusal to act, if the Chairman of
the Board has been designated Chief Executive Officer, the President shall
perform the duties of the Chief Executive Officer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the Chief
Executive Officer. At all other times the President shall have the active
management of the business of the Corporation under the general supervision of
the Chief Executive Officer. The President shall have concurrent power with the
Chief Executive Officer to sign bonds, mortgages, certificates for shares and
other contracts and documents, whether or not under the
<PAGE>
seal of the Corporation except in cases where the signing and execution thereof
shall be expressly delegated by law, by the Board of Directors, or by these
By-laws to some other officer or agent of the Corporation. In general, the
President shall perform all duties incident to the office of president and such
other duties as the Chief Executive Officer or the Board of Directors may from
time to time prescribe.
SECTION 6.6. THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if
-------------------------
one is chosen, shall be chosen from among the members of the board. If the
Chairman of the Board has not been designated Chief Executive Officer, the
Chairman of the Board shall perform such duties as may be assigned to the
Chairman of the Board by the Chief Executive Officer or by the Board of
Directors.
SECTION 6.7. VICE CHAIRMAN OF THE BOARD. In the absence of the Chief
--------------------------
Executive Officer or in the event of his inability or refusal to act, if the
Chairman of the Board has been designated Chief Executive Officer, the Vice
Chairman, or if there be more than one, the Vice Chairmen, in the order
determined by the Board of Directors, shall perform the duties of the Chief
Executive Officer, and when so acting shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer. At all other
times, the Vice Chairman or Vice Chairmen shall perform such duties and have
such powers as the Chief Executive Officer or the Board of Directors may from
time to time prescribe.
SECTION 6.8. THE VICE PRESIDENT. In the absence of the President or
------------------
in the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Executive Vice President and
then the other Vice President or Vice Presidents in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.9. THE SECRETARY. The Secretary shall attend all meetings
-------------
of the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the Chief Executive Officer, under whose supervision
he shall be. The Secretary shall have custody of the corporate seal of the
Corporation and the Secretary, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
<PAGE>
SECTION 6.10. THE ASSISTANT SECRETARY. The Assistant Secretary, or if
-----------------------
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.11. THE TREASURER. The Treasurer shall have the custody of
-------------
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the Corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
SECTION 6.12. THE ASSISTANT TREASURER. The Assistant Treasurer, or if
-----------------------
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 6.13. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of
-----------------------------------
any officer of the Corporation, or for any other reason the Board of Directors
may deem sufficient, the Board of Directors may delegate the powers or duties,
or any of such powers or duties, of any officers or officer to any other officer
or to any director.
SECTION 6.14. COMPENSATION. The Board of Directors shall have the
------------
authority to establish reasonable compensation of all officers for services to
the Corporation.
<PAGE>
ARTICLE VII
-----------
CERTIFICATES FOR SHARES
-----------------------
SECTION 7.1. CERTIFICATES OF SHARES. The shares of the Corporation
----------------------
shall be represented by certificates, provided that the Board of Directors of
the Corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, Chief Executive
Officer, or the President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all the signatures on the certificate may be a facsimile.
SECTION 7.2. SIGNATURES OF FORMER OFFICER, TRANSFER AGENT OR
-----------------------------------------------
REGISTRAR. In case any officer, transfer agent, or registrar who has signed or
- ---------
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person or entity were such officer, transfer agent or registrar at the date of
issue.
SECTION 7.3. TRANSFER OF SHARES. Transfers of shares of the
------------------
Corporation shall be made only on the books of the Corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of certificate for such shares. Prior to due
presentment of a certificate for shares for registration of transfer, the
Corporation may treat a registered owner of such shares as the person
exclusively entitled to vote, to receive notifications and otherwise have and
exercise all of the right and powers of an owner of shares.
SECTION 7.4. LOST, DESTROYED OR STOLEN CERTIFICATES. Whenever a
--------------------------------------
certificate representing shares of the Corporation has been lost, destroyed or
stolen, the holder thereof may file in the office of the Corporation an
affidavit setting forth, to the best of his knowledge and belief, the time,
place, and circumstance of such loss, destruction or theft together with a
statement of indemnity sufficient in the opinion of the Board of Directors to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss of any such certificate. Thereupon the Board may
cause to be issued to such person or such person's legal representative a new
certificate or a duplicate of the certificate alleged to have been
<PAGE>
lost, destroyed or stolen. In the exercise of its discretion, the Board of
Directors may waive the indemnification requirements provided herein.
ARTICLE VIII
------------
DIVIDENDS
---------
SECTION 8. DIVIDENDS. The Board of Directors of the Corporation may
---------
declare and pay dividends upon the shares of the Corporation's capital stock in
any form determined by the Board of Directors, in the manner and upon the terms
and conditions provided by law.
ARTICLE IX
----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
SECTION 9.1. CONTRACTS. The Board of Directors may authorize any
---------
officer or officers, agent or agents agents to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
SECTION 9.2. LOANS. No loans shall be contracted on behalf of the
-----
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 9.3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
-------------------
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers or agents of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 9.4. DEPOSITS. The funds of the Corporation may be deposited
--------
or invested in such bank account, in such investments or with such other
depositaries as determined by the Board of Directors.
<PAGE>
ARTICLE X
---------
AMENDMENTS
----------
SECTION 10. AMENDMENTS. These By-laws may be adopted, amended or
----------
repealed by either the Corporation's Board of Directors or its stockholders;
provided, however, regarding indemnification of directors, Article XI may only
be amended by the Corporation's stockholders.
ARTICLE XI
----------
SECTION 11.1 INDEMNIFICATION. The Corporation shall indemnify, in
---------------
accordance with and to the full extent now or hereafter permitted by law, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without limitation, any
action by or in the right of the Corporation), by reason of his acting as a
director of the Corporation (and the Corporation, in the sole discretion of the
Board of Directors, may so indemnify a person by reason of the fact that he is
or was an officer or employee of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation) against any liability or expense actually and reasonably incurred
by such person in respect thereof; provided, however, that the Corporation shall
not be obligated to indemnify any such director (i) with respect to proceedings,
claims or actions initiated or brought voluntarily by such person and not by way
of defense or brought against such person in response to a proceeding, claim or
action by such person against the Corporation, or (ii) for any amounts paid in
settlement of an action effected without the prior written consent of the
Corporation to such settlement or, (iii) if liability was incurred because the
director breached or failed to perform a duty he owes to the corporation and the
breach or failure to perform constitutes (a) a willful failure to deal fairly
with the corporation or its stockholders in connection with a matter in which
the director has a material conflict of interest, (b) a violation of criminal
law, unless the director had reasonable cause to believe his conduct was lawful
or no reasonable cause to believe his conduct was unlawful, (c) a transaction
from which the director derived an improper personal profit, or (d) willful
misconduct. The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea, shall not, by
itself, create a presumption that indemnification of the director or officer is
not required. A director or officer who seeks indemnification shall make a
written request to the Corporation. Such indemnification is not exclusive of any
other right to indemnification provided by law, agreement or otherwise.
SECTION 11.2 DETERMINATION OF RIGHT TO INDEMNIFICATION. Unless
-----------------------------------------
otherwise provided by the Corporation's Certificate of Incorporation, these
by-laws, or written agreement between the director or officer, the
determination as to right to
<PAGE>
indemnification shall be made by a majority vote of a quorum of the Board of
Directors consisting of directors not at the time parties to the same or related
proceedings. If a quorum of disinterested directors cannot be obtained, the
determination will be made by majority vote of a committee duly appointed by the
Board of Directors and consisting solely of two or more directors not at the
time parties to the same or related proceedings. Directors who are parties to
the same or related proceedings may participate in the designation of members of
the committee.
<PAGE>
EXHIBIT 3.31
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
NORTHWEST INDIANA DIALYSIS, INC.
................................................................................
................................................................................
I, EDWIN J. SIMCOX, Secretary of State of Indiana, hereby certify that
Articles of Incorporation of the above Corporation, in the form prescribed by my
office, prepared and signed in duplicate by the incorporator(s), and
acknowledged and verified by the same, have been presented to me at my office
accompanied by the fees prescribed by law; that I have found such Articles
conform to law; that I have endorsed my approval upon the duplicate copies of
such Articles; that all fees have been paid as required by law; that one copy of
such Articles has been filed in my office; and that the remaining copy of such
Articles bearing the endorsement of my approval and filing has been returned by
me to the incorporator(s) or his(their) representatives; all as prescribed by
the provisions of the INDIANA GENERAL CORPORATION ACT, as amended.
NOW, THEREFORE, I hereby issue to such Corporation this Certificate of
Incorporation, and further certify that its corporate existence has begun.
[SEAL] In Witness Whereof, I have hereunto set my
hand and affixed the seal of the State of
Indiana, at the City of Indianapolis, this
12th day of January, 1984
............................................
EDWIN J. SIMCOX, Secretary of State
By..........................................
Deputy
<PAGE>
NOTE: THIS FORM MAY NOW ALSO BE USED FOR INCORPORATING PURSUANT TO THE MEDICAL
PROFESSIONAL CORPORATION ACT, THE DENTAL PROFESSIONAL CORPORATION ACT, AND THE
PROFESSIONAL CORPORATION ACT OF 1965, AS WELL AS THE GENERAL CORPORATION ACT. IF
THE CORPORATION IS TO BE FORMED PURSUANT TO THE AUTHORITY OF ONE OF THESE
STATUTES OTHER THAN THE GENERAL CORPORA-TION ACT, SO INDICATE IN THE PREAMBLE
BELOW BY STRIKING THE REFERENCES TO THE THREE INAPPROPRIATE STATUTES.
PROFESSIONAL ACCOUNTING CORPORATIONS ARE CONSIDERED TO BE FORMED PURSUANT TO THE
AUTHORITY OF THE INDIANA GENERAL CORPORATION ACT, BUT SUBJECT TO THE PROVISIONS
OF ?? 23.1.13.5, AND APPROPRIATE STATUTORY REFERENCE SHOULD BE MADE IN THE
PREAMBLE OR ARTICLE II BELOW.
CORPORATE FORM NO. 101 (Jan. 1977) PAGE ONE
ARTICLES OF INCORPORATION
LARRY A. CONRAD, SECRETARY OF STATE OF INDIANA
USE WHITE PAPER - SIZE 8 1/2 X 11 - FOR INSERTS
FILING REQUIREMENTS - PRESENT 2 ORIGINALLY SIGNED AND FULLY EXECUTED COPIES TO
SECRETARY OF STATE, ROOM 155, STATE HOUSE, INDIANAPOLIS 46204
RECORDING REQUIREMENTS - RECORDING OF ARTICLES OF INCORPORATION IN THE OFFICE OF
THE COUNTY RECORDER IS NO LONGER REQUIRED BY THE INDIANA GENERAL CORPORATION
ACT.
ARTICLES OF INCORPORATION
-------------------------
OF
--
NORTHWEST INDIANA DIALYSIS, INC.
- --------------------------------------------------------------------------------
The undersigned incorporator or incorporators, desiring to form a
corporation (hereinafter referred to as the "Corporation") pursuant to the
provisions of the Indiana General Corporation Act (Medical Professional
Corporation Act/ Dental Professional Corporation Act/Professional Corporation
Act of 1965), as amended (hereinafter referred to as the "Act"), execute the
following Articles of Incorporation.
ARTICLE I
---------
NAME
----
The name of the Corporation is NORTHWEST INDIANA DIALYSIS, INC.
ARTICLE II
----------
PURPOSES
--------
THE PURPOSES FOR WHICH THE CORPORATION IS FORMED ARE: To carry on and
conduct any and every kind of manufacturing, sales, distribution, investment,
and service business; to manufacture, process, fabricate, rebuild, service,
invest in, purchase, sell or otherwise dispose of and generally deal in and with
raw materials, products, goods, wares, merchandise and real and personal
property, both tangible and intangible, of every kind and character; to make
investments of every kind and nature, and to provide services of every kind and
character.
(IND. - 55 - 3/21/78)
<PAGE>
ARTICLE III
-----------
PERIOD OF EXISTENCE
-------------------
The period during which the Corporation shall continue is perpetual
----------------
ARTICLE IV
----------
RESIDENT AGENT AND PRINCIPAL OFFICE
-----------------------------------
Section 1. Resident Agent. The name and address of the Corporation's
-------------------------
Resident's Agent for service of process is
CT Corporation System One N. Capitol Avenue
- --------------------------------------------------------------------------------
(NAME) (NUMBER AND STREET OR BUILDING)
INDIANA
Indianapolis 46204
- --------------------------------------------------------------------------------
(CITY) (STATE) (ZIP CODE)
Section 2. Principal Office. The post office address of the principal of the
---------------------------
Corporation is _________________________________________________________________
2200 Grant Street, Suite 201 Gary INDIANA 46404
- --------------------------------------------------------------------------------
(NUMBER AND STREET OF BUILDING) (CITY) (STATE) (ZIP CODE)
ARTICLE V
---------
AUTHORIZED SHARES
-----------------
Section 1. Number of Shares:
- ---------------------------
The total number of shares which the Corporation is to have authority to issue
is 1,000.
A. The number of authorized shares which the corporation designates as having
par value is 1,000 with a par value of $ 1,00.
B. The number of authorized shares which the corporation designates as without
par value is none.
Section 2. Terms of Shares (if any):
- -----------------------------------
(IND. - 55)
<PAGE>
PRESCRIBED BY LARRY A. CONRAD SECRETARY OF STATE
(JAN. 1977)
ARTICLE VI
----------
REQUIREMENTS PRIOR TO DOING BUSINESS
------------------------------------
The Corporation will not commence business until consideration of the value
at least $1,000 (one thousand dollars) has been received for the issuance of
shares.
ARTICLE VII
----------
DIRECTOR(S)
-----------
Section 1. Number of Directors: The initial Board of Directors is composed
------------------------------
of 4 member(s). The number of directors may be from time to time fixed by the
By-Laws of the Corporation at any number. In the absence of a By-Law fixing
the number of directors, the number of shall be 4.
Section 2. Names and Post Office Addresses of the Director(s): The name(s)
-------------------------------------------------------------
and post office address(es) of the initial Board of Director(s) of the
Corporation is (are):
NAME NUMBER AND STREET OR BUILDING CITY STATE ZIP CODE
---- ----------------------------- ---- ----- --------
Sandra Gadson 2200 Grant Street, Suite 201 Gary Indiana 46404
Arthur Morris 101 N. Scoville Oak Park Illinois 60302
Michael Carbon 101 N. Scoville Oak Park Illinois 60302
Paul Balter 101 N. Scoville Oak Park Illinois 60302
Section 3. Qualifications of Directors (if any):
-----------------------------------------------
(IND. - 55)
<PAGE>
PRESCRIBED BY LARRY A. CONRAD, SECRETARY OF STATE
(JAN. 1977)
ARTICLE VIII
------------
INCORPORATOR(S)
---------------
The name(s) and post office address(es) of the incorporator(s) of the
Corporation is (are):
<TABLE>
<CAPTION>
NAME NUMBER AND STREET OR BUILDING CITY STATE ZIP CODE
---- ----------------------------- ---- ----- --------
<S> <C> <C> <C> <C>
David J. Hochman 70 W. Madison Street, Chicago Illinois 60602
Suite 2200
</TABLE>
ARTICLE IX
----------
PROVISIONS FOR REGULATION OF BUSINESS
-------------------------------------
AND CONDUCT OF AFFAIRS OF CORPORATION
-------------------------------------
("Powers" of the Corporation, its directors or shareholders)
(IND. - 55)
<PAGE>
PRESCRIBED BY LARRY A. CONRAD SECRETARY OF STATE
(JAN. 1977)
IN WITNESS WHEREOF, the undersigned, being all of the incorporator(s)
designated in Article VIII, execute(s) these Articles of Incorporation and
certify to the truth of the facts herein stated, this 9/th/ day of January,
1984.
/s/ David J. Hochman
............................. ................................
(Written Signature) (Written Signature)
David J. Hochman
............................. .............................
(Printed Signature) (Printed Signature)
.............................
(Written Signature)
.............................
(Printed Signature)
STATE OF Illinois )
) ss:
COUNTY OF Cook )
I, the undersigned, a Notary Public duly commissioned to take
acknowledgements and administer oaths in the State of Indiana, certify that
David J. Hochman being incorporator(s) referred to in Article VIII of the
foregoing Articles of Incorporation, personally appeared before me; acknowledged
the execution thereof; and swore to the truth of the facts therein stated.
Witness my hand and Notarial Seal this 9/th/ day of January, 1984
/s/ Janice Sals
.............................
(Written Signature)
JANICE SALS
.............................
(Printed Signature)
My Commission Expires: Notary Public
August 17, 1987
.........................
This instrument was prepared by Finger, Hochman & Delott, P.C., Attorney at
...............................
(Name)
Law, 70 W. Madison Street, Suite 2200, Chicago, Illinois 60602
...........................................................................
(Number and Street or Building) (City) (State) (Zip Code)
*Mail to the attention of: David J. Hochman
--------------------------
(IND. - 55)
<PAGE>
<TABLE>
<S> <C>
[SEAL] NOTICE OF CHANGE OF REGISTERED Provided by: EVAN BAYH
OFFICE OR REGISTERED AGENT Indiana Secretary of State
ALL CORPORATIONS
State Form 26276(R/1-88)
Indiana Code 23-1-24-2 (for profit corporations)
Indiana Code 23-7-1.1-53 (non-profit corporations)
Present original and 2 copies NO FILING FEE
</TABLE>
- --------------------------------------------------------------------------------
Name of Corporation Date of Incorporation
NORTHWEST INDIANA DIALYSIS, INC JANUARY 12, 1994
- --------------------------------------------------------------------------------
Current Registered Office Address Zip Code
ONE NORTH CAPITOL AVENUE, INDIANAPOLIS, INDIANA 46204
- --------------------------------------------------------------------------------
New Registered Office Address c/o The Prentice-Hall Corporation System, Inc.
50 South Meridian Street, Suite 700, Indianapolis, Indiana 46204-3542
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current Registered Agent (Type or Print Name)
C T CORPORATION SYSTEM
- --------------------------------------------------------------------------------
New Registered Agent (Type or Print Name)
The Prentice-Hall Corporation System, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS BY REGISTERED AGENT OR CORPORATION
- --------------------------------------------------------------------------------
This statement is a representation that the new registered agent has
consented to the appointment as registered agent, or statement attached
signed by registered agent giving consent to act as the new registered
agent.
After the change or changes are made, the street address of this
corporation's registered agent and the address of its registered office
will be identical.
The registered agent filing this statement of change of the registered
agent's business street address has notified the represented corporation in
writing of the change, and the notification was manually signed or signed
in facsimile.
The Prentice-Hall Corporation System, Inc.
By: /s/ Anthony E. Mackey, asst sec. of PHCS
----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned being the (Title of Officer) Secretary
of said corporation executes this notice and verifies, subject to penalties
of perjury, that the statements contained herein are true, this 6th day of
June 1994
- --------------------------------------------------------------------------------
Signature. Printed Name
(pb) /s/ Paul Balter Paul Balter, M.D.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.32
NORTHWEST INDIANA DIALYSIS, INC.
--------------------------------
BY-LAWS
-------
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The corporation shall hold an annual meeting
--------- ---------------
of its stockholders for the election of directors and for the transaction of
general business at such place as may be designated by the Board of Directors,
at 3:00 p.m. on the second Saturday in April of each year, if not a legal
holiday, and if a legal holiday, then on the first day following which is not a
legal holiday. Such annual meetings shall be general meetings open for the
transaction of any business within the powers of the corporation without special
notice of such business, except in cases in which special notice is required by
statute, by the articles of incorporation or by these by-laws. Failure to hold
the annual meeting shall not work any forfeiture or dissolution of the
corporation.
SECTION 2. Special Meetings. Unless otherwise prescribed by statute,
--------- ----------------
special meetings of the stockholders may be called at any time by the Board of
Directors or by the President and shall be called by the President or the
Secretary upon a written request of stockholders owning a twenty-five percent
(25%) interest in amount of entire outstanding shares of the corporation
entitled in vote. No business other than that stated in the notice described in
the next succeeding section shall be transacted at any special meeting without
the unanimous consent of all the stockholders entitled to vote thereat.
SECTION 3. Notice of Meetings. Except as otherwise provided by law, written
--------- -----------------
or printed notice stating the place, date and hour of the meeting and, in the
case of a special meeting, a brief statement of the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than fifty (50) days before the date of every meeting of stockholders either
personally or by mail, by or at the direction of the President or the Secretary,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
corporation, with postage thereon prepaid. Whenever any notice is required to be
given under the provisions of Indiana law, the articles of incorporation or
these by-laws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether it be before or after the time stated therein,
shall be deemed equivalent to the giving of such notice. It shall not be
requisite to the validity of any meeting of stockholders that notice thereof,
whether prescribed by law, by the articles of incorporation or by these by-laws,
shall have been given to any stockholder who attends in person or by proxy. No
notice other than by verbal announcement needs be given of any adjourned
meetings of stockholders.
1
<PAGE>
SECTION 4. Place of Meetings. Annual and special meetings of stockholders
--------- -----------------
shall be held at one of the corporation's offices or at such place or places
within or without the State of Indiana as shall be fixed by the Board of
Directors.
SECTION 5. Quorum. Except as otherwise required by law, the articles of
--------- ------
incorporation or these by-laws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the corporation entitled to vote
shall constitute a quorum at all meetings of the stockholders. In case a quorum
shall not be present at any meeting, a majority in interest of the stockholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting, from time to time, without notice other than announcement
at the meeting, until the requisite amount of stock entitled to vote shall be
present. If upon the reconvening of any such adjourned meeting a majority of the
stock entitled to vote shall be represented, any business may be transacted
which might have been transacted at the meeting as originally noticed, but only
those stockholders entitled to vote at the meeting as originally noticed shall
be entitled to vote at such time as it is reconvened.
Section 6. Voting. Each outstanding share of the capital stock shall be
--------- ------
entitled to one (1) vote on each matter submitted to a vote at a meeting of
stockholders. Shares to its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
When a quorum is present or represented at any meeting of stockholders, the vote
of the holders of the majority of the shares present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which a different vote is required by virtue of an express provision
of law, the articles of incorporation or another section of these by-laws.
SECTION 7. Proxies. Any stockholder entitled to vote at a meeting of
--------- -------
stockholders may vote either in person or by the proxy executed in writing by
the stockholder or by his duly authorized attorney-in-fact.
SECTION 8. Action Without Meeting. Whenever the vote of stockholders at a
--------- ----------------------
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of a statute, the articles of incorporation
or of these by-laws, the meeting and vote of stockholders may be dispensed with
if all the stockholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken.
2
<PAGE>
SECTION 9. List of Stockholders. At least ten (10) days prior to each
--------- --------------------
meeting of stockholders at which directors are to be elected, the Secretary
shall make or cause to be made a complete list of the stockholders entitled to
vote at the ensuing election, arranged in alphabetical order, showing the
mailing address of each according to the records of the corporation and the
number of voting shares held by each. Such list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
corporation, and shall at all times during the usual hours for business be open
to the examination of any stockholder, and shall also be produced and kept at
the time and place of such election for the inspection of any stockholder during
the whole time thereof.
The original stock ledger or transfer book, or a duplicate thereof, kept
at the principal office of the corporation, shall be prima facie evidence as to
who are the stockholders entitled to examine such list or stock ledger or
transfer book or to vote at any meeting of stockholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Powers. The business and affairs of the corporation shall be
--------- ------
managed by a Board of Directors, which may exercise all of the powers of the
corporation except such as are by statute, the articles of incorporation or
these by-laws conferred upon or reserved to the stockholders. Continuing and
exclusive authority to fix, supervise and control the professional, business and
other affairs of the corporation shall be wholly vested in the Board of
Directors.
SECTION 2. Number. The Board of Directors shall consist of four directors.
--------- ------
The directors need not be stockholders.
SECTION 3. Election and Term. The directors shall be elected at the annual
--------- -----------------
meeting of shareholders and each shall serve until his successor shall have been
elected and qualified.
SECTION 4. Meetings. The newly elected directors may hold their first
--------- --------
meeting without notice, for the purpose of organization and the transaction of
business, immediately after the annual meeting of the stockholders, or the time
and place of such meeting may be fixed by consent in writing of all the
directors.
3
<PAGE>
Regular meetings of the Board of Directors may be held without notice at
such places and times as shall be determined from time to time by resolution of
the directors. Unless otherwise determined as aforesaid, regular meetings shall
be held at the place of and immediately after the annual meeting of
stockholders.
Special meetings of the Board of Directors may be called by the President
or by the Secretary on the written request of any director and shall be held at
such place or places as may be determined by the directors, or as shall be
stated in the call of the meeting.
SECTION 5. Notice of Meetings. No notice of regular meetings of the board
--------- ------------------
need be given. Notice of the place, day and hour of every special meeting shall
be given to each director at least one (1) day before the meeting, by delivering
the same to him personally, by sending the same to him by telegraph, or by
leaving the same at his residence or usual place of business or, in the
alternative, upon two (2) days' notice, by mailing it postage prepaid, and
addressed to him at his last know mailing address, as reflected in the records
of the corporation. It shall not be requisite to the validity of any meeting of
the Board of Directors that notice thereof shall have been given to any director
who attends, except where a director attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or covened. No notice of adjourned meeting of the Board of Directors need
be specified in the notice or waiver of notice of such meeting. All regular and
special meetings of the Board of Directors shall be open for the transaction of
any business within the powers of the corporation without special notice of such
business, except in those cases in which special notice is required by law, the
articles of incorporation or by these by-laws.
SECTION 6. Quorum. At all meetings of the Board of Directors, a
--------- ------
majority of the Board of Directors shall constitute a quorum for the transaction
of business. The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless the
act of a greater number is required by law, the articles of incorporation or
these by-laws. In the absence of a quorum, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no notice
thereof need be given other than by announcement at the meeting which shall be
adjourned. Upon the reconvening of any adjourned meeting, if a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting when originally convened.
SECTION 7. Informal Action. Unless otherwise restricted by the
--------- ---------------
articles of incorporation or these by-laws, any action required or permitted to
be taken at any meeting of the Board of Directors or of the Executive Committee
may be taken without a meeting, if a written consent to such action is executed
by all members of the Board of Directors or of the Executive Committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or the Executive Committee.
4
<PAGE>
SECTION 8. Compensation. Directors shall not receive any stated salary
--------- ------------
for their services as directors or as members of committees, but by resolution
of the Board of Directors a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 9. Indemnification. (a) To the extent permitted by law, the Board
--------- ---------------
of Directors of the corporation may by resolution indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (whether or not by or in the right of the corporation) by reason
of the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had not reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgement, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 9. (b) Any indemnification under Subsection (a) hereof (unless
---------
ordered by a court) shall be made by the Board of Directors only upon a
determination in the specific case that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Subsection (a). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable
and a quorum of disinterested directors so directs, by independent legal counsel
(compensated by the corporation) in a written opinion, or (3) by the
stockholders.
SECTION 9. (c) The indemnification provided by this Section shall not be
---------
deemed exclusive of any other rights to which those indemnified may be entitled
under any agreement, vote of stockholders, disinterested directors, or
otherwise, both as to the action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
5
<PAGE>
SECTION 10. Resignations. Any director, member of the Executive Committee
---------- ------------
or officer may resign at any time. Such resignation shall be made in writing,
and shall take effect at the time specified therein, and if no time is
specified, at the time of its actual receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 11. Vacancies. Vacancies occurring in the Board of Directors,
---------- ---------
through resignation, death, or other incapacity shall be filled by a majority
vote of the remaining directors, provided that if such vote results in a tie,
such vacancy may be filled by vote of the shareholders at a special meeting
called for the purpose. Newly created directorships resulting from an increase
in the number or directors, shall be filled by the shareholders at their next
annual meeting or at a special meeting of shareholders called for that purpose.
The directors so chosen shall hold office until their successors are duly
elected and shall qualify.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. Executive Committee. The Board of Directors by resolution
--------- -------------------
adopted by a majority of the whole Board of Directors may designate an Executive
Committee of two (2) directors. Except as otherwise provided by law, during the
intervals between the meetings of the Board of Directors, the Executive
Committee shall have and may exercise all of the powers of the Board of
Directors in the management of the corporation. The Executive Committee shall
keep full accounts of its transactions. All actions by the Executive Committee
shall be reported to the Board of Directors at its meeting next succeeding such
action.
SECTION 2. Meetings of Executive Committee. The Executive Committee shall
--------- -------------------------------
fix its own rules of procedure and shall meet as provided by such rules and it
shall also meet at the call of either member of the Committee. Both members of
the Executive Committee shall be necessary to constitute a quorum, and the
concurrence of both shall be required in all matters to constitute the act of
the Committee.
SECTION 3. Executive Committee Powers. For all purposes of these by-laws,
--------- --------------------------
the words "Board of Directors," "directors," "Board" or any equivalent term
shall be construed to include "Executive Committee," it being the intent that
such Committee shall, except as otherwise provided by law, have and exercise all
of the powers conferred on the Board of Directors by law, the articles of
incorporation and these by-laws.
ARTICLE IV
OTHER COMMITTEES
To the extent that such action is not inconsistent with the provisions of
Article III hereof, the Board of Directors may designate one or more committees
in addition to the Executive Committee. Each
6
<PAGE>
committee shall consist of one (1) or more of the directors of the corporation,
and to the extent provided by the Board of Directors, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the corporation, and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be determined from time to time
by the Board of Directors. The committee shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
ARTICLE V
OFFICERS
SECTION 1. Officers. The officers of the corporation shall be a President,
--------- --------
a Vice President, a Secretary and a Treasurer. In addition, the Board of
Directors may elect such Vice Presidents, Assistant Secretaries and Assistant
Treasurers as the Board of Directors may deem proper. None of the officers need
be directors. The officers shall be elected at the first meeting of the Board of
Directors and at each annual meeting of the directors. Any two (2) or more
offices may be held by the same person.
SECTION 2. Other Officers and Agents. The Board of Directors may appoint
--------- -------------------------
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. President. The President shall be the chief executive officer
--------- ---------
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of president of a corporation, and
subject to the powers of the Board of Directors, he shall have general
supervision, direction and control of the business of the corporation. He shall
preside at all meetings of the stockholders if present thereat. Except as the
Board of Directors shall authorize the execution thereof in some other manner,
he shall execute bonds, mortgages and other contracts on behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed, the seal shall be attested by the signature of the
Secretary or an Assistant Secretary.
SECTION 4. Vice President. Each Vice President shall have such powers and
--------- --------------
shall perform such duties as shall be assigned to him by the Board of Directors.
7
<PAGE>
SECTION 5. Secretary. The Secretary shall give, or cause to be given,
--------- ---------
notice of all meetings of stockholders and directors, and all other notices
required by law or by these by-laws, and in case of his absence or refusal to do
so, any such notice may be given by any person directed by the President, or by
the directors or stockholders, upon whose request the meeting is called as
provided in these by-laws. He shall record all the proceedings of the meetings
of the corporation and of the Board of Directors in a book to be kept for that
purpose, and shall perform such other duties as may be assigned to him by the
Board of Directors or the President. He shall have the custody of the seal of
the corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors or the President, and attest the same.
SECTION 6. Treasurer. The Treasurer shall have the custody of the
--------- ---------
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors or the President, taking proper vouchers for such
disbursements. He shall render to the President and the Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board of Directors prescribe.
SECTION 7. Assistant Secretaries and Assistant Treasurers. Assistant
--------- ----------------------------------------------
Secretaries and Assistant Treasurers, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the Board of Directors.
SECTION 8. Removal of Officers. Any officer of the corporation may be
--------- -------------------
removed, by the Board of Directors, whenever in its judgment, the best interests
of the corporation will be served thereby.
ARTICLE VI
MISCELLANEOUS
SECTION 1. Certificates of Stock. Certificates of stock, numbered and with
--------- ---------------------
the Seal of the corporation affixed, signed by the President or Vice President,
and the Treasurer or an Assistant Treasurer, or Secretary or an Assistant
Secretary, shall be issued to each stockholder certifying the number of shares
owned by him in the corporation.
8
<PAGE>
SECTION 2. Lost Certificate. A new certificate of stock may be issued in
--------- ----------------
the place of any certificate theretofore issued by the corporation and alleged
to have been lost or destroyed. However, the Directors may, in their discretion,
require the owner of the lost or destroyed certificate, or his legal
representative, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
the certificate, or the issuance of a new certificate.
SECTION 3. Transfer of Shares. The shares of stock of the corporation
--------- ------------------
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representative, and upon such
transfer, the old certificates shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, by whom they shall be cancelled, and new certificates shall thereupon
be issued.
SECTION 4. Dividends. Subject to the provisions of the articles of
--------- ---------
incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meetings, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend, there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors may from time to time in their
absolute discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 5. Seal. The corporate seal shall be circular in form and shall
--------- ----
contain the name of the corporation and the words "CORPORATE SEAL, INDIANA."
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
SECTION 6. Fiscal Year. The fiscal year of the corporation shall end on
--------- -----------
the last day of March.
SECTION 7. Checks. All checks, drafts or other orders for the payment of
--------- ------
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 8. Notice and Waiver of Notice. Whenever any notice is required to
--------- ---------------------------
be given by these by-laws, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
certified or registered mail, return receipt requested, in a sealed post-paid
wrapper, addressed to the person entitled thereto at his last known address.
Such notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by law.
9
<PAGE>
ARTICLE VII
AMENDMENTS
The power to make, alter, amend or repeal these by-laws is vested in the
Board of Directors but the unanimous vote of the entire Board of Directors shall
be necessary to effect any alteration, amendment or repeal of these by-laws.
10
<PAGE>
EXHIBIT 3.33
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
OHIO VALLEY DIALYSIS SERVICES, INC.
I, EVAN BAYH, Secretary of State of Indiana, hereby certify that Articles of
Incorporation of the above corporation, have been presented to me at my office
accompanied by the fees prescribed by law; that I have found such Articles
conform to law; all as prescribed by the provisions of the Indiana Business
Corporation Law, as amended.
NOW, THEREFORE, I hereby issue to such Corporation this Certificate of
Incorporation, and further certify that its corporate existence will begin April
21, 1998.
In Witness Whereof, I have
hereunto set my hand and
affixed the seal of the State
of Indiana, at the City of
Indianapolis, this Twenty-first
day of April, 1998
[SEAL] _______________________________
EVAN BAYH, Secretary of State
By_____________________________
Deputy
<PAGE>
ARTICLES OF INCORPORATION (PAGE 1 OF 2)
State Form 4159 (R4 17-81) Obsolete
after 12-87 Corporate Form 101 Prescribed by Evan Bayh, Indiana
Secretary of State
INSTRUCTIONS: Use 8 1/2 x 11 inch White Paper for
Inserts
Filing Requirements - Present Original
and One Copy to: Secretary of State,
Room 155 State House, Indianapolis,
Indiana 46204
Filing Fee - $90.00
ARTICLES OF INCORPORATION
-------- -- -------------
OF
--
OHIO VALLEY DIALYSIS SERVICES, INC.
The undersigned incorporator or incorporators, desiring to form a
corporation (hereinafter referred to as the "Corporation") pursuant to the
provisions of:
(Indicate appropriate act)
[X] Indiana Business Corporation Law [_] Indiana Professional
Corporation Act of 1983
as amended, executes the following Articles of Incorporation:
ARTICLE I
---------
NAME
----
The name of the corporation is OHIO VALLEY DIALYSIS SERVICES, INC.
(The name must contain the word "Corporation," "Incorporated," "Limited,"
"Company," or an abbreviation of one of these words.)
ARTICLE II
----------
REGISTERED OFFICE AND AGENT
---------- ------ --- -----
The street address of the corporation's initial registered office in
Indiana and the name of its initial registered agent at that office is:
CT Corporation System 1 N. Capitol Avenue
- --------------------------------------------------------------------------------
(Name) (Number and Street of Building)
Indianapolis Indiana 46204
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
<PAGE>
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
ARTICLES OF AMENDMENT
To Whom These Presents Come, Greeting:
WHEREAS, there has been presented to me at this office, Articles of Amendment
for:
OHIO VALLEY DIALYSIS SERVICES, INC.
and said Articles of Amendment have been prepared and signed in accordance with
the provisions of the
Indiana Business Corporation Law,
as amended.
The name of the corporation is amended as follows:
OHIO VALLEY DIALYSIS CENTER, INC.
NOW, THEREFORE, I, EVAN BAYH, Secretary of State of Indiana, hereby certify that
I have this day filed said articles in this office.
The effective date of these Articles of Amendment is May 16, 1988.
In Witness Whereof, I have hereunto set my hand and
[SEAL] affixed the seal of the State of Indiana, at the
City of Indianapolis, this Sixteenth day of May, 1998
_____________________________________________________
EVAN BAYH, Secretary of State
By___________________________________________________
Deputy
<PAGE>
[SEAL] ARTICLES OF AMENDMENT OF THE ARTICLES OF INCORPORATION
State form 35333R2/Corporate Form no 102 (March 1987)
Articles of Amendment (Amending Individual Articles Only)
Prescribe by Evan Bayh, Secretary of State of Indiana
Recording Requirements. Recording of Articles of Amendment in the Office of the
County Recorder is generally no longer required by the Indiana General
Corporation Act. However, if the name of the corporation is changed by this
amendment, a certified copy of the certificate of Amendment must be filed with
the recorder of every county in which the corporation owns real estate.
Instructions: Present 2 Originally Signed and Fully Executed Copies to:
SECRETARY OF STATE
Fee: $30.00 ROOM 155 STATE HOUSE
INDIANAPOLIS, INDIANA 48204
(317) 232-6576
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
OHIO VALLEY DIALYSIS SERVICES, INC.
================================================================================
The undersigned officers of
OHIO VALLEY DIALYSIS SERVICES, INC.
- --------------------------------------------------------------------------------
(hereinafter referred to as the "Corporation") existing pursuant to the
provisions of:
(Indicate appropriate act) Business Law
Indiana Corporation [_] Indiana Professional
Corporation Act of 1983 as amended (hereinafter referred to as the "Act"),
desiring to give notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the following facts:
- --------------------------------------------------------------------------------
ARTICLE 1 AMENDMENT(S)
- --------------------------------------------------------------------------------
SECTION 1 The date of incorporation of the corporation is:
April 21, 1988
- --------------------------------------------------------------------------------
SECTION 2 The name of the corporation following the amendment to this Articles
of Incorporation is:
OHIO VALLEY DIALYSIS CENTER, INC.
- --------------------------------------------------------------------------------
SECTION 3
The exact text of Article(s) One of the Articles of Incorporation is now as
follows:
The name of the corporation is: OHIO VALLEY DIALYSIS CENTER, INC.
- --------------------------------------------------------------------------------
(INDIANA - 1026 - 3/3/88
<PAGE>
<TABLE>
<S> <C>
[SEAL] NOTICE OF CHANGE OF REGISTERED Provided by: EVAN BAYH
OFFICE OR REGISTERED AGENT Indiana Secretary of State
ALL CORPORATIONS
State Form 26276(R/1-88)
Indiana Code 23-1-24-2 (for profit corporations)
Indiana Code 23-7-1-1-53 (non-profit corporations)
Present original and 2 copies NO FILING FEE
</TABLE>
- --------------------------------------------------------------------------------
Name of Corporation Date of Incorporation
OHIO VALLEY DIALYSIS CENTER, INC April 21, 1988
- --------------------------------------------------------------------------------
Current Registered Office Address Zip Code
ONE NORTH CAPITOL AVENUE, INDIANAPOLIS, INDIANA 46204
- --------------------------------------------------------------------------------
New Registered Office Address c/o The Prentice-Hall Corporation System, Inc.
50 South Meridian Street, Suite 700, Indianapolis, Indiana 46204-3542
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current Registered Agent (Type or Print Name)
C T CORPORATION SYSTEM
- --------------------------------------------------------------------------------
New Registered Agent (Type or Print Name)
The Prentice-Hall Corporation System, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS BY REGISTERED AGENT OR CORPORATION
- --------------------------------------------------------------------------------
This statement is a representation that the new registered agent has
consented to the appointment as registered agent, or statement attached
signed by registered agent giving consent to act as the new registered
agent.
After the change or changes are made, the street address of this
corporation's registered agent and the address of its registered office
will be identical.
The registered agent filing this statement of change of the registered
agent's business street address has notified the represented corporation in
writing of the change, and the notification was manually signed or signed
in facsimile.
The Prentice-Hall Corporation System, Inc.
By: /s/ Anthony E. Mackey, asst sec. of PHCS
-----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned being the (Title of Officer) President
of said corporation executes this notice and verifies, subject to penalties
of perjury, that the statements contained herein are true, this 6th day of
June 1994
- --------------------------------------------------------------------------------
Signature Printed Name
(pb) /s/ Paul Balter Paul Balter, M.D.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.34
OHIO VALLEY DIALYSIS SERVICES, INC.
-----------------------------------
BY-LAWS
-------
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The corporation shall hold an annual meeting
--------- ---------------
of its stockholders for the election of directors and for the transaction of
general business at such place as may be designated by the Board of Directors,
at 3:00 p.m. on the second Saturday in January of each year, if not a legal
holiday, and if a legal holiday, then on the first day following which is not a
legal holiday. Such annual meetings shall be general meetings open for the
transaction of any business within the powers of the corporation without special
notice of such business, except in cases in which special notice is required by
statute, by the articles of incorporation or by these by-laws. Failure to hold
the annual meeting shall not work any forfeiture or dissolution of the
corporation.
SECTION 2. Special Meetings. Unless otherwise prescribed by statute,
--------- ----------------
special meetings of the stockholders may be called at any time by the Board of
Directors or by the President and shall be called by the President or the
Secretary upon a written request of stockholders owing a twenty-five percent
(25%) interest in amount of entire outstanding shares of the corporation
entitled to vote. No business other than that stated in the notice described in
the next succeeding section shall be transacted at any special meeting without
the unanimous consent of all of the stockholders entitled to vote thereat.
SECTION 3. Notice of Meetings. Except as otherwise provided by law,
--------- ------------------
written or printed notice stating the place, date and hour of the meeting and,
in case of a special meeting, a brief statement of the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than fifty (50) days before the date of every meeting of stockholders either
personally or by mail, by or at the direction of the President or the Secretary,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
corporation, with postage thereon prepaid. Whenever any notice is required to be
given under the provisions of Indiana law, the articles of incorporation or
these by-laws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether it be before or after the time stated therein,
shall be deemed equivalent to the giving of such notice. It shall not be
requisite to the validity of any meeting of stockholders that notice thereof,
whether prescribed by law, by the articles of incorporation or by these by-laws,
shall have been given to any stockholder who attends in person or by proxy. No
notice other than by verbal announcement need be given of any adjourned meetings
of stockholders.
<PAGE>
SECTION 4. Place of Meetings. Annual and special meetings of stockholders
--------- -----------------
shall be held at one of the corporation's offices or at such place or places
within or without the State of Indiana as shall be fixed by the Board of
Directors.
SECTION 5. Quorum. Except as otherwise required by law, the articles of
--------- ------
incorporation or these by-laws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the corporation entitled to vote
shall constitute a quorum at all meetings of the stockholders. In case a quorum
shall not be present at any meeting, a majority in interest of the stockholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting, from time to time, without notice other than announcement
at the meeting, until the requisite amount of stock entitled to vote shall be
present. If upon the reconvening of any such adjourned meeting a majority of the
stock entitled to vote shall be represented, any business may be transacted
which might have been transacted at the meeting as originally noticed, but only
those stockholders entitled to vote at the meeting as originally noticed shall
be entitled to vote at such time as it is reconvened.
SECTION 6. Voting. Each outstanding share of the capital stock shall be
--------- ------
entitled to one (1) vote on each matter submitted to a vote at a meeting of
stockholders. Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
When a quorum is present or represented at any meeting of stockholders, the vote
of the holders of a majority of the shares present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which a different vote is required by virtue of an express provision
of law, the articles of incorporation or another section of these by-laws.
SECTION 7. Proxies. Any stockholder entitled to vote at a meeting of
--------- -------
stockholders may vote either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact.
SECTION 8. Action Without Meeting. Whenever the vote of stockholders at a
--------- ----------------------
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of a statute, the articles of incorporation
or of these by-laws, the meeting and vote of stockholders may be dispense with
if all the stockholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken.
2
<PAGE>
SECTION 9. List of stockholders. At least ten (10) days prior to each
--------- --------------------
meeting of stockholders at which directors are to be elected, the Secretary
shall make or cause to be made a complete list of the stockholders entitled to
vote at the ensuing election, arranged in alphabetical order, showing the
mailing address of each according to the records of the corporation and the
number of voting shares held by each. Such list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
corporation, and shall at all times during the usual hours for business be open
to the examination of any stockholder, and shall also be produced and kept at
the time and place of such election for the inspection of any stockholder during
the whole time thereof.
The original stock ledger or transfer book, or a duplicate thereof, kept at
the principle office of the corporation, shall be prime facie evidence as to who
are the stockholders entitled to examine such list or stock ledger or transfer
book or to vote at any meeting of stockholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Powers. The business and affairs of the corporation shall be
--------- ------
managed by a Board of Directors, which may exercise all of the powers of the
corporation except such are by statute, the articles of incorporation or these
by-laws conferred upon or reserved to the stockholders. Continuing and exclusive
authority to fix, supervise and controll the professional, business and other
affairs of the corporation shall be wholly vested in the Board of Directors.
SECTION 2. Number. The Board of Directors shall consist of six directors.
--------- ------
The directors need not be stockholders.
SECTION 3. Election and Term. The directors shall be elected at the annual
--------- -----------------
meeting of shareholders and each shall serve until his successor shall have been
elected and qualified.
SECTION 4. Meetings. The newly elected directors may hold their first
--------- --------
meeting without notice, for the purpose of organization and the transaction of
business, immediately after the annual meeting of the stockholders, or the time
and place of such meeting may be fixed by consent in writing of all the
directors.
3
<PAGE>
Regular meetings of the Board of Directors may be held without notice at
such places and times as shall be determined from time to time by resolution of
the directors. Unless otherwise determined as aforesaid, regular meetings shall
be held at the place of and immediately after the annual meeting of
stockholders.
Special meetings of the Board of Directors may be called by the President
or by the Secretary on the written request of any director and shall be held at
such place or places as may be determined by the directors, or as shall be
stated in the call of the meeting.
SECTION 5. Notice of Meetings. No notice of regular meetings of the board
--------- ------------------
need be given. Notice of the place, day and hour of every special meeting shall
be given to each director at least one (1) day before the meeting, by delivering
the same to him personally, by sending the same to him by telegraph, or by
leaving the same at his residence or usual place of business or, in the
alternative, upon two (2) days' notice, by mailing it postage prepaid, and
addressed to him at his last known mailing address, as reflected in the records
of the corporation. It shall not be requisite to the validity of any meeting of
the Board of Directors that notice thereof shall have been given to any director
who attends, except where a director attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or covened. No notice of adjourned meetings of the Board of Directors
need be specified in the notice or waiver of notice of such meeting. All regular
and special meetings of the Board of Directors shall be open for the transaction
of any business within the powers of the corporation without special notice of
such business, except in those cases in which special notice is required by law,
the articles of incorporation or by these by-laws.
SECTION 6. Quorum. At all meetings of the Board of Directors, a majority
--------- ------
of the Board of Directors shall constitute a quorum for the transaction of
business. The act of the majority of the Directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors, unless the act
of a greater number is required by law, the articles of incorporation or these
by-laws. In the absence of a quorum, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no notice thereof need
be given other than by announcement at the meeting which shall be adjourned.
Upon the reconvening of any such adjourned meeting, if a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting when originally convened.
SECTION 7. Informal Action. Unless otherwise restricted by the articles
--------- ---------------
of incorporation or these by-laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of the Executive Committee may be
taken without a meeting, if a written consent to such action is executed by all
members of the Board of Directors or of the Executive Committee, as the case may
be, and such written consent is filed with the minutes of proceedings of the
Board of Directors or the Executive Committee.
4
<PAGE>
SECTION 8. Compensation. Directors shall not receive any stated salary
--------- ------------
for their services as directors or as members of committees, but by resolution
of the Board of Directors a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 9. Indemnification. (a) To the extent permitted by law, the
--------- ---------------
Board of Directors of the corporation may by resolution indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (whether or not by or in the right or the corporation ) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had not reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgement, order, settlement,
conviction, or upon a plea or nolo contendere or its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 9. (b) Any indemnification under Subsection (a) hereof (unless
---------
ordered by a court) shall be made by the Board of Directors only upon a
determination in the specific case that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Subsection (a). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable
and a quorum of disinterested directors so directs, by independent legal counsel
(compensated by the corporation) in a written opinion, of (3) by the
stockholders.
SECTION 9. (c) The indemnification provided by this Section shall not
---------
be deemed exclusive of any other rights to which those indemnified may be
entitled under any agreement, vote of stockholders, disinterested directors, or
otherwise, both as to the action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
5
<PAGE>
SECTION 10. Resignations. Any director, member of the Executive
---------- ------------
Committee or officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time is
specified, at the time of its actual receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 11. Vacancies. Vacancies occurring in the Board of Directors,
---------- ---------
through resignation, death, or other incapacity shall be filled by a majority
vote of the remaining directors, provided that if such vote results in a tie,
such vacancy may be filled by vote of the shareholders at a special meeting
called for the purpose. Newly created directorships resulting from an increase
in the number of directors, shall be filled by the shareholders at their next
annual meeting or at a special meeting of shareholders called for that purpose.
The directors so chosen shall hold office until their successors are duly
elected and shall qualify.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. Executive Committee. The Board of Directors by resolution
--------- -------------------
adopted by a majority of the whole Board of Directors may designate an Executive
Committee of two (2) directors. Except as otherwise provided by law, during the
intervals between the meetings of the Board of Directors, the Executive
Committee shall have any may exercise all of the powers of the Board of
Directors in the management of the corporation. The Executive Committee shall
keep full accounts of its transactions. All actions by Executive Committee
shall be reported to the Board of Directors at its meeting next succeeding such
action.
SECTION 2. Meetings of Executive Committee. The Executive Committee
--------- ------------------------------
shall fix its own rules of procedure and shall meet as provided by such rules
and it shall also meet at the call of either member of the Committee. Both
members of the Executive Committee shall be necessary to constitute a quorum,
and the concurrence of both shall be required in all matters to constitute the
act of the Committee.
SECTION 3. Executive Committee Powers. For all purposes of these by-
--------------------------
laws, the words "Board of Directors," "directors," "Board" or any equivalent
term shall be construed to include "Executive Committee," it being the intent
that such Committee shall, except as otherwise provided by law, have and
exercise all of the powers conferred on the Board of Directors by law, the
articles of incorporation and these by-laws.
ARTICLE IV
OTHER COMMITTEES
To the extent that such action is not inconsistent with the provisions of
Article III hereof, the Board of Directors may designate one or more committees
in addition to the Executive Committee. Each
6
<PAGE>
committee shall consist of one (1) more of the directors of the corporation, and
to the extent provided by the Board of Directors, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the corporation, and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee of
committees shall have such name or names as may be determined from time to time
by the Board of Directors. the committee shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
ARTICLE V
OFFICERS
SECTION 1. Officers. the officers of the corporation shall be a
--------- --------
President, an Executive Vice President, a Vice President, a Secretary and a
Treasurer. In addition, the Board of Directors may elect such Vice Presidents,
Assistant Secretaries and Assistant Treasurers as the Board of Directors may
deem proper. None of the officers need be directors. The officers shall be
elected at the first meeting of the Board of Directors and at each annual
meeting of the directors Any two (2) or more offices may be held by the same
person.
SECTION 2. Other Officers and Agents. The Board of Directors may
--------- -------------------------
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. President. The President shall be the chief executive
--------- ---------
officer of the corporation and shall have the general powers and duties of
supervision and management vested in the office of president of a corporation,
and subject to the powers of the Board of Directors, he shall have general
supervision, direction and control of the business of the corporation. He shall
preside at all meeting of the stockholders if present thereat. Except as the
Board of Directors shall authorize the execution thereof in some other manner,
he shall execute bonds, mortgages and other contracts on behalf of the
corporation, and shall cause the seal to be affixed to any instrument required
it and when so affixed, the seal shall be attested by the signature of the
Secretary or an Assistant Secretary.
SECTION 4. Vice President. The Executive Vice President and each Vice
--------- --------------
President shall have such powers and shall perform such duties as shall be
assigned to him by the Board of Directors.
7
<PAGE>
SECTION 5. Secretary. The Secretary shall give, or cause to be given,
--------- ---------
notice of all meetings of stockholders and directors, and all other notices
required by law or by these by-laws, and in case of his absence or refusal to do
so, any such notice may be given by any person directed by the President, or by
the directors or stockholders, upon whose request the meeting is called as
provided in these by-laws. He shall record all the proceedings of the meetings
of the corporation and of the Board of Directors in a book to be kept for that
purpose, and shall perform such other duties as may be assigned to him by the
Board of Directors or the President. He shall have the custody of the seal of
the corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors or the Presidents, and attest the same.
SECTION 6. Treasurer. The Treasurer shall have the custody of the
--------- ---------
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors or the President, taking proper vouchers for such
disbursements. He shall render to the President and the Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transaction as Treasurer and of the financial condition of
the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board of Directors prescribe.
SECTION 7. Assistant Secretaries and Assistant Treasurers. Assistant
--------- ----------------------------------------------
Secretaries and Assistant Treasurers, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the Board of Directors.
SECTION 8. Removal of Officers. Any officer of the corporation may by
--------- -------------------
removed, by the Board of Directors, whenever in its judgment, the best interest
of the corporation will be served thereby.
ARTICLE VI
MISCELLANEOUS
SECTION 1. Certificate of Stock. Certificates of stock, numbered and
--------- --------------------
with the seal of the Corporation affixed, signed by the President or Vice
President, and the Treasurer or an Assistant Treasurer, or Secretary or an
Assistant Secretary, shall be issued to each stockholder certifying the number
of shares owned by him in the corporation.
8
<PAGE>
SECTION 2. Lost Certificate. A new certificate of stock may be issued
--------- ----------------
in the place of any certificate theretofore issued by the corporation and
alleged to have been lost or destroyed. However, the Directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representative, to give the corporation a bond, in such sum as they may direct,
nor exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
the certificate, or the issuance of a new certificate.
SECTION 3. Transfer of Shares. The shares of stock of the corporation
--------- ------------------
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representative, and upon such transfer,
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock and transfer books and ledger, by
whom they shall be cancelled, and new certificates shall thereupon be issued.
SECTION 4. Dividends. Subject to the provisions of the articles of
--------- ---------
incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meetings, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend, there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors may from time to time in their
absolute discretion deem proper for working capital or as a reserve fund to
meet contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 5. Seal. The corporate seal shall be circular in form and
--------- ----
shall contain the name of the corporation and the words "CORPORATE SEAL,
INDIANA." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
SECTION 6. Fiscal Year. The fiscal year of the corporation shall end
--------- -----------
on the last day of December.
SECTION 7. Checks. All checks, drafts or other orders for the payment
--------- ------
of money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 8. Notice and Waiver of Notice. Whenever any notice is
--------- ---------------------------
required to be given by these by-laws, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by certified or registered mail, return receipt requested, in a sealed
post-paid wrapper, addressed to the person entitled thereto at his last known
address. Such notice shall be deemed to have been given on the day of such
mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by law.
9
<PAGE>
ARTICLE VII
AMENDMENTS
The power to make, alter, amend or repeal these by-laws is vested in the
Board of Directors but the unanimous vote of the entire Board of Directors shall
be necessary to effect any alteration, amendment or repeal of these by-laws.
10
<PAGE>
Certificate Number 37514
----------
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
[LOGO]
TO ALL WHOM THESE PRESENTS SHALL COME GREETING: WHEREAS, Articles of
Incorporation duly signed and verified of WEST SUBURBAN KIDNEY CENTER, S.C.
have been filed in the Office of the Secretary of State on the 31st day of March
A.D. 1969, as provided by "THE BUSINESS CORPORATION ACT" of Illinois, in force
July 13, A.D. 1933.
Now Therefore, I, PAUL POWELL, Secretary of State of the State of Illinois, by
virtue of the powers vested in me by law, do hereby issue this certificate of
incorporation and attach thereto a copy of the Articles of Incorporation of the
aforesaid corporation.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois, Done at the City of Springfield this 31st
day of March A.D. 1969 and of the Independence of the United States the one
hundred and 93rd.
/s/ Paul Powell
--------------------------------
SECRETARY OF STATE
[SEAL]
<PAGE>
FORM B C A 17
BEFORE ATTEMPTING TO EXECUTE THESE BLANKS BE SURE TO READ CAREFULLY
THE INSTRUCTIONS ON THE BACK THEREOF
[THESE ARTICLES MUST BE FILED IN DUPLICATE]
----------------------------
(Do not write in this space)
STATE OF ILLINOIS } Date Paid 3-31-69
} ss. Initial License Fee $ .60
COOK COUNTY } Franchise Tax $ 133.34
Filing Fee $ 75.00
TO PAUL POWELL, Secretary of State: Clerk [SIGNATURE ILLEGIBLE]
----------------------------
The undersigned,
------------------------------------------------------------------------------
Address
Name Number Street City State
------------------------------------------------------------------------------
Robert C. Muehrcke c/o West Suburban Hospital 518 N, Austin, Oak Park, Ill.
------------------------------------------------------------------------------
Arthur Gene Lawrence c/o West Suburban Hospital 518 N, Austin, Oak Park, Ill.
------------------------------------------------------------------------------
Joseph B. Moles c/o West Suburban Hospital 518 N, Austin, Oak Park, Ill.
------------------------------------------------------------------------------
being one or more natural persons of the age of twenty-one years or more or a
corporation, and having subscribed to shares of the corporation to be
organized pursuant hereto, for the purpose of forming a corporation under "The
Business Corporation Act" of the State of Illinois, do hereby adopt the
following Articles of Incorporation:
ARTICLE ONE
The name of the corporation hereby incorporated is: WEST SUBURBAN KIDNEY
CENTER, S.C.
ARTICLE TWO
The address of its initial registered office in the State of Illinois is:
Suite 711, 209 S. LaSalle Street in the City of Chicago, (80604), County of
------------------------- ---- ------- -----
(Zip Code)
Cook and the name of its initial Registered Agent at said address is: Jerry M.
---- --------
Reinsdorf
---------
ARTICLE THREE
The duration of the corporation is: perpetual
-----------------------------------------
<PAGE>
ARTICLE FOUR
THE PURPOSE OR PURPOSES FOR WHICH THE CORPORATION IS ORGANIZED ARE:
Medical Corporation: To own, operate and maintain an establishment for the
study, diagnosis and treatment of human ailments and injuries, whether physical
or mental, and to promote medical, surgical and scientific research and
knowledge: provided that medical or surgical treatment, consultation or advice
may be given by employees of the corporation only if there are licensed pursuant
to the Medical Practice Act.
ARTICLE FIVE
Paragraph 1: The aggregate number of shares which the corporation is authorized
to issue 10,000 divided into 3 (three) classes. The designation of each class,
------ ---------
the number of shares of each class, and the par value, if any, of the shares of
each class, or a statement that the shares of any class are without par value,
are as follows:
<TABLE>
<CAPTION> Series Number of Par value per share or statement that shares
Class (If any) Shares are without par value
<S> <C> <C> <C>
common 10,000 $1.00
</TABLE>
Paragraph 2: The preferences, qualifications, limitations, restrictions and the
special or relative rights in respect of the shares of each class are:
NONE
<PAGE>
ARTICLE SIX
The class and number of shares which the corporation proposes to issue
without further report to the Secretary of State, and the consideration
(expressed in dollars) to be received by the corporation therefor, are:
<TABLE>
<CAPTION>
Total consideration to be
Class of shares Number of shares received therefor:
<S> <C> <C>
common 1,200 $ 1,200
$
</TABLE>
ARTICLE SEVEN
The corporation will not commence business until at least one thousand
dollars has been received as consideration for the issuance of shares.
ARTICLE EIGHT
The number of directors to be elected at the first meeting of the
shareholders is: three
-------
ARTICLE NINE
Paragraph 1: It is estimated that the value of all property to be owned by the
corporation for the following year wherever located will be $__________
Paragraph 2: It is estimated that the value of the property to be located within
the State of Illinois during the following year will be $____________
Paragraph 3: It is estimated that the gross amount of business which will be
transacted by the corporation during the following year will be $__________
Paragraph 4: It is estimated that the gross amount of business which will be
transacted at or from places of business in the State of Illinois during the
following year will be $___________ . The corporation elects to pay the initial
franchise tax on the basis of its entire stated capital of the corporation.
NOTE: If all the property of the corporation is to be located in this State
and all of its business is to be transacted at or from places of business in
this State, or if the incorporators elect to pay the initial franchise tax on
the basis of its entire stated capital and paid-in surplus, then the information
called for in Article Nine need not be stated.
<PAGE>
[SIGNATURE ILLEGIBLE]
----------------------------------
__________________________________
[SIGNATURE ILLEGIBLE]
----------------------------------
__________________________________} Incorporators
[SIGNATURE ILLEGIBLE]
----------------------------------
__________________________________
__________________________________
NOTE: There may be one or more incorporators. Each incorporator shall be
either a corporation, domestic or foreign, or a natural person of the age of
twenty-one years or more. If a corporation acts as incorporator, the name of the
corporation and state of incorporation shall be shown and the execution must be
by its President or Vice-President and verified by him, and the corporate seal
shall be affixed and attested by its Secretary or an Assistant Secretary.
OATH AND ACKNOWLEDGMENT
STATE OF ILLINOIS ) ss.
COOK County )
[SIGNATURE ILLEGIBLE]. A Notary Public, do hereby certify that on the 28th
day of March 1969 Robert C. Muehrcke, Arthur Gene Lawrence and Joseph B. Moles
personally appeared before me and being first duly sworn by me acknowledged the
signing of the foregoing document in the respective capacities therein set forth
and declared that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
above written.
Place [SIGNATURE ILLEGIBLE]
----------------------------------
(NOTARIAL SEAL) Notary Public
Here
FORM B C A-17
================================================================================
ARTICLES OF INCORPORATION
WEST SUBURBAN KIDNEY CENTER, S.C.
================================================================================
The following fees are required to be paid at the time of issuing certificate of
incorporation: Filing fee, $75.00: Initial license fee of 50c per $1,000.00 or
1/20th of 1% of the amount of stated capital and paid-in surplus the corporation
proposes to issue without further report Article Six: Initial franchise tax of
1/10th of 1% of the issued, as above noted. However, the minimum initial
franchise tax is $100.00 and varies monthly on $100.000, or lees, as follows:
January, $150.00: February, ???, March, $133.33: April, $125.00: May, $116.67,
June, ???: July, $100.00: August, $91.47: September, $83.34: October, $75.00:
November, $66.67: December, $54.34. (See Ser. 133 BCA).
In excess of $100.000 the franchise tax per $1,000.00 is as follows: Jan, $1.50:
Feb, 1.4167: March, 1.3334: April, 1.25, May, 1.1667: June, 1.0834: July, $1.00:
Aug, .9167: Sept, .8334: Oct. .75, Nov. 6667: Dec. 5834. All shares issued in
excess of the amount mentioned in Article Six of this application must be
reported within 60 days from date of issuance thereof and franchise tax and
license fee paid thereon: otherwise, the corporation is subject to a penalty of
1% for each month on the amount until reported and subject to a time of not to
exceed $500.00.
The same fees are required for a subsequent issue of shares except the filing
fee is $1.00 instead of $75.00.
[SIGNATURE ILLEGIBLE]
================================================================================
Secretary of State
<PAGE>
File Number 4947-719-8
---------------
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
[LOGO]
WHEREAS, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF WEST
SUBURBAN KIDNEY CENTER, S.C. INCORPORATED UNDER THE LAWS OF THE STATE OF
ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY
THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984.
Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois,
by virtue of the powers vested in me by law, do hereby issue this certificate
and attach hereto a copy of the Application of the aforesaid corporation.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois, at the City of Springfield, this 27TH day
of FEBRUARY A.D. 1992 and of the Independence of the United States the two
hundred and 16TH.
/s/ George H. Ryan
------------------------------
SECRETARY OF STATE
[SEAL]
<PAGE>
Form BCA-10.30 ARTICLES OF AMENDMENT
(Rev. Jan. 1991) File # 4947-719-8
- --------------------------------------------------------------------------------
George H. Ryan SUBMIT IN DUPLICATE
Secretary of State
Department of Business Services ---------------------------
Springfield, IL 62756
Telephone (217) 782-6961 This space for use by
Secretary of State
- ------------------------------------ Date 2-27-92
Franchise Tax $
Filing Fee $ 25
remit payment in check or money Penalty $
order, payable to "Secretary of State"
Approved:
- --------------------------------------------------------------------------------
1. CORPORATE NAME: West Suburban Kidney Center, S.C
-------------------------------------------------------------
(Note 1)
2. MANNER OF ADOPTION:
The following amendment of the Articles of Incorporation was adopted
on February 20, 1992 in the manner indicated below. ("X" one box only)
[_] By a majority of the incorporators, provided no directors were named
in the articles of incorporation and no directors have been elected;
or by a majority of the board of directors, in accordance with Section
10.10, the corporation having issued no shares as of the time of
adoption of this amendment;
(Note 2)
[_] By a majority of the board of directors, in accordance with Section
10.15, shares having been issued by shareholder action not being
required for the adoption of the amendment;
(Note 3)
[_] By the shareholders, in accordance with Section 10.20, a resolution of
the board of directors having been duly adopted and submitted to the
shareholders. At a meeting of shareholders, not less than the minimum
number of votes required by statute and by the articles of
incorporation were voted in favor of the amendment;
(Note 4)
[_] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
shareholders having not less than the minimum number of votes required
by statute and by the articles of incorporation. Shareholders who have
not consented in writing have been given notice in accordance with
Section 7.10;
(Note 4)
[X] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
all the shareholders entitled to vote on this amendment;
(Note 4)
(INSERT AMENDMENT)
(Any article being amended is required to be set forth in its entirety.)
(Suggested language for an amendment to change the corporate name is RESOLVED,
that the Articles of Incorporation be amended to read as follows:)
- --------------------------------------------------------------------------------
(NEW NAME)
All changes other than name, include on page 2
(over)
<PAGE>
Resolution
RESOLVED, that paragraphs 1 and 2 of Article V of the Articles of
Incorporation of this corporation are hereby changed and amended to read as
follows:
PARAGRAPH 1: The aggregate number of shares which the corporation is authorized
to issue is 10,010,000 divided into two (2) classes. The designation of each
class, the number of shares of each class, and the par value, if any, of the
shares of each class, or a statement that the shares of any class are without
par value, are as follows:
<TABLE>
<CAPTION>
PAR VALUE PER SHARE OR
SERIES NUMBER STATEMENT THAT SHARES
CLASS (if any) OF SHARES ARE WITHOUT PAR VALUE
- ----- -------- --------- ----------------------
<S> <C> <C> <C>
COMMON NONE 10,000 $1.00 par value per share
CLASS A NONE 10,000,000 $1.00 par value per share
PREFERRED
</TABLE>
PARAGRAPH 2: The preference, qualification, limitations, restrictions, and the
special or relative rights in respect to the shares of each class are:
The stated capital of the Corporation shall be at least equal to the sum of the
aggregate par value of all issued shares having par value, plus such amounts as
from time to time by resolution of the Board of Directors may be transferred
thereto.
Upon dissolution, whether voluntary or involuntary, or upon the insolvency,
liquidation or distribution of the assets of the Corporation, the holders of the
Class A Preferred Stock shall be first entitled to receive out of the net assets
of the Corporation, the par value of $1.00 per share. All of the other assets if
there are any, shall be distributed among the holders of shares of the Common
Stock.
Class A Preferred Stock of the Corporation shall be non-voting at all times.
<PAGE>
3. The manner in which any exchange, reclassification or cancellation of
issued shares, or a reduction of the number of authorized shares of any
class below the number of issued shares of that class, provided for or
effected by this amendment, is as follows: (if not applicable, insert "No
change")
No Change
4. (a) The manner in which said amendment effects a change in the amount of
paid-in capital (Paid-in capital replaces the terms Stated Capital and
Paid-in Surplus and is equal to the total of these accounts) is as follows:
(if not applicable, insert "No change")
No Change
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (If not applicable,
insert "No change")
No Change
Before Amendment After Amendment
Paid-in Capital $_______________ $______________
(Complete either Item 5 or 6 below)
5. The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirms, under penalties of perjury,
that the facts stated herein are true.
Dated 2/20 1992 West Suburban Kidney Center, S.C.
--------------------------, -- ---------------------------------
(Exact Name of Corporation)
attested by /s/ Paul Balter by /s/ Arthur Morris
--------------------------- -------------------------------
(Signature of Secretary or (Signature of President or
Assistant Secretary) Vice President)
Paul Balter, Secretary Arthur Morris, President
---------------------------- ---------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
6. If amendment is authorized by the incorporators, the incorporators must
sign below.
OR
If amendment is authorized by the directors and there are no officers, then
a majority of the directors or such directors as may be designated by the
board, must sign below.
The undersigned affirms, under the penalties of perjury, that the facts
stated herein are true.
Dated_______________________, 19__
__________________________________ ____________________________________
__________________________________ ____________________________________
__________________________________ ____________________________________
__________________________________ ____________________________________
<PAGE>
NOTES and INSTRUCTIONS
NOTE 1: State the true exact corporate name as it appears on the records of
the office of the Secretary of State, BEFORE any amendments herein
reported.
NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares
have been issued and before any directors have been named or elected.
((S) 10.10)
NOTE 3: Directors may adopt amendments without shareholder approval in only
six instances, as follows:
(a) to remove the names and addresses of directors named in the
articles of incorporation;
(b) to remove the name and address of the initial registered agent
and registered office, provided a statement pursuant to (S) 5.10
is also filed;
(c) to split the issued whole shares and unissued authorized shares
by multiplying them by a whole number, so long as no class or
series is adversely affected thereby;
(d) to change the corporate name by substituting the word
"corporation", "incorporated", "company", "limited", or the
abbreviation "corp.", "inc.", "co.", or "ltd." for a similar word
or abbreviation in the name, or by adding a geographical
attribution to the name;
(e) to reduce the authorized shares of any class pursuant to a
cancellation statement filed in accordance with (S) 9.05.
(f) to restate the articles of incorporation as currently amended.
((S) 10.15)
NOTE 4: All amendments not adopted under (S) 10.10 or (S) 10.15 require (1)
that the board of directors adopt a resolution setting forth the
proposed amendment and (2) that the shareholders approve the
amendment.
Shareholder approval may be (1) by vote at a shareholders' meeting
(either annual or special) or (2) by consent, in writing, without a
meeting.
To be adopted, the amendment must receive the affirmative vote or
consent of the holders of at least 2/3 of the outstanding shares
entitled to vote on the amendment (but if class voting applies, then
also at least a 2/3 vote within each class is required).
The articles of incorporation may supercede the 2/3 vote requirement
by specifying any smaller or larger vote requirement not less than a
majority of the outstanding shares entitled to vote and not less than
a majority within each class when class voting applies. ((S) 10.20)
NOTE 5: When shareholder approval is by consent, all shareholders must be
given notice of the proposed amendment at least 5 days before the
consent is signed. If the amendment is adopted, shareholders who have
not signed the consent must be promptly notified of the passage of the
amendment. ((S)(S) 7.10 & 10.20)
<PAGE>
File Number 4947-719-8
-----------
STATE OF ILLINOIS
OFFICE OF
THE SECRETARY OF STATE
[LOGO]
WHEREAS, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF WEST SUBURBAN
KIDNEY CENTER, S.C. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE
BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS
CORPORATION ACT OF ILLINOIS, IN FORCE JULY ,. A.D. 1984.
Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois,
by virtue of the powers vested in me by law, do hereby issue this certificate
and attach hereto a copy of the Application of the aforesaid corporation.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois, at the City of Springfield, this 26th day
of April A.D. 1993 and of the Independence of the United States the two hundred
and 17th.
George H Ryan
[SEAL] -------------------------------------
SECRETARY OF STATE
<PAGE>
<TABLE>
<S> <C> <C>
Form BOA-10.30 ARTICLES OF AMENDMENT File# D 4947-719-8
(Rev. Jan. 1991)
- ---------------------------------------------------------------------------------------------------------
George H. Ryan SUBMIT IN DUPLICATE
-------------------------------------
Secretary of State
Department of Business Services This space for use by
Springfield, IL 62756 Secretary of State
Telephone (217) 782-1832
Date 4-26-93
- ----------------------------------------
Franchise Tax $
Remit payment in check or money Filing Fee $ 25.00
order, payable to "Secretary of State." Penalty $
Approved: [SIGNATURE ILLEGIBLE]
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1. CORPORATE NAME: West Suburban Kidney Center, S.C.
----------------------------------------------------------
(Note 1)
2. MANNER OF ADOPTION AND TEXT OF AMENDMENT:
The following amendment of the Articles of Incorporation was adopted
on November 30, 1992 in the manner indicated below. ("X" one box only)
[_] By a majority of the incorporators, provided no directors were named
in the articles of incorporation and no directors have been elected;
or by a majority of the board of directors, in accordance with Section
10.10, the corporation having issued no shares as of the time of
adoption of this amendment;
(Note 2)
[_] By a majority of the board of directors, in accordance with Section
10.15, shares having been issued but shareholder action not being
required for the adoption of the amendment;
(Note 3)
[_] By the shareholders, in accordance with Section 10.20, a resolution of
the board of directors having been duly adopted and submitted to the
shareholders. At a meeting of shareholders, not less than the minimum
number of votes required by statute and by the articles of
incorporation were voted in favor of the amendment;
(Note 4)
[_] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
shareholders having not less than the minimum number of votes required
by statute and by the articles of incorporation. Shareholders who have
not consented in writing have been given notice in accordance with
Section 7.10;
(Note 4)
[X] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
all the shareholders entitled to vote on this amendment.
(Note 4)
When amendment effects a name change, insert the new corporate name below. Use
Page 2 for all other amendments.
Article 1: The name of the corporation is:
3x
- --------------------------------------------------------------------------------
(NEW NAME)
All changes other than name, include on page 2
(over)
<PAGE>
TEXT OF AMENDMENT
(Any article being amended is required to be set forth in its entirety)
RESOLVED, that paragraph 1 of Article V of the Articles of Incorporation of
this corporation is hereby changed and amended to read as follows:
PARAGRAPH 1: The aggregate number of shares which the corporation is authorized
to issue is 15,010,000 divided into two (2) classes. The designation of each
class, the number of shares of each class, and the par value, if any, of the
shares of each class, or a statement that the shares of any class are without
par value, are as follows:
<TABLE>
<CAPTION>
PAR VALUE PER SHARE OR
SERIES NUMBER STATEMENT THAT SHARES
CLASS (if any) OF SHARES ARE WITHOUT PARE VALUE
- ---------- ---------- ------------- --------------------------
<S> <C> <C> <C>
COMMON NONE 10,000 $1.00 par value per share
CLASS A
PREFERRED NONE 15,000,000 $1.00 par value per share
</TABLE>
<PAGE>
3. The manner in which any exchange, reclassification or cancellation of
issued shares, or a reduction of the number of authorized shares of any
class below the number of issued shares of that class, provided for or
effected by this amendment, is as follows: (if not applicable, insert "No
change")
No Change
4. (a) The manner in which said amendment effects a change in the amount of
paid-in capital (Paid-in capital replaces the terms Stated Capital and
Paid-in Surplus and is equal to the total of these accounts) is as follows:
(if not applicable, insert "No change")
No Change
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (If not applicable,
insert "No change")
No Change
Before Amendment After Amendment
Paid-in Capital $_______________ $______________
(Complete either Item 5 or 6 below)
5. The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirms, under penalties of perjury,
that the facts stated herein are true.
Dated November 30 1992 WEST SUBURBAN KIDNEY CENTER, S.C.
---------------------------, ----- ---------------------------------
(Exact Name of Corporation)
attested by (pb) /s/ Paul Balter by (amm) Arthur M. Morris
------------------------------ -------------------------------
(Signature of Secretary or (Signature of President or
Assistant Secretary) Vice President)
Paul Balter, M.D., Secretary Arthur M. Morris, M.D., President
------------------------------ ---------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
6. If amendment is authorized by the incorporators, the incorporators must
sign below.
OR
If amendment is authorized by the directors and there are no officers, then
a majority of the directors or such directors as may be designated by the
board, must sign below.
The undersigned affirms, under the penalities of perjury, that the facts
stated herein are true.
Dated _______________________, 19__
___________________________________ __________________________________
___________________________________ __________________________________
___________________________________ __________________________________
___________________________________ __________________________________
<PAGE>
NOTES AND INSTRUCTIONS
NOTE 1: State the true exact corporate name as it appears on the records of
the office of the Secretary of State, BEFORE any amendments herein
reported.
NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares
have been issued and before any directors have been named or
elected. ((S) 10.10)
NOTE 3: Directors may adopt amendments without shareholder approval in only
six instances, as follows:
(a) to remove the names and addresses of directors named in the
articles of incorporation;
(b) to remove the name and address of the initial registered agent
and registered office, provided a statement pursuant to (S) 5.10
is also filed;
(c) to split the issued whole shares and unissued authorized shares
by multiplying them by a whole number, so long as no class or
series is adversely affected thereby;
(d) to change the corporate name by substituting the word
"corporation", "incorporated", "company", "limited", or the
abbreviation "corp.", "inc.", "co.", or "ltd." for a similar word
or abbreviation in the name, or by adding a geographical
attribution to the name;
(e) to reduce the authorized shares of any class pursuant to a
cancellation statement filed in acccordance with (S) 9.05.
(f) to restate the articles of incorporation as currently amended.
((S) 10.15)
NOTE 4: All amendments not adopted under (S) 10.10 or (S) 10.15 require (1)
that the board of directors adopt a resolution setting forth the
proposed amendment and (2) that the shareholders approve the
amendment.
Shareholder approval may be (1) by vote at a shareholders' meeting
(either annual or special) or (2) by consent, in writing, without a
meeting.
To be adopted, the amendment must receive the affirmative vote or
consent of the holders of at least 2/3 of the outstanding shares
entitled to vote on the amendment (but if class voting applies, then
also at least 2/3 vote within each class is required).
The articles of incorporation may supercede the 2/3 vote requirement
by specifying any smaller or larger vote requirement not less than a
majority of the outstanding shares entitled to vote and not less than
a majority within each class when class voting applies. ((S) 10.20)
NOTE 5: When shareholder approval is by consent, all shareholders must be
given notice of the proposed amendment at least 5 days before the
consent is signed. If the amendment is adopted, shareholders who have
not signed the consent must be promptly notified of the passage of the
amendment. ((S)(S) 7.10 & 10.20)
The filing fee for articles of amendment - $25.00
The filing fee for restated articles - $100.00.
<PAGE>
STATE OF ILLINOIS
Office of
The Secretary of State
Whereas, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF WEST SUBURBAN
KIDNEY CENTER, S.C. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE
BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS
CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984.
Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois,
by virtue of the powers vested in me by law, do hereby issue this certificate
and attach hereto a copy of the Application of the aforesaid corporation.
In Testimony Whereof, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois, at the City of Springfield, this 11TH day
of APRIL A.D. 1996 and of the Independence of the United States the two hundred
and 20TH.
/s/ George H. Ryan
--------------------------
Secretary of State
[SEAL]
<PAGE>
Form BCA-10.30 ARTICLES OF AMENDENT
(Rev. Jan. 1995 File # 4947-719-8
- --------------------------------------------------------------------------------
George H Ryan SUBMIT IN DUPLICATE
Secretary of State
Department of Business Servics FILED This space for use by
Springfield, IL 62756 Secretary of State
Telephone (217) 782-1832 April 11 1996 Date 04-11-96
- -------------------------------
Remit payment in check or money Franchise Tax $
order, payable to "Secretary George H. Ryan Filing Fee* $25.00
of State." Secretary of State Penalty $
*The filing fee for articles of
amendment. $25.00 Approved:
- --------------------------------------------------------------------------------
1. CORPORATE NAME: West Suburban Kidney Center, S.C.
------------------------------------------------------------
(Note 1)
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was adopted
on 10-1-1995 in the manner indicated below. ("X" one box only)
[_] By a majority of the incorporators, provided no directors were named
in the articles of incorporation and no directors have been elected;
(Note 2)
[_] By a majority of the board of directors, in accordance with Section
10.10, the corporation having issued no shares as of the time of
adoption of this amendment;
(Note 2)
[_] By a majority of the board of directors, in accordance with Section
10.15, shares having been issued but shareholder action not being
required for adoption of the amendment;
(Note 3)
[_] By the shareholders, in accordance with Section 10.20, a resolution of
the board of directors having been duly adopted and submitted to the
shareholders. At a meeting of shareholders, not less than the minimum
number of votes required by statue and by the articles of
incorporation were voted in favor of the amendment;
(Note 4)
[_] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of the directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
shareholders having not less than the minimum number of votes required
by statue and by the articles of incorporation. Shareholders who have
not consented in writing have been given notice in accordance with
Section 7.10;
(Note 4 & 5)
[x] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed by
all the shareholders entitled to vote on this amendment.
3. TEXT OF AMENDMENT:
a. When amendment effects a name change, insert the new corporate name
below. Use Page 2 for all other amendments.
Article 1: The Name of the corporation is:
WSKC Dialysis Services, Inc.
- --------------------------------------------------------------------------------
(NEW NAME)
All changes other than the name, include on page 2
(over)
<PAGE>
TEXT OF AMENDMENT
b. (if amendment affects the corporate purpose, the amended purpose is
required to be set forth in its entirety. If there is not sufficient space
to do so, add one or more sheets of this size.)
RESOLVED, that Article Four of the Corporation's Articles of Incorporation is
hereby amended to read as follows:
"The purpose or purposes for which the corporation is organized are:
Maintain and conduct any and every kind of sales, distribution, leasing,
investment, and service business; to manufacture, process, fabricate,
rebuild, service, invest in, purchase, sell, lease or otherwise dispose of
and generally deal in and with raw materials, products, wares, goods,
merchandise and real and personal property, both tangible and intangible, of
every kind and description; to make investments of every kind and nature; and
to provide services of every kind and character. To acquire, own, use, convey
and otherwise dispose of and deal in real property.
The corporation elects to be governed by the Business Corporation Act and
will not engage in the practice of medicine.
Page 2
<PAGE>
4. The manner, if not set forth in Article 3b, in which any exchange,
reclassification or cancellation of issued shares, or a reduction of
the number of authorized shares of any class below the number of
issued shares of that class, provided for or effected by this
amendment, is as follows: (If not applicable, insert "No change")
No Change
5. (a) The manner, if not set forth in Article 3b, in which said
amendment effects a change in the amount of paid-in capital (Paid-in
capital replaces the terms Stated Capital and Paid-in Surplus and is
equal to the total of these accounts) is as follows: (If not
applicable, insert "No change")
No Change
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (If not
applicable, insert "No change")
No Change
Before Amendment After Amendment
Paid-in Capital $____________ $_____________
(Complete either item 6 or 7 below. All signatures must be in
BLACK INK.)
---------
6. The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirms, under penalties of perjury,
that the facts stated herein are true.
Dated October 1, 1995 WEST SUBURBAN KIDNEY CENTER, S.C.
------------- ---- -----------------------------------
(Exact Name of Corporation at date
of execution)
attested by /s/ Paul Balter by /s/ Arthur M. Morris
------------------------ ---------------------------------
(Signature of Secretary (Signature of President or
or Assistant Secretary) Vice President)
Paul Balter, M.D., Secretary Arthur M. Morris, M.D., President
---------------------------- -----------------------------------
(Type or Print Name and (Type or Print Name and
Title) Title)
7. If amendment is authorized pursuant to Section 10.10 by the incorporators,
the incorporators must sign below, and type or print name and title.
OR
If amendment is authorized by the directors pursuant to Section 10.10 and
there are no officers, then a majority of the directors or such directors
as may be designated by the board, must sign below, and type or print name
and title.
The undersigned affirms, under the penalties of perjury, that the facts
stated herein are true.
Dated__________________________, 19__
_____________________________________ ___________________________________
_____________________________________ ___________________________________
_____________________________________ ___________________________________
_____________________________________ ___________________________________
Page 3
<PAGE>
NOTES and INSTRUCTIONS
NOTE 1: State the true exact corporate name as it appears on the records of
the office of the Secretary of State, BEFORE any amendments herein
reported.
NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares
have been issued and before any directors have been named or elected.
((S)10.10)
NOTE 3: Directors may adopt amendments without shareholder approval in only
seven instances, as follows:
(a) to remove the names and addresses of directors named in the
articles of incorporation;
(b) to remove the name and address of the initial registered agent
and registered office, provided a statement pursuant to (S) 5.10
is also filed;
(c) to increase, decrease, create or eliminate the par value of the
shares of any class, so long as no class or series of shares is
adversely affected.
(d) to split the issued whole shares and unissued authorized shares
by multiplying them by a whole number, so long as no class or
series is adversely affected thereby;
(e) to change the corporate name by substituting the word
"corporation", "incorporated", "company", "limited", or the
abbreviation "corp", "inc", "co", or "ltd", for a similar word or
abbreviation in the name , or by adding a geographical
attribution to the name;
(f) to reduce the authorized shares of any class pursuant to a
cancellation statement filed in accordance with (S) 9.05,
(g) to restate the articles of incorporation as currently amended.
((S) 10.15)
NOTE 4: All amendments not adopted under (S) 10.10 or (S) 10.15 require (1)
that the board of directors adopt a resolution setting forth the
proposed amendment and (2) that the shareholders approve the
amendment.
Shareholder approval may be (1) by vote at a shareholder's meeting
(either annual or special) or (2) by consent, in writing, without a
meeting.
To be adopted, the amendment must receive the affirmative vote or
consent of the holders of at least 2/3 of the outstanding shares
entitled to vote on the amendment (but if class voting applies, then
also at least a 2/3 vote within each class is required).
The articles of incorporation may supersede the 2/3 vote requirement
by specifying any smaller or larger vote requirement not less than a
majority of the outstanding shares entitled to vote and not less than
a majority within each class when class voting applies. ((S)10.20)
NOTE 5: When shareholder approval is by consent, all shareholders must be
given notice of the proposed amendment at least 5 days before the
consent is signed. If the amendment is adopted, shareholders who have
not signed the consent must be promptly notified of the passage of the
amendment. ((S) (S) 7.10 & 10.20)
Page 4
<PAGE>
<TABLE>
<S> <C>
PLEASE TYPE OR PRINT CLEARLY IN BLACK INK FILING DEADLINE IS: PRIOR TO 03/01/91
------------------
RETURN TO: STATE OF ILLINOIS CORPORATION
Department of Business Services DOMESTIC CORPORATION ANNUAL REPORT FILE NO.
Secretary of State D 4947-719-8
Springfield IL. 62756
Telephone (217) 782-7808 YEAR OF 1991
</TABLE>
1.)
CORPORATE NAME WEST SUBURBAN KIDNEY CENTER, S.C.
REGISTERED AGENT C/O ALLAN S FINGER 062686
REGISTERED OFFICE 30 N LASALLE STREET COOK
CITY, IL, ZIP CODE CHICAGO, IL. 60602-2502
<TABLE>
<S> <C>
2.) AGENT/OFFICE CHANGES ONLY (see 11h)
3.) Date Incorporated 03/31/1969 WEST SUBURBAN KIDNEY CENT
----------------------------------
Corporation Name
Give complete address of principal office, if other than above: David J. Hochman
----------------------------------
101 N. Scoville Registered Agent
Oak Park, IL 60302 30 N LaSalle Street
----------------------------------
Registered Office - Street Address
Federal Employer identification Number Chicago, Cook, IL 60602-2502
----------------------------------
(FEIN) * 362668594 City, County, IL Zip Code
</TABLE>
4.) The names and addresses of the officers and directors are: (if officers are
directors, so state.)
<TABLE>
<CAPTION>
NAME OFFICE NUMBER & STREET CITY STATE ZIP
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arthur M. Morris President 101 N SCOVILLE, OAK PARK, IL 60301
- -----------------------------------------------------------------------------------------------------------------------------
Paul Balter Secretary "
- -----------------------------------------------------------------------------------------------------------------------------
Paul Balter Treasurer "
- -----------------------------------------------------------------------------------------------------------------------------
Director SEE ATTACHED SCHEDULE FOR DIRECTORS
- -----------------------------------------------------------------------------------------------------------------------------
Director
- -----------------------------------------------------------------------------------------------------------------------------
Director
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
5.) The type of business actually conducted in Illinois is: to provide
professional medical services
6.) Number of shares authorized and issued (as of 12/31/90)
<TABLE>
<CAPTION>
CLASS SERIES PAR VALUE NUMBER AUTHORIZED NUMBER ISSUED
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PAR STOCK none $1.00 10000 1,200
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
7a.) The amount of paid-in capital as of 12/31/90 7b.) The Paid-in Capital as of 12/31/90
is: on record with the Secretary of State is:
*PAID-IN CAPITAL $1,200,00 TOTAL $1,200
-------------- -----------
** "Paid-in Capital" replaces the terms (The figure in item 7b may not be altered.)
Stated Capital and Paid-in Surplus
It does not include Retained Earnings.
====================================================================================================================================
ITEM 8 MUST BE SIGNED
Under the penalty of perjury and as an authorized officer,
I declare that this annual report and, if applicable, the
statement of change of registered agent and/or office,
pursuant to provisions of the Business Corporation Act,
has been examined by me and is, to the best of my know-
8.) By (amm) /s/ Arthur M. Morris Pres 2/5/91 ledge and belief, true, correct, and complete.
-----------------------------------------------------
(Any Authorized Officer's Signature) (Title) (Date)
====================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT 3.36
WEST SUBURBAN KIDNEY CENTER, S.C.
BY-LAWS
ARTICLE 1
STOCKHOLDERS
SECTION 1. Annual Meetings. The corporation shall hold an annual meeting
---------------
of its stockholders for the election of directors and for the transaction of
general business at such place as may be designated by the Board of Directors,
at 3:00 p.m., on the second Saturday in April of each year, if not a legal
holiday, and if a legal holiday, then on the first day following which is not a
legal holiday. Such annual meetings shall be general meetings open for the
transaction of any business within the powers of the corporation without special
notice of such business, except in cases in which special notice is required by
statute, by the articles of incorporation or by these by-laws.
SECTION 2. Special Meetings. Unless otherwise prescribed by statute,
----------------
special meetings of the stockholders may be called at any time by the Board of
Directors or by the President and shall be called by the President or the
Secretary upon a written request of stockholders owning a twenty-five per cent
(25%) interest in amount of the entire outstanding shares of the corporation
entitled to vote. No business other than that stated in the notice described in
the next succeeding section shall be transacted at any special meeting without
the unanimous consent of all of the stockholders entitled to vote thereat.
SECTION 3. Notice of Meetings. Except as otherwise provided by law,
------------------
written or printed notice stating the place, date and hour of the meeting and,
in case of a special meeting, a brief statement of the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than forty (40) days before the date of every meeting of stockholders either
personally or by mail, by or at the direction of the President or the Secretary,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
corporation, with postage thereon prepaid. Whenever any notice is required to be
given under the provisions of Illinois law, the articles of incorporation or
these by-laws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether it be before or after the time stated therein,
shall
<PAGE>
be deemed equivalent to the giving of such notice. It shall not be requisite to
the validity of any meeting of stockholders that notice thereof, whether
prescribed by law, by the articles of incorporation or by these by-laws, shall
have been given to any stockholder who attends in person or by proxy. No notice
other than by verbal announcement need be given of any adjourned meetings of
stockholders.
SECTION 4. Place of Meetings. Annual and special meetings of stockholders
-----------------
shall be held at one of the corporation's offices or at such place or places as
shall be fixed by the Board of Directors.
SECTION 5. Quorum. Except as otherwise required by law, the articles of
------
incorporation or these by-laws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the corporation entitled to vote
shall constitute a quorum at all meetings of the stockholders. In case a quorum
shall not be present at any meeting, a majority in interest of the stockholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until the requisite amount of stock entitled to vote shall be
present. If upon the reconvening of any such adjourned meeting a majority of the
stock entitled to vote shall be represented, any business may be transacted
which might have been transacted at the meeting as originally noticed, but only
those stockholders entitled to vote at the meeting as originally noticed shall
be entitled to vote at such time as it is reconvened.
SECTION 6. Voting. Except when cumulative voting is required by law, each
------
outstanding share of the capital stock shall be entitled to one (1) vote on each
matter submitted to a vote at a meeting of stockholders. Shares of its own stock
belonging to the corporation shall not be voted, directly or indirectly, at any
meeting and shall not be counted in determining the total number of outstanding
shares at any given time, but shares of its own stock held by it in fiduciary
capacity may be voted and shall be counted in determining the total number of
outstanding shares at any given time. When a quorum is present or represented at
any meeting of stockholders, the vote of the holders of a majority of the shares
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which a different vote is
required by virtue of an express provision of law, the articles of incorporation
or another section of these by-laws.
SECTION 7. Proxies. Any stockholder entitled to vote at a meeting of
-------
stockholders may vote either in person or by proxy executed in
2
<PAGE>
writing by the stockholder or by his duly authorized attorney-in-fact; provided,
however, that no proxy to vote any shares of the corporation shall issue to or
be voted by any person who is licensed pursuant to the Illinois Medical Practice
Act.
SECTION 8. Action without Meeting. Whenever the vote of stockholders
----------------------
at a meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of a statute, the articles of incorporation
or of these by-laws, the meeting and vote of stockholders may be dispensed with
if all the stockholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken.
SECTION 9. List of Stockholders. At least ten (10) days prior to each
--------------------
meeting of stockholders at which directors are to be elected, the Secretary
shall make or cause to be made a complete list of the stockholders entitled to
vote at the ensuing election, arranged in alphabetical order, showing the
mailing address of each according to the records of the corporation and the
number of voting shares held by each. Such list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
corporation, and shall at all times during the usual hours for business be open
to the examination of any stockholder, and shall also be produced and kept at
the time and place of such election for the inspection of any stockholder during
the whole time thereof.
The original stock ledger or transfer book, or a duplicate thereof,
kept at the principal office of the corporation, shall be prima facie evidence
as to who are the stockholders entitled to examine such list or stock ledger or
transfer book or to vote at any meeting of stockholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Powers. The business and affairs of the corporation shall
------
be managed by a Board of Directors, which may exercise all of the powers of the
corporation except such as are by statute, the articles of incorporation or
these by-laws conferred upon or reserved to the stockholders. Continuing and
exclusive authority to fix, supervise and control the professional, business and
other affairs of the corporation shall be
3
<PAGE>
wholly vested in the Board of Directors.
SECTION 2. Number. The number of directors shall be three except that
------
in cases where all of the shares of the corporation are owned beneficially and
of record by either one (1) or two (2) stockholders, the stockholders by
resolution at an annual or special meeting may fix the number of directors to be
less than three (3) but not less than the number of stockholders. The directors
need not be stockholders but must at all times be persons licensed pursuant to
the Illinois Medical Practice Act.
SECTION 3. Election and Term. The directors shall be elected at the
-----------------
annual meeting of shareholders and each shall serve until his successor shall
have been elected and qualified.
SECTION 4. Meetings. The newly elected directors may hold their first
--------
meeting without notice, for the purpose of organization and the transaction of
business, immediately after the annual meeting of the stockholders, or the time
and place of such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the Board of Directors may be held without notice
at such places and times as shall be determined from time to time by resolution
of the directors. Unless otherwise determined as aforesaid, regular meetings
shall be held at the place of and immediately after the annual meeting of
stockholders.
Special meetings of the Board of Directors may be called by the
President or by the Secretary on the written request of any director and shall
be held at such place or places as may be determined by the directors, or as
shall be stated in the call of the meeting.
SECTION 5. Notice of Meetings. No notice of regular meetings of the
------------------
board need be given. Notice of the place, day and hour of every special meeting
shall be given to each director at least one (1) day before the meeting, by
delivering the same to him personally, by sending the same to him by telegraph,
or by leaving the same at his residence or usual place of business, or, in the
alternative, upon two (2) days' notice, by mailing it, postage prepaid, and
addressed to him at his last known mailing address, as reflected in the records
of the corporation. It shall not be requisite to the validity of any meeting of
the Board of Directors that notice thereof shall have been given to any director
who attends, except where a director attends for the express purpose of
objecting to the
4
<PAGE>
transaction of any business because the meeting is not lawfully called or
convened. No notice of adjourned meetings of the Board of Directors need be
specified in the notice or waiver of notice of such meeting. All regular and
special meetings of the Board of Directors shall be open for the transaction of
any business within the powers of the corporation without special notice of
such business, except in those cases in which special notice is required by law,
the articles of incorporation or by these by-laws.
SECTION 6. Quorum. At all meetings of the Board of Directors, a
------
majority of the Board of Directors shall constitute a quorum for the transaction
of business. The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless the
act of a greater number is required by law, the articles of incorporation or
these by-laws. In the absence of a quorum, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no notice
thereof need be given other than by announcement at the meeting which shall be
adjourned. Upon the reconvening of any such adjourned meeting, if a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting originally convened.
SECTION 7. Informal Action. Unless otherwise restricted by the
---------------
articles of incorporation or these by-laws, any action required or permitted to
be taken at any meeting of the Board of Directors or of the Executive Committee
may be taken without a meeting, if a written consent to such action is executed
by all members of the Board of Directors or of the Executive Committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or the Executive Committee.
SECTION 8. Compensation. Directors shall not receive any stated salary
------------
for their services as directors or as members of committees, but by resolution
of the Board of Directors a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 9. Indemnification. (a) To the extent permitted by law, the
---------------
Board of Directors of the corporation may by resolution indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (whether or not by or in the right
5
<PAGE>
of the corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had not
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 9. (b) Any indemnification under Subsection (a) hereof (unless
--------------
ordered by a court) shall be made by the Board of Directors only upon a
determination in the specific case that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Subsection (a). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable
and a quorum of disinterested directors so directs, by independent legal counsel
(compensated by the corporation) in a written opinion, or (3) by the
stockholders
SECTION 9. (c) The indemnification provided by this Section shall not
--------------
be deemed exclusive of any other rights to which those indemnified may be
entitled under any agreement, vote of stockholders, disinterested directors,
or otherwise, both as to the action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
6
<PAGE>
SECTION 10. Resignations. Any director, member of the Executive
------------
Dommittee or officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its actual receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 11. Vacancies. Vacancies occurring in the Board of Directors,
---------
through death, resignation or otherwise, and newly created directorships
resulting from an increase in the number of directors, may be filled by an
election at an annual meeting or at a special meeting of shareholders called for
that purpose. The directors so chosen shall hold office until their successors
are duly elected and shall qualify.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. Executive Committee. The Board of Directors by resolution
-------------------
adopted by a majority of the whole Board of Directors may designate an Executive
Committee of two (2) directors. Except as otherwise provided by law, during the
intervals between the meetings of the Board of Directors, the Executive
Committee shall have and may exercise all of the powers of the Board of
Directors in the management of the corporation. The Executive Committee shall
keep full accounts of its transactions. All actions by the Executive Committee
shall be reported to the Board of Directors at its meeting next succeeding such
action.
SECTION 2. Meetings of Executive Committee. The Executive Committee
-------------------------------
shall fix its own rules of procedure and shall meet as provided by such rules
and its shall also meet at the call of either member of the Committee. Both
members of the Executive Committee shall be necessary to constitute a quorum,
and the concurrence of both shall be required in all matters to constitute the
act of the Committee.
SECTION 3. Executive Committee Powers. For all purposes of these
--------------------------
by-laws, the words "Board of Directors", "directors", "Board" or any equivalent
term shall be construed to include "Executive Committee", it being the intent
that such Committee shall, except as otherwise provided by law, have and
exercise all of the powers conferred on the Board of Directors by law, the
articles of incorporation and these by-laws.
7
<PAGE>
ARTICLE IV
OTHER COMMITTEES
To the extent that such action is not inconsistent with the provisions
of Article III hereof, the Board of Directors may designate one or more
committees in addition to the Executive Committee. Each committee shall consist
of one (1) or more of the directors of the corporation, and to the extent
provided by the Board of Directors, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
corporation, and may have power to authorize the seal of the corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such name or names as may be determined from time to time by the Board of
Directors. The committees shall keep regular minutes of their proceedings and
report the same to the Board of Directors when required.
ARTICLE V
OFFICERS
SECTION 1. Officers. The officers of the corporation shall be a
--------
President, a Vice President, a Secretary and a Treasurer. In addition, the Board
of Directors may elect such Vice Presidents, Assistant Secretaries and Assistant
Treasurers as the Board of Directors may deem proper. None of the officers need
be directors, but all must be person licensed to practice pursuant to the
Illinois Medical Practice Act. The officers shall be elected at the first
meeting of the Board of Directors after each annual meeting of stockholders. Any
two (2) or more offices, other than those of President and Secretary may be held
by the same person.
SECTION 2. Other Officers and Agents. The Board of Directors may
-------------------------
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. President. The President shall be the chief executive
---------
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of president of a
corporation, and subject to the powers of the Board of Directors, he shall have
general supervision, direction and control of the business of the corporation.
He shall preside at all meetings of the stockholders if present thereat. Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal
8
<PAGE>
to be affixed to any instrument requiring it and when so affixed, the seal shall
be attested by the signature of the Secretary or an Assistant Secretary.
SECTION 4. Vice-President. Each Vice-President shall have such powers
--------------
and shall perform such duties as shall be assigned to him by the Board of
Directors.
SECTION 5. Secretary. The Secretary shall give, or cause to be given,
---------
notice of all meetings of stockholders and directors, and all other notices
required by law or by these by-laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person directed by the
President, or by the directors or stockholders, upon whose request the meeting
is called as provided in these by-laws. He shall record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose, and shall perform such other duties as may be assigned to
him by the Board of Directors or the President. He shall have the custody of the
seal of the corporation and shall affix the same to all instruments requirint
it, when authorized by the Board of Directors or the President, and attest the
same.
SECTION 6. Treasurer. The Treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors or the President, taking proper vouchers for
such disbursements. He shall render to the President and the Board of Directors
at the regular meetings of the Board of Directors, or whenever they may request
it, an account of all his transactions as Treasurer and of the financial
condition of the corporation. If required by the Board of Directors, he shall
give the corporation a bond for the faithful discharge of his duties in such
amount and with such surety as the Board of Directors shall prescribe.
SECTION 7. Assistant Treasurers and Assistant Secretaries. Assistant
----------------------------------------------
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the Board of Directors.
SECTION 8. Removal of Officers. Any officer of the corporation may be
-------------------
removed, by the Board of Directors, whenever in its judgment the best interests
of the corporation will be served thereby.
9
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 1. Certificates of Stock. Certificates of stock, numbered and
---------------------
with the seal of the corporation affixed, signed by the President or Vice
President, and the Treasurer or an Assistant Treasurer, or Secretary or an
Assistant Secretary, shall be issued to each stockholder certifying the number
of shares owned by him in the corporation.
SECTION 2. Lost Certificates. A new certificate of stock may be issued
-----------------
in the place of any certificate theretofore issued by the corporation and
alleged to have been lost or destroyed. However, the Directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representative, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
the certificate, or the issuance of a new certificate.
SECTION 3. Transfer of Shares. The shares of stock of the corporation
------------------
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock and transfer books and ledgers, by
whom they shall be cancelled, and new certificates shall thereupon be issued.
SECTION 4. Dividends. Subject to the provisions of the articles of
---------
incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meetings, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
absolute discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
10
<PAGE>
SECTION 5. Seal. The corporate seal shall be circular in form and
----
shall contain the name of the corporation and the words "CORPORATE SEAL
ILLINOIS". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
SECTION 6. Fiscal Year. The fiscal year of the corporation shall end
-----------
on the last day of March.
SECTION 7. Checks. All checks, drafts or other orders for the payment
------
of money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 8. Notice and Waiver of Notice. Whenever any notice is
---------------------------
required to be given by these by-laws, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by certified or registered mail, return receipt requested, in a sealed
post-paid wrapper, addressed to the person entitled thereto at his last known
address. Such notice shall be deemed to have been given on the day of such
mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by law.
Whenever any notice is required to be given under the provisions of
any law, the articles of incorporation of these by-laws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
SECTION 9. Closing the Transfer Books and Fixing the Record Date. For
-----------------------------------------------------
the purpose of determining the right of shareholders to vote or receive
dividends, the Directors may provide that the stock transfer books shall be
closed for a stated period not to exceed forty (40) days. In such event, the
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders for at least ten (10) days or
in the case of a merger or consolidation at least 20 days, immediately prior to
a meeting of the shareholders. In lieu of closing the stock transfer books, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date to be not more than 40 days, and, for a
meeting of shareholders, not less than 10 days or in case of a merger or
consolidation, not less than 20 days, immediately preceding such meeting or
payment of such dividend. If the Directors shall not so provide for a closing of
the transfer books or the fixing of a record date, then the date on which notice
of the meeting of the shareholders was given or the date on which the resolution
of the Board of Directors declaring a dividend was adopted, as the case may be,
shall be the record date for determining
11
<PAGE>
the rights of shareholders. When a determination of shareholders entitled to
vote at a meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
ARTICLE VII
AMENDMENTS
SECTION 1. By Shareholders. These by-laws may be amended or repealed
---------------
and new by-laws may be adopted at any annual or special meeting of the
stockholders by a two-thirds (2/3) vote of the stock issued and outstanding and
entitled to vote thereat. However, such action may be taken at a special meeting
only if the notice of meeting specifically designates the provisions of these
by-laws proposed for amendment or repeal and sets forth any new provisions
proposed to be adopted.
SECTION 2. By Directors. These by-laws may be amended or repealed and
------------
new by-laws may be adopted at any regular or special meeting of the Board of
Directors by a unanimous vote of the entire Board of Directors.
12
<PAGE>
EXHIBIT 3.37
CERTIFICATE OF INCORPORATION
OF
EVEREST NEW YORK HOLDINGS, INC.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
The undersigned, for the purpose of forming a corporation pursuant to
the provisions of the Business Corporation Law of the State of New York, does
hereby certify as follows:
1. The name of the Corporation is Everest New York Holdings, Inc.
2. The purposes for which the Corporation is formed are as follows:
a. To engage in any lawful act or activity for which corporations
may be formed under the Business Corporation Law. This
Corporation will not engage in any act or activity for which
approval by any state department, official, board, agency or
other body is required until such approval shall first be
obtained.
b. To do everything necessary, proper, or convenient for the
accomplishment of any of the purposes set forth herein and to do
every other act and thing incidental thereto that is not
prohibited by the laws of the State of New York or by the
provisions of this Certificate of Incorporation.
<PAGE>
3. The principal office of the Corporation is to be located in Bronx
County in the State of New York.
4. The Corporation shall have authorized only one class of shares,
which shall consist of two hundred (200) shares of common stock without par
value.
5. The Secretary of State of the State of New York is hereby
designated as the agent of the Corporation upon whom process against the
Corporation may be served. A copy of any such process served upon the Secretary
of State shall be mailed to New York Dialysis Management, Inc., 1325 Morris
Park, Bronx, New York 10461.
6. The period of the Corporation's duration shall be perpetual or
until dissolved by a vote of the shareholders.
7. The subscriber is over the age of eighteen (18) years.
8. Directors shall be elected by a vote of shareholders at the
annual meeting of shareholders.
9. No holder of shares of the Corporation of any class, now or
hereafter authorized, shall have any preferential or preemptive right to
subscribe for, purchase or receive any shares of the Corporation of any class,
now or hereafter authorized, or any options or warrants for such shares, or any
rights to subscribe to or purchase such shares, or any securities convertible to
or exchangeable for such shares, which may at any time be issue, sold or offered
for sale by the Corporation.
10. A director shall not be personally liable to the Corporation or
its shareholders for damage for any breach of duty as a director, except for any
matter in respect of which such director shall be liable by reason that, in
addition to any and all other requirements for such liability, there shall have
been a judgment or other final adjudication
<PAGE>
adverse to such director that establishes that such director's acts or omissions
were in bad faith or involved international misconduct or a knowing violation of
law or that such director personally gained in fact a financial profit or other
advantage to which such director was not legally entitled or that such
director's act violated Section 719 of the Business Corporation Law. Neither the
amendment nor the repeal of this Article shall eliminate or reduce the effect of
this Article in respect to any matter occurring, or any cause of action, suit or
claim that, but for this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
11. Subject to any limitations contained elsewhere in this
Certificate of Incorporation, the by-laws of the Corporation may be adopted,
amended or repealed by a majority of the entire board of directors of the
Corporation, but any by-laws adopted by the board of directors may be amended or
repealed by a majority of the shareholders entitled to vote thereon. Except as
may otherwise be specifically provided in this Certificate of Incorporation, no
provision of this Certificate of Incorporation is intended by the Corporation to
be construed as limiting, prohibiting, denying or abrogating any of the general
of specific powers or right conferred under the Business Corporation Law upon
the Corporation, upon its shareholders, bondholders and security holders, and
upon its directors, officers and other corporate personnel.
12. The Corporation may be dissolved at any time by the affirmative
vote of the holders of a majority of the outstanding shares of the Corporation
entitled to vote thereon at a meeting duly called for that purpose, or by
unanimous written consent of the holders of all outstanding shares entitled to
vote thereon without a meeting. In the event of the dissolution of the
Corporation, corporate property and assets shall, after payment of all debts of
the
<PAGE>
Corporation, be distributed to the shareholders, each shareholder to participate
in such distribution in direct proportion to the number of shares held by each
shareholder.
IN WITNESS WHEREOF, the undersigned has executed, signed and
acknowledged this Certificate of Incorporation as of the 22nd day of July, 1997.
/s/ E. Raymond Kolarsey
-----------------------
E. Raymond Kolarsey
121 State Street
Albany, New York 12207
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this 22nd day of July, 1997, before me the subscriber, personally
appeared E. RAYMOND KOLARSEY, to me known and known to me to be the same person
described in and who executed the within Certificate of Incorporation, and he
duly acknowledged to me that he executed the same.
/s/ Flora M. Baller
-------------------
Notary Public
FLORA M. BALLER
NOTARY PUBLIC, STATE OF NEW YORK
QUALIFIED IN COLUMBIA COUNTY
MY COMMISSION EXPIRES 11/30/97
<PAGE>
EXHIBIT 3.39
CERTIFICATE OF INCORPORATION
OF
EVEREST ONE IPA, INC.
(UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW)
FIRST: The name of the corporation is: Everest One IPA, Inc.
SECOND: The corporation is formed for the following purposes:
a. To function as an Independent Practice Association as
defined in 10 NYCRR 98.2(aa).
b. To arrange by contract for the delivery or provision of
health services by individuals, entities and facilities licensed or certified to
practice medicine and other health professions, and, as appropriate, ancillary
medical services and equipment, by which arrangements such health care providers
and suppliers will provide their services in accordance with and for such
compensation as may be established by a contract between the corporation and one
or more health maintenance organizations which have been granted a certificate
of authority pursuant to the provisions of Article 44 of the Public Health Law
of the State of New York, as amended.
c. To exercise the general powers and purposes authorized by
Section 202 of the Business Corporation Law which are to be exercised only as
powers and purposes incidental to accomplishing the primary Independent Practice
Association powers and purposes of the corporation.
d. Notwithstanding any other provisions of this certificate to
the contrary, nothing contained herein shall authorize the corporation to
establish, operate, construct, lease or maintain a hospital or to provide
hospital service or health related service or to operate a drug maintenance
program, a certified home health agency, a hospice, or a health maintenance
organization or to provide a comprehensive health services plan as defined and
covered by Articles 28, 33, 36, 40 and 44, respectively of the Public Health
Law, or to solicit, collect or otherwise raise or obtain any funds,
contributions or grants from any source for the establishment or operation of
any hospital.
THIRD: The office of this corporation is to be located in the County of
Bronx, State of New York.
FOURTH: The aggregate number of shares which this corporation shall have
authority to issue is 200 common shares, which shares are without par value.
<PAGE>
FIFTH: The Secretary of the State of New York is hereby designated the
agent of this corporation upon whom process against this corporation may be
served. The post office address to which the Secretary of State shall mail a
copy of any process against this corporation served upon him as agent of this
corporation is Everest Healthcare Services, 1325 Morris Park Ave., Bronx, New
York 10461.
SIXTH: The duration of the corporation is to be perpetual.
SEVENTH: The corporation shall, to the fullest extent permitted by Article
7 of the Business Corporation Law, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said
Article from and against any and all of the expenses, liabilities, or other
matters referred to in or covered by said Article, and the indemnification
provided herein shall not be deemed exclusive or any other rights to which any
person may be entitled under any By-Law, resolution of directors or
shareholder's resolution, agreement, or otherwise, as permitted by said Article,
as to action in any capacity in which such person served at the request of the
corporation.
EIGHTH: The personal liability of the directors of the corporation is
eliminated to the fullest extent permitted by the provisions of paragraph (b) of
Section 402 of the Business Corporation Law, as the same may be amended and
supplemented.
Signed on July 24, 1997.
/s/ E. Raymond Kolarsey
------------------------------------------
E. Raymond Kolarsey, Incorporator
Hinman, Straub, Pigors & Manning, P.C.
121 State Street
Albany, New York 12207-1693
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF ALBANY )
On the date hereinafter set forth, before me came E. Raymond Kolarsey,
to me known to be the individual who is described in, and who signed the
foregoing Certificate of Incorporation, and he acknowledged to me that he signed
the same.
Signed on July 24, 1997.
/s/ Flora M. Baller
-------------------
Notary Public
FLORA M. BALLER
NOTARY PUBLIC, STATE OF NEW YORK
QUALIFIED IN COLUMBIA COUNTY
MY COMMISSION EXPIRES 11/30/97
<PAGE>
EXHIBIT 4.1
================================================================================
EVEREST HEALTHCARE SERVICES CORPORATION.
as Issuer,
and
THE SUBSIDIARY GUARANTORS
(defined herein)
and
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
as Trustee
------------------------
INDENTURE
Dated as of May 5, 1998
------------------------
up to $150,000,000
9-3/4% Senior Subordinated Notes due 2008
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3)................................................... N.A.
(a)(4)................................................... N.A.
(a)(5)................................................... 7.8; 7.10
(b)...................................................... 7.8; 7.10; 13.2
(c)...................................................... N.A.
311(a)...................................................... 7.11
(b)...................................................... 7.11
(c)...................................................... N.A.
312(a)...................................................... 2.5
(b)...................................................... 13.3
(c)...................................................... 13.3
313(a)...................................................... 7.6
(b)(1)................................................... N.A.
(b)(2)................................................... 7.6
(c)...................................................... 7.6; 13.2
(d)...................................................... 7.6
314(a)...................................................... 4.6; 4.8; 13.2
(b)...................................................... N.A.
(c)(1)................................................... 13.4
(c)(2)................................................... 13.4
(c)(3)................................................... N.A.
(d)...................................................... N.A.
(e)...................................................... 13.5
(f)...................................................... N.A.
315(a)...................................................... 7.1(b)
(b)...................................................... 7.5; 13.2
(c)...................................................... 7.1(a)
(d)...................................................... 7.1(c)
(e)...................................................... 6.11
316(a)(last sentence)....................................... 2.9
(a)(1)(A)................................................ 6.5
(a)(1)(B)................................................ 6.4
(a)(2)................................................... N.A.
(b)...................................................... 6.7
(c)...................................................... 9.5
317(a)(1)................................................... 6.8
(a)(2)................................................... 6.9
(b)...................................................... 2.4
318(a)...................................................... 13.1
(c)...................................................... 13.1
</TABLE>
___________________________
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions......................................................... 1
Section 1.2. Incorporation by Reference of TIA................................... 27
Section 1.3. Rules of Construction............................................... 28
ARTICLE II. THE NOTES
Section 2.1. Form and Dating..................................................... 28
Section 2.2. Execution and Authentication;
Aggregate Principal Amount......................................... 29
Section 2.3. Registrar and Paying Agent.......................................... 31
Section 2.4. Paying Agent To Hold Assets in Trust................................ 31
Section 2.5. Noteholder Lists.................................................... 32
Section 2.6. Transfer and Exchange............................................... 32
Section 2.7. Replacement Notes................................................... 33
Section 2.8. Outstanding Notes................................................... 33
Section 2.9. Treasury Notes...................................................... 34
Section 2.10. Temporary Notes..................................................... 34
Section 2.11. Cancellation........................................................ 34
Section 2.12. Defaulted Interest.................................................. 35
Section 2.13. CUSIP Number........................................................ 35
Section 2.14. Deposit of Moneys................................................... 35
Section 2.15. Book-Entry Provisions for Global Note............................... 35
Section 2.16. Special Transfer Provisions......................................... 37
ARTICLE III. REDEMPTION
Section 3.1. Notices to Trustee.................................................. 39
Section 3.2. Selection of Notes To Be Redeemed................................... 39
Section 3.3. Notice of Redemption................................................ 39
Section 3.4. Effect of Notice of Redemption...................................... 40
Section 3.5. Deposit of Redemption Price......................................... 41
Section 3.6. Notes Redeemed in Part.............................................. 41
ARTICLE IV. COVENANTS
Section 4.1. Payment of Notes.................................................... 41
Section 4.2. Maintenance of Office or Agency..................................... 42
Section 4.3. Corporate Existence................................................. 42
Section 4.4. Payment of Taxes and Other Claims................................... 42
Section 4.5. Business Activities................................................. 43
Section 4.6. Compliance Certificate; Notice of Default........................... 43
Section 4.7. Compliance with Laws................................................ 44
Section 4.8. Reports to Holders.................................................. 44
Section 4.9. Waiver of Stay, Extension or Usury Laws............................. 45
Section 4.10. Limitation on Restricted Payments................................... 45
Section 4.11. Limitation on Transactions with Affiliates.......................... 48
</TABLE>
(i)
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<TABLE>
<S> <C>
Section 4.12. Limitation on Indebtedness.......................................... 49
Section 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries............................................. 52
Section 4.14. Prohibition on Incurrence of Layered Indebtedness................... 53
Section 4.15. Limitation on Change of Control..................................... 53
Section 4.16. Limitation on Asset Sales........................................... 55
Section 4.17. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries............................................ 59
Section 4.18. Limitation on Liens................................................. 60
Section 4.19. Payments for Consent................................................ 60
Section 4.20. Additional Guarantees............................................... 61
Section 4.21. Sale and Leaseback Transactions..................................... 61
Section 4.22. Limitation on Restricted and Unrestricted Subsidiaries.............. 62
Section 4.23. Sales of Accounts Receivable........................................ 63
ARTICLE V. SUCCESSOR CORPORATION
Section 5.1. When Company May Merge, Etc......................................... 64
Section 5.2. Successor Corporation Substituted................................... 66
ARTICLE VI. DEFAULT AND REMEDIES
Section 6.1. Events of Default................................................... 66
Section 6.2. Acceleration........................................................ 68
Section 6.3. Other Remedies...................................................... 69
Section 6.4. Waiver of Past Defaults............................................. 69
Section 6.5. Control by Majority................................................. 69
Section 6.6. Limitation on Suits................................................. 70
Section 6.7. Rights of Holders To Receive Payment................................ 70
Section 6.8. Collection Suit by Trustee.......................................... 71
Section 6.9. Trustee May File Proofs of Claim.................................... 71
Section 6.10. Priorities.......................................................... 71
Section 6.11. Undertaking for Costs............................................... 72
Section 6.12. Restoration of Rights and Remedies.................................. 72
ARTICLE VII. TRUSTEE
Section 7.1. Duties of Trustee................................................... 73
Section 7.2. Rights of Trustee................................................... 74
Section 7.3. Individual Rights of Trustee........................................ 75
Section 7.4. Trustee's Disclaimer................................................ 75
Section 7.5. Notice of Default................................................... 75
Section 7.6. Reports by Trustee to Holders....................................... 76
Section 7.7. Compensation and Indemnity.......................................... 76
Section 7.8. Replacement of Trustee.............................................. 77
Section 7.9. Successor Trustee by Merger, Etc.................................... 78
Section 7.10. Eligibility; Disqualification....................................... 78
Section 7.11. Preferential Collection of Claims Against Company................... 79
ARTICLE VIII. DISCHARGE OF INDENTURE; DEFEASANCE
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
Section 8.1. Termination of the Company's Obligations........................... 79
Section 8.2. Legal Defeasance and Covenant Defeasance........................... 80
Section 8.3. Conditions to Legal Defeasance or Covenant
Defeasance........................................................ 82
Section 8.4. Application of Trust Money......................................... 83
Section 8.5. Repayment to the Company or the Subsidiary
Guarantors........................................................ 84
Section 8.6. Satisfaction and Discharge......................................... 84
Section 8.7. Reinstatement...................................................... 85
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. Without Consent of Holders......................................... 85
Section 9.2. With Consent of Holders............................................ 86
Section 9.3. Effect on Senior Indebtedness...................................... 87
Section 9.4. Compliance with TIA................................................ 87
Section 9.5. Revocation and Effect of Consents.................................. 87
Section 9.6. Notation on or Exchange of Notes................................... 88
Section 9.7. Trustee To Sign Amendments, Etc.................................... 89
ARTICLE X. SUBORDINATION
Section 10.1. Notes Subordinated to Senior Indebtedness.......................... 89
Section 10.2. No Payment on Notes in Certain Circumstances....................... 89
Section 10.3. Payment Over of Proceeds Upon Dissolution, Etc..................... 91
Section 10.4. Payments May Be Paid Prior to Dissolution.......................... 92
Section 10.5. Subrogation........................................................ 92
Section 10.6. Obligations of the Company Unconditional........................... 93
Section 10.7. Notice to Trustee.................................................. 93
Section 10.8. Reliance on Judicial Order or Certificate of
Liquidating Agent.................................................. 94
Section 10.9. Trustee's Relation to Senior Indebtedness.......................... 94
Section 10.10. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Indebtedness........ 95
Section 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes............................................ 95
Section 10.12. This Article X Not To Prevent Events of Default.................... 96
Section 10.13. Trustee's Compensation Not Prejudiced.............................. 96
ARTICLE XI. GUARANTEES
Section 11.1. Unconditional Guarantee............................................ 96
Section 11.2. Severability....................................................... 97
Section 11.3. Release of a Subsidiary Guarantor.................................. 98
Section 11.4. Limitation of Subsidiary Guarantor's Liability..................... 98
Section 11.5. Subsidiary Guarantors May Consolidate, Etc., on Certain Terms...... 99
Section 11.6. Contribution....................................................... 99
Section 11.7. Waiver of Subrogation.............................................. 100
Section 11.8. Execution of Guarantee............................................. 100
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE XII. SUBORDINATION OF GUARANTEES
Section 12.1. Subordination of Guarantee......................................... 101
Section 12.2. No Payment on Guarantees in Certain Circumstances.................. 101
Section 12.3. Payment Over of Proceeds Upon Dissolution, Etc..................... 103
Section 12.4. Payments May Be Paid Prior to Dissolution.......................... 104
Section 12.5. Subrogation........................................................ 105
Section 12.6. Obligations of Each Subsidiary Guarantor Unconditional............. 105
Section 12.7. Notice to Trustee.................................................. 106
Section 12.8. Reliance on Judicial Order or Certificate of Liquidating Agent..... 106
Section 12.9. Trustee's Relation to Guarantor Senior Indebtedness................ 107
Section 12.10. Subordination Rights Not Impaired by Acts or Omissions of a
Subsidiary Guarantor or Holders of Guarantor Senior Indebtedness.. 107
Section 12.11. Noteholders Authorize Trustee To Effectuate Subordination of
Guarantees........................................................ 108
Section 12.12. This Article XII Not To Prevent Events of Default.................. 109
Section 12.13. Trustee's Compensation Not Prejudiced.............................. 109
ARTICLE XIII. MISCELLANEOUS
Section 13.1. TIA Controls....................................................... 109
Section 13.2. Notices............................................................ 109
Section 13.3. Communications by Holders with Other Holders....................... 110
Section 13.4. Certificate and Opinion as to Conditions Precedent................. 110
Section 13.5. Statements Required in Certificate or Opinion...................... 111
Section 13.6. Rules by Trustee, Paying Agent, Registrar.......................... 111
Section 13.7. Legal Holidays..................................................... 112
Section 13.8. Governing Law...................................................... 112
Section 13.9. No Adverse Interpretation of Other Agreements...................... 112
Section 13.10. No Recourse Against Others......................................... 112
Section 13.11. Successors......................................................... 112
Section 13.12. Duplicate Originals................................................ 112
Section 13.13. Severability....................................................... 113
</TABLE>
Signatures................................................................. 113
Exhibit A(1) - Form of Initial Note with Guarantee.........................A.1-1
Exhibit A(2) - Form of Exchange Note with Guarantee........................A.2-1
Exhibit B - Form oF Legend for Global Notes.............................. B-1
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors.................... C-1
(iv)
<PAGE>
Exhibit D - Form of CertificatE To Be Delivered
in Connection with Transfers
Pursuant to Regulation S..................................... D-1
Exhibit E - Form of Supplemental Indenture............................... E-1
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
(v)
<PAGE>
INDENTURE
INDENTURE, dated as of May 5, 1998, by and among Everest Healthcare
Services Corporation, a Delaware corporation (the "Company"), the Subsidiary
-------
Guarantors (as hereinafter defined) and American National Bank and Trust Company
of Chicago, as Trustee (the "Trustee").
-------
The Company has duly authorized the creation of an issue of 9-3/4%
Senior Subordinated Notes due 2008 and, to provide therefor, the Company has
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Notes, when duly issued and executed, by the Company and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company, have been
done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
-----------
"Acceleration Notice" has the meaning provided in Section 6.2.
-------------------
"Accounts Receivable Subsidiary" means a newly created, Unrestricted
------------------------------
Subsidiary of the Company (i) which is formed solely for the purpose of, and
which engages in no activities other than activities in connection with,
financing accounts receivable of the Company and/or its Restricted Subsidiaries,
(ii) which is designated by the Board of Directors of the Company as an Accounts
Receivable Subsidiary pursuant to a Board Resolution set forth in an Officers'
Certificate and delivered to the Trustee, (iii) that has total assets at the
time of such creation and designation with a book value of $10,000 or less, (iv)
which has no Indebtedness other than Non-Recourse Debt, and (v) with which
neither the Company nor any Restricted Subsidiary of the Company has any
contract, agreement, arrangement or understanding other than contracts,
agreements, arrangements and understandings entered into in the ordinary course
of business in connection with sales of accounts receivable in accordance with
Section 4.23 and fees payable in the ordinary course of business in connection
with servicing accounts receivable.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
---------------------
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
<PAGE>
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation.
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the SEC promulgated thereunder.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
-------------------
the lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee of such Subsidiary Guarantor at such date and
(y) the present fair salable value of the assets of such Subsidiary Guarantor at
such date exceeds the amount that will be required to pay the probable liability
of such Subsidiary Guarantor on its debts (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date and after
giving effect to any collection from any Subsidiary of such Subsidiary Guarantor
in respect of the obligations of such Subsidiary under the Guarantee), excluding
debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" means, with respect to any specified Person, any other
---------
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
provided, that beneficial ownership of 10% or more of the voting Capital Stock
of a Person shall be deemed to be control. The terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.11.
---------------------
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Article 28 Company" means an entity organized and operated for the
------------------
primary purpose of conducting a Permitted Business and subject to a federal or
state law or regulation that: (i) limits or restricts the types of individuals
or entities that are permitted to hold an ownership or investment interest in
such an entity; and (ii) prohibits the Company and its Subsidiaries from being
able to directly hold an ownership or investment interest in such an entity.
"Asset Acquisition" means (a) an Investment by the
-----------------
-2-
<PAGE>
Company or any Restricted Subsidiary of the Company in any other Person pursuant
to which such Person (x) shall become a Restricted Subsidiary of the Company, or
(y) shall be merged with or into the Company or any Restricted Subsidiary of the
Company, or (b) the acquisition by the Company or any Restricted Subsidiary of
the Company of the assets of any Person (other than a Subsidiary of the Company)
which constitute all or substantially all of the assets of such Person or
comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
----------
transfer, lease, assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Subsidiary of the Company; or (b) any
other property or assets of the Company or any Restricted Subsidiary of the
Company; provided, however, that Asset Sales shall not include (i) a transaction
or series of related transactions for which the Company or its Subsidiaries
receive aggregate consideration of less than $1,000,000; (ii) sales of accounts
receivable to the Accounts Receivable Subsidiary in accordance with Section 4.23
other than the Initial Sale; and (iii) the sale, lease, conveyance, disposition
or other transfer (w) of the Capital Stock of an Unrestricted Subsidiary, (x) of
all or substantially all of the assets of the Company as permitted under Section
5.1, (y) involving only cash, Cash Equivalents or inventory in the ordinary
course of business or obsolete equipment in the ordinary course of business
consistent with past practices of the Company, or (z) involving only the lease
or sublease of any assets in the ordinary course of business.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
-----------------
means at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Authenticating Agent" has the meaning provided in Section 2.2.
--------------------
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.2(a).
---------------
"Board of Directors" means, as to any Person, the board
------------------
-3-
<PAGE>
of directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means a day that is not a Legal Holiday.
------------
"Capital Stock" means (i) in the case of a corporation, corporate
-------------
stock, (ii) in the case of an association or other entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Capitalized Lease Obligation" means, as to any Person, the
----------------------------
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
----------------
or unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from both Standard & Poor's Rating Services ("S&P") and Moody's Investors
---
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year
-------
from the date of creation thereof and, at the time of acquisition, having the
highest ratings obtainable from both S&P and Moody's; (iv) certificates of
deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above, entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest
-4-
<PAGE>
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Change of Control" means the occurrence of one or more of the
-----------------
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company and its Subsidiaries taken as a whole to any Person or
group of related Persons for purposes of Section 13(d) of the Exchange Act (a
"Group") together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of this Indenture); (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); (iii) the acquisition of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
in one or more transactions by any Person or Group other than a Person who is a
stockholder of the Company as of the Issue Date or Group comprised solely of
such Persons (the "Control Group") of either more than 25% of the aggregate
ordinary voting power represented by the issued and outstanding Capital Stock of
the Company or more than 25% of the aggregate issued and outstanding Common
Stock of the Company and such beneficial ownership percentage is greater than
the beneficial ownership of the Control Group; (iv) Home Dialysis of America,
Inc. or West Suburban Kidney Center, S.C. cease to be a Wholly Owned Restricted
Subsidiary of the Company, or (v) the replacement of a majority of the Board of
Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
"Change of Control Date" has the meaning provided in Section 4.15.
----------------------
"Change of Control Offer" has the meaning provided in Section 4.15.
-----------------------
"Change of Control Payment Date" has the meaning provided in Section
------------------------------
4.15.
"Common Stock" of any Person means any and all shares, interests or
------------
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
-5-
<PAGE>
"Company" means Everest Healthcare Services Corporation, a Delaware
-------
corporation and its successors that become a party to this Indenture in
accordance with its terms.
"Consolidated EBITDA" means, with respect to any Person, for any
-------------------
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business or other transactions the
effect of which has been excluded from Consolidated Net Income), (B)
Consolidated Interest Expense and (C) Consolidated Non-cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Subsidiaries in
accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
----------------------------------------
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
-------------------
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
----------------
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital or revolving credit facilities, occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds thereof), had
occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or
Asset Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one of
its Subsidiaries (including any Person who becomes a Subsidiary as a result of
the Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness and also including any Consolidated EBITDA (provided that
such Consolidated EBITDA shall be included only to the extent includable
pursuant to the definition of "Consolidated Net Income") attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring during the Four Quarter Period or at any time
-6-
<PAGE>
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) had
occurred on the first day of the Four Quarter Period. If such Person or any of
its Subsidiaries directly or indirectly guarantees Indebtedness of a third
Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
--------------------------
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person and its Restricted Subsidiaries (other than
dividends paid in Qualified Capital Stock or dividends to the extent payable to
the Company or its Restricted Subsidiaries) paid, accrued or scheduled to be
paid or accrued during such period (other than in the case of Preferred Stock of
such Person and its Restricted Subsidiaries for which the dividends are tax
deductible for federal income tax purposes, which shall be included in
Consolidated Fixed Charges without being multiplied by the fraction in (y)) and
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
-----------------------------
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, whether paid or
accrued, including without limitation, (a) any amortization of debt discount and
amortization or write-off of deferred financing
-7-
<PAGE>
costs, (b) the net costs under Interest Swap Obligations, (c) all capitalized
interest and (d) the interest portion of any deferred payment obligation,
including with respect to Attributable Debt; (ii) the aggregate dividend
payments of such Person and its Restricted Subsidiaries for such period with
respect to Disqualified Capital Stock; and (iii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
-----------------------
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis (before Preferred Stock (other than
Disqualified Stock) dividend requirements), determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains from Asset
Sales or abandonments of reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains or losses, (c) the net income
of any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Subsidiary of the referent Person,
(d) the net income (but not loss) of any Restricted Subsidiary of the referent
Person to the extent that the declaration of dividends or similar distributions
by that Restricted Subsidiary of that income is restricted (or subject to tax)
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a
Restricted Subsidiary of the referent Person by such Person (subject to the
limitation in clause (d)), (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve reduced
Consolidated Net Income accrued at any time following the Issue Date, (g) income
or loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued), (h) in the case of a successor to the referent
Person by consolidation or merger or as a transferee of the referent Person's
assets, any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets, (i) any gain realized in connection with the
disposition of any securities other than Cash Equivalents by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (j) all gains or losses from
the cumulative effect of any change in accounting principles.
"Consolidated Net Worth" means, (A) with respect to any partnership,
----------------------
the common and preferred partnership equity of such partnership and its
consolidated subsidiaries, as determined on a consolidated basis in accordance
with GAAP, and (B) with respect
-8-
<PAGE>
to any other Person as of any date, the sum of (i) the consolidated equity of
the common equityholders of such Person and its consolidated Subsidiaries as of
such date plus (ii) the respective amounts reported on such Person's balance
sheet as of such date with respect to any series of preferred equity (other than
Disqualified Capital Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
equity, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of this Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, plus (y) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person, for
-----------------------------
any period, the aggregate Consolidated Pooling Expenses, depreciation,
amortization and other non-cash expenses of such Person and its Subsidiaries
reducing Consolidated Net Income of such Person for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve relating to possible cash charges or expenditures for
any future or past period).
"Consolidated Pooling Expenses" of any Person means for any period,
-----------------------------
with respect to such Person and its Subsidiaries on a consolidated basis, the
transaction and the transaction-related expenses for such period in connection
with a pooling of interests transaction, determined in accordance with GAAP, but
only to the extent such expenses would have been capitalized, in accordance with
GAAP, if such transaction had been a purchase transaction.
"Contributions" means any loans, cash advances, capital contributions,
-------------
investments or other transfers of assets for either (i) Capital Stock or (ii)
less than fair value by the Company or any of its Restricted Subsidiaries to any
Subsidiary or other Affiliate of the Company other than to a Subsidiary
Guarantor.
"Covenant Defeasance" has the meaning provided in Section 8.2(c).
-------------------
"Credit Facility" means the Amended and Restated Credit Agreement,
---------------
dated as of May 15, 1997, as amended, among the Company, Harris Trust and
Savings Bank, individually and as Agent, and the lenders which are or become
parties thereto,
-9-
<PAGE>
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder; provided that such
increase in borrowings is permitted by Section 4.12) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
-------
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Default Notice" has the meaning provided in Section 10.2(a).
--------------
"Depository" means The Depository Trust Company, its nominees and
----------
successors.
"Depository Participants" has the meaning provided in Section 2.15.
-----------------------
"Designated Senior Indebtedness" means (i) Indebtedness under or in
------------------------------
respect of the Credit Facility and (ii) any other Indebtedness constituting
Senior Indebtedness which, at the time of determination, has an aggregate
principal amount of at least $35,000,000 and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"Disqualified Capital Stock" means, with respect to any person, any
--------------------------
Capital Stock which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Eligible Joint Venture" means any Person which meets all of the
----------------------
following criteria: (a) no Affiliate of the Company or
-10-
<PAGE>
a Restricted Subsidiary (other than a Restricted Subsidiary of the Company) has
an investment in such Person, (b) such Person is engaged in a Permitted
Business, (c) the Company and/or any of its Restricted Subsidiaries at all times
(i) controls, by voting power, board or management committee membership, or
through the provisions of any applicable partnership, shareholder or other
similar agreement or under an operating, maintenance or management agreement or
otherwise, the business operations of such Person, and (ii) owns at least 20% of
the total outstanding Capital Stock of such Person entitled to participate in
distributions in respect of the earnings, sale or liquidation of such Person,
(d) no more than $100,000 principal amount of the Indebtedness of such Person
outstanding at any one time is not Non-Recourse Debt, and (e) a default or event
of default under the Indebtedness of such Person would not result in a default
or event of default under any Indebtedness of the Company or its Restricted
Subsidiaries, except for Indebtedness permitted pursuant to (d).
"Event of Default" has the meaning provided in Section 6.1.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute or statutes thereto.
"Exchange Notes" means the 9-3/4% Senior Subordinated Notes due 2008
--------------
to be issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement or, with respect to Initial Notes issued under this Indenture
subsequent to the Issue Date pursuant to Section 2.2, a registration rights
agreement substantially identical to the Registration Rights Agreement.
"Exchange Offer" has the meaning assigned to such term in the
--------------
Registration Rights Agreement, dated as of May 5, 1998, by and among the
Company, the Subsidiary Guarantors, and BT Alex. Brown Incorporated, as initial
purchaser (the "Registration Rights Agreement").
-----------------------------
"fair market value" means, with respect to any asset or property, the
-----------------
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"First Call Date" means May 1, 2003.
---------------
"Foreign Subsidiary" means any Subsidiary of the Company either (a)
------------------
which is organized outside of the United States of America, (b) whose principal
activities are conducted outside of the United States of America or (c) whose
only
-11-
<PAGE>
material assets are Capital Stock in Subsidiaries which are Foreign
Subsidiaries.
"Funding Guarantor" has the meaning provided in Section 11.6.
-----------------
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Global Note" has the meaning provided in Section 2.1.
-----------
"Guarantee" means the Guarantees executed and delivered by any
---------
Subsidiary Guarantor with respect to the Company's obligations under this
Indenture and the Notes.
"Guarantor Blockage Period" has the meaning provided in Section
-------------------------
12.2(a).
"Guarantor Default Notice" has the meaning provided in Section
------------------------
12.2(a).
"Guarantor Designated Senior Indebtedness", with respect to any
----------------------------------------
Subsidiary Guarantor, means (i) if such Subsidiary Guarantor is party to the
Credit Facility, Indebtedness under or in respect of the Credit Facility and
(ii) any other Indebtedness constituting Guarantor Senior Indebtedness of such
Subsidiary Guarantor which, at the time of determination, has an aggregate
principal amount of at least $35,000,000 (including the principal amount of
Obligations of the Company and its Subsidiaries under such Indebtedness) and is
specifically designated in the instrument evidencing such Guarantor Senior
Indebtedness as "Designated Senior Indebtedness" or "Guarantor Designated Senior
Indebtedness" by the Company or any of its Subsidiaries.
"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
-----------------------------
Guarantor, all Indebtedness and other Obligations specified below payable
directly or indirectly by such Subsidiary Guarantor (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law), whether outstanding on the
Issue Date or thereafter created, incurred or assumed, by such Subsidiary
Guarantor: (i) the principal of, interest on and all other Obligations related
to the Credit Facility (including without limitation all loans, letters of
credit and other extensions of credit under the Credit Facility, and all
expenses, fees, reimbursements, indemnities and other amounts owing pursuant to
the Credit Facility); (ii) amounts
-12-
<PAGE>
payable in respect of any Interest Swap Obligations and Currency Agreements;
(iii) all Indebtedness not prohibited by Section 4.12 that is not expressly pari
passu with or subordinated to the Guarantee of such Subsidiary Guarantor; and
(iv) all permitted Refinancings thereof. Notwithstanding the foregoing,
"Guarantor Senior Indebtedness" shall not include (a) any Indebtedness of the
Subsidiary Guarantor to the Company or a Subsidiary of the Company, (b)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Subsidiary of the Company (including, without
limitation, amounts owed for compensation), (c) Indebtedness to trade creditors
and other amounts incurred in connection with obtaining goods, materials or
services, (d) Indebtedness represented by Disqualified Capital Stock, (e) any
liability for federal, state, local or other taxes owed or owing by the
Subsidiary Guarantor, (f) Indebtedness incurred in violation of Section 4.12,
(g) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Subsidiary Guarantor and (h) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Subsidiary
Guarantor.
"Holder" or "Noteholder" means the person in whose name a Note is
------ ----------
registered on the Registrar's books.
"incur" has the meaning provided in Section 4.12.
-----
"Indebtedness" means with respect to any Person, without duplication,
------------
(i) all indebtedness of such Person, whether or not contingent, for borrowed
money, (ii) all indebtedness of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all Capitalized Lease Obligations of
such Person, (iv) all indebtedness or other obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not in default or overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all indebtedness for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all indebtedness of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all indebtedness under Currency Agreements and Interest Swap
Agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such
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<PAGE>
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if any. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock. The amount of any Indebtedness (other than
Disqualified Capital Stock) outstanding as of any date shall be (i) the accreted
value thereof, to the extent such Indebtedness does not require current payments
of interest, (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness, (iii) in the case of Currency Agreements and Interest Swap
Agreements, the amount that would appear on the consolidated balance sheet of
the Person in accordance with GAAP and (iv) in the case of any guarantee or
other contingent obligation in respect of Indebtedness of any other Person shall
be deemed to be equal to the maximum amount of such Indebtedness, unless the
liability is limited by the terms of such guarantee or contingent obligation, in
which case the amount of such guarantee or other obligation shall be deemed to
equal the maximum amount of such liability.
"Independent Financial Advisor" means a firm (i) which does not, and
-----------------------------
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time in accordance with the terms hereof.
"Initial Notes" means, collectively, (i) the 9-3/4% Senior
-------------
Subordinated Notes due 2008 of the Company issued on the Issue Date and (ii) one
or more series of 9-3/4% Senior Subordinated Notes due 2008 that are issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.2, in
each case for so long as such securities constitute Restricted Securities.
"Initial Sale" means the first transaction in which accounts
------------
receivable are sold by the Company and/or its Restricted Subsidiaries to an
Accounts Receivable Subsidiary.
"Insolvency or Liquidation Proceedings" means with
-------------------------------------
-14-
<PAGE>
respect to any Person (i) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding relative to such Person or to the creditors of such Person, as such,
or to the assets of such Person, or (ii) any liquidation, dissolution,
reorganization or winding up of such Person, whether voluntary or involuntary,
or (iii) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of such Person.
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" when used with respect to any Note, means the
---------------------
stated maturity of an installment of interest specified in such Note.
"Interest Swap Obligations" means the obligations of any Person
-------------------------
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect
----------
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person (including a Subsidiary of the referent Person).
"Investment" shall exclude extensions of trade credit by the Company and its
Subsidiaries on commercially reasonable terms in accordance with normal trade
practices of the Company or such Subsidiary, as the case may be. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Capital Stock of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Capital Stock of such Subsidiary not sold or disposed.
For the purposes of Section 4.10, the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Company or any of its Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment,
-15-
<PAGE>
reduced by the payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such Investment; provided
that no such payment of dividends or distributions or receipt of any such other
amounts shall reduce the amount of any Investment if such payment of dividends
or distributions or receipt of any such amounts would be included in
Consolidated Net Income.
"Issue Date" means the date of original issuance of the Notes.
----------
"Legal Defeasance" has the meaning provided in Section 8.2(b).
----------------
"Legal Holiday" has the meaning provided in Section 13.7.
-------------
"Lien" means any lien, mortgage, deed of trust, pledge, security
----
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means May 1, 2008.
-------------
"Net Cash Proceeds" means, with respect to any Asset Sale, the
-----------------
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) income taxes paid or payable
after taking into account any reduction in consolidated income tax liability due
to available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale, (d) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, (e) proceeds
required to be placed in escrow, provided, that upon the release of any such
proceeds from such escrow to the Company or a Subsidiary of the Company such
released proceeds shall constitute "Net Cash Proceeds" and (f) in the case of a
sale by a Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary, the minority interests' proportionate share of such Net Cash
Proceeds.
-16-
<PAGE>
"Net Proceeds Offer" has the meaning provided in Section 4.16.
------------------
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
-----------------
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness, but excluding, in the case of (x) the Accounts
Receivable Subsidiary, warranty claims, indemnity rights and rights of set-off
with respect to accounts receivable that are sold to such Accounts Receivable
Subsidiary, and (y) any Eligible Joint Venture, any amounts loaned by the
Company or any such Restricted Subsidiary to such Eligible Joint Venture for
working capital purposes); (b) is directly or indirectly liable (as a guarantor
or otherwise, except as set forth in (a)); or (c) constitutes the lender (except
as set forth in (a)); (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of the Company or its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity; and (iii) as to which
the lenders, except for lenders under Indebtedness in existence on the Issue
Date or instruments governing Acquired Indebtedness (a) have acknowledged that
they do not have recourse to the holder of the Capital Stock of the debtor or
(b) have been notified in writing that they will not have any recourse to the
stock or assets of either the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person other than a "U.S. Person" (as
---------------
defined in Regulation S under the Securities Act).
"Notes" means, collectively, the Initial Notes, the Private Exchange
-----
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium, interest,
-----------
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any person, the Chairman of the
-------
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of such
person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"Officers' Certificate" means, with respect to any Person, a
---------------------
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such
-17-
<PAGE>
Person and otherwise complying with the requirements of Sections 13.4 and 13.5,
as they relate to the making of an Officers' Certificate.
"Offshore Physical Notes" has the meaning provided in Section 2.1.
-----------------------
"Opinion of Counsel" means a written opinion from legal counsel, who
------------------
may be counsel for the Company and who is reasonably acceptable to the Trustee,
complying with the requirements of Sections 13.4 and 13.5, as they relate to the
giving of an Opinion of Counsel.
"Pari Passu Debt" means any Indebtedness of the Company or its
---------------
Restricted Subsidiaries which, by its terms, is pari passu in right of payment
to the Notes or the Guarantees.
"Paying Agent" has the meaning provided in Section 2.3.
------------
"Payment in Full" (together with any correlative phrases, e.g., "paid
---------------
in full" and "pay in full") means (i) with respect to any Senior Indebtedness
other than Senior Indebtedness under or in respect of the Credit Facility,
payment in full thereof or due provision for payment thereof (x) in accordance
with the terms of the agreement or instrument pursuant to which such Senior
Indebtedness was issued or is governed or (y) otherwise to the reasonable
satisfaction of the holders of such Senior Indebtedness, which shall include, in
any Insolvency or Liquidation Proceeding, approval by such holders individually
or as a class, of the provision for payment thereof, and (ii) with respect to
Senior Indebtedness under or in respect of the Credit Facility, payment in full
thereof in cash or Cash Equivalents.
"Permitted Business" means the business of the Company and its
------------------
Subsidiaries as existing on the Issue Date or such other businesses as the Board
of Directors of the Company determines are reasonably related thereto as
evidenced by a Board Resolution.
"Permitted Indebtedness" has the meaning provided in Section 4.12(b).
----------------------
"Permitted Insolvency Payments" means (i) securities distributed to
-----------------------------
the Holders of the Notes in an Insolvency or Liquidation Proceeding pursuant to
a plan of reorganization consented to by each class of the Senior Indebtedness,
but only if all of the terms and conditions of such securities (including,
without limitation, term, tenor, interest, amortization, subordination,
standstills, covenants and defaults), are at least as favorable (and provide the
same relative benefits) to the holders of Senior Indebtedness and to the holders
of any security distributed in such Insolvency or Liquidation Proceeding on
account of any such Senior Indebtedness as the terms and conditions of the Notes
and this Indenture are, and provide to
-18-
<PAGE>
the holders of Senior Indebtedness, and (ii) payments from a trust established
pursuant to Article VIII, provided that payment into such trust was not made
either (x) within 90 days prior to the commencement of an Insolvency or
Liquidation Proceeding, or (y) during any period in which payment on the Notes
is blocked pursuant to Article X.
"Permitted Investments" means (i) Investments by the Company or any
---------------------
Subsidiary of the Company in any Person engaged in a Permitted Business that is
or will become immediately after such Investment a Wholly Owned Restricted
Subsidiary of the Company other than a Foreign Subsidiary or that will merge or
consolidate into the Company or a Wholly Owned Restricted Subsidiary of the
Company other than a Foreign Subsidiary; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; provided that any Indebtedness evidencing
such Investment is unsecured and subordinated to the Company's obligations under
the Notes and this Indenture, pursuant to a written agreement and to the same
extent that the Notes are subordinated to Senior Indebtedness; (iii) investments
in cash and Cash Equivalents; (iv) loans and advances to employees and officers
of the Company and its Subsidiaries in the ordinary course of business for bona
fide business purposes not in excess of $1,000,000 at any one time outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Subsidiaries' businesses and otherwise
in compliance with this Indenture; (vi) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (vii) Investments made by the Company or any of its Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with Section 4.16; (viii) Investments in an Accounts Receivable
Subsidiary received in consideration of sales of accounts receivable in
accordance with Section 4.23; (ix) Investments by the Company or any Restricted
Subsidiary in a Restricted Subsidiary or an Eligible Joint Venture in an amount
at any one time outstanding not to exceed $5,000,000 in the aggregate, so long
as that after giving effect to any such Investment, no Default or Event of
Default shall have occurred, and the Consolidated Fixed Charge Coverage Ratio of
the Company is greater than 2.5 to 1.0; and (x) other Investments in any Person
having an aggregate fair market value (measured on the date each such Investment
was made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (x) that are at
the time outstanding, not to exceed $10,000,000, so long as that after giving
effect to any such Investment, no Default or Event of Default shall have
occurred.
"Permitted Liens" means the following types of Liens:
---------------
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) being
-19-
<PAGE>
contested in good faith by appropriate proceedings and as to which the
Company or its Restricted Subsidiaries, as the case may be, shall have set
aside on its books such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(iv) Liens securing letters of credit issued in the ordinary course
of business consistent with past practice in connection with the items
referred to in clause (iii) or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(v) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(vi) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(viii) purchase money Liens to finance property or assets of the
Company or any Subsidiary of the Company acquired in the ordinary course of
business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Subsidiary
of the Company, other than the property and assets so acquired and (B) the
Lien securing such Indebtedness shall be created within 90 days of such
acquisition;
-20-
<PAGE>
(ix) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(x) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(xi) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xii) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xiii) Liens securing Indebtedness under Currency Agreements;
(xiv) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.12; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company, and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Subsidiary of the
Company, and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of its Subsidiaries, other than the
property or assets that secured the Acquired Indebtedness prior to the time
such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company, and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary of
the Company;
(xv) Liens to secure Attributable Debt that is permitted to be
incurred pursuant to Section 4.21; provided that any such Liens shall not
extend to or cover any assets of the Company or any Restricted Subsidiary,
other than the assets which are the subject of the Sale and Leaseback
Transaction in which the Attributable Debt is incurred;
(xvi) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its Restricted
Subsidiaries;
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<PAGE>
(xvii) any interest or title of a lessor in the property subject to
any lease, whether characterized as capitalized or operating other than any
such interest or title resulting from or arising out of a default by the
Company or any of its Restricted Subsidiaries of its obligations under such
lease;
(xviii) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of personal property
that are otherwise permitted under this Indenture and under which the
Company or any of its Restricted Subsidiaries is lessee;
(xix) Liens arising by virtue of any statutory or common law
provisions relating to banker's Liens, rights of setoff or similar rights
as to deposit accounts or other funds maintained with a creditor depositary
institution; and
(xx) Liens in favor of the Trustee and any substantially equivalent
Lien granted to any trustee or similar institution under any indenture
governing Indebtedness permitted to be incurred or outstanding under this
Indenture.
"Person" means an individual, partnership, corporation, limited
------
liability company, unincorporated organization, trust or joint venture, a
governmental agency or political subdivision thereof or other entity.
"Physical Notes" has the meaning provided in Section 2.1.
--------------
"Preferred Stock" of any Person means any Capital Stock of such Person
---------------
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
---------
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" has the meaning set forth in the Registration
----------------------
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Initial Notes in the form set forth in Exhibit A(l).
------------
"Proceeds Purchase Date" has the meaning provided in Section 4.16.
----------------------
"pro forma" means, with respect to any calculation made or required to
---------
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under
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<PAGE>
the Securities Act, as determined by the Board of Directors of the Company in
consultation with its independent public accountants.
"Property" of any person means all types of real, personal, tangible,
--------
intangible or mixed property owned by such person whether or not included in the
most recent consolidated balance sheet of such person and its Subsidiaries under
GAAP.
"Public Equity Offering" means an underwritten equity offering,
----------------------
pursuant to an effective registration statement under the Act, of the Qualified
Capital Stock of the Company, or of any entity of which the Company is a direct
or indirect subsidiary, to the extent the proceeds thereof shall have been
received or contributed to the Company.
"Qualified Capital Stock" means any Capital Stock that is not
-----------------------
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
"Record Date" means, with respect to any Note, any of the Record Dates
-----------
specified in such Note, whether or not a Legal Holiday.
"Redemption Date," when used with respect to any Note to be redeemed,
---------------
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
"Redemption Price," when used with respect to any Note to be redeemed,
----------------
means the price fixed for such redemption pursuant to this Indenture and the
Notes.
"Reference Date" has the meaning provided in Section 4.10.
--------------
"Refinance" means, in respect of any security or Indebtedness, to
---------
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
------------------------
Subsidiary of the Company of Indebtedness incurred in accordance with Section
4.12 (other than pursuant to clause (iii), (v), (vi), (vii), (x), (xi), (xii) or
(xiii) of Section 4.12(b)), in each case that does not (1) result in an increase
in the aggregate principal amount of Indebtedness of such Person as of the date
of such proposed Refinancing (plus the amount of any premium or penalty required
to be paid under the terms of the instrument governing such Indebtedness and
plus the amount of reasonable expenses incurred by the Company in connection
with
-23-
<PAGE>
such Refinancing) or (2) create Indebtedness with (A) a Weighted Average
Life to Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is solely Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes or any
Guarantee, then such Refinancing Indebtedness shall have a final maturity date
later than 91 days after the final maturity date of the Notes and shall be
subordinate to the Notes at least to the same extent and in the same manner as
the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.3.
---------
"Registration Rights Agreement" has the meaning provided in the
-----------------------------
definition of "Exchange Offer."
"Regulation S" means Regulation S under the Act.
------------
"Representative" means the indenture trustee or other trustee, agent
--------------
or representative in respect of any Designated Senior Indebtedness; provided
that if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness.
"Repurchase Date" has the meaning provided in Section 4.15.
---------------
"Restricted Payment" has the meaning provided in Section 4.10.
------------------
"Restricted Security" has the meaning assigned to such term in Rule
-------------------
144(a)(3) under the Act; provided that the Trustee shall be entitled to request
and conclusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Security.
"Restricted Subsidiary" of a Person means any Subsidiary of the
---------------------
referent Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Act.
---------
"Sale and Leaseback Transaction" means any direct or indirect
------------------------------
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of any property, whether owned by
the Company or any Subsidiary at the Issue Date or later acquired, which has
been or
-24-
<PAGE>
is to be sold or transferred by the Company or such Subsidiary to such Person
or to any other Person from whom funds have been or are to be advanced by such
Person on the security of such Property.
"SEC" means the United States Securities and Exchange Commission and
---
any successor agency.
"Senior Indebtedness" means, all Indebtedness and other Obligations
-------------------
specified below payable directly or indirectly by the Company or any of its
Restricted Subsidiaries (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law), whether outstanding on the Issue Date or thereafter created,
incurred or assumed, by the Company or any of its Restricted Subsidiaries: (i)
the principal of, interest on and all other Obligations related to, the Credit
Facility (including without limitation all loans, letters of credit and other
extensions of credit under the Credit Facility, and all expenses, fees,
reimbursements, indemnities and other amounts owing pursuant to the Credit
Facility); (ii) amounts payable in respect of any Interest Swap Obligations and
Currency Agreements; (iii) all Indebtedness not prohibited by Section 4.12 that
is not expressly pari passu with or subordinated to the Notes; and (iv) all
permitted Refinancings thereof. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (a) any Indebtedness of the Company to a
Subsidiary of the Company, (b) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of the Company or any Subsidiary of
the Company (including, without limitation, amounts owed for compensation), (c)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (d) Indebtedness represented by
Disqualified Capital Stock, (e) any liability for federal, state, local or other
taxes owed or owing by the Company, (f) Indebtedness incurred in violation of
Section 4.12, (g) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (h) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule
----------------------
1.02(w) of Regulation S-X under the Securities Act.
"Stated Maturity" means, with respect to any installment of interest,
---------------
accreted value or principal on any series of Indebtedness, the date on which
such payment of interest or principal is due or is scheduled to be paid in the
original documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest,
accreted value or principal prior to the date originally scheduled for the
payment or accretion thereof.
-25-
<PAGE>
"Subsidiary", with respect to any Person, means (i) any corporation of
----------
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means (i) initially, Amarillo Acute Dialysis
--------------------
Specialists, L.L.C., Con-Med Supply Company, Inc., Continental Health Care,
Ltd., Dialysis Specialists of Corpus Christi, L.L.C., Dialysis Specialists of
South Texas, L.L.C., Dupage Dialysis Ltd., Everest Management, Inc., Hemo
Dialysis of Amarillo L.L.C., Home Dialysis of America, Inc., Home Dialysis of
Dayton, Inc., Lake Avenue Dialysis Center, Inc., Mercy Dialysis Center, Inc.,
New York Dialysis Management, Inc., North Buckner Dialysis Center, Inc.,
Northwest Indiana Dialysis, Inc., Ohio Valley Dialysis Center, Inc., and WSKC
Dialysis Services, Inc., and (ii) each of the Company's Subsidiaries that in the
future executes a supplemental indenture in which such Subsidiary agrees to be
bound by the terms of this Indenture as a Subsidiary Guarantor; provided that
any Person constituting a Subsidiary Guarantor as described above shall cease to
be a Subsidiary Guarantor when its respective Guarantee is released in
accordance with the terms thereof.
"Surviving Entity" has the meaning provided in Section
----------------
5.1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.4.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer of the Trustee assigned by the
-------------
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
"U.S. Government Obligations" means non-callable direct obligations
---------------------------
of, and non-callable obligations guaranteed by, the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Physical Notes" has the meaning provided in
-------------------
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<PAGE>
Section 2.1.
"Unrestricted Notes" means one or more Notes that do not and are not
------------------
required to bear the private placement legend in the form set forth on Exhibit
-------
A(l), including, without limitation, the Exchange Notes in the form set forth as
- ----
Exhibit A(2) hereto.
- ------------
"Unrestricted Subsidiary" means any Subsidiary that is designated by
-----------------------
the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to
a Board Resolution, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) on the date of such designation
is not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company or such Restricted
Subsidiary; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Capital Stock or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or its
Restricted Subsidiaries, and has at least one executive officer that is not a
director or executive officer of the Company or its Restricted Subsidiaries.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (i) 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, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means any
----------------------------------
Restricted Subsidiary of such Person of which all the outstanding voting
securities are owned by such Person or any Wholly Owned Restricted Subsidiary of
such Person.
Section 1.2. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
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<PAGE>
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Subsidiary Guarantors, or any other obligor on the Notes or the Guarantees.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
Section 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE II.
THE NOTES
Section 2.1. Form and Dating.
---------------
The Initial Notes, the notation thereon relating to the Guarantees and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit A(1) hereto. The Exchange Notes, the notation thereon relating to
------------
the Guarantees and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A(2) hereto. The Notes may have notations,
------------
legends or endorsements required by law, stock exchange rule or depository rule
or usage. The Company and the Trustee shall approve the form of the Notes and
any notation,
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<PAGE>
legend or endorsement on them. Each Note shall be dated the date of its
issuance.
The terms and provisions contained in the Notes and the Guarantees
annexed hereto as Exhibits A(l) and A(2), shall constitute, and are hereby
------------- ----
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Subsidiary Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A(l) (the "Global Note"),
------------ -----------
deposited with the Trustee, as custodian for the Depository, and shall bear the
legend set forth in Exhibit B, duly executed by the Company and the Subsidiary
---------
Guarantors, if any, and authenticated by the Trustee as hereinafter provided.
The aggregate principal amount of the Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A(l) (the
------------
"Offshore Physical Notes"). Notes offered and sold in reliance on any other
-----------------------
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued, and Notes offered and sold in reliance
on Rule 144A may be issued, in the form of permanent certificated Notes in
registered form, in substantially the form set forth in
Exhibit A(1) (the "U.S. Physical Notes"). The Offshore Physical Notes and the
- ------------ -------------------
U.S. Physical Notes are sometimes collectively herein referred to as the
"Physical Notes."
- ---------------
Section 2.2. Execution and Authentication;
Aggregate Principal Amount.
---------------------------
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to the Notes for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the Notes. Each
Subsidiary Guarantor shall execute the Guarantee in the manner set forth in
Section 11.8.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
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<PAGE>
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $150,000,000 in one or more series,
(ii) Private Exchange Notes from time to time only in exchange for a like
principal amount of Initial Notes and (iii) Unrestricted Notes from time to time
only (x) in exchange for a like principal amount of Initial Notes or (y) in an
aggregate principal amount of not more than the excess of $150,000,000 over the
sum of the aggregate principal amount of (A) Initial Notes then outstanding, (B)
Private Exchange Notes then outstanding and (C) Unrestricted Notes issued in
accordance with (iii)(x) above, in each case upon a written order of the Company
in the form of an Officers' Certificate of the Company. Each such written order
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated, whether the Notes are to be Initial Notes,
Private Exchange Notes or Unrestricted Notes and whether the Notes are to be
issued as Physical Notes or Global Notes or such other information as the
Trustee may reasonably request. In addition, with respect to authentication
pursuant to clauses (ii) or (iii) of the first sentence of this paragraph, the
first such written order from the Company shall be accompanied by an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee stating
that the issuance of the Private Exchange Notes or the Unrestricted Notes, as
the case may be, does not give rise to an Event of Default, complies with this
Indenture and has been duly authorized by the Company. The aggregate principal
amount of Notes outstanding at any time may not exceed $150,000,000, except as
provided in Section 2.8.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Company shall use its best efforts to obtain the same
"CUSIP" number for such Notes as is printed on the Notes outstanding at such
time; provided, however, that if any series of Notes issued under this Indenture
subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee to be a different
class of security than the Notes outstanding at such time for federal income tax
purposes, the Company may obtain a "CUSIP" number for such Notes that is
different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the "Authenticating
--------------
Agent") reasonably acceptable to the Company to
- -----
-30-
<PAGE>
authenticate Notes. Unless otherwise provided in the appointment, an
Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such Authenticating Agent. An Authenticating Agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (b) Notes may be presented or surrendered for payment
---------
("Paying Agent") and (c) notices and demands to or upon the Company in respect
- --------------
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The
term "Paying Agent" includes any additional Paying Agent. Neither the Company
nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.7.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. The
Paying Agent or Registrar may resign upon 30 days prior written notice to the
Company.
Section 2.4. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that, subject to Articles X and XII, each Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all assets held by
the Paying Agent for the payment of principal of, or interest on, the Notes
(whether
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<PAGE>
such assets have been distributed to it by the Company or any other obligor on
the Notes), and the Company and the Paying Agent shall notify the Trustee in
writing of any Default by the Company (or any other obligor on the Notes) in
making any such payment. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent shall have no
further liability for such assets.
Section 2.5. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee as of each Record Date and before
each related Interest Payment Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of Noteholders, which list may be
conclusively relied upon by the Trustee.
Section 2.6. Transfer and Exchange.
---------------------
Subject to the provisions of Sections 2.15 and 2.16, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar or co-Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transaction are met; provided, however, that the Notes presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registrations of transfer
and exchanges, the Company shall issue and execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request. No service
charge shall be made to a Noteholder for any registration of transfer or
exchange. The Company may require from such Noteholder payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or similar governmental
charge payable upon exchanges or transfers pursuant to Sections 2.10, 3.6, 4.15,
4.16 or 9.6, in which event the Company shall be responsible for the payment of
such taxes).
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<PAGE>
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article III, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Section 2.7. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and execute and the Trustee shall authenticate a replacement
Note if the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an affidavit of lost certificate and an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Note is replaced. The Company may
charge such Holder for its reasonable, out-of-pocket expenses in replacing a
Note, including reasonable fees and expenses of the Trustee and counsel and the
Trustee may charge the Company for the Trustee's reasonable out-of-pocket
expenses in replacing such Note. Every replacement Note shall constitute an
additional Obligation of the Company.
Section 2.8. Outstanding Notes.
-----------------
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.9, a Note does not cease to be
outstanding because the Company, any Subsidiary Guarantor or any of their
respective Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.7 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
- ---- ----
of such Note and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the
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<PAGE>
Notes payable on that date and is not prohibited from paying such money to the
Holders thereof pursuant to the terms of this Indenture, then on and after that
date such Notes shall cease to be outstanding and interest on them shall cease
to accrue.
Section 2.9. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company, any Subsidiary Guarantor or any of their respective Affiliates
shall be considered as though they are not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes which a Trust Officer of the
Trustee actually knows are so owned shall be so considered. The Company shall
notify the Trustee, in writing, when it, any Subsidiary Guarantor or any of
their respective Affiliates repurchases or otherwise acquires Notes, and of the
aggregate principal amount of such Notes so repurchased or otherwise acquired.
Section 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated, and shall direct
the Trustee to authenticate such Notes and certify that all conditions precedent
to the issuance of such Notes contained herein have been complied with.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company and the Trustee consider appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.2 definitive Notes in exchange for temporary Notes.
Section 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
(subject to the record-retention requirements of the Exchange Act) dispose of
all Notes surrendered for registration of transfer, exchange, payment or
cancellation. Subject to Section 2.7, the Company may not issue new Notes to
replace Notes that it has paid or delivered to the Trustee for cancellation. If
the Company or any Subsidiary Guarantor shall acquire any of the Notes, such
acquisition shall not operate as a redemption or
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<PAGE>
satisfaction of the Indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee for cancellation pursuant to this Section
2.11.
Section 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Section 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use one or more "CUSIP" numbers,
and if so, the appropriate CUSIP number(s) shall be included in all notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made by the Trustee as to the
correctness or accuracy of any CUSIP number(s) printed in the notice or on the
Notes, and that reliance may be placed only on the other identification numbers
printed on the Notes. The Company shall promptly notify the Trustee of any
change in the CUSIP number.
Section 2.14. Deposit of Moneys.
-----------------
Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and on the Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be.
Section 2.15. Book-Entry Provisions for Global Note.
-------------------------------------
(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit B. Members of, or participants in, the Depository ("Depository
- --------- ----------
Participants") shall have no rights under this Indenture with respect to any
- ------------
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the
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Company or the Trustee as the absolute owner of the Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Depository
Participants, the operation of customary practices governing the exercise of the
rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.16. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Note and a
successor depository is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.16, bear the Private Placement Legend.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Depository Participants and persons that may
hold interests through Depository Participants, to take any action which a
Holder is entitled to take under this Indenture or the Notes.
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Section 2.16. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
---------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the date of this Indenture and the transferor
certifies that it is not, and for the preceding three months has not
been, an Affiliate of the Company or any Subsidiary Guarantor, and
that the Restricted Security was not acquired from the Company or an
Affiliate of the Company less than two years prior to the date of the
proposed transfer or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-
U.S. Persons), the proposed transferee has delivered to the Registrar
a certificate substantially in the form of Exhibit C hereto or (2)
---------
in the case of a transfer to a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit D hereto; and
---------
(ii) if the proposed transferor is a Depository Participant
holding a beneficial interest in the Global Note, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i)
above and (y) instructions given in accordance with the Depository's
and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of outstanding
Physical Notes) a decrease in the principal amount of the Global Note in an
amount equal to the principal amount of the beneficial interest in the
Global Note to be transferred, and (b) the Company shall execute and the
Trustee shall authenticate and deliver one or more Physical Notes of like
tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made
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in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that
it is purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is a Depository Participant, and
the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the circumstance contemplated by paragraph
(a)(i)(x) of this Section 2.16 exist or (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such Private Placement Legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Act.
(d) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16
for a period of three years. The Company shall have the right to inspect and
make copies of
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all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
ARTICLE III.
REDEMPTION
Section 3.1. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to Paragraph Six of the
Notes, it shall notify both the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed. The
Company shall give each notice provided for in this Section 3.1 at least 30 days
(or 45 days if the Company causes the Trustee to give notice of redemption to
the Holders pursuant to Section 3.3 hereof) before the Redemption Date, together
with an Officers' Certificate and Opinion of Counsel stating that such
redemption shall comply with the conditions contained herein and in the Notes.
Section 3.2. Selection of Notes To Be Redeemed.
---------------------------------
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that if a
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portions thereof for redemption shall be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to Depository procedures), unless such method is otherwise
prohibited. The Trustee shall make the selection from the Notes outstanding and
not previously called for redemption and shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof to be redeemed.
Notes in denominations of $1,000 may be redeemed only in whole. The Trustee may
select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Notes that have denominations larger than $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Notes are to be redeemed, with
a copy to the
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Trustee and any Paying Agent.
Each notice for redemption shall identify the Notes to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless (a) the Company defaults in making the
redemption payment or (b) such redemption payment is prohibited
pursuant to Article X or XII hereof or otherwise, interest on Notes
called for redemption ceases to accrue on and after the Redemption
Date, and the only remaining right of the Holders of such Notes is to
receive payment of the Redemption Price plus accrued interest, if any,
to the Redemption Date, upon surrender to the Paying Agent of the
Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of
such Note to be redeemed and that, on or after the Redemption Date,
and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be
issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
Section 3.4. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.3,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption, unless prohibited
pursuant to Article X or XII or otherwise pursuant to this Indenture, shall be
paid at the Redemption Price (which shall include accrued
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interest thereon to the Redemption Date), but installments of interest, the
maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant record dates referred
to in the Notes.
Section 3.5. Deposit of Redemption Price.
---------------------------
On or before the Redemption Date, the Company shall deposit with the
Paying Agent in immediately available funds U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Notes or portions
thereof to be redeemed on that date. The Paying Agent shall promptly return to
the Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article VII.
If the Company complies with the preceding paragraph and payment of
the Notes is not prohibited under Article X or XII or otherwise, then, unless
the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed shall cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
Section 3.6. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is to be redeemed in part, the Company
shall issue and execute, and the Trustee shall authenticate for the Holder, a
new Note or Notes equal in principal amount to the unredeemed portion of the
Note surrendered.
ARTICLE IV.
COVENANTS
Section 4.1. Payment of Notes.
----------------
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
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Section 4.2. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under Section
2.3. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.2.
Section 4.3. Corporate Existence.
-------------------
Except as otherwise permitted by Article V, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate
existence of each of the Restricted Subsidiaries in accordance with the
respective organizational documents of each such Restricted Subsidiary and the
material rights (charter and statutory) and franchises of the Company and each
such Restricted Subsidiary; provided, however, that the Company shall not be
required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Subsidiaries, any such existence, material right
or franchise, if the Board of Directors of the Company shall determine in good
faith that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries, taken as a whole.
Section 4.4. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
its Properties or any of its Subsidiaries' Properties and (ii) all material
lawful claims for labor, materials and supplies that, if unpaid, might by law
become a Lien upon its Properties or any of its Subsidiaries' Properties,
except, in each case, as would not be, in the aggregate, reasonably likely to
have a material adverse effect on the business and financial condition of the
Company and its Restricted Subsidiaries, taken as a whole; provided, however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
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Section 4.5. Business Activities.
-------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business other than Permitted Businesses, except
to such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
Section 4.6. Compliance Certificate;
Notice of Default.
-----------------------
(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, an Officers' Certificate which complies
with TIA (S) 314(a)(4) stating that a review of its activities during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed and
fulfilled its Obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to such Officer's knowledge the
Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and the Obligations contained in this
Indenture and the Notes and no Default or Event of Default occurred during such
year and at the date of such certificate there is no Default or Event of Default
that has occurred and is continuing or, if such signers do know of such Default
or Event of Default, the certificate shall describe the Default or Event of
Default and its status with particularity. The Officers' Certificate shall also
notify the Trustee should the Company elect to change the manner in which it
fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to Section 4.8
shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article IV, V or VI of this Indenture insofar as they relate to
accounting matters or, if any such violation has occurred, specifying the nature
and period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
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(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 13.2 hereof,
by registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action (including any action the Company
is taking or proposes to take in respect thereof) within thirty days of such
occurrence.
Section 4.7. Compliance with Laws.
--------------------
The Company shall, and shall cause each of its Subsidiaries to, comply
with all applicable statutes, rules, regulations, orders and restrictions of the
United States of America, all states and municipalities thereof, and of any
governmental department, commission, board, regulatory authority, bureau, agency
and instrumentality of the foregoing, in respect of the conduct of its
businesses and the ownership of its properties, except for such noncompliances
as are not in the aggregate reasonably likely to have a material adverse effect
on the business or financial condition of the Company and its Subsidiaries,
taken as a whole.
Section 4.8. Reports to Holders.
------------------
(a) The Company shall deliver to the Trustee within 15 days after the
filing of the same with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports, if any, which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company
shall also comply with the other provisions of TIA (S) 314(a).
(b) At the Company's expense, regardless of whether the Company is
required to furnish such reports and other information referred to in paragraph
(a) above to its stockholders pursuant to the Exchange Act, the Company shall
cause such reports and other information to be mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar within
15 days after it files (or if it is no longer subject to such requirement, would
have been required to file) them with the SEC.
(c) The Company shall provide to any Holder any information
reasonably requested by such Holder concerning the
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Company (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144A under the Act.
(d) At the Company's expense, the Company shall cause an annual
report if furnished by it to stockholders generally and each quarterly or other
financial report if furnished by it to stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
register of Notes maintained by the Registrar at the time of such mailing or
furnishing to stockholders. The Company shall make such annual, quarterly and
other financial reports available to securities analysts and prospective
investors upon request.
Section 4.9. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company and each Subsidiary Guarantor covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Subsidiary Guarantor, as the case may be, from paying all or
any portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be and as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Subsidiary Guarantor hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
Section 4.10. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly: (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock or any Restricted Subsidiary's Capital Stock; (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any Subsidiary of the Company or any warrants, rights or options
to purchase or acquire shares of any class of such Capital Stock; (c) make any
Investment (other than Permitted Investments); or (d) make any payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness subordinated in right of payment to the Notes or the
Guarantees, except a payment of interest or principal at Stated Maturity (each
of the foregoing actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), unless at the time of such Restricted
------------------
Payment and immediately after giving effect thereto,
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(i) no Default or Event of Default shall have occurred and be continuing; and
(ii) the Company is able to incur at least $1.00 of additional Indebtedness (in
addition to Permitted Indebtedness) in compliance with Section 4.12; and (iii)
the aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property as
determined reasonably and in good faith by the Board of Directors of the
Company) is less than the sum of: (w) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company earned subsequent to the Issue Date and on or prior to
the date the Restricted Payment occurs (the "Reference Date") (treating such
--------------
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on or prior
to the Reference Date of Qualified Capital Stock of the Company; plus (y) 100%
of the net cash proceeds from the sale of Investments by the Company (other than
Permitted Investments) provided that such Investment was made after the Issue
Date; plus (z) without duplication of any amounts included in clause (iii)(x)
above, 100% of the aggregate net cash proceeds of any equity contribution
received by the Company from a holder of the Company's Capital Stock (excluding,
in the case of clauses (iii)(x) and (z), any net cash proceeds from a Public
Equity Offering to the extent used to redeem the Notes).
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph shall not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; or (2) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any shares of Qualified Capital Stock of the Company or payment,
redemption, acquisition or defeasance of Indebtedness subordinated in right of
payment to the Notes or the Guarantees, either (i) solely in exchange for shares
of Qualified Capital Stock of the Company and Refinancing Indebtedness or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock of the Company (excluding, in the case of clause (2)(ii), any net cash
proceeds from a Public Equity Offering to the extent used to redeem the Notes);
(3) the defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Refinancing
Indebtedness; (4) the payment of any dividend or distribution by a Restricted
Subsidiary of the Company to the Company or a Wholly Owned Restricted Subsidiary
of the Company; (5) the repurchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company held by any member of
the Company's (or any of its Restricted Subsidiaries') management either (a)
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pursuant to any management equity subscription agreement or stock option
agreement in effect as of the date of this Indenture, or (b) upon the
termination of such person's employment; provided that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Capital Stock pursuant
to clauses (a) and (b) shall not exceed $1,000,000 in any twelve-month period
and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; (6) if no Default or Event of Default shall
have occurred and be continuing, repurchases of Capital Stock deemed to occur
upon the exercise of stock options if such Capital Stock represents a portion of
the exercise price thereof; (7) Investments in, including Contributions to, a
Restricted Subsidiary if such Restricted Subsidiary is not a Foreign Subsidiary,
including Investments in, or Contributions to a Person which becomes a
Restricted Subsidiary as a result thereof and, if such Person is not already a
Subsidiary Guarantor, such Person (a) executes and delivers to the Trustee a
supplemental indenture in the form of Exhibit E hereto pursuant to which such
Restricted Subsidiary shall guarantee all of the Obligations of the Company with
respect to this Indenture and the Notes and (b) delivers to the Trustee an
Opinion of Counsel reasonably satisfactory to the Trustee to the effect that
such supplemental indenture has been duly executed and delivered by such
Restricted Subsidiary and is in compliance with the terms of this Indenture; (8)
so long as no Default or Event of Default shall have occurred and be continuing,
dividends and distributions by a Restricted Subsidiary pro rata to the holders
of its Capital Stock as their interests may appear; (9) the payment of a
preferred return to certain of the equity holders of Tri-State Perfusion, LLC,
pursuant to agreements in effect as of the Issue Date; and (10) the acquisition
of any equity in The Extracorporeal Alliance, L.L.C., pursuant to the terms of
one or more of the Put/Call Agreements dated November 26, 1996, by and among the
Company, The Extracorporeal Alliance, L.L.C., Great Lakes Perfusion, Inc., Bay
Extracorporeal Technologies, Inc., Everest Management, Inc., and certain other
parties signatory thereto with the cash proceeds actually received by the
Company or the trustee under the terms of the related Trust Agreement from any
life insurance policy insuring the life of the party whose estate or beneficiary
is exercising such put; provided, that any increase in the annual premiums for
such policies over the annual premium in effect as of the Issue Date shall be
deemed to be an "Investment" for purposes of this Indenture. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date in
accordance with clause (iii) of the immediately preceding paragraph, amounts
expended pursuant to clauses (1) and (5) shall be included in such calculation.
Not later than 45 days after the end of each calendar quarter, the
Company shall deliver to the Trustee an Officers' Certificate stating that any
Restricted Payment made during such calendar quarter complies with this
Indenture and setting forth in reasonable detail the basis upon which the
required calculations were computed, which calculations may be based upon
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the Company's latest available internal quarterly financial statements.
Section 4.11. Limitation on Transactions with Affiliates.
------------------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any Affiliate of the Company or its
Restricted Subsidiaries (each an "Affiliate Transaction"), other than (x)
---------------------
Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable to the Company or such
Restricted Subsidiary than those that could reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $1,000,000 shall be approved by the Board
of Directors of the Company or such Restricted Subsidiary, as the case may be,
such approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves aggregate payments or other property
with a fair market value of more than $5,000,000, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the Trustee. For purposes of calculating the fair market
value of any transaction with or for the benefit of an Article 28 Company, the
value of any investment in any Subsidiary of the Company that engages in
transactions with such Article 28 Company shall be disregarded.
The restrictions set forth in the preceding paragraph shall not apply
to, and the following shall be deemed not to be Affiliate Transactions: (i)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors or employees of the Company or any Subsidiary of the Company
as determined in good faith by the Company's Board of Directors; (ii)
transactions exclusively between or among the Company and any of its Wholly
Owned Restricted Subsidiaries or exclusively between or among such Wholly Owned
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Restricted Subsidiaries, provided such transactions are not otherwise prohibited
by this Indenture and in the case of transactions involving Wholly Owned
Restricted Subsidiaries that are Foreign Subsidiaries, such transactions are on
terms no less favorable to the other Wholly Owned Restricted Subsidiary than
those that could reasonably have been obtained in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate of the
Company or such Subsidiary; (iii) any agreement as in effect as of the Issue
Date or any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
the Holders in any material respect than the original agreement as in effect on
the Issue Date; (iv) transactions permitted by Section 4.23; (v) Restricted
Payments permitted by Section 4.10 and Permitted Investments; (vi) contracts
pursuant to which the Company or a Wholly Owned Restricted Subsidiary provides
management services to an Affiliate in exchange for payments in cash or Cash
Equivalents, that are no less favorable to the Company or such Wholly Owned
Restricted Subsidiary than those that could reasonably be obtained in a
comparable transaction at such time on an arm's length basis from a Person that
is not an Affiliate of the Company or such Wholly Owned Restricted Subsidiary;
and (vii) leases of employees for payments in cash or Cash Equivalents that are
greater than or equal to the wage and benefit cost of such employees.
Section 4.12. Limitation on Indebtedness.
--------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
-----
(other than Permitted Indebtedness); provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company and its
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.0 to 1.0. The accrual of interest and
the accretion of original issue discount shall not constitute the incurrence of
Indebtedness.
(b) "Permitted Indebtedness" means without duplication, each of the
----------------------
following:
(i) Indebtedness under the Notes and the Indenture;
(ii) Indebtedness under the Guarantees;
(iii) Indebtedness incurred pursuant to the Credit Facility (and the
guarantees thereunder) in an aggregate principal amount at any time
outstanding not to exceed
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$100,000,000, less the amount of any required permanent repayments, if any
(which are accompanied by a corresponding permanent commitment reduction)
thereunder (excluding any such payments on the Issue Date or to the extent
refinanced at the time of payment);
(iv) other Indebtedness of the Company and its Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(v) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Subsidiaries and Interest Swap Obligations of
any Subsidiary of the Company covering Indebtedness of such Subsidiary;
provided, however, that (x) such Interest Swap Obligations are designed to
protect the Company and its Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with the Indenture (and are
used for bona fide hedging, and not speculative, purposes); and (y) the
notional principal amount of such Interest Swap Obligation does not exceed
the principal amount of the Indebtedness to which such Interest Swap
Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that such
Currency Agreements: (i) are designed to protect against fluctuations in
currency value (and are used for bona fide hedging, and not speculative,
purposes) and (ii) in the case of Currency Agreements which relate to
Indebtedness, such Currency Agreements do not increase the Indebtedness of
the Company and its Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vii) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company; provided that if as of any date any Person other
than the Company or a Wholly Owned Restricted Subsidiary of the Company
owns or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of a Restricted Subsidiary of the Company
permitted pursuant to clause (7) of the second paragraph of Section 4.10 or
clause (ix) or (x) of the definition of "Permitted Investment";
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(ix) Indebtedness of the Company to a Restricted Subsidiary of the
Company for so long as such Indebtedness is held subject to no Lien;
provided that (a) any Indebtedness of the Company to a Restricted
Subsidiary of the Company is unsecured and subordinated, pursuant to a
written agreement, to the Company's Obligations under the Indenture and the
Notes and (b) if as of any date any Person other than a Restricted
Subsidiary of the Company owns or holds any such Indebtedness or any Person
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;
(x) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(xi) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit for the account of the Company or such
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance
or similar requirements in the ordinary course of business;
(xii) Refinancing Indebtedness;
(xiii) Indebtedness incurred by the Company or any Restricted
Subsidiary of the Company in connection with the purchase or improvement of
property (real or personal) or equipment or other capital expenditures in
the ordinary course of business or consisting of Capitalized Lease
Obligations; provided that at the time of the incurrence thereof, such
Indebtedness which is then outstanding does not exceed $5,000,000;
(xiv) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary, for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred in connection with the
disposition of any business, assets or Restricted Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose
of financing such acquisition; provided that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and the Restricted
Subsidiary in connection with such disposition;
(xv) Obligations in respect of performance bonds and completion
guarantees provided by the Company or any Restricted Subsidiary of the
Company in the ordinary course of business;
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(xvi) Guarantees by the Company or a Restricted Subsidiary of the
Company of Indebtedness incurred by the Company or a Restricted Subsidiary
of the Company so long as the incurrence of such Indebtedness by the
Company or any such Restricted Subsidiary of the Company is otherwise
permitted by the terms of the Indenture; and
(xvii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $7,500,000 at
any one time outstanding.
(c) For purposes of determining compliance with this Section 4.12,
in the event that an item of Indebtedness meets the criteria of more than
one of the categories of Permitted Indebtedness described in Section
4.12(b) or is entitled to be incurred pursuant to Section 4.12(a), the
Company shall, in its sole discretion, classify such item of Indebtedness
in any manner that complies with this Section 4.12 and such item of
Indebtedness shall be treated as having been incurred pursuant to only one
of Section 4.12(a) or (b).
Section 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
-----------------------------------------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay or guarantee any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
Subsidiary of the Company; (4) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the properties or
assets of the Person so acquired; (5) agreements existing on the Issue Date to
the extent and in the manner such agreements are in effect on the Issue Date;
(6) purchase money obligations for property acquired that impose restrictions of
the nature described in clause (4) above on the property so acquired; (7) any
instrument or agreement governing Indebtedness permitted to be incurred under
Section 4.12, which is secured by a Lien permitted to be incurred under Section
4.18, which encumbrance or restriction is not applicable to any property or
assets other than the property or assets subject to such Lien; (8) an agreement
governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (4), (5), (6) or
(7)
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above; provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Refinancing Indebtedness are no less favorable
to the Company in any material respect as determined by the Board of Directors
of the Company in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred to
in such clause (2), (4), (5), (6) or (7); or (9) any restrictions imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or property of any Restricted Subsidiary
that apply pending the closing of such sale or disposition.
Section 4.14. Prohibition on Incurrence of Layered Indebtedness.
-------------------------------------------------
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is both (a) subordinate or
junior in right of payment to any Senior Indebtedness and (b) senior in any
respect in right of payment to the Notes. No Subsidiary Guarantor shall incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is both (a) subordinate or junior in right of payment to its Guarantor
Senior Indebtedness and (b) senior in right of payment to its Guarantee.
Section 4.15. Limitation on Change of Control.
-------------------------------
(a) Upon the occurrence of a Change of Control, each Holder shall have
the right to require the repurchase of such Holder's Notes pursuant to the offer
described in paragraph (b) below (the "Change of Control Offer"), at a purchase
-----------------------
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (the "Repurchase Date") (subject to
---------------
the rights of the holders of record on the relevant record date to receive
interest on the relevant interest payment date). Within 10 days after the date
upon which the Change of Control occurs (the "Change of Control Date") requiring
----------------------
the Company to make a Change of Control Offer pursuant to this Section 4.15, the
Company shall so notify the Trustee in writing.
(b) Within 30 days following any Change of Control Date, the Company
shall send, by first class mail, a notice to each Holder, with a copy to the
Trustee, which notice shall govern the terms of the Change of Control Offer.
The notice to the Holders shall contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Change of Control Offer.
Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.15 and that all Notes tendered will be accepted for
payment;
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be
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no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law) (the "Change
------
of Control Payment Date");
-----------------------
(3) that any Note not tendered will continue to accrue interest
if interest is then accruing;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent at the address specified in
the notice prior to 5:00 p.m., New York City time, on the third
Business Day prior to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than 5:00 p.m., New York City
time, on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased; and
(7) the circumstances and relevant facts regarding such Change
of Control.
(c) On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all Notes
or portions thereof so tendered and accepted and (iii) deliver to the Trustee
Notes so accepted for cancellation pursuant to Section 2.11, together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail or deliver to the Holders of
Notes so accepted payment in an amount equal to the purchase price plus accrued
interest, if any, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail or deliver to such Holders new Notes equal in
principal amount to any unpurchased portion of the Notes surrendered. Any Notes
not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company
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shall publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
(d) Prior to the mailing of the notice to Holders described in clause
(b) above, but in any event within 30 days following any Change of Control, the
Company shall (i) repay in full all Indebtedness and terminate all commitments
under the Credit Facility and all other Senior Indebtedness the terms of which
require repayment upon a Change of Control or prohibit a Change of Control Offer
or offer to repay in full and terminate all commitments under all Indebtedness
under the Credit Facility and all other such Senior Indebtedness and to repay
the Indebtedness owed to each lender which has accepted such offer or (ii)
obtain the requisite consents under the Credit Facility and all other Senior
Indebtedness to permit the repurchase of the Notes as described above.
(e) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.
(f) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.15 and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.16. Limitation on Asset Sales.
-------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by the Company's Board of
Directors);
(ii) at least 75% of the consideration received by the Company
or such Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received
at the time
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of such disposition; provided that the amount of (x) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent
balance sheet), of the Company or any Restricted Subsidiary (other
than (I) contingent liabilities (except to the extent reflected (or
reserved for) on a balance sheet of the Company or any Restricted
Subsidiary as of the date prior to the date of consummation of such
transaction) and (II) liabilities that are by their terms subordinated
to the Notes or the Guarantees) that are assumed by the transferee of
any such assets and (y) any securities, notes or other obligations
received by the Company or any such Restricted Subsidiary from such
transferee that are converted within 90 days by the Company or such
Restricted Subsidiary into cash or Cash Equivalents (to the extent so
received), shall be deemed to be cash or Cash Equivalents for purposes
of this provision; and
(iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 180 days of receipt
thereof either (A) to prepay any Senior Indebtedness and, in the case
of any Senior Indebtedness under any Credit Facility, effect a
permanent reduction in the availability under such Credit Facility,
(B) to make an investment in properties and assets (other than cash,
Cash Equivalents or inventory) that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets
that will be used in a Permitted Business ("Replacement Assets"), or
------------------
(C) a combination of prepayment and investment permitted by the
foregoing clauses (iii)(A) and (iii)(B).
(b) On the 181st day after an Asset Sale or such earlier date, if
any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such
Asset Sale as set forth in clauses (a)(iii)(A), (iii)(B) and (iii)(C)
(each, a "Net Proceeds Offer Trigger Date"), the portion of such aggregate
-------------------------------
amount of Net Cash Proceeds which have not been applied on or before such
Net Proceeds Offer Trigger Date as permitted in clauses (a)(iii)(A),
(iii)(B) and (iii)(C) equal to the principal amount of the Notes divided by
the sum of the principal amount of the Notes and all Indebtedness
constituting Pari Passu Debt (each a "Net Proceeds Offer Amount") shall be
-------------------------
applied by the Company or such Subsidiary to make an offer to purchase (the
"Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not
------------------ -------------------------------
less than 30 nor more than 45 days following the applicable Net Proceeds
Offer Trigger Date, from all Holders on a pro rata basis, that amount of
Notes equal to the Net
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<PAGE>
Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued and unpaid interest thereon, if
any, to the date of purchase; provided, however, that if at any time any
non-cash consideration received by the Company or any Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash or Cash Equivalents (other
than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset
Sale hereunder and the Net Cash Proceeds thereof shall be applied in
accordance with this Section 4.16. The Company may defer the Net Proceeds
Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5,000,000 resulting from one or more Asset Sales
(at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5,000,000, shall be applied as required
pursuant to this paragraph).
(c) In the event of the transfer of substantially all (but not all)
of the property and assets of the Company and its Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.1, the
successor corporation shall be deemed to have sold the properties and
assets of the Company and its Subsidiaries not so transferred for purposes
of this Section 4.16, and shall comply with the provisions of this Section
4.16 with respect to such deemed sale as if it were an Asset Sale. In
addition, the fair market value of such properties and assets of the
Company or its Subsidiaries deemed to be sold shall be deemed to be Net
Cash Proceeds for purposes of this Section 4.16.
(d) Notwithstanding paragraphs (a) and (b), the Company and its
Subsidiaries shall be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent: (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets (including
for purposes of this paragraph (d) only, inventory) and the remainder
constitutes cash or Cash Equivalents and (ii) such Asset Sale is for fair
market value; provided that any consideration not constituting Replacement
Assets (including for purposes of this paragraph (d) only, inventory)
received by the Company or any of its Subsidiaries in connection with any
Asset Sale permitted to be consummated under this paragraph shall
constitute Net Cash Proceeds subject to the provisions of paragraphs (a)
and (b).
(e) Each Net Proceeds Offer shall be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee. The notice shall contain
all instructions and materials necessary to enable such Holders
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to tender Notes pursuant to the Net Proceeds Offer and shall state the
following terms:
(1) that the Net Proceeds Offer is being made pursuant to
Section 4.16 and that all Notes tendered will be accepted for payment;
provided, however, that if the aggregate principal amount of Notes
tendered in a Net Proceeds Offer plus accrued interest at the
expiration of such offer exceeds the aggregate amount of the Net
Proceeds Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (based on amounts tendered) (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or integral multiples thereof shall
be purchased);
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be 20 Business Days from
the date such notice is mailed, or such longer period as may be
required by law) (the "Proceeds Purchase Date");
----------------------
(3) that any Note not tendered will continue to accrue interest
if interest is then accruing;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Net Proceeds
Offer shall cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a
Net Proceeds Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in
the notice prior to 5:00 p.m., New York City time, on the Proceeds
Purchase Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than 5:00 p.m., New York City
time, on the Proceeds Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Note purchased; and
(7) that Holders whose Notes were purchased only in part will be
issued new Notes equal to principal amount to the unpurchased portion
of the Notes surrendered.
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(f) On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b) above, (ii)
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase
price of all Notes to be purchased and (iii) deliver to the Trustee Notes so
accepted for cancellation pursuant to Section 2.11, together with an Officers'
Certificate stating the Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any and the Company shall execute and issue, and the Trustee shall promptly
authenticate and mail or deliver to such Holders new Notes equal in principal
amount to any unpurchased portion of the Notes surrendered. The Company shall
publicly announce the results of the Net Proceeds Offer on or as soon as
practicable after the Proceeds Purchase Date. For purposes of this Section
4.16, the Trustee shall act as the Paying Agent.
(g) To the extent that the aggregate amount of Notes tendered
pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the
Company may use any remaining Net Proceeds Offer Amount for general corporate
purposes, and the Net Proceeds Offer Amount shall return to zero.
(h) Prior to the mailing of the notice to Holders described in clause
(e) above, but in any event within 30 days following any Net Proceeds Offer
Trigger Date, the Company shall (i) repay in full all Indebtedness and terminate
all commitments under the Credit Facility and all other Senior Indebtedness the
terms of which would prohibit the Net Proceeds Offer, or (ii) obtain the
requisite consents under the Credit Facility and all other Senior Indebtedness
to permit the Net Proceeds Offer.
(h) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with Section 4.16, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under Section 4.16 by
virtue thereof.
Section 4.17. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.
-----------------------------------------------------
The Company: (i) shall not, and shall not permit any of its
Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Restricted Subsidiary of the Company to any Person
(other than the Company or a Restricted Subsidiary of the Company), unless both
(a)
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either (x) after giving effect to such transfer, conveyance, sale, lease or
other disposition such Person remains a Restricted Subsidiary of the Company or
(y) such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Restricted Subsidiary and (b) the Net Cash Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.16, and (ii) shall not permit any Restricted
Subsidiary of the Company to issue any of its Capital Stock (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person, unless after giving effect to such issuance such
Restricted Subsidiary remains a Restricted Subsidiary of the Company.
Notwithstanding the foregoing, the Company may transfer up to a 2% of the equity
in Dialysis Specialists of Northeast Ohio, Ltd. pursuant to the terms of the
Operating Agreement of such entity as in effect on the Issue Date.
Section 4.18. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless: (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes are equally and ratably secured,
except for (A) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (B) Liens securing Senior
Indebtedness; (C) Liens securing Guarantor Senior Indebtedness; (D) Liens in
favor of the Company or a Wholly Owned Restricted Subsidiary of the Company on
assets of any Restricted Subsidiary of the Company; (E) Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness which
has been secured by a Lien permitted under this Indenture and which has been
incurred in accordance with the provisions of this Section 4.18; provided,
however, that such Liens (x) are no less favorable to the Holders and are not
more favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (y) do not extend to or cover
any property or assets of the Company or any of its Subsidiaries not securing
the Indebtedness so Refinanced; and (F) Permitted Liens.
Section 4.19. Payments for Consent.
--------------------
Neither the Company nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to
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any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Section 4.20. Additional Guarantees.
---------------------
If (i) the Company or any of its Restricted Subsidiaries shall, after
the date of this Indenture, transfer or cause to be transferred, including by
way of any Investment, in one or a series of transactions (whether or not
related), any assets, businesses, divisions, real property or equipment having
an aggregate fair market value (as determined in good faith by the Board of
Directors) in excess of $1,000,000 to any Restricted Subsidiary that is not a
Subsidiary Guarantor or a Foreign Subsidiary, (ii) the Company or any of its
Restricted Subsidiaries shall acquire another Restricted Subsidiary other than a
Foreign Subsidiary having total assets with a fair market value (as determined
in good faith by the Board of Directors) in excess of $1,000,000, or (iii) any
Restricted Subsidiary other than a Foreign Subsidiary shall incur Indebtedness
in excess of $1,000,000, then the Company shall, at the time of such transfer,
acquisition or incurrence, (i) cause such transferee, acquired Restricted
Subsidiary or Restricted Subsidiary incurring Indebtedness (if not then a
Subsidiary Guarantor) to execute a Guarantee of the Obligations of the Company
under the Notes in the form set forth in Exhibit E hereto and (ii) deliver to
---------
the Trustee an Opinion of Counsel, in form reasonably satisfactory to the
Trustee, that such Guarantee is a valid, binding and enforceable obligation of
such transferee, acquired Restricted Subsidiary or Restricted Subsidiary
incurring Indebtedness, subject to customary exceptions for bankruptcy,
fraudulent conveyance and equitable principles. Notwithstanding the foregoing,
the Company or any of its Restricted Subsidiaries may make an Investment (which
does not constitute a Permitted Investment) in any Restricted Subsidiary of the
Company without compliance with this Section 4.20 provided that such Investment
is otherwise permitted by Section 4.10.
Section 4.21. Sale and Leaseback Transactions.
-------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that
the Company or any Restricted Subsidiary may enter into a Sale and Leaseback
Transaction if (i) the Company could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such Sale and Leaseback Transaction
pursuant to Section 4.12 and (b) incurred a Lien to secure such Indebtedness
pursuant to Section 4.18 and (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (in the case
of gross cash proceeds in excess of $1,000,000 as determined
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in good faith by the Board of Directors of such Person and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such Sale and Leaseback Transaction.
Section 4.22. Limitation on Restricted and Unrestricted Subsidiaries.
------------------------------------------------------
(a) The Board of Directors of the Company may, if no Default or Event
of Default shall have occurred and be continuing or would arise therefrom,
designate an Unrestricted Subsidiary to be a Restricted Subsidiary, provided,
however, that (i) any such redesignation shall be deemed to be an incurrence as
of the date of such redesignation by the Company and its Restricted Subsidiaries
of the Indebtedness (if any) of such redesignated Subsidiary for purposes of
Section 4.12, and (ii) unless such redesignated Subsidiary shall not have any
Indebtedness outstanding (other than Permitted Indebtedness), no such
designation shall be permitted if immediately after giving effect to such
redesignation and the incurrence of any such additional Indebtedness (other than
Permitted Indebtedness) the Company could not incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.12.
(b) The Board of Directors of the Company also may, if no Default or
Event of Default shall have occurred and be continuing or would arise therefrom,
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if (i) such
designation is at that time permitted under Section 4.10, (ii) immediately after
giving effect to such designation, the Company could incur $1.00 of additional
Indebtedness (in addition to Permitted Indebtedness) pursuant to Section 4.12,
(iii) such Subsidiary meets the requirements of the definition of the term
Unrestricted Subsidiary, and (iv) any Subsidiary of such designated Restricted
Subsidiary is also designated as, and meets the requirements of, an Unrestricted
Subsidiary. Any such designation by the Board of Directors of the Company shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by Section 4.10 and setting forth in reasonable detail the underlying
calculations.
(c) For purposes of Section 4.10, (i) an "Investment" shall be deemed
to have been made at the time any Restricted Subsidiary of the Company is
designated as an Unrestricted Subsidiary in an amount (proportionate to the
Company's equity interest in such Subsidiary) equal to the net worth of such
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
as an Unrestricted Subsidiary; (ii) at any date, the aggregate amount of all
Restricted Payments made as Investments since the Issue Date shall exclude and
be reduced by an amount (proportionate to the Company's equity interest in such
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Subsidiary) equal to the net worth of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated as a Restricted Subsidiary, not
to exceed, in the case of any such redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary, the amount of Investments previously made by the
Company and its Restricted Subsidiaries in such Unrestricted Subsidiary (in each
of clause (i) and (ii), "net worth" is to be calculated based upon the fair
market value of the assets of such Subsidiary as of any such date of
designation); and (iii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer.
(d) If, at any time, any Unrestricted Subsidiary would fail to meet
the requirements of the definition of the term Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date (and, if such Indebtedness
is not permitted to be incurred as of such date under Section 4.12, the Company
shall be in default of such covenant).
(e) The Subsidiaries of the Company that are not designated by the
Board of Directors of the Company as Restricted or Unrestricted Subsidiaries
shall be deemed to be Restricted Subsidiaries of the Company. Notwithstanding
the foregoing, all Subsidiaries of an Unrestricted Subsidiary shall be
Unrestricted Subsidiaries.
Section 4.23. Sales of Accounts Receivable.
----------------------------
The Company may, and any of its Restricted Subsidiaries may, sell, at
any time and from time to time, all of their respective accounts receivable to
an Accounts Receivable Subsidiary; provided that (i) the cash received in each
sale is not less than 90% of the aggregate face value of the receivables sold
and the remainder of the consideration received in each such sale is a
promissory note (a "Promissory Note") which is subordinated to no Indebtedness
---------------
or obligation other than that due to the financial institution or other entity
providing the financing to the Accounts Receivable Subsidiary with respect to
such accounts receivable (a "Financier"); provided further that the Initial Sale
---------
shall include all eligible accounts receivable of the Company and/or its
Restricted Subsidiaries that shall be party to such arrangements in existence on
the date of the Initial Sale, (ii) the cash proceeds received from the Initial
Sale less reasonable and customary transaction costs will be deemed to be Net
Cash Proceeds and shall be applied in accordance with Section 4.16; and (iii)
the Company and its Restricted Subsidiaries shall sell their accounts receivable
to the Accounts Receivable Subsidiary no less frequently than on a weekly basis.
The Company (i) shall not permit any Accounts Receivable Subsidiary to
sell any accounts receivable purchased
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from the Company or any of its Restricted Subsidiaries to any other person
except on an arm's-length basis and solely for consideration in the form of cash
or Cash Equivalents, (ii) shall not permit the Accounts Receivable Subsidiary to
engage in any business or transaction other than the purchase, financing and
sale of accounts receivable of the Company and its Restricted Subsidiaries and
activities incidental thereto, (iii) shall not permit any Accounts Receivable
Subsidiary to incur Indebtedness in an amount in excess of the book value of
such Accounts Receivable Subsidiary's total assets, as determined in accordance
with GAAP, (iv) shall, at least as frequently as monthly, cause the Accounts
Receivable Subsidiary to remit to the Company, or the relevant Restricted
Subsidiary, as the case may be, as payment on the Promissory Notes, all
available cash or Cash Equivalents not held in a collection account pledged to a
Financier, to the extent not applied to pay or maintain reserves for reasonable
operating expenses of the Accounts Receivable Subsidiary or to satisfy
reasonable minimum operating capital requirements and (v) shall not, and shall
not permit any of its Restricted Subsidiaries to, sell accounts receivable to
any Accounts Receivable Subsidiary upon (1) the occurrence of a Default with
respect to the Company and its Restricted Subsidiaries and (2) the occurrence of
any of the events specified in Section 6.1(6) with respect to such Accounts
Receivable Subsidiary.
ARTICLE V.
SUCCESSOR CORPORATION
Section 5.1. When Company May Merge, Etc.
---------------------------
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Subsidiary of the Company to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of the Company's
assets (determined on a consolidated basis for the Company and the
Company's Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless:
(i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person
which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company and of the
Company's Subsidiaries substantially as an entirety (the "Surviving
---------
Entity") (x) shall be a corporation organized and validly existing
------
under the laws of the United States or any State thereof or the
District of Columbia and (y) shall
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expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any,
and interest on all of the Notes and the performance of every covenant
of the Notes, this Indenture and the Registration Rights Agreement on
the part of the Company to be performed or observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving
effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may
be, (1) shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to such
transaction and (2) shall be able to incur at least $1.00 of
additional Indebtedness (in addition to Permitted Indebtedness)
pursuant to Section 4.12;
(iii) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y)
above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and
(iv) the Company or the Surviving Entity shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, transfer,
lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating
to such transaction have been satisfied.
(b) For purposes of clause (a) above, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of
one or more Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company shall be deemed to be the transfer of all or substantially all of
the properties and assets of the Company.
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Section 5.2. Successor Corporation Substituted.
---------------------------------
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the Surviving
Entity shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture and the Notes with the same
effect as if such Surviving Entity had been named as such.
ARTICLE VI.
DEFAULT AND REMEDIES
Section 6.1. Events of Default.
-----------------
The following events are defined as "Events of Default":
(1) the failure to pay interest on any Notes or any amount
payable pursuant to any Guarantee with respect to interest when the same
becomes due and payable and the default continues for a period of 30 days
(whether or not such payment shall be prohibited by Article X or XII);
(2) the failure to pay the principal on any Notes or any amount
payable pursuant to any Guarantee (other than as provided in (1)), when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Article X or XII);
(3) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to
Section 5.1, which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(4) there shall be a default under any Indebtedness of the
Company or any Restricted Subsidiary, whether such Indebtedness now exists
or shall hereinafter be created, if both (A) such default either (1)
results from the failure to pay any such Indebtedness at its stated final
maturity or (2) relates to an obligation other than the obligation to pay
such Indebtedness at its stated final maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior
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to its stated final maturity and (B) the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in default for
failure to pay principal at stated final maturity or the maturity of which has
been so accelerated, aggregates $5,000,000 or more at any one time outstanding;
(5) one or more judgments (to the extent not covered by insurance and
as to which the insurer has not acknowledged coverage in writing) in an
aggregate amount in excess of $5,000,000 shall have been rendered against the
Company or any of its Restricted Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable;
(6) With respect to the Company, any Subsidiary Guarantor or any of
their Significant Subsidiaries, either:
(x) such entity (A) commences a voluntary case or
proceeding under any Bankruptcy Law with respect to itself, (B)
consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy
Law, (C) consents to the appointment of a Custodian of it or for
substantially all of its property, (D) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against
it, (E) makes a general assignment for the benefit of its creditors,
or (F) takes any corporate action to authorize or effect any of the
foregoing; or
(y) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of such entity, which shall (A)
approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of such entity, (B)
appoint a Custodian of such entity or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs,
and in any such case, such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
(7) except as permitted by this Indenture, any Guarantee shall cease
to be, or be asserted in writing by any Subsidiary Guarantor or the Company not
to be, in full force and effect, and enforceable in accordance with its terms.
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Section 6.2. Acceleration.
------------
(a) If an Event of Default (other than an Event of Default specified
in clause (6) above) shall occur and be continuing, either the Trustee or
the Holders of at least 25% in principal amount of outstanding Notes may
declare the principal of and accrued interest on all the Notes to be due
and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration"
(the "Acceleration Notice"), and the same (i) shall become immediately due
-------------------
and payable or (ii) if there are any amounts outstanding under the Credit
Facility, shall become immediately due and payable upon the first to occur
of an acceleration under the Credit Facility or 5 Business Days after
receipt by the Company and the Representative under the Credit Facility of
such Acceleration Notice. If an Event of Default specified in clause (6)
above occurs and is continuing, then all unpaid principal of, and premium,
if any, and accrued and unpaid interest on all of the outstanding Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
(b) The Holders of a majority in principal amount of the Notes may, at
any time after a declaration of acceleration with respect to the Notes as
described in paragraph (a), rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iv) if the Company has paid the Trustee
its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (6) of the description
above of Events of Default, the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been
cured or waived. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
(c) Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture and under the TIA.
(d) In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of
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avoiding payment of the premium that the Company would have had to pay if
the Company then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also
become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of
the Company with the intention of avoiding the prohibition on redemption of
the Notes prior to the First Call Date, then the premium specified herein
for redemption as of the First Call Date shall also become immediately due
and payable to the extent permitted by law upon the acceleration of the
Notes.
Section 6.3. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.4. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.9, 6.7 and 9.2, the Holders of a majority in
principal amount of the outstanding Notes by notice to the Trustee may waive an
existing Default or Event of Default and its consequences, except a Default in
the payment of principal of or interest on any Note as specified in clauses (1)
and (2) of Section 6.1. When a Default or Event of Default is waived, it is
cured and ceases.
Section 6.5. Control by Majority.
-------------------
Subject to Section 2.9, the Holders of a majority in principal amount
of the outstanding Notes may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on it, including, without limitation, any remedies provided
for in Section 6.3. Subject to Section 7.1, however, the Trustee may refuse to
follow any direction that the Trustee reasonably believes conflicts with any
law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of another Holder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other
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action deemed proper by the Trustee which is not inconsistent with such
direction.
Section 6.6. Limitation on Suits.
-------------------
A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer of satisfactory indemnity;
and
(5) during such 30-day period the Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with
the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal and premium, if any, or
interest on such Note on or after the respective due dates set forth in such
Note (including upon acceleration thereof); provided that upon institution of
any proceeding or exercise of any remedy, such Holders provide the Trustee with
prompt written notice thereof.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
Section 6.7. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
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Section 6.8. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company, any Subsidiary Guarantor, or any other obligor on the Notes for the
whole amount of principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate per annum borne by the Notes, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.9. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agent and counsel, and any other amounts due the Trustee under Section 7.7. The
Company's payment obligations under this Section 6.9 shall be secured in
accordance with the provisions of Section 7.7 hereunder. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
VI, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
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Second: subject to Articles X and XII, to Holders for amounts due
and unpaid on the Notes for interest and premium, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for interest and premium, respectively;
Third: subject to Articles X and XII, to Holders for amounts due
and unpaid on the Notes for principal, ratably without preference or
priority of any kind, according to the amounts due and payable on the
Notes for principal; and
Fourth: subject to Articles X and XII, to the Company, the
Subsidiary Guarantors, or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Notes.
Section 6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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ARTICLE VII.
TRUSTEE
Section 7.1. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture
and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and the TIA and no others and
no covenants or obligations shall be implied in this Indenture against
the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, in the case of any such certificate or
opinion which by any provision hereof is specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except
that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2, 6.4 or 6.5.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its
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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.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from
other assets except to the extent required by law.
Section 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document reasonably believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, or both, which shall conform to Sections 13.4 and 13.5. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any attorney or agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless
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such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee may consult with counsel that is regularly engaged in
matters involving trust indentures and selected by the Trustee in good
faith, and the written opinion of such counsel as to matters of law shall
be full and complete authorization and protection from liability in respect
of any action taken, omitted or suffered by it hereunder in good faith and
in accordance with the advice or opinion of such counsel.
(h) The Trustee shall not be charged with knowledge of any Defaults or
Events of Default unless either (1) a Trust Officer of the Trustee shall
have actual knowledge of such Default or Event of Default or (2) written
notice of such Default or Event of Default shall have been given to the
Trustee by any Holder or by the Company or any other obligor on the Notes
or any holder of Senior Indebtedness or Guarantor Senior Indebtedness or
any representative thereof.
Section 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication.
Section 7.5. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note, the
Trustee may withhold the notice if and so long as its Board of Directors, the
executive committee of its Board of Directors or a committee of its directors
and/or Trust Officers in good faith determines that withholding the notice is in
the interest of the Holders.
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Section 7.6. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 1, the Trustee shall, to the extent
that any of the events described in TIA (S) 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as
of such date that complies with TIA (S) 313(a). The Trustee also shall comply
with TIA (S)(S) 313(b) and (c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
The Company shall promptly notify the Trustee in writing if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA (S)
313(d).
Section 7.7. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable, documented out-of-pocket
expenses incurred or made by it in connection with the performance of its duties
under this Indenture. Such expenses shall include the reasonable, documented
fees and expenses of the Trustee's agents and counsel.
The Company hereby agrees to indemnify the Trustee and its agents,
employees, officers, directors and shareholders for, and hold it harmless
against, any loss, liability or expense incurred by it (except for such actions
to the extent caused by any negligence, bad faith or willful misconduct on its
part), arising out of or in connection with the administration of this trust
including the reasonable, documented costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its rights, powers or duties hereunder. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. At the Trustee's sole discretion, the
Company shall defend the claim and the Trustee shall provide reasonable
cooperation and may participate at the Company's expense in the defense.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Company shall pay the reasonable, documented fees and expenses
of such counsel; provided that the Company shall not be required to pay such
fees and expenses if it assumes the Trustee's defense, there is no conflict of
interest between the Company and the Trustee in connection with such defense as
reasonably determined by the Trustee and no Default or Event of Default has
occurred and is continuing. The Company need not pay for any settlement made
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without its written consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(6) occurs, such expenses and the compensation
for such services are intended to constitute expenses of administration under
any Bankruptcy Law.
The obligations of the Company under this Section 7.7 and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's Obligations pursuant to Article VIII or the
termination of this Indenture.
Section 7.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing, such
resignation to be effective upon the appointment of a successor Trustee. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee in writing and may
appoint a successor Trustee with the Company's consent which consent shall not
be unreasonably withheld. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company, which if no Default or Event of Default has occurred
and is continuing, shall be
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subject to the approval of the Company, not to be unreasonably withheld or
delayed.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
Section 7.9. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation without any further act shall, if such resulting,
surviving or transferee corporation is otherwise eligible hereunder, be the
successor Trustee; provided that such corporation shall be otherwise qualified
and eligible under this Article VII.
Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding company,
shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall
comply with TIA (S) 310(b); provided, however, that there shall be excluded from
the operation of TIA (S) 310(b)(1) any indenture or indentures under
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which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA (S) 310(b)(1) are met.
Section 7.11. Preferential Collection of
Claims Against Company.
----------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE VIII.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. Termination of the
Company's Obligations.
---------------------
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.1, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.5) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article III, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of
the redemption of all of the Notes under arrangements satisfactory to the
Trustee for the giving of such notice or (ii) all Notes have otherwise
become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, U.S. Legal Tender in such amount as is
sufficient without consideration of reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding Notes to
maturity or redemption; provided that the Trustee shall have been
irrevocably instructed to apply such U.S. Legal Tender to the payment of
said principal, premium, if any, and interest with respect to the Notes
and, provided, further, that from and after the time of deposit, the money
deposited shall not be subject to the rights of holders of Senior
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Indebtedness pursuant to the provisions of Article X;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligations under
the Notes and this Indenture have been complied with. Such Opinion of
Counsel shall also state that such satisfaction and discharge does not
result in a default under the Credit Facility (if then in effect) or any
other agreement or instrument then known to such counsel that binds or
affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.5, 2.6, 2.7, 2.8, 4.1, 4.2, 7.7, 8.5 and 8.6 shall survive until the
Notes are no longer outstanding pursuant to the last paragraph of Section 2.8.
After the Notes are no longer outstanding, the Company's obligations in Sections
7.7, 8.5 and 8.6 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's and the Subsidiary
Guarantors' obligations under the Notes, the Guarantees and this Indenture
except for those surviving obligations specified above.
Section 8.2. Legal Defeasance and
Covenant Defeasance.
-------------------
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, elect to have either paragraph
(b) or (c) below be applied to all outstanding Notes upon compliance with
the conditions set forth in Section 8.3.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company and the Subsidiary
Guarantors shall, subject to the satisfaction of the conditions set forth
in Section 8.3, be deemed to have been discharged from its obligations with
respect to all outstanding Notes on the date the conditions set forth below
are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
----------------
Defeasance means that
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the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section 8.4 hereof
and the other Sections of this Indenture referred to in (i) and (ii) below,
and to have satisfied all its other obligations under such Notes and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), and Holders of
the Notes and any amounts deposited under Section 8.3 hereof shall cease to
be subject to any obligations to, or the rights of, any holder of Senior
Indebtedness or Guarantor Senior Indebtedness under Article X or XII, as
the case may be, or otherwise, except for the following provisions, which
shall survive until otherwise terminated or discharged hereunder: (i) the
rights of Holders of outstanding Notes to receive solely from the trust
fund described in Section 8.4 hereof, and as more fully set forth in such
Section, payments in respect of the principal of and interest on such Notes
when such payments are due, (ii) the Company's obligations with respect to
such Notes under Article II and Section 4.2 hereof, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (iv) this Article VIII.
Subject to compliance with this Article VIII, the Company may exercise its
option under this paragraph (b) notwithstanding the prior exercise of its
option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3 hereof, be released
from its obligations under Section 4.5, Sections 4.10 through 4.23 and
Article V hereof with respect to the outstanding Notes on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
--------
Defeasance"), and the Notes shall thereafter be deemed not "outstanding"
----------
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other
purposes hereunder (it being understood that such Notes shall not be deemed
outstanding for accounting purposes) and Holders of the Notes and any
amounts deposited under Section 8.3 hereof shall cease to be subject to any
obligations to, or the rights of, any holder of Senior Indebtedness or
Guarantor Senior Indebtedness under Article X or Article XII or
otherwise. For this purpose, such Covenant Defeasance means that, with
respect to the outstanding Notes, the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of
any reference elsewhere herein to any such covenant or by reason
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of any reference in any such covenant to any other provision herein or in
any other document and such omission to comply shall not constitute a
Default or an Event or Default under Section 6.1(3) hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under
paragraph (a) hereof of the option applicable to this paragraph (c),
subject to the satisfaction of the conditions set forth in Section 8.3
hereof, those events described in Section 6.1 (except those events
described in Section 6.1(1), (2), and (6)) shall not constitute Events of
Default.
Section 8.3. Conditions to Legal Defeasance
or Covenant Defeasance.
----------------------
The following shall be the conditions to the application of either
Section 8.2(b) or 8.2(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations, or a combination thereof, in such amounts as will be
sufficient (without reinvestment), in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the Notes on the stated date for payment
thereof or on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.2(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm
that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of an election under Section 8.2(c) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders will not recognize income, gain or loss for federal income tax
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purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) No Default or Event of Default shall have occurred and be
continuing on the date of the deposit specified in paragraph (a) or insofar
as an Event of Default specified in Section 6.1(6) is concerned, at any
time in the period ending on the 91st day after the date of the deposit
specified in paragraph (a);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of or constitute a default under this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Indebtedness, including, without limitation,
those arising under the Indenture and (B) after the 91st day following the
date of deposit specified in paragraph (a), the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally.
Section 8.4. Application of Trust Money.
--------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article VIII, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against
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any tax, fee or other charge imposed on or assessed against the U.S. Legal
Tender or U.S. Government Obligations deposited pursuant to Section 8.3 hereof
or the principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Section 8.5. Repayment to the Company
or the Subsidiary Guarantors.
----------------------------
(a) Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company, or if deposited with the
Trustee by any Subsidiary Guarantor, to such Subsidiary Guarantor, from
time to time upon request any U.S. Legal Tender or U.S. Government
Obligations held by it as provided in Section 8.3 hereof which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are
in excess of the amount thereof that would then be required to be deposited
to effect an equivalent Legal Defeasance or Covenant Defeasance.
(b) The Trustee and the Paying Agent shall pay to the Company, or if
deposited with the Trustee by any Subsidiary Guarantor, to such Subsidiary
Guarantor, upon request any money held by them for the payment of principal
or interest that remains unclaimed for two years after the date due;
provided that the Trustee or such Paying Agent, before being required to
make any payment may at the expense of the Company cause to be published
once in a newspaper of general circulation in the City of New York or mail
to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein which shall be at least
30 days from the date of such publication or mailing any unclaimed balance
of such money then remaining will be repaid to the Company or a Subsidiary
Guarantor. After payment to the Company or a Subsidiary Guarantor, as the
case may be, Noteholders entitled to such money must look to the Company
for payment as general creditors unless an applicable law designates
another Person.
Section 8.6. Satisfaction and Discharge.
--------------------------
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in the Indenture) as to all outstanding
Notes when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust)
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have been delivered to the Trustee for cancellation or (b) all Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable and the Company has irrevocably deposited or caused to be deposited with
the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the Notes to
the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (ii) the Company has paid all other sums payable
under the Indenture by the Company; and (iii) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
Section 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article VIII by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and each Subsidiary Guarantor's obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Article VIII until such time as the Trustee or
Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government
Obligations in accordance with Article VIII; provided that if the Company or any
Subsidiary Guarantor, as the case may be, has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company or any Subsidiary Guarantor, as the case may be, shall be subrogated to
the rights of the Holders of such Notes to receive such payment from the U.S.
Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. Without Consent of Holders.
--------------------------
The Company, when authorized by a Board Resolution, the Subsidiary
Guarantors, and the Trustee, together, may amend or supplement this Indenture,
the Notes or any Guarantee without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided
that such amendment or supplement does not adversely affect the rights
of any Holder;
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(2) to comply with Article V;
(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(4) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
or
(5) to make any change that would provide any additional benefit
or rights to the Holders or that does not adversely affect the rights
of any Holder;
provided that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate stating that such amendment or supplement complies with
the provisions of this Section 9.1, and such amendment or supplement does not in
the opinion of the Trustee, adversely affect the rights of any of the Holders in
any material respect. In formulating its opinion on such matters, the Trustee
will be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an Opinion of Counsel.
Section 9.2. With Consent of Holders.
-----------------------
Subject to Section 6.7, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the then
outstanding Notes, may amend or supplement this Indenture, the Notes or any
Guarantee without notice to any other Holders. Subject to Section 6.7, the
Holder or Holders of a majority in aggregate principal amount of the outstanding
Notes may waive compliance by the Company with any provision of this Indenture
or the Notes without notice to any other Holder. No amendment, supplement or
waiver, including a waiver pursuant to Section 6.4, shall, without the consent
of each Holder of each Note affected thereby:
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Notes or any Guarantee;
(2) reduce the rate of or change or have the effect
of changing the time for payment of interest, including defaulted
interest, on any Notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption or repurchase, or reduce the
redemption or repurchase price therefor;
(4) make any Notes payable in money other than
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that stated in the Notes;
(5) make any change in the provisions of this Indenture
protecting the right of each Holder to receive payment of principal of
and interest on such Note on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default;
(6) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control or make and consummate a Net
Proceeds Offer with respect to any Asset Sale or modify any of the
provisions or definitions with respect thereto;
(7) modify or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the
Notes or the Guarantees in a manner which adversely affects the
Holders; or
(8) release any Subsidiary Guarantor from any of its obligations
under the Guarantee other than in accordance with the terms of this
Indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
Section 9.3. Effect on Senior Indebtedness.
-----------------------------
No amendment, supplement or waiver of this Indenture shall adversely
affect the rights of any holder of Senior Indebtedness or Guarantor Senior
Indebtedness, if any (including their rights under Article X or Article XII of
this Indenture), without the consent of such holder.
Section 9.4. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
Section 9.5. Revocation and Effect of Consents.
---------------------------------
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Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
written notice to the Trustee or the Company received before the date on which
the Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (8) of Section 9.2, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; provided that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal of and interest
on a Note, on or after the respective due dates expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.
Section 9.6. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may, at the written direction of the Company, require the Holder of the
Note to deliver it to the Trustee. The Trustee at the written direction of the
Company may place an appropriate notation on the Note regarding the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such notation
or exchange shall be made at the sole cost and expense of the Company. Failure
to make the appropriate notation or issue a new Note shall not affect the
validity and effect of such amendment,
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supplement or waiver.
Section 9.7. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver which
affects the Trustee's own rights, duties or immunities under this Indenture.
The Trustee shall be entitled to receive, if requested, an indemnity reasonably
satisfactory to it and to receive, and shall be fully protected in relying upon,
an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article IX is authorized or permitted by this Indenture.
ARTICLE X.
SUBORDINATION
Section 10.1. Notes Subordinated to
Senior Indebtedness.
-------------------
The Company covenants and agrees and the Trustee and each Holder of
the Notes, by its acceptance thereof, likewise covenants and agrees, that all
Notes shall be issued subject to the provisions of this Article X; and the
Trustee and each person holding any Note, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that the payment of
all Obligations on the Notes by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of payment to the
prior Payment in Full of all Obligations with respect to any Senior
Indebtedness, whether outstanding on the Issue Date or thereafter incurred; that
the subordination is for the benefit of, and shall be enforceable directly by,
the holders of Senior Indebtedness, and that each holder of Senior Indebtedness
whether now outstanding or hereinafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Senior Indebtedness in reliance upon the
covenants and provisions contained in this Indenture and the Notes.
Section 10.2. No Payment on Notes in
Certain Circumstances.
---------------------
(a) If either (i) any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on, reimbursement for drawings
under letters of credit issued as part of, or regularly accruing fees with
respect to, any Senior Indebtedness, or (ii) any default occurs and is
continuing with respect to any Designated Senior Indebtedness resulting in
the acceleration of the maturity of all or any portion of any Designated
Senior
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Indebtedness, no payment of any kind or character (other than Permitted
Insolvency Payments) shall be made by the Company or any of its
Subsidiaries with respect to any Obligations on the Notes or to acquire any
of the Notes for cash or property. In addition, if any other event of
default occurs and is continuing with respect to any Designated Senior
Indebtedness, as such event of default is defined in the instrument
creating or evidencing such Designated Senior Indebtedness, permitting the
holders of such Designated Senior Indebtedness then outstanding to
accelerate the maturity thereof and if the Representative for the
respective issue of Designated Senior Indebtedness gives written notice of
the event of default to the Trustee (a "Default Notice"), then, unless and
--------------
until all events of default have been cured or waived or have ceased to
exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Indebtedness terminating the Blockage
Period (as defined below), during the 179 days after the delivery of such
Default Notice (the "Blockage Period"), neither the Company nor any of its
---------------
Subsidiaries shall: (x) make any payment of any kind or character (other
than Permitted Insolvency Payments) with respect to any Obligations on the
Notes or (y) acquire any of the Notes for cash or property (other than in
exchange for Permitted Insolvency Payments). Notwithstanding anything
herein to the contrary, in no event shall a Blockage Period extend beyond
179 days from the date of the commencement of the Blockage Period and only
one such Blockage Period may be commenced within any 365 consecutive days.
No event of default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior
Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior
Indebtedness whether or not within a period of 365 consecutive days, unless
such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing
after the date of commencement of such Blockage Period that, in either
case, would give rise to an event of default pursuant to any provisions
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.2(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective
amount of Senior Indebtedness held by such holders) or their respective
Representatives, as their respective interests may appear for application
to the
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payment of the Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid in full, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of Senior
Indebtedness. The Trustee shall be entitled to rely on information
regarding amounts then due and owing on the Senior Indebtedness, if any,
received from the holders of Senior Indebtedness (or their Representatives)
or, if such information is not received from such holders or their
Representatives, from the Company and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior
Indebtedness.
(c) Nothing contained in this Article X shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.2 or to pursue any rights or
remedies hereunder.
Section 10.3. Payment Over of Proceeds
Upon Dissolution, Etc.
---------------------
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors in
an Insolvency or Liquidation Proceeding relating to the Company or its
property, whether voluntary or involuntary, all Obligations due upon all
Senior Indebtedness shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Indebtedness, by the Company or any of its Subsidiaries,
before any payment or distribution of any kind or character is made on
account of any Obligations on the Notes, or for the acquisition, by the
Company or any of its Subsidiaries, of any of the Notes for cash or
property, except for Permitted Insolvency Payments. Upon any such
Insolvency or Liquidation Proceeding, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities (other than Permitted Insolvency Payments), to which the Holders
of the Notes or the Trustee would be entitled shall be paid by the Company
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by the Holders of the
Notes or by the Trustee if received by them, directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the amounts
of Senior Indebtedness held by such holders) or their Representatives, as
their interests may appear, for application to the payment of the Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been
paid in full, after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of
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security or enforcement of any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or required to be paid to any
Custodian under any Bankruptcy Law, then, if such payment is recovered by,
or paid over to, such Custodian the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, shall be received by any Holder when such
payment or distribution is prohibited by Section 10.3(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid
over or delivered to, the holders of Senior Indebtedness (pro rata to such
holders on the basis of the respective amount of Senior Indebtedness held
by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of Senior Indebtedness remaining
unpaid until all such Senior Indebtedness has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior
Indebtedness.
Section 10.4. Payments May Be Paid Prior
to Dissolution.
--------------
Nothing contained in this Article X or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.2 and 10.3, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with the
Trustee any moneys for such payments, or (ii) in the absence of actual knowledge
of the Trustee that a given payment would be prohibited by Section 10.2 or 10.3,
the application by the Trustee of any moneys deposited with it for the purpose
of making such payments of principal of and interest on the Notes to the Holders
entitled thereto, unless at least one Business Day prior to the date upon which
such payment would otherwise become due and payable, the Trustee shall have
received the written notice provided for in Section 10.2(a) or in Section 10.7
(provided that, notwithstanding the foregoing, such application shall otherwise
be subject to the provisions of the first sentence of Section 10.2(a) and
Section 10.3). The Company shall give prompt written notice to the Trustee of
any dissolution, winding-up, liquidation or reorganization of the Company.
Section 10.5. Subrogation.
-----------
Subject to the payment in full in cash or Cash
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Equivalents of all Senior Indebtedness, the Holders of the Notes shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the Notes shall be paid in full;
and, for the purposes of such subrogation, no such payments or distributions to
the holders of the Senior Indebtedness by or on behalf of the Company or by or
on behalf of the Holders by virtue of this Article X which otherwise would have
been made to the Holders shall, as between the Company and the Holders of the
Notes, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness, it being understood that the provisions of this Article X are and
are intended solely for the purpose of defining the relative rights of the
Holders of the Notes, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article X shall have been
applied, pursuant to the provisions of this Article X, to the payment of amounts
payable under the Senior Indebtedness, then the Holders shall be entitled to
receive from the holders of such Senior Indebtedness any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount sufficient to pay all amounts payable under or in respect of the Senior
Indebtedness in full in cash or Cash Equivalents.
Section 10.6. Obligations of the Company
Unconditional.
-------------
Nothing any contained in this Article X or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders of the Notes the principal of and any interest on the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Holder of any
Note or the Trustee on its behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
Section 10.7. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article X. Regardless
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of anything to the contrary contained in this Article X or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Senior Indebtedness or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing from
the Company, or from a holder of Senior Indebtedness or a Representative
therefor, and, prior to the receipt of any such written notice, the Trustee
shall be entitled to assume (in the absence of actual knowledge to the contrary)
that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article X, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior 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 X and, if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
Section 10.8. Reliance on Judicial Order or
Certificate of Liquidating Agent.
---------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article X, the Trustee, subject to the provisions of Article VII hereof,
and the Holders of the Notes shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which Insolvency or Liquidation
Proceedings are pending, or upon a certificate of the Custodian or other person
making such payment or distribution, delivered to the Trustee or the holders of
the Notes, for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article X.
Section 10.9. Trustee's Relation to
Senior Indebtedness.
-------------------
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article X with respect to any
Senior Indebtedness which may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture shall deprive the Trustee or any such agent of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the
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Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article X, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall
not be liable to any such holders if the Trustee shall pay over or distribute to
or on behalf of Holders or the Company or any other person money or assets to
which any holders of Senior Indebtedness shall be entitled by virtue of this
Article, except if such payment is made as a result of willful misconduct or
gross negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Indebtedness, the distribution may be made and the notice given
to their Representatives, if any.
Section 10.10. Subordination Rights Not Impaired
by Acts or Omissions of the Company
or Holders of Senior Indebtedness.
---------------------------------
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article X or the obligations
hereunder of the Holders of the Notes to the holders of the Senior 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 payment or
collection of Senior Indebtedness; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
Section 10.11. Noteholders Authorize Trustee To
Effectuate Subordination of Notes.
---------------------------------
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to
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take such action as may be necessary or appropriate to effectuate, as between
the holders of Senior Indebtedness and the Holders of Notes, the subordination
provided in this Article X, and appoints the Trustee its attorney-in-fact for
such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of the Company (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business or assets of the Company, the filing of a claim for the unpaid balance
of its or his Notes and accrued interest in the form required in those
proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Indebtedness
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holders any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Senior Indebtedness or their Representative to vote in
respect of the claim of any Holder in any such proceeding.
Section 10.12. This Article X Not To
Prevent Events of Default.
-------------------------
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article X shall not be construed
as preventing the occurrence of an Event of Default.
Section 10.13. Trustee's Compensation Not Prejudiced.
-------------------------------------
Nothing in this Article X shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE XI.
GUARANTEES
Section 11.1. Unconditional Guarantee.
-----------------------
Each Subsidiary Guarantor fully and unconditionally, jointly and
severally, Guarantees (such guarantee to be referred to herein as the
"Guarantee") to each Holder of a Note authenticated and delivered by the Trustee
---------
and to the Trustee and its successors and assigns, the Notes or the obligations
of the Company hereunder or thereunder, that: (i) the principal of and
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interest on the Notes shall be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any interest, to the
extent lawful, of the Notes and all other Obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof and (ii) in case
of any extension of time of payment or renewal of any Notes or of any such other
obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at stated maturity, by acceleration or otherwise, subject,
however, in the case of clauses (i) and (ii) above, to the limitations set forth
in Section 11.4. Each Subsidiary Guarantor agrees that its Obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Guarantee
shall not be discharged except by complete performance of the Obligations
contained in the Notes, this Indenture and in this Guarantee. If any Noteholder
or the Trustee is required by any court or otherwise to return to the Company,
any Subsidiary Guarantor, or any Custodian acting in relation to the Company or
any Subsidiary Guarantor, any amount paid by the Company or any Subsidiary
Guarantor to the Trustee or such Noteholder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect as to such
amount only. Each Subsidiary Guarantor further agrees that as between each
Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Obligations Guaranteed hereby may be
accelerated as provided in Article VI for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations Guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article VI, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by each Subsidiary Guarantor for the purpose of this Guarantee.
Section 11.2. Severability.
------------
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way
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be affected or impaired thereby.
Section 11.3. Release of a Subsidiary Guarantor.
---------------------------------
(a) In the event of either (a) a sale or other disposition of all or
substantially all of the assets of any Subsidiary Guarantor, by way of
merger, consolidation or otherwise, or a sale or other disposition of all
of the Capital Stock of any Subsidiary Guarantor, or (b) in the event that
the Company designates a Subsidiary Guarantor to be an Unrestricted
Subsidiary, or such Subsidiary Guarantor ceases to be a Subsidiary of the
Company, then such Subsidiary Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of
the Capital Stock of such Subsidiary Guarantor to a Person other than the
Company or a Subsidiary Guarantor or any such designation) or the entity
acquiring the property (in the event of a sale or other disposition of all
or substantially all of the assets of such Subsidiary Guarantor) shall be
released and relieved of any obligations under its Guarantee; provided that
the Net Cash Proceeds of such sale or other disposition are applied in
accordance with Section 4.15 or 4.16, as applicable.
(b) In the case of a sale, assignment, lease, transfer, conveyance or
other disposition of all or substantially all of the assets of a Subsidiary
Guarantor, upon the assumption provided for in Section 11.5(b), such
Subsidiary Guarantor shall be discharged from all further liability and
obligation under the Indenture.
(c) The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a written request by the Company accompanied
by an Officers' Certificate certifying as to the compliance with this
Section 11.3 and the other provisions of this Indenture.
(d) Any Subsidiary Guarantor not so released remains liable for the
full amount of principal of and interest on the Notes as provided in this
Article XI.
Section 11.4. Limitation of Subsidiary
Guarantor's Liability.
---------------------
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the Guarantee
by such Subsidiary Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
Holders and each such Subsidiary Guarantor hereby irrevocably agree that the
Obligations of such Subsidiary Guarantor under its Guarantee shall be limited to
the maximum
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amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation, any
Obligations under the Credit Facility) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to Section 11.6, result in the Obligations of such
Subsidiary Guarantor under its Guarantee not constituting such fraudulent
transfer or conveyance.
Section 11.5. Subsidiary Guarantors May
Consolidate, Etc., on Certain Terms.
-----------------------------------
(a) No Subsidiary Guarantor may consolidate with or merge with or
into (whether or not such Subsidiary Guarantor is the surviving Person),
another corporation, Person or entity whether or not affiliated with such
Subsidiary Guarantor unless, either:
(x) such consolidation or merger constitutes an Asset Sale in
compliance with Sections 4.16 and 4.17 which is subject to the
provisions of Section 11.3(a); or
(y) (i) the Person formed by or surviving any such consolidation
or merger (if other than such Subsidiary Guarantor) assumes all the
Obligations of such Subsidiary Guarantor under the Notes, the
Guarantee, the Indenture, and the Registration Rights Agreement
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee; (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists; (iii) such
Subsidiary Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth
(immediately after giving effect to such transaction), equal to or
greater than the Consolidated Net Worth of such Subsidiary Guarantor
immediately preceding the transaction; and (iv) the Company would be
permitted to incur at least $1.00 of additional Indebtedness (in
addition to Permitted Indebtedness) pursuant to Section 4.12(a).
(b) The requirements of Section 11.5(a)(y)(i), (iii) and (iv) shall
not apply in the case of a consolidation with or merger with or into the
Company or another Subsidiary Guarantor.
Section 11.6. Contribution.
------------
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under this
-----------------
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Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Subsidiary Guarantors in a pro rata amount based on the Adjusted Net
Assets of each Subsidiary Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Company's obligations with respect to the Notes or any other Subsidiary
Guarantor's Obligations with respect to this Guarantee.
Section 11.7. Waiver of Subrogation.
---------------------
Each Subsidiary Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of such Subsidiary
Guarantor's Obligations under this Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against the Company, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding sentence
and the Notes shall not have been paid in full, such amount shall have been
deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Notes, and shall forthwith
be paid to the Trustee for the benefit of such Holders to be credited and
applied upon the Notes, whether matured or unmatured, in accordance with the
terms of this Indenture. Each Subsidiary Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.7 is knowingly made in contemplation of such benefits.
Section 11.8. Execution of Guarantee.
----------------------
To evidence their guarantee to the Noteholders specified in Section
11.1, the Subsidiary Guarantors hereby agree to execute the Guarantee in
substantially the form of Exhibit A recited to be endorsed on Note ordered to be
---------
authenticated and delivered by the Trustee. Each Subsidiary Guarantor hereby
agrees that its Guarantee set forth in Section 11.1 shall remain in full force
and effect notwithstanding any failure to endorse on each Note a notation of
such Guarantee. Each such Guarantee shall be signed on behalf of each Subsidiary
Guarantor by two Officers, or an Officer and an Assistant Secretary or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to such Guarantee prior to the authentication of the Note
on which it is endorsed, and
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the delivery of such Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of such Guarantee on behalf of such
Subsidiary Guarantor. Such signatures upon the Guarantee may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Guarantee, and in case any such officer who shall have signed
the Guarantee shall cease to be such officer before the Note on which such
Guarantee is endorsed shall have been authenticated and delivered by the Trustee
or disposed of by the Company, such Note nevertheless may be authenticated and
delivered or disposed of as though the person who signed the Guarantee had not
ceased to be such officer of the Subsidiary Guarantor.
ARTICLE XII.
SUBORDINATION OF GUARANTEES
Section 12.1. Subordination of Guarantee.
--------------------------
Each Subsidiary Guarantor covenants and agrees and the Trustee and
each Holder of the Guarantees, by its acceptance thereof, likewise covenants and
agrees, that all Guarantees shall be issued subject to the provisions of this
Article XII; and the Trustee and each person holding any Guarantee, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that the payment of all Obligations on the Guarantees by such Subsidiary
shall, to the extent and in the manner herein set forth, be subordinated and
junior in right of payment to the prior Payment in Full of all Obligations with
respect to any Guarantor Senior Indebtedness of such Subsidiary Guarantor,
whether outstanding on the Issue Date or thereafter incurred; that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Guarantor Senior Indebtedness, and that each holder of Guarantor
Senior Indebtedness whether now outstanding or hereinafter created, incurred,
assumed or guaranteed shall be deemed to have acquired Guarantor Senior
Indebtedness in reliance upon the covenants and provisions contained in this
Indenture and the Notes.
Section 12.2. No Payment on Guarantees in
Certain Circumstances.
--------------------------------
(a) If either (i) any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on, reimbursement for drawings
under letters of credit issued as part of, or regularly accruing fees with
respect to, any Guarantor Senior Indebtedness or any Senior Indebtedness
guaranteed by a Subsidiary Guarantor (which guarantee constitutes Guarantor
Senior Indebtedness of such Subsidiary Guarantor), or (ii) any default
occurs and is continuing with respect to any Guarantor Designated Senior
Indebtedness resulting in the acceleration of the maturity
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of all or any portion of any Guarantor Designated Senior Indebtedness, no
payment of any kind or character (other than Permitted Insolvency Payments)
shall be made by such Subsidiary Guarantor or any of its Subsidiaries with
respect to any Obligations on its Guarantee or to acquire any of the Notes
or the related Guarantee for cash or property. In addition, if any other
event of default occurs and is continuing with respect to any Guarantor
Designated Senior Indebtedness, as such event of default is defined in the
instrument creating or evidencing such Guarantor Designated Senior
Indebtedness, permitting the holders of such Guarantor Designated Senior
Indebtedness then outstanding to accelerate the maturity thereof and if the
Representative for the respective issue of Guarantor Designated Senior
Indebtedness gives written notice of the event of default to the Trustee (a
"Guarantor Default Notice"), then, unless and until all events of default
------------------------
have been cured or waived or have ceased to exist or the Trustee receives
notice from the Representative for the respective issue of Guarantor
Designated Senior Indebtedness terminating the Guarantor Blockage Period
(as defined below), during the 179 days after the delivery of such
Guarantor Default Notice (the "Guarantor Blockage Period"), neither the
-------------------------
Subsidiary Guarantor nor any of its Subsidiaries shall: (x) make any
payment of any kind or character (other than Permitted Insolvency Payments)
with respect to any Obligations on the Notes or its Guarantee or (y)
acquire any of the Notes or the related Guarantee for cash or property
(other than in exchange for Permitted Insolvency Payments). Notwithstanding
anything herein to the contrary, in no event shall a Guarantor Blockage
Period extend beyond 179 days from the date of the commencement of the
Guarantor Blockage Period and only one such Guarantor Blockage Period may
be commenced within any 365 consecutive days. No event of default which
existed or was continuing on the date of the commencement of any Guarantor
Blockage Period with respect to the Guarantor Designated Senior
Indebtedness shall be, or be made, the basis for commencement of a second
Guarantor Blockage Period by the Representative of such Guarantor
Designated Senior Indebtedness whether or not within a period of 365
consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Guarantor Blockage Period that, in either case, would give rise to an event
of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of
default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is
prohibited by Section 12.2(a), such
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payment shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Guarantor Senior Indebtedness (pro rata to
such holders on the basis of the respective amount of Guarantor Senior
Indebtedness held by such holders) or their respective Representatives, as
their respective interests may appear for application to the payment of the
Guarantor Senior Indebtedness remaining unpaid until all such Guarantor
Senior Indebtedness has been paid in full, after giving effect to any
concurrent payment, distribution or provision therefor to or for the
holders of Guarantor Senior Indebtedness. The Trustee shall be entitled to
rely on information regarding amounts then due and owing on the Guarantor
Senior Indebtedness, if any, received from the holders of Guarantor Senior
Indebtedness (or their Representatives) or, if such information is not
received from such holders or their Representatives, from such Subsidiary
Guarantor and only amounts included in the information provided to the
Trustee shall be paid to the holders of Guarantor Senior Indebtedness.
(c) Nothing contained in this Article XII shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.2 or to pursue any rights or
remedies hereunder.
Section 12.3. Payment Over of Proceeds
Upon Dissolution, Etc.
------------------------
(a) Upon any payment or distribution of assets of any Subsidiary
Guarantor of any kind or character, whether in cash, property or
securities, to creditors in an Insolvency or Liquidation Proceeding
relating to the Subsidiary Guarantor or its property, whether voluntary or
involuntary, all Obligations due upon all Guarantor Senior Indebtedness
shall first be paid in full in cash or Cash Equivalents, or such payment
duly provided for to the satisfaction of the holders of Guarantor Senior
Indebtedness, by the Subsidiary Guarantor or any of its Subsidiaries,
before any payment or distribution of any kind or character is made on
account of any Obligations on the Notes or the related Guarantee, or for
the acquisition, by the Subsidiary Guarantor or any of its Subsidiaries, of
any of the Notes or the related Guarantees for cash or property, except for
Permitted Insolvency Payments. Upon any such Insolvency or Liquidation
Proceeding, any payment or distribution of assets of the Subsidiary
Guarantor of any kind or character, whether in cash, property or securities
(other than Permitted Insolvency Payments), to which the Holders of the
Notes or the Trustee would be entitled shall be paid by the Subsidiary
Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, or by the
Holders of the Notes or by the Trustee if received by them, directly to the
holders of Guarantor Senior Indebtedness (pro rata to
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such holders on the basis of the amounts of Guarantor Senior Indebtedness
held by such holders) or their Representatives, as their interests may
appear, for application to the payment of the Guarantor Senior Indebtedness
remaining unpaid until all such Guarantor Senior Indebtedness has been paid
in full, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Guarantor Senior Indebtedness.
(b) To the extent any payment of Guarantor Senior Indebtedness
(whether by or on behalf of such Subsidiary Guarantor, as proceeds of
security or enforcement of any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or required to be paid to any
Custodian, under any Bankruptcy Law, then, if such payment is recovered by,
or paid over to such Custodian, the Guarantor Senior Indebtedness or part
thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of a Subsidiary Guarantor of any kind or character,
whether in cash, property or securities, shall be received by any Holder
when such payment or distribution is prohibited by Section 12.3(a), such
payment or distribution shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Guarantor Senior
Indebtedness (pro rata to such holders on the basis of the respective
amount of Guarantor Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Guarantor Senior Indebtedness may
have been issued, as their respective interests may appear, for application
to the payment of Guarantor Senior Indebtedness remaining unpaid until all
such Guarantor Senior Indebtedness has been paid in full in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior
Indebtedness.
Section 12.4. Payments May Be Paid
Prior to Dissolution.
--------------------
Nothing contained in this Article XII or elsewhere in this Indenture
shall prevent (i) any Subsidiary Guarantor, except under the conditions
described in Sections 12.2 and 12.3, from making payments at any time for the
purpose of making payments of principal of and interest on the Notes, or from
depositing with the Trustee any moneys for such payments, or (ii) in the absence
of actual knowledge by the Trustee that a given payment would be prohibited by
Section 12.2 or 12.3, the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of and interest on
the Notes to the Holders entitled thereto, unless at least one Business Day
prior
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to the date upon which such payment would otherwise become due and payable, the
Trustee shall have received the written notice provided for in Section 12.2(a)
or in Section 12.7 (provided that, notwithstanding the foregoing, such
application shall otherwise be subject to the provisions of the first sentence
of Section 12.2(a) and Section 12.3). Each Subsidiary Guarantor shall give
prompt written notice to the Trustee of any dissolution, winding-up, liquidation
or reorganization of such Subsidiary Guarantor.
Section 12.5. Subrogation.
-----------
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Indebtedness, the Holders of the Notes shall be subrogated to
the rights of the holders of Guarantor Senior Indebtedness to receive payments
or distributions of cash, property or securities of such Subsidiary Guarantor
applicable to the Guarantor Senior Indebtedness of such Subsidiary Guarantor
until the Notes shall be paid in full; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Guarantor
Senior Indebtedness by or on behalf of such Subsidiary Guarantor or by or on
behalf of the Holders by virtue of this Article XII which otherwise would have
been made to the Holders shall, as between the Subsidiary Guarantor and the
Holders of the Notes, be deemed to be a payment by such Subsidiary Guarantor to
or on account of the Guarantor Senior Indebtedness, it being understood that the
provisions of this Article XII are and are intended solely for the purpose of
defining the relative rights of the Holders of the Notes, on the one hand, and
the holders of the Guarantor Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article XII shall have been
applied, pursuant to the provisions of this Article XII, to the payment of
amounts payable under the Guarantor Senior Indebtedness, then the Holders shall
be entitled to receive from the holders of such Guarantor Senior Indebtedness
any payments or distributions received by such holders of Guarantor Senior
Indebtedness in excess of the amount sufficient to pay all amounts payable under
or in respect of the Guarantor Senior Indebtedness in full in cash or Cash
Equivalents.
Section 12.6. Obligations of Each Subsidiary Guarantor
Unconditional.
-------------
Nothing contained in this Article XII or elsewhere in this Indenture
or in the Notes or the Guarantees is intended to or shall impair, as among any
Subsidiary Guarantor, its creditors other than the holders of Guarantor Senior
Indebtedness, and the Holders of the Notes, the obligation of such Subsidiary
Guarantor, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of and any interest on the Notes as and when the same shall
become due and payable in
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accordance with the terms of the Guarantees, or is intended to or shall affect
the relative rights of the Holders of the Notes and creditors of any Subsidiary
Guarantor other than the holders of Guarantor Senior Indebtedness, nor shall
anything herein or therein prevent the Holder of any Note or the Trustee on its
behalf from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, in respect of cash,
property or securities of any Subsidiary Guarantor received upon the exercise of
any such remedy.
Section 12.7. Notice to Trustee.
-----------------
The Company or any Subsidiary Guarantor shall give prompt written
notice to the Trustee of any fact known to the Company or any such Subsidiary
Guarantor which would prohibit the making of any payment to or by the Trustee in
respect of the Guarantees pursuant to the provisions of this Article XII.
Regardless of anything to the contrary contained in this Article XII or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge of
the existence of any default or event of default with respect to any Guarantor
Senior Indebtedness or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company or a Subsidiary Guarantor, or from a holder
of Guarantor Senior Indebtedness or a Representative therefor, and, prior to the
receipt of any such written notice, the Trustee shall be entitled to assume (in
the absence of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article XII, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amounts of
Guarantor Senior 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 XII, and if such
evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
Section 12.8. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of any Subsidiary Guarantor
referred to in this Article XII, the Trustee, subject to the provisions of
Article VII hereof, and the Holders of the Notes shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which
Insolvency or Liquidation Proceedings are pending, or upon
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certificate of the Custodian or other person making such payment or
distribution, delivered to the Trustee or the holders of the Notes, for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Guarantor Senior Indebtedness and other
Indebtedness of such Subsidiary Guarantor, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XII.
Section 12.9. Trustee's Relation to Guarantor
Senior Indebtedness.
-------------------
The Trustee and any agent of any Subsidiary Guarantor or the Trustee
shall be entitled to all the rights set forth in this Article XII with respect
to any Guarantor Senior Indebtedness which may at any time be held by it in its
individual or any other capacity to the same extent as any other holder of
Guarantor Senior Indebtedness and nothing in this Indenture shall deprive the
Trustee or any such agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XII, and no implied
covenants or obligations with respect to the holders of Guarantor Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Indebtedness and shall not be liable to any such holders if the Trustee shall
pay over or distribute to or on behalf of Holders or any such Subsidiary
Guarantor or any other person money or assets to which any holders of Guarantor
Senior Indebtedness shall be entitled by virtue of this Article, except if such
payment is made as a result of willful misconduct or gross negligence of the
Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Indebtedness, the distribution may be made and the
notice given to their Representatives, if any.
Section 12.10. Subordination Rights Not Impaired
by Acts or Omissions of a Subsidiary
Guarantor or Holders of Guarantor
Senior Indebtedness.
-------------------
No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Subsidiary Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by such Subsidiary Guarantor with the terms
of this Indenture, regardless of any knowledge thereof which any such holder may
have or
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otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Guarantor Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article XII or the obligations
hereunder of the Holders of the Notes to the holders of the Guarantor Senior
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,
Guarantor Senior Indebtedness, or otherwise amend or supplement in any manner
Guarantor Senior Indebtedness, or any instrument evidencing the same or any
agreement under which Guarantor Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Guarantor Senior Indebtedness; (iii) release any person
liable in any manner for the payment or collection of Guarantor Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
such Subsidiary Guarantor and any other person.
Section 12.11. Noteholders Authorize Trustee To
Effectuate Subordination of Guarantees.
--------------------------------------
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Guarantor
Senior Indebtedness and the Holders of Notes, the subordination provided in this
Article XII, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Subsidiary Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business or assets of such Subsidiary Guarantor, the filing of a claim for the
unpaid balance of its or his Notes and accrued interest in the form required in
those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Guarantor Senior
Indebtedness or their Representative are or is hereby authorized to have the
right to file and are or is hereby authorized to file an appropriate claim for
and on behalf of the Holders of said Notes. Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Guarantor Senior Indebtedness
or their Representative to authorize or consent to or accept or adopt on behalf
of any Holders any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder
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thereof, or to authorize the Trustee or the holders of Guarantor Senior
Indebtedness or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
Section 12.12. This Article XII Not To Prevent
Events of Default.
-----------------
The failure to make a payment on account of principal of or interest
on the Guarantees by reason of any provision of this Article XII shall not be
construed as preventing the occurrence of an Event of Default.
Section 12.13. Trustee's Compensation Not Prejudiced.
-------------------------------------
Nothing in this Article XII shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE XIII.
MISCELLANEOUS
Section 13.1. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 13.2. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by private courier service guaranteeing next day delivery, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or the Subsidiary Guarantors, if any:
Everest Healthcare Services Corporation
101 North Scoville
Oak Park, Illinois 60302
Attention:Chief Financial Officer
Telecopy: (708) 386-1711
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois
Attention: Alan Berry, Esq.
Telecopy: (312) 902-1001
-109-
<PAGE>
if to the Trustee:
American National Bank and Trust Company of Chicago
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Corporate Trust Division
Telecopy: (312) 661-6491
with a copy to:
American National Bank and Trust Company of Chicago
14 Wall Street - 8th Floor
New York, New York l0005
Attention: Corporate Trust
Each of the Company, the Subsidiary Guarantors, and the Trustee by
written notice to each other such Person may designate additional or different
addresses for notices to such Person. Any notice or communication to the
Company, the Subsidiary Guarantors, or the Trustee shall be deemed to have been
given or made as of the date so delivered if personally delivered or delivered
by private courier service guaranteeing next day delivery; when answered back,
if telexed; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to such
Holder by first class mail or other equivalent means at such Holder's address as
it appears on the registration books of the Registrar and shall be sufficiently
given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 13.3. Communications by Holders
with Other Holders.
------------------
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Subsidiary Guarantors, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S) 312(c).
Section 13.4. Certificate and Opinion as
to Conditions Precedent.
-----------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company
-110-
<PAGE>
shall furnish to the Trustee upon request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with;
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(3) where applicable, a certificate or opinion by an
independent certified public accountant reasonably satisfactory to the
Trustee that complies with TIA (S) 314(c).
Section 13.5. Statements Required in
Certificate or Opinion.
----------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.6, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
Section 13.6. Rules by Trustee, Paying Agent,
Registrar.
---------
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make
-111-
<PAGE>
reasonable rules for its functions.
Section 13.7. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
Section 13.8. Governing Law.
-------------
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE.
Section 13.9. No Adverse Interpretation
of Other Agreements.
-------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 13.10. No Recourse Against Others.
--------------------------
No director, officer, employee or stockholder, as such, of the Company
or any Subsidiary shall have any liability for any obligations of the Company or
any Subsidiary under the Notes, any Guarantee or this Indenture. Each Holder by
accepting a Note waives and releases all such liability. Such waiver and
release are part of the consideration for the issuance of the Notes. This
provision does not affect any possible claims under federal securities laws.
Section 13.11. Successors.
----------
All agreements of the Company and the Subsidiary Guarantors in this
Indenture, the Notes and the Guarantees shall bind their successors. All
agreements of the Trustee in this Indenture shall bind its successors.
Section 13.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
-112-
<PAGE>
Section 13.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Notes or in the Guarantees shall be held invalid, illegal or unenforceable, in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the fullest extent permitted by law.
-113-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
EVEREST HEALTHCARE SERVICES CORPORATION
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
CON-MED SUPPLY COMPANY, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
CONTINENTAL HEALTH CARE, LTD.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
DIALYSIS SPECIALISTS OF CORPUS CHRISTI, L.L.C.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
-114-
<PAGE>
DUPAGE DIALYSIS LTD.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
EVEREST MANAGEMENT, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
HEMO DIALYSIS OF AMARILLO L.L.C.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
HOME DIALYSIS OF AMERICA, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
HOME DIALYSIS OF DAYTON, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
LAKE AVENUE DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
MERCY DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
-115-
<PAGE>
NEW YORK DIALYSIS MANAGEMENT, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
NORTH BUCKNER DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
NORTHWEST INDIANA DIALYSIS, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
OHIO VALLEY DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
WSKC DIALYSIS SERVICES, INC.
By: /s/ CRAIG W. MOORE
---------------------------------------------
Name: Craig W. Moore
Title: Chief Executive Officer
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
as Trustee
By: /s/ ANJALI GOTTREICH
---------------------------------------------
Name: Anjali Gottreich
Title: Assistant Vice President
-116-
<PAGE>
EXHIBIT A(l)
------------
[FORM OF INITIAL NOTE]
----------------------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT,
(C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE ACT.
<PAGE>
CUSIP No.:
EVEREST HEALTHCARE SERVICES CORPORATION
9-3/4% SENIOR SUBORDINATED NOTE DUE 2008
No. $
EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal sum
of Dollars, on May 1, 2008.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
EVEREST HEALTHCARE SERVICES CORPORATION
By:
_______________________________________
Name:
Title:
By:
_______________________________________
Name:
Title:
Dated: [ ], 1998
Certificate of Authentication
This is one of the 9-3/4% Senior Subordinated Notes due 2008 referred
to in the within-mentioned Indenture.
AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, as Trustee
By:
_______________________________________
Authorized Signatory
A.1-2
<PAGE>
(REVERSE OF SECURITY)
---------------------
9-3/4% Senior Subordinated Note due 2008
----------------------------------------
1. Interest. EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from May 5, 1998. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing November 1, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). Payments
in respect of the Notes represented by the Restricted Global Note (including
principal of, interest and premium, if any, on the Restricted Global Note) shall
be made by wire transfer of immediately available funds to the accounts
specified by the Restricted Global Note Holder. In all other cases, however,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, American National Bank and
--------------------------
Trust Company of Chicago (the "Trustee") will act as Paying Agent and Registrar.
The Company may change any Paying Agent, Registrar or co-Registrar without
notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated as
---------
of May 5, 1998 (the "Indenture"), by and among the Company, the Subsidiary
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Note is one of a duly authorized
issue of Initial Notes of the Company designated as its 9-3/4% Senior
Subordinated Notes due 2008 (the "Initial Notes"). The Notes include the Initial
Notes, the Private
A.1-3
<PAGE>
and the Unrestricted Notes issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement or, with respect to Initial Notes issued under
the Indenture subsequent to the Issue Date, a registration rights agreement
substantially identical to the Registration Rights Agreement. The Initial Notes
and the Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of them. The Notes are general unsecured obligations
of the Company limited in aggregate principal amount to $150,000,000. As
provided for in Article XI of the Indenture, the payment on each Note is
guaranteed on a senior subordinated basis by the Subsidiary Guarantors. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time.
5. Subordination. The Notes are subordinated in right of payment,
-------------
in the manner and to the extent set forth in the Indenture, to the prior payment
in full of all Senior Indebtedness of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
The Guarantees in respect of the Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full of all Guarantor Senior Indebtedness of each Subsidiary Guarantor, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assured or guaranteed. Each Holder by its acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on its
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
6. Redemption Provisions. Except as provided below, the Notes may
---------------------
not be redeemed prior to May 1, 2003.
(a) Optional Redemption. On or after such date, the Notes may be redeemed
-------------------
at the option of the Company, at any time as a whole, or from time to time in
part, on not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of principal amount), plus accrued
and unpaid interest (if any) to the date of redemption (subject to the rights of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing May 1:
A.1-4
<PAGE>
<TABLE>
<CAPTION>
Redemption
Price
-----------
<S> <C>
2003......................... 104.875%
2004......................... 103.250%
2005......................... 101.625%
2006 and thereafter.......... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to May 1, 2001, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem up to an aggregate of 35% of the principal amount of
the Notes originally issued at a redemption price equal to 109.75% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of redemption (subject to the rights of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); provided that at least 65% of the aggregate principal amount of the Notes
originally issued in the offering remain outstanding immediately after the
occurrence of any such redemption. In order to effect the foregoing redemption
with the proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 60 days after the consummation of any such Public
Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption shall cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
8. Offers to Purchase. Section 4.15 of the Indenture provides that,
------------------
upon a Change of Control, each holder will have the right, subject to certain
conditions set forth in the Indenture, to require the Company to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued interest to the date of repurchase. Section 4.16 of the Indenture
provides that, after certain Asset Sales, and subject to further limitations
contained therein, the Company will make an offer to purchase certain amounts of
the Notes in accordance with the procedures set forth in the Indenture.
A.1-5
<PAGE>
9. Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or interest
---------------
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions, the
-----------------------------
Indenture, the Notes or the Guarantees may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated Notes, or comply with Article V
of the Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness or Liens, make payments in respect of its
Capital Stock or certain Indebtedness, enter into transactions with Affiliates,
create dividend or other payment restrictions affecting Subsidiaries, incur
Indebtedness that is subordinated in right of payment to Senior Indebtedness and
senior in right of
A.1-6
<PAGE>
payment to the Notes, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation and sell Capital Stock of a Restricted
Subsidiary. Such limitations are subject to a number of important qualifications
and exceptions. The Company must annually report to the Trustee on compliance
with such limitations.
15. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No director, officer, employee or
--------------------------
stockholder, as such, of the Company shall have any liability for any obligation
of the Company or any Subsidiary under the Notes, any Guarantee or the
Indenture. Each Holder of a Note by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The laws of the State of New York shall govern
-------------
this Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an
A.1-7
<PAGE>
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
---------
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Everest Healthcare Services Corporation,
101 North Scoville, Oak Park, Illinois 60302, Attn: Chief Financial Officer.
A.1-8
<PAGE>
SENIOR SUBORDINATED GUARANTEE
-----------------------------
Amarillo Acute Dialysis Specialists, L.L.C., Con-Med Supply Company,
Inc., Continental Health Care, Ltd., Dialysis Specialists of Corpus Christi,
L.L.C., Dialysis Specialists of South Texas, L.L.C., Dupage Dialysis Ltd.,
Everest Management, Inc., Hemo Dialysis of Amarillo L.L.C., Home Dialysis of
America, Inc., Home Dialysis of Dayton, Inc., Lake Avenue Dialysis Center, Inc.,
Mercy Dialysis Center, Inc., New York Dialysis Management, Inc., North Buckner
Dialysis Center, Inc., Northwest Indiana Dialysis, Inc., Ohio Valley Dialysis
Center, Inc., and WSKC Dialysis Services, Inc. (the "Subsidiary Guarantors")
have unconditionally guaranteed on a senior subordinated basis (such guarantee
by each Subsidiary Guarantor being referred to herein as the "Guarantee") (i)
the due and punctual payment of the principal of and interest on the Notes,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful, and the due and punctual performance of all other Obligations of
the Company to the Holders or the Trustee all in accordance with the terms set
forth in Article XI of the Indenture and (ii) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor, to the extent and in the manner provided, in Article XII
of the Indenture, and reference is hereby made to such Indenture for the precise
terms of the Guarantee therein made.
No stockholder, director, officer, employee or stockholder, as such,
of the Subsidiary Guarantor shall have any liability under the Guarantee. Each
holder of a Note by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Guarantees.
A.1-9
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
AMARILLO ACUTE DIALYSIS
SPECIALISTS, L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
CON-MED SUPPLY COMPANY, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
CONTINENTAL HEALTH CARE, LTD.
By:_________________ By:_________________
Name: Name:
Title: Title:
DIALYSIS SPECIALISTS OF CORPUS
CHRISTI,L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
DIALYSIS SPECIALISTS OF SOUTH
TEXAS, L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.1-10
<PAGE>
DUPAGE DIALYSIS LTD.
By:_________________ By:_________________
Name: Name:
Title: Title:
EVEREST MANAGEMENT, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
HEMO DIALYSIS OF AMARILLO
L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
HOME DIALYSIS OF AMERICA, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
HOME DIALYSIS OF DAYTON, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.1-11
<PAGE>
LAKE AVENUE DIALYSIS CENTER,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
MERCY DIALYSIS CENTER, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
NEW YORK DIALYSIS MANAGEMENT,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
NORTH BUCKNER DIALYSIS CENTER,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
NORTHWEST INDIANA DIALYSIS,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
OHIO VALLEY DIALYSIS CENTER,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.1-12
<PAGE>
WSKC DIALYSIS SERVICES, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.1-13
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________
_______________________________________________________
_______________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint, ___________________, agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Date: ________________________ Signed: __________________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:__________________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) May 6, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
[Check One]
---------
(1) ____ to the Company or a subsidiary thereof; or
(2) ____ pursuant to and in compliance with Rule 144A under the Securities
Act; or
(3) ____ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) ____ outside the United States to a "foreign person" in
compliance with Rule 904 of Regulation S under the
A.1-14
<PAGE>
Securities Act ; or
(5) ____ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) ____ pursuant to an effective registration statement under the
Securities Act; or
(7) ____ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: _________________________ Signed: ___________________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:__________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
----------------------------------------------------
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's
A.1-15
<PAGE>
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Date: _________________________ Signed: ___________________________
NOTICE: To be executed by
an executive
officer
A.1-16
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
----------------------------------
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
principal amount you elect to have purchased:
$________________
Dated:_________________________ ______________________________
NOTICE: The signature on this
assignment must correspond
with the name as it appears
upon the face of the within
Note in every particular
without alteration or
enlargement or any change
whatsoever and be guaranteed
by the endorser's bank or
broker.
Signature Guarantee: _________________________________
A.1-17
<PAGE>
EXHIBIT A(2)
------------
[FORM OF EXCHANGE NOTE]
---------------------
CUSIP No.:
EVEREST HEALTHCARE SERVICES CORPORATION
9-3/4% SENIOR SUBORDINATED NOTE DUE 2008
No. $
EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal sum
of Dollars, on May 1, 2008.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
EVEREST HEALTHCARE SERVICES
CORPORATION
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
Dated: [ ], 1998
Certificate of Authentication
This is one of the 9-3/4% Senior Subordinated Notes due 2008 referred
to in the within-mentioned Indenture.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as Trustee
By:_______________________________________
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
---------------------
9-3/4% Senior Subordinated Note due 2008
----------------------------------------
1. Interest. EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from May 5, 1998. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing November 1, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). Payments
in respect of the Notes represented by the Restricted Global Note (including
principal of, interest and premium, if any, on the Restricted Global Note) shall
be made by wire transfer of immediately available funds to the accounts
specified by the Restricted Global Note Holder. In all other cases, however,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, American National Bank
--------------------------
and Trust Company of Chicago (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
---------
dated as of May 5, 1998 (the "Indenture"), by and among the Company, the
Subsidiary Guarantors and the Trustee. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. This Note is one of a
duly authorized issue of Exchange Notes of the Company designated as its 9-3/4%
Senior Subordinated Notes due 2008 (the "Initial Notes"). The Notes include the
Initial Notes, the Private
A.2-2
<PAGE>
Exchange Notes and the Unrestricted Notes issued in exchange for the Initial
Notes pursuant to the Registration Rights Agreement or, with respect to Initial
Notes issued under the Indenture subsequent to the Issue Date, a registration
rights agreement substantially identical to the Registration Rights Agreement.
The Initial Notes and the Unrestricted Notes are treated as a single class of
securities under the Indenture. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Company limited in aggregate principal
amount to $150,000,000. As provided for in Article XI of the Indenture, the
payment on each Note is guaranteed on a senior subordinated basis by the
Subsidiary Guarantors. Each Holder, by accepting a Note, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
5. Subordination. The Notes are subordinated in right of payment,
-------------
in the manner and to the extent set forth in the Indenture, to the prior payment
in full of all Senior Indebtedness of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
The Guarantees in respect of the Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full of all Guarantor Senior Indebtedness of each Subsidiary Guarantor, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assured or guaranteed. Each Holder by its acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on its
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
6. Redemption Provisions. Except as provided below, the Notes may
---------------------
not be redeemed prior to May 1, 2003.
(a) Optional Redemption. On or after such date, the Notes may be
-------------------
redeemed at the option of the Company, at any time as a whole, or from time to
time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) to the date of redemption (subject to the
rights of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing May 1:
A.2-3
<PAGE>
<TABLE>
<CAPTION>
Redemption
Price
-----------
<S> <C>
2003.............................. 104.875%
2004.............................. 103.250%
2005.............................. 101.625%
2006 and thereafter............... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to May 1, 2001, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem up to an aggregate of 35% of the principal amount of
the Notes originally issued at a redemption price equal to 109.75% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of redemption (subject to the rights of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); provided that at least 65% of the aggregate principal amount of the Notes
originally issued in the offering remain outstanding immediately after the
occurrence of any such redemption. In order to effect the foregoing redemption
with the proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 60 days after the consummation of any such Public
Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption shall cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
8. Offers to Purchase. Section 4.15 of the Indenture provides that,
------------------
upon a Change of Control each holder will have the right, subject to certain
conditions set forth in the Indenture, to require the Company to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued interest to the date of repurchase. Section 4.16 of the Indenture
provides that, after certain Asset Sales, and subject to further limitations
contained therein, the Company will make an offer to purchase certain amounts of
the Notes in accordance with the procedures set forth in the Indenture.
A.2-4
<PAGE>
9. Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions,
-----------------------------
the Indenture, the Notes or the Guarantees, may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated Notes, or comply with Article V
of the Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness or Liens, make payments in respect of its
Capital Stock or certain Indebtedness, enter into transactions with Affiliates,
create dividend or other payment restrictions affecting Subsidiaries, incur
Indebtedness that is subordinated in right of payment to Senior Indebtedness and
senior in right of
A.2-5
<PAGE>
payment to the Notes, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation and sell Capital Stock of a Restricted
Subsidiary. Such limitations are subject to a number of important qualifications
and exceptions. The Company must annually report to the Trustee on compliance
with such limitations.
15. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No director, officer, employee or
--------------------------
stockholder, as such, of the Company shall have any liability for any obligation
of the Company under the Notes or the Indenture. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The laws of the State of New York shall govern
-------------
this Note and the Indenture, without regard to principles of conflict of laws.
A.2-6
<PAGE>
21. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
---------
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Everest Healthcare Services Corporation,
101 North Scoville, Oak Park, Illinois, 60302 Attn: Chief Financial Officer.
A.2-7
<PAGE>
SENIOR SUBORDINATED GUARANTEE
-----------------------------
Amarillo Acute Dialysis Specialists, L.L.C., Con-Med Supply Company,
Inc., Continental Health Care, Ltd., Dialysis Specialists of Corpus Christi,
L.L.C., Dialysis Specialists of South Texas, L.L.C., Dupage Dialysis Ltd.,
Everest Management, Inc., Hemo Dialysis of Amarillo L.L.C., Home Dialysis of
America, Inc., Home Dialysis of Dayton, Inc., Lake Avenue Dialysis Center, Inc.,
Mercy Dialysis Center, Inc., New York Dialysis Management, Inc., North Buckner
Dialysis Center, Inc., Northwest Indiana Dialysis, Inc., Ohio Valley Dialysis
Center, Inc., and WSKC Dialysis Services, Inc. (the "Subsidiary Guarantors")
have unconditionally guaranteed on a senior subordinated basis (such guarantee
by each Subsidiary Guarantor being referred to herein as the "Guarantee") (i)
the due and punctual payment of the principal of and interest on the Notes,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful, and the due and punctual performance of all other Obligations of
the Company to the Holders or the Trustee all in accordance with the terms set
forth in Article XI of the Indenture and (ii) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor, to the extent and in the manner provided, in Article XII
of the Indenture, and reference is hereby made to such Indenture for the precise
terms of the Guarantee therein made.
No director, officer, employee or stockholder, as such, of the
Subsidiary Guarantor shall have any liability under the Guarantee. Each holder
of a Note by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Guarantees.
A.2-8
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
AMARILLO ACUTE DIALYSIS
SPECIALISTS, L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
CON-MED SUPPLY COMPANY, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
CONTINENTAL HEALTH CARE, LTD.
By:_________________ By:_________________
Name: Name:
Title: Title:
DIALYSIS SPECIALISTS OF CORPUS
CHRISTI, L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.2-9
<PAGE>
DIALYSIS SPECIALISTS OF SOUTH
TEXAS, L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
DUPAGE DIALYSIS LTD.
By:_________________ By:_________________
Name: Name:
Title: Title:
EVEREST MANAGEMENT, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
HEMO DIALYSIS OF AMARILLO
L.L.C.
By:_________________ By:_________________
Name: Name:
Title: Title:
HOME DIALYSIS OF AMERICA, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
HOME DIALYSIS OF DAYTON, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.2-10
<PAGE>
LAKE AVENUE DIALYSIS CENTER,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
MERCY DIALYSIS CENTER, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
NEW YORK DIALYSIS MANAGEMENT,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
NORTH BUCKNER DIALYSIS CENTER,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
NORTHWEST INDIANA DIALYSIS,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
OHIO VALLEY DIALYSIS CENTER,
INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.2-11
<PAGE>
WSKC DIALYSIS SERVICES, INC.
By:_________________ By:_________________
Name: Name:
Title: Title:
A.2-12
<PAGE>
ASSIGNMENT FORM
---------------
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________
_______________________________________________________
_______________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint, ___________________, agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Date: _________________ Signed: _______________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:______________________________
A.2-13
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
-----------------------------------
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
principal amount you elect to have purchased:
$________________
Dated:____________________ ____________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it appears
upon the face of the within Note in every
particular without alteration or enlargement
or any change whatsoever and be guaranteed
by the endorser's bank or broker.
Signature Guarantee:____________________________________
A.2-14
<PAGE>
EXHIBIT B
---------
FORM OF LEGEND FOR GLOBAL NOTES
-------------------------------
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR
DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE
AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY
A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE
OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
<PAGE>
EXHIBIT C
---------
Form of Certificate To Be Delivered
-----------------------------------
in Connection with Transfers to
-------------------------------
Non-QIB Institutional Accredited Investors
------------------------------------------
__________, ____
American National Bank and Trust Company of Chicago
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Corporate Trust Division
Re: EVEREST HEALTHCARE SERVICES CORPORATION
(the "Company")
9 3/4 Senior Subordinated
Notes due 2008 (the "Notes")
----------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_________ aggregate
principal amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated April 30, 1998, relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i)-
(iii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" in the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (the "Indenture") and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Notes except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act") and all applicable State securities
laws.
3. We understand that the offer and sale of the Notes (and the
related Guarantees) have not been registered under the Securities Act, and that
the Notes (and the related Guarantees) may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. Persons except as
permitted in the following sentence. We agree, on our own behalf and on behalf
of any accounts for which we are acting as hereinafter stated, that if we should
sell or otherwise transfer any Notes we will do so only (i) to the Company or
any subsidiary thereof, (ii) inside the United States in accordance with Rule
144A promulgated under the Securities Act to a "qualified institutional buyer"
(as defined in Rule 144A under the
<PAGE>
Securities Act), (iii) inside the United States to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to you a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of the Notes, substantially in the form of this letter, (iv) outside
the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare Plan (as defined the section
entitled "Transfer Restrictions" in the Offering Memorandum), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certification, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Company and the Initial Purchaser (as defined in the Offering
Memorandum) are entitled to rely upon this letter and are irrevocably authorized
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By: _______________________________
Authorized Signature
C-2
<PAGE>
EXHIBIT D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------------------
American National Bank and Trust Company of Chicago
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Corporate Trust Division
Re: EVEREST HEALTHCARE SERVICES CORPORATION
(the "Company") 9-3/4% Senior Subordinated
Notes due 2008 (the "Notes")
-------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
1. the offer of the Notes was not made to a person in the United
States;
2. either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
3. no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
5. we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters
<PAGE>
covered hereby. Terms used in this certificate have the meanings set forth in
Regulation S.
Very truly yours,
[Name of Transferor]
By: _____________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
---------
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________ __, ____ between Subsidiary Guarantor (the "New Subsidiary Guarantor"),
a direct or indirect domestic Restricted Subsidiary of Everest Healthcare
Services Corporation (the "Company") and American National Bank and Trust
Company of Chicago, as trustee under the indenture referred to below (the
"Trustee"). Capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Indenture (as defined below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 5, 1998, providing for
the issuance of an aggregate principal amount of $___________ of 9-3/4% Senior
Subordinated Notes due 2008 (the "Notes");
WHEREAS, Section 4.10 of the Indenture provides that under certain
circumstances the Company may cause, and Section 4.20 of the Indenture provides
that under certain circumstances the Company must cause, certain of its
subsidiaries to execute and deliver to the Trustee a supplemental indenture
pursuant to which such subsidiaries shall unconditionally guarantee all of the
Company's Obligations under the Notes pursuant to a Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to guarantee
the Company's Obligations under the Notes and the Indenture on the terms and
subject to the conditions set forth in Article XI and XII of the Indenture and
to be bound by all other applicable provisions of the Indenture.
<PAGE>
3. NO RECOURSE AGAINST OTHERS. No director, officer, employee or
stockholder, as such, of the Subsidiary Guarantor shall have any liability for
any obligations of the Company or any Subsidiary under the Notes, any
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes.
4. NEW YORK LAW TO GOVERN. The Internal law of the State of New
York shall govern and be used to construe this Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
8. EFFECT OF SUPPLEMENTAL INDENTURE. Except as amended by this
Supplemental Indenture, the terms and provisions of the Indenture shall remain
in full force and effect.
E-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: __________________ [Name of New Subsidiary Guarantor]
By:_____________________________
Name:
Title:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
as Trustee
By:_______________________________________
Name:
Title:
E-3
<PAGE>
EXHIBIT 4.2
Everest Healthcare Services Corporation
9-3/4% $100,000,000
Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
------------------
April 30, 1998
BT Alex. Brown Incorporated
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Everest Healthcare Services Corporation, a Delaware corporation (the
"Company"), and its subsidiaries which have signed this Agreement (the
- --------
"Subsidiary Guarantors," and together with the Company, the "Issuers"), hereby
- ---------------------- -------
confirm their agreement with you (the "Initial Purchaser"), as set forth below.
-----------------
1. The Securities. Subject to the terms and conditions herein
--------------
contained, the Company proposes to issue and sell to the Initial Purchaser
$100,000,000 aggregate principal amount of its []% Senior Subordinated Notes,
Series A due 2008 (the "Notes"). The Notes are to be issued under an indenture
-----
(the "Indenture") to be dated as of May 5, 1998 by and between the Company, the
---------
Subsidiary Guarantors and American National Bank and Trust Company of Chicago,
as Trustee (the "Trustee"). The Notes will be guaranteed on a senior
-------
subordinated basis by the Subsidiary Guarantors, pursuant to their guarantee
(the "Guarantees"). The Notes and the Guarantees are hereinafter collectively
----------
referred to as the "Securities." Capitalized terms used but not defined herein
----------
shall have the meanings given to such terms in the Indenture. The Notes will be
offered and sold to the Initial Purchaser without being registered under the
Securities Act of 1933, as amended (the "Act"), in reliance on exemptions
---
therefrom.
In connection with the sale of the Notes, the Issuers have prepared a
preliminary offering memorandum dated April 20, 1998 (the "Preliminary
-----------
Memorandum") and a final offering memorandum dated the date hereof (the "Final
- ---------- -----
Memorandum"; the Preliminary Memorandum and the Final Memorandum each herein
- ----------
being referred to as a "Memorandum"), each setting forth or including
----------
descriptions of the terms of the Notes, the terms of the Offering
<PAGE>
(as defined below), the transactions contemplated thereby and hereby (the
"Transactions"), the Issuers and any material developments relating to the
------------
Issuers and their Subsidiaries as such term is defined in Section 1-02(x) of
Regulation S-X promulgated under the Act (a "Subsidiary") occurring after the
----------
date of the most recent historical financial statements included therein.
The Issuers understand that the Initial Purchaser proposes to make an
offering of the Notes (the "Offering") only on the terms and in the manner set
--------
forth in the Final Memorandum and Section 8 hereof as soon as the Initial
Purchaser deems advisable after this Agreement has been executed and delivered,
to persons in the United States whom the Initial Purchaser reasonably believes
to be qualified institutional buyers ("Qualified Institutional Buyers" or
------------------------------
"QIBs") as defined in Rule 144A under the Act, as such rule may be amended from
----
time to time ("Rule 144A"), in transactions under Rule 144A; to a limited number
---------
of other institutional "accredited investors" ("Accredited Investors") as
--------------------
defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of the Act in
private sales exempt from registration under the Act; and outside the United
States to certain persons in reliance on Regulation S under the Act.
The Initial Purchaser and any direct and indirect transferees of the
Notes will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
--------- -------------------
Agreement"), to be dated the Closing Date (as defined in Section 3 below),
- ---------
pursuant to which the Issuers will agree, among other things, to file a
registration statement (the "Registration Statement") with the Securities and
----------------------
Exchange Commission (the "Commission") registering the Notes or the Exchange
----------
Notes (as defined in the Registration Rights Agreement) under the Act.
2. Representations and Warranties of the Issuers. Each of the
---------------------------------------------
Issuers, jointly and severally, represents and warrants to, and agrees with, the
Initial Purchaser that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date thereof
and at all times subsequent thereto up to the Closing Date contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information furnished to
the Company in writing by the Initial Purchaser expressly for use in the
Preliminary Memorandum, the
2
<PAGE>
Final Memorandum or any amendment or supplement thereto. Each of the Preliminary
Memorandum and the Final Memorandum, as of its date, contains all the
information specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Act.
(b) As of the Closing Date and after giving effect to the
Transactions, the Company will have the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; as of the date hereof and upon
consummation of the Transactions, only wholly-owned Subsidiaries of the Company
will be the Subsidiary Guarantors; except as set forth in the Final Memorandum
and except for rights of first refusal and other approval rights in the non-
wholly-owned Subsidiaries, all of the outstanding shares of capital stock of the
Company and its Subsidiaries have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; except as set forth in
the Final Memorandum, all of the outstanding shares of capital stock of the
Company and its Subsidiaries held by the Company or its Subsidiaries will be
free and clear of all liens, encumbrances, equities and claims or restrictions
on transferability (other than those imposed by the Act and the securities or
"Blue Sky" laws of certain jurisdictions) or voting. Except as set forth in the
Final Memorandum and except for certain put arrangements which directly or
indirectly inure to the benefit of minority interest holders in The
Extracorporeal Alliance, L.L.C., Saint Margaret Mercy Dialysis Centers, L.L.C.,
Tri-State Perfusion, L.L.C. and Perfusion Resource Association, L.L.C., there
are no outstanding (i) options, warrants or other rights to purchase, (ii)
agreements or other obligations to issue or (iii) other rights to convert any
obligation into, or exchange any securities for, shares of capital stock of or
ownership interests in the Company or its Subsidiaries. The Company owns,
directly or indirectly, all of the issued and outstanding capital stock of its
Subsidiaries purported to be owned by it in the Memorandum. Except for its
Subsidiaries, the Company does not own, directly or indirectly, any shares of
capital stock or any other equity or long-term debt securities or have any
equity interest in any firm, partnership, joint venture or other entity other
than those purported to be owned by it in the Memorandum.
(c) Each of the Issuers is duly incorporated (or in the case of a
limited partnership or limited liability company, duly organized), validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation (or formation) and has all requisite corporate (or partnership or
limited liability company) power and authority to own its properties and conduct
its business as now conducted and as described in the Final Memorandum; each of
the Issuers is duly qualified to do business as a foreign corporation (or
foreign
3
<PAGE>
limited partnership or limited liability company) in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the general affairs, management, business, condition (financial or
otherwise), prospects or results of operations of the Company and its
Subsidiaries, taken as a whole (any such event, a "Material Adverse Effect").
-----------------------
(d) Each of the Issuers has all requisite corporate (or partnership
or limited liability company) power and authority to execute, deliver and
perform each of its obligations under the Notes , the Exchange Notes and the
Private Exchange Notes (each as defined in the Registration Rights Agreement)
and the Guarantees thereof. The Securities, when issued, will be in the form
contemplated by the Indenture. The Notes, the Exchange Notes, the Private
Exchange Notes and the Guarantees thereof have each been duly and validly
authorized by the Issuers and, when executed by the Issuers and authenticated by
the Trustee in accordance with the provisions of the Indenture and, in the case
of the Notes, when delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will constitute valid and legally
binding obligations of the Issuers entitled to the benefits of the Indenture,
and enforceable against the Issuers, in accordance with their terms, except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a court of
equity or law).
(e) Each of the Issuers has all requisite corporate (or partnership
or limited liability company) power and authority to execute, deliver and
perform its obligations under the Indenture. The Indenture meets the
requirements for qualification under the Trust Indenture Act of 1939, as amended
(the "TIA"). The Indenture has been duly and validly authorized by the Issuers
---
and, when executed and delivered by the Issuers, and assuming the due
authorization, execution and delivery by the Trustee, will constitute a valid
and legally binding agreement of the Issuers, enforceable against the Issuers in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is considered in
a court of equity or law).
4
<PAGE>
(f) Each of the Issuers has all requisite corporate (or partnership
or limited liability company) power and authority to execute, deliver and
perform its obligations under the Registration Rights Agreement. The
Registration Rights Agreement has been duly and validly authorized by the
Issuers and, assuming the due authorization, execution and delivery by the
Initial Purchaser, will constitute a valid and legally binding agreement of the
Issuers, enforceable against the Issuers in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a court of
equity or law) and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy considerations.
(g) Each of the Issuers has all requisite corporate (or partnership
or limited liability company) power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by the Issuers of the
Transactions have been duly and validly authorized by the Issuers. This
Agreement has been duly executed and delivered by the Issuers and constitutes a
valid and legally binding agreement of the Issuers, enforceable against the
Issuers in accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a court of equity or law) and any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(h) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the issuance and
sale by the Issuers of the Securities to the Initial Purchaser or the
consummation by the Issuers of the Transactions, except such as (i) have been
obtained, (ii) may be required under state securities or "Blue Sky" laws in
connection with the purchase and resale of the Notes by the Initial Purchaser or
(iii) as may be required from the Commission or under state securities or "Blue
Sky" laws in connection with the transactions contemplated by the Registration
Rights Agreement. None of the Issuers is (i) in violation of its certificate or
articles of incorporation or bylaws (or limited partnership agreement or similar
organizational documents), (ii) in breach or violation of any statute, judgment,
decree, order,
5
<PAGE>
rule or regulation applicable to any of them or any of their respective
properties or assets, except for any such breach or violation which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, or (iii) in breach of or default under (nor has any event
occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject (collectively, "Contracts"), except
---------
for any such breach, default, violation or event which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(i) The execution, delivery and performance by the Issuers of this
Agreement, the Indenture and the Registration Rights Agreement, and the
consummation by the Issuers of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Notes to the
Initial Purchaser) will not conflict with or constitute or result in a breach of
or a default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of any of (i) the terms or
provisions of any Contract, except for any such conflict, breach, violation,
default or event which would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, (ii) the certificate or articles
of incorporation or bylaws (or limited partnership agreement or similar
organizational documents) of any of the Issuers, or (iii) (assuming compliance
with the registration requirements of the Act with respect to the transactions
contemplated by the Registration Rights Agreement and all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the representations
and warranties of the Initial Purchaser in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation applicable to any of the Issuers or
any of their respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(j) The audited consolidated financial statements of the Company
included in the Final Memorandum present fairly in all material respects the
consolidated financial position, results of operations and cash flows of the
Company at the dates and for the periods to which they relate and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, except as otherwise stated therein. The summary and
selected financial and statistical data in the Final Memorandum present fairly
in all material respects
6
<PAGE>
the information shown therein and have been prepared and compiled on a basis
consistent with the audited financial statements included therein, except as
otherwise stated therein. Ernst & Young, LLP (the "Independent Accountants") is
------------------------
an independent public accounting firm within the meaning of the Act and the
rules and regulations promulgated thereunder.
(k) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final Memorandum
(i) comply as to form in all material respects with the applicable requirements
of Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) have been prepared in accordance with the
------------
Commission's rules and guidelines with respect to pro forma financial
statements, and (iii) have been properly computed on the basis described
therein. The assumptions used in the preparation of the pro forma financial
data and other pro forma financial information included in the Final Memorandum
are reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein.
(l) There is not pending any action, suit, proceeding, inquiry or
investigation to which the Company or any of its Subsidiaries is a party, or to
which the property or assets of the Company or any of its Subsidiaries are
subject, before or brought by any court, arbitrator or governmental agency or
body which, if determined adversely to the Company or any of its Subsidiaries,
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the consummation of the other transactions described in the
Final Memorandum and, to the knowledge of the Issuers, no such proceedings are
threatened.
(m) The Issuers and their Subsidiaries possess and have performed
their respective obligations with respect to all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and
have made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals, presently required or necessary to own or lease, as the case
may be, and to operate their respective properties and to carry on their
respective businesses as now or proposed to be conducted as set forth in the
Final Memorandum ("Permits"), except where the failure to obtain such Permits or
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perform such obligations would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. No event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
of any such Permit or
7
<PAGE>
results in any other material impairment of the rights of the holder of any such
Permit and none of the Issuers or any of their Subsidiaries has received any
notice of any proceeding relating to revocation or modification of any such
Permit, except in each case as described in the Final Memorandum and except in
each case where such revocation or modification would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(n) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein, (i) none of the Issuers or
their Subsidiaries has incurred any liabilities or obligations, direct or
contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business which
liabilities, obligations, transactions or contracts would, individually or in
the aggregate, be material to the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations of the
Issuers and their Subsidiaries, taken as a whole; (ii) there shall not have been
any material change in the capital stock or long-term indebtedness of the
Issuers or any payment of or declaration to pay any dividends or any other
distribution with respect to any of the Issuer's or the Subsidiary Guarantor's
capital stock other than those payable to the Issuer or Subsidiary Guarantor;
and (iii) there has not been any event or series of events that would reasonably
be expected to have a Material Adverse Effect.
(o) Each of the Issuers and their Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, except
where the failure to so file such returns would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and has
paid all taxes shown as due thereon; and other than tax deficiencies which any
of the Issuers or their Subsidiaries is contesting in good faith and for which
any of the Issuers or their Subsidiaries has provided adequate reserves, there
is no tax deficiency that has been asserted against any of the Issuers or their
Subsidiaries that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(p) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Issuers, after due
inquiry, believe to be reliable and accurate.
(q) None of the Issuers, their Subsidiaries or any agent acting on
their behalf has taken or will take any action that might cause this Agreement
or the sale of the Notes to violate Regulation G, T, U or X of the Board of
Governors of the
8
<PAGE>
Federal Reserve System, in each case as in effect, or as the same may hereafter
be in effect, on the Closing Date.
(r) Each of the Issuers and their Subsidiaries has good and
marketable title to all real property and good title to all personal property
described in the Final Memorandum as being owned by it and good and marketable
title to all leasehold estates in the real and personal property described in
the Final Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. All leases,
Contracts and agreements to which each of the Issuers and their Subsidiaries is
a party or by which any of them is bound are valid and enforceable against the
Issuers or their Subsidiaries, as the case may be, and are valid and enforceable
against the other party or parties thereto and are in full force and effect with
only such exceptions as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. The Issuers and their
Subsidiaries own or possess adequate licenses or other rights to use all
patents, trademarks, service marks, trade names, copyrights and know-how
material to the conduct of the businesses operated by them as described in the
Final Memorandum, and none of the Issuers or any of their Subsidiaries has
received any notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with respect to any
patents, trademarks, service marks, trade names, copyrights or know-how which,
if such assertion of infringement or conflict were sustained, would reasonably
be expected to have a Material Adverse Effect.
(s) There are no legal or governmental proceedings involving or
affecting any of the Issuers, their Subsidiaries or any of their respective
properties or assets which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum, nor are
there any material Contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not described in the
Final Memorandum.
(t) Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, (A) each of the Issuers and their
Subsidiaries is in compliance with and not subject to any order or decree under
applicable Environmental Laws (as defined below), (B) each of the Issuers and
their Subsidiaries has made all filings and provided all notices required under
any applicable
9
<PAGE>
Environmental Law, and is in compliance with all Permits required under any
applicable Environmental Laws and each of them is in full force and effect, (C)
there is no civil, criminal or administrative action, suit, demand, claim,
hearing, notice of violation, investigation, proceeding, notice or demand letter
or request for information pending or, to the knowledge of the Issuers,
threatened against any of the Issuers or their Subsidiaries under any
Environmental Law, (D) no lien, charge, encumbrance or restriction has been
recorded under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by any of the Issuers or their
Subsidiaries, (E) none of the Issuers or their Subsidiaries has received notice
that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or any comparable state law, (F) no property or facility of
------
any of the Issuers or their Subsidiaries is (i) listed or proposed for listing
on the National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability Information System
List promulgated pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the common
------------------
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of hazardous materials, and (iii) underground
and above ground storage tanks and related piping, and emissions, discharges,
releases or threatened releases therefrom.
(u) Each of the Issuers carries insurance in such amounts and
covering such risks as is reasonably adequate for the conduct of its business
and the value of its properties.
(v) Except as described in the Memorandum, no collective bargaining
agreement exists with any of the Issuers' or their Subsidiaries' employees and,
to the Issuers' knowledge, no such agreement is imminent. None of the Issuers
or their Subsidiaries is involved in any labor dispute or disturbance which
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect nor, to the knowledge of the Issuers, is any such
dispute or disturbance threatened.
10
<PAGE>
(w) None of the Issuers is, or with the giving of notice or lapse of
time or both would be, in violation of any covenant not to compete with any
entity, which violation would individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(x) Each of the Issuers and their Subsidiaries is in compliance in
all material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
-----
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which any of the Issuers or their Subsidiaries would have any
liability; none of the Issuers or their Subsidiaries has incurred or expects to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); none of the Issuers or their
----
Subsidiaries has any liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability with respect to any
pension, profit sharing or other plan which is subject to ERISA, to which it
makes or ever has made a contribution and in which any employee of it is or has
ever been a participant; and each "pension plan" for which the Issuers would
have any liability that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(y) Each of the Issuers and their Subsidiaries maintains internal
accounting controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is permitted
only in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at reasonable
intervals.
(z) None of the Issuers or their Subsidiaries is or, upon the
consummation of the Transactions, will be an "investment company" or "promoter"
or "principal underwriter" for an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(aa) The Notes, the Exchange Notes, the Guarantees, the Indenture, the
Registration Rights Agreement and this Agreement
11
<PAGE>
conform in all material respects to the descriptions thereof in the Final
Memorandum.
(bb) No holder of securities of the Issuers will be entitled to have
such securities registered under the registration statements required to be
filed by the Issuers pursuant to the Registration Rights Agreement other than as
expressly permitted thereby.
(cc) Immediately after the consummation of the Transactions, the fair
value and present fair saleable value of the assets of each of the Issuers (on a
consolidated basis) will exceed the sum of its stated liabilities and identified
contingent liabilities; none of the Issuers (on a consolidated basis) is, nor
will it be, after giving effect to the execution, delivery and performance of
this Agreement and the consummation of the Transactions, (a) left with
unreasonably small capital with which to carry on its business as it is proposed
to be conducted, (b) unable to pay its debts (including identified contingent
liabilities) as they mature or (c) otherwise insolvent.
(dd) None of the Issuers or any of their respective Affiliates (as
defined in Rule 501(b) of Regulation D under the Act) has, directly or through
any agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of any "security" (as defined in the Act), which is or
could be integrated with the sale of the Securities in a manner that would
require the registration under the Act of the Securities or (ii) engaged in any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Securities or
in any manner involving a public offering within the meaning of Section 4(2) of
the Act. Assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 8 hereof, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Initial Purchaser in the
manner contemplated by this Agreement to register any of the Securities under
the Act or to qualify the Indenture under the TIA.
(ee) No securities of the Issuers are of the same class (within the
meaning of Rule 144A under the Act) as the Securities and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a U.S. automated inter-dealer quotation system.
(ff) None of the Issuers or their Subsidiaries has taken, nor will any
of them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of the
price of the Notes.
12
<PAGE>
Any certificate signed by any officer of the Issuers and delivered to
the Initial Purchaser or to counsel for the Initial Purchaser shall be deemed a
joint and several representation and warranty by the Issuers to the Initial
Purchaser as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
----------------------------------------
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Issuers agree to issue
and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase
from the Issuers, the principal amounts of Notes set forth opposite the name of
such Initial Purchaser on Schedule I hereto at a purchase price equal to
97.0% of their principal amount. One or more certificates in definitive
form for the Securities that the Initial Purchaser has agreed to purchase
hereunder, and in such denomination or denominations and registered in such name
or names as the Initial Purchaser requests upon notice to the Company at least
36 hours prior to the Closing Date, shall be delivered by or on behalf of the
Issuers to the Initial Purchaser, against payment by or on behalf of the Initial
Purchaser of the purchase price therefor by wire transfer (same day funds), to
such account or accounts as the Company shall specify prior to the Closing Date,
or by such means as the parties hereto shall agree prior to the Closing Date.
Such delivery of and payment for the Notes shall be made at the offices of
Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661 at 10:00 A.M., New York time, on May 5, 1998, or at such other place,
time or date as the Initial Purchaser, on the one hand, and the Company, on the
other hand, may agree upon, such time and date of delivery against payment being
herein referred to as the "Closing Date." The Issuers will make such
------------
certificate or certificates for the Notes available for checking and packaging
by the Initial Purchaser at the offices of the Initial Purchaser in New York,
New York, or at such other place as the Initial Purchaser may designate, at
least 24 hours prior to the Closing Date.
4. Offering by the Initial Purchaser. The Initial Purchaser proposes
---------------------------------
to make an offering of the Notes at the price and upon the terms set forth in
the Final Memorandum, as soon as practicable after this Agreement is entered
into and as in the judgment of the Initial Purchaser is advisable.
5. Covenants of the Issuers. The Issuers covenant and agree with
------------------------
the Initial Purchaser that:
(a) The Issuers will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchaser shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the
13
<PAGE>
proposed amendment or supplement and as to which the Initial Purchaser shall not
have given its consent. The Issuers shall, promptly, upon the reasonable request
of the Initial Purchaser or counsel for the Initial Purchaser, make any
amendments or supplements to the Preliminary Memorandum or the Final Memorandum
that may be necessary or advisable in connection with the resale of the Notes by
the Initial Purchaser.
(b) The Issuers shall cooperate with the Initial Purchaser in
arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchaser
may designate and shall continue such qualifications in effect for so long as
may be necessary to complete the resale of the Securities; provided, however,
-------- -------
that in connection therewith, none of the Issuers shall be required to qualify
as a foreign corporation or to execute a general consent to service of process
in any jurisdiction or subject itself to taxation in excess of a nominal dollar
amount in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchaser of the Notes or the Private Exchange Notes, any event
occurs or information becomes known as a result of which the Final Memorandum as
then amended or supplemented would include any untrue statement of a material
fact, or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
if for any other reason it is necessary at any time to amend or supplement the
Final Memorandum to comply with applicable law, the Issuers shall promptly
notify the Initial Purchaser thereof and shall prepare, at their own expense, an
amendment or supplement to the Final Memorandum that corrects such statement or
omission or effects such compliance.
(d) The Issuers shall, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchaser may reasonably request.
(e) The Issuers shall apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Securities remain outstanding, the
Issuers shall furnish to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the Issuers to the Trustee
or to the holders of the Securities and, as soon as available, copies of any
reports or financial statements furnished to or filed by the
14
<PAGE>
Issuers with the Commission or any national securities exchange on which any
class of securities of the Issuers may be listed.
(g) Prior to the Closing Date, the Issuers shall furnish to the
Initial Purchaser, as soon as they have been prepared by the Company and are
available, a copy of any unaudited interim consolidated financial statements of
the Issuers for any period subsequent to the period covered by the most recent
financial statements appearing in the Final Memorandum.
(h) Neither the Issuers nor any of their respective Affiliates shall
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any "security" (as defined in the Act) which could be integrated with the
sale of the Securities in a manner which would require the registration under
the Act of the Securities.
(i) Except as required by the terms of the Registrations Rights
Agreement, none of the Issuers shall engage in any form of general solicitation
or general advertising (as those terms are used in Regulation D under the Act)
in connection with the offering of the Securities or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding, the
Issuers shall make available at their expense, upon request, to any holder of
such Securities and any prospective purchasers thereof the information specified
in Rule 144A(d)(4) under the Act, unless the Issuers are then subject to Section
13 or 15(d) of the Exchange Act.
(k) The Issuers shall use their best efforts (i) to permit the Notes
to be designated PORTAL securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. relating to
trading in the Private Offerings, Resales and Trading through Automated Linkages
market (the "Portal Market") and (ii) to permit the Notes to be eligible for
-------------
clearance and settlement through The Depository Trust Company.
(l) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S), the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S and will not, except in accordance with the provisions of Regulation S, if
applicable, issue any such Notes in the form of definitive securities.
(m) Prior to the consummation of the Exchange Offer or the
effectiveness of an applicable Shelf Registration Statement
15
<PAGE>
(as such terms are defined in the Registration Rights Agreement) if, in the
reasonable judgment of the Initial Purchaser, the Initial Purchaser or any of
its Affiliates is required to deliver a Memorandum in connection with sales of,
or market making activities with respect to, the Securities, (A) to periodically
amend or supplement the Memorandum so that the information contained in the
Memorandum complies with the requirements of Rule 144A of the Act, (B) to amend
or supplement the Memorandum when necessary to reflect any material changes in
the information provided therein so that the Memorandum will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
existing as of the date the Memorandum is so delivered, not misleading and (C)
to provide the Initial Purchaser with copies of each such amended or
supplemented Memorandum, as the Initial Purchaser may reasonably request. The
Issuers hereby expressly acknowledge that the indemnification and contribution
provisions of Section 9 hereof are specifically applicable and relate to each
offering memorandum, registration statement, prospectus, amendment or supplement
referred to in this Section 5(m).
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(o) Not to distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Notes other than the Memorandum.
6. Expenses. The Issuers jointly and severally agree to pay all
--------
costs and expenses incident to the performance of their obligations under this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 11 hereof, including all
costs and expenses incident to (i) the printing, word processing or other
production of documents with respect to the transactions contemplated hereby,
including any costs of printing the Preliminary Memorandum and the Final
Memorandum and any amendment or supplement thereto, and any "Blue Sky"
memoranda, (ii) all arrangements relating to the delivery to the Initial
Purchaser of copies of the foregoing documents, (iii) the fees and disbursements
of counsel, the accountants and any other experts or advisors retained by the
Company, (iv) preparation (including printing), issuance and delivery to the
Initial Purchaser of the Notes, (v) the qualification of the Notes under state
securities and "Blue Sky" laws, including filing fees and reasonable fees and
disbursements of counsel for the Initial Purchaser relating thereto, (vi)
expenses in connection with any meetings with prospective investors in the
Notes, (vii) fees and expenses of the Trustee including fees and expenses of
counsel,
16
<PAGE>
(viii) all expenses and listing fees incurred in connection with the application
for quotation of the Notes on the PORTAL Market and (ix) any fees charged by
investment rating agencies for the rating of the Notes. If the sale of the Notes
provided for herein is not consummated because any condition to the obligations
of the Initial Purchaser set forth in Section 7 hereof is not satisfied, because
this Agreement is terminated or because of any failure, refusal or inability on
the part of the Issuers to perform all obligations and satisfy all conditions on
their part to be performed or satisfied hereunder (other than solely by reason
of a default by the Initial Purchaser of its obligations hereunder after all
conditions hereunder have been satisfied in accordance herewith), the Issuers,
jointly and severally, agree to promptly reimburse the Initial Purchaser upon
demand for all out-of-pocket expenses (including reasonable fees, disbursements
and charges of Willkie Farr & Gallagher, counsel for the Initial Purchaser) that
shall have been reasonably incurred by the Initial Purchaser in connection with
the proposed purchase and sale of the Notes.
7. Conditions of the Initial Purchaser's Obligations. The obligation
-------------------------------------------------
of the Initial Purchaser to purchase and pay for the Notes shall, in its sole
discretion, be subject to the satisfaction or waiver of the following conditions
on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Katten Muchin & Zavis, counsel for the Issuers, in form and
substance satisfactory to counsel for the Initial Purchaser, to the effect that:
(i) Each of the Issuers is duly incorporated (or in the
case of a limited partnership or limited liability company, duly
formed), validly existing and in good standing under the laws of its
jurisdiction of incorporation (or formation) and has all requisite
corporate (or partnership or limited liability company) power and
authority to own its properties and to conduct its business as
described in the Final Memorandum. Each of the Issuers is duly
qualified to do business as a foreign corporation (or limited
partnership or limited liability company) in good standing in all
other jurisdictions where the ownership or leasing of its properties
or the conduct of its business requires such qualification, except
where the failure to be so qualified would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
17
<PAGE>
(ii) The Company has the authorized, issued and
outstanding capitalization set forth in the Final Memorandum; all of
the outstanding shares of capital stock of the Company will have been
duly authorized and validly issued, fully paid and nonassessable.
(iii) Based solely upon a review of the stock (or
securities) transfer ledger, which was certified to us as true,
correct and complete, and copies of the applicable certificates, all
of the shares of capital stock of, or other securities evidencing
equity ownership interests in, each Subsidiary of the Company
purported to be owned by the Company or its Subsidiaries in the Final
Memorandum are owned by the Company, or a Subsidiary of the Company.
All of such issued and outstanding shares of capital stock of, or
other securities evidencing equity ownership interests in, each
Subsidiary of the Company (A) have been duly and validly authorized
and issued, (B) are fully paid and non-assessable, (C) have not been
issued in violation of any preemptive or, to such counsel's knowledge,
similar rights and, (D) to such counsel's knowledge, after a review of
the stock (or securities) transfer ledger, which was certified to such
counsel as true, correct and complete, and copies of the applicable
certificates are owned free and clear of any lien, except for liens
securing obligations under the Credit Facility and liens for taxes not
yet due and payable.
(iv) Except as set forth in the Final Memorandum (A)
there are no options, warrants or other rights to purchase from any of
the Issuers shares of capital stock or ownership interests in any of
the Issuers, (B) no agreements or other obligations to issue, or other
rights to convert, any obligation into, or exchange any securities
for, shares of capital stock or ownership interests in any of the
Issuers are or will be outstanding and (C) no holder of securities of
any of the Issuers is or will be entitled to have such securities
registered under a registration statement filed by the Issuers
pursuant to the Registration Rights Agreement.
(v) Each of the Issuers has all requisite corporate (or
partnership or limited liability company) power and authority to
execute, deliver and perform each of its obligations under the
Indenture, the Notes, the Exchange Notes, the Private Exchange Notes
and the Guarantees; the Indenture meets the requirements for
qualification under the TIA; the Indenture has been
18
<PAGE>
duly and validly authorized, executed and delivered by the Issuers and
(assuming the due authorization, execution and delivery thereof by the
Trustee), constitutes the valid and legally binding agreement of the
Issuers, enforceable against each of the Issuers in accordance with
its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a court of
equity or law).
(vi) The Notes and the Guarantees are in the form
contemplated by the Indenture. The Notes and the Guarantees have been
duly and validly authorized by the applicable Issuers and, when duly
executed and delivered by the applicable Issuers and paid for by the
Initial Purchaser in accordance with the terms of this Agreement
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the
Notes by the Trustee in accordance with the Indenture), will
constitute the valid and legally binding obligations of the applicable
Issuers, entitled to the benefits of the Indenture, and enforceable
against each of the applicable Issuers in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether
such enforcement is considered in a court of equity or law).
(vii) The Exchange Notes, the Private Exchange Notes and
the Guarantees thereof have been duly and validly authorized by the
applicable Issuers, and when the Exchange Notes, the Private Exchange
Notes and the Guarantees thereof have been duly executed and delivered
by the applicable Issuers in accordance with the terms of the
Registration Rights Agreement and the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee
and due authentication and delivery of the Exchange Notes and the
Private Exchange Notes by the Trustee in accordance with the
Indenture), will constitute the valid and legally binding obligations
of the Issuers, entitled to the benefits of the Indenture, and
enforceable against
19
<PAGE>
each of the applicable Issuers in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether
such enforcement is considered in a court of equity or law).
(viii) Each of the Issuers has all requisite corporate (or
partnership or limited liability company) power and authority to
execute, deliver and perform its obligations under the Registration
Rights Agreement; the Registration Rights Agreement has been duly and
validly authorized, executed and delivered by the Issuers (assuming
due authorization, execution and delivery thereof by the Initial
Purchaser), and constitutes the valid and legally binding agreement of
the Issuers, enforceable against each of the Issuers in accordance
with its terms, except that (A) the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a court of
equity or law) and (B) any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and
public policy considerations.
(ix) Each of the Issuers has all requisite corporate (or
partnership) power and authority to execute, deliver and perform their
obligations under this Agreement and to consummate the transactions
contemplated hereby; this Agreement and the consummation by the
Issuers of the transactions contemplated hereby have been duly and
validly authorized, executed and delivered by the Issuers.
(x) The Indenture, the Notes, the Guarantees and the
Registration Rights Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(xi) To the knowledge of such counsel, except as
disclosed in the Final Memorandum, no legal or governmental
proceedings are pending or threatened to which any of the Issuers or
any of their Subsidiaries is a party or to which the property or
assets of any of
20
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the Issuers or any of their Subsidiaries is subject which, if
determined adversely to any of the Issuers or any of their
Subsidiaries, would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, or which seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Notes to be sold hereunder or the
consummation of the other transactions described in the Final
Memorandum under the caption "Use of Proceeds."
(xii) To the knowledge of such counsel, none of the
Issuers is (i) in violation of its certificate or articles of
incorporation or bylaws (or limited partnership agreement or similar
organizational document), (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to any of them
or any of their respective properties or assets, except for any such
breach or violation which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, or (iii) in
breach or default under (nor has any event occurred which, with notice
or passage of time or both, would constitute a default under) or in
violation of any of the terms or provisions of any Contract described
in the Memorandum or otherwise known to such counsel, except for any
such breach, default, violation or event which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(xiii) The execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Notes to
the Initial Purchaser) will not conflict with or constitute or result
in a breach or a default under (or an event which with notice or
passage of time or both would constitute a default under) or violation
of any of (i) the terms or provisions of any Contract described in the
Memorandum or otherwise known to such counsel to which any of the
Issuers or their Subsidiaries is a party, except for any such
conflict, breach, violation, default or event which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (ii) the certificate or articles of
incorporation or bylaws (or limited partnership agreement or similar
organizational document) of any of the Issuers, or (iii) (assuming
compliance with all applicable state securities or
21
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"Blue Sky" laws and assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation described in the
Memorandum or otherwise known to such counsel to be applicable to any
of the Issuers, their Subsidiaries or any of their respective
properties or assets, except for any such conflict, breach or
violation which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(xiv) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by the
Issuers of the Securities to the Initial Purchaser or the consummation
by the Issuers of the other transactions contemplated hereby, except
such (a) as may be required under Blue Sky laws, as to which such
counsel need express no opinion, (b) as may be required from the
Commission in connection with the transactions contemplated by the
Registration Rights Agreement and (c) as have previously been
obtained.
(xv) To the knowledge of such counsel, each of the
Issuers and their Subsidiaries has obtained all Permits necessary to
conduct the businesses now or proposed to be conducted by it as
described in the Final Memorandum, the lack of which would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; to the knowledge of such counsel, each of the
Issuers and their Subsidiaries has fulfilled and performed all of its
obligations with respect to such Permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit.
(xvi) To the knowledge of such counsel, the Issuers and
their Subsidiaries own or possess adequate licenses or other rights to
use all patents, trademarks, service marks, trade names, copyrights
and know-how necessary to conduct the businesses now or proposed to be
operated by them as described in the Final Memorandum, and the Issuers
have not received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, trademarks,
service marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, would reasonably
be expected to have a Material Adverse Effect.
22
<PAGE>
(xvii) To the knowledge of such counsel, there are no legal
or governmental proceedings pending or threatened against any of the
Issuers, their Subsidiaries or any of their respective properties or
assets which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum,
nor are there any material contracts or other documents which would be
required to be described in a prospectus pursuant to the Act that are
not described in the Final Memorandum.
(xviii) None of the Issuers is, nor immediately after the
sale of the Notes to be sold hereunder and the application of the
proceeds from such sale (as described in the Final Memorandum under
the caption "Use of Proceeds") will be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended.
(xix) No registration under the Act of the Notes is
required in connection with the sale of the Notes to the Initial
Purchaser as contemplated by this Agreement and the Final Memorandum
or in connection with the initial resale of the Notes by the Initial
Purchaser in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of a Shelf Registration
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case
assuming (i) (A) that the purchasers who buy such Notes in the initial
resale thereof are Qualified Institutional Buyers or Accredited
Investors or (B) that the offer or sale of the Notes is made in an
offshore transaction as defined in Regulation S, (ii) the accuracy of
the Initial Purchaser's representations in Section 8 and those of the
Issuers contained in this Agreement regarding the absence of a general
solicitation in connection with the sale of such Notes to the Initial
Purchaser and the initial resale thereof and (iii) the due performance
by the Initial Purchaser of the agreements set forth in Section 8
hereof.
(xx) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes will violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
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<PAGE>
(xxi) The statements under the captions "Risk Factors--
Reliance on Third Party Reimbursement," "Risk Factors--Extensive
Government Regulation," "Use of Proceeds," "Business--Dialysis
Industry Overview" (last paragraph only), "Business--Sources of
Revenue Reimbursement," "Business--Regulatory Matters," "Management--
Employment Agreements," "Management--Voting Agreements," "Certain
Relationships and Related Transactions," "Description of Credit
Facility," "Description of Notes," "Exchange Offer; Registration
Rights," and "Certain Federal Income Tax Considerations" in the Final
Memorandum, insofar as such statements constitute a summary of legal
matters, documents or proceedings referred to therein (to such
counsel's knowledge with respect to factual matters) are correct in
all material respects.
(xxii) When the Notes are issued and delivered pursuant to
this Agreement, such Notes will not be of the same class (within the
meaning of Rule 144A under the Act) as securities of the Issuer that
are listed on a national securities exchange registered under Section
6 of the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(xxiii) Each of the Preliminary Memorandum and the Final
Memorandum, as of its respective date, and each amendment or
supplement thereto, as of its date (except for the financial statement
and the notes thereto and schedules and other financial, statistical
and accounting data included therein, as to which no opinion need be
expressed), complied as to form in all material respects with the
requirements of Rule 144A(d)(4) of the Act.
At the time the foregoing opinion is delivered, Katten Muchin & Zavis
shall additionally state that it has participated in conferences with officers
and other representatives of the Issuers, representatives of the independent
public accountants for the Issuers, representatives of the Initial Purchaser and
counsel for the Initial Purchaser, at which conferences the contents of the
Final Memorandum and related matters were discussed, and, although it has not
independently verified and is not passing upon and assumes no responsibility for
the accuracy, completeness or fairness of the statements contained in the Final
Memorandum (except to the extent specified in subsection 7(a)(x) and (xxi)), no
facts have come to their attention which lead them to believe that the Final
Memorandum, on the date thereof or at the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated
24
<PAGE>
therein or necessary to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading (it being
understood that such firm need express no opinion with respect to the financial
statements and related notes thereto and the other financial and accounting data
included in the Final Memorandum). The opinion of Katten Muchin & Zavis
described in this Section shall be rendered to the Initial Purchaser at the
request of the Issuers and shall so state therein.
Such counsel is licensed to practice law in the State of Illinois and
will express no opinion as to any laws other than the internal laws of the State
of Illinois, the General Corporation Laws of the State of Delaware, the Laws of
the State of New York, and the federal laws of the United States. The opinions
required by this Section 7(a) may be subject to such exceptions and
qualifications as you and your counsel deem reasonable.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser, dated
as of the Closing Date and addressed to the Initial Purchaser, of Willkie Farr &
Gallagher, counsel for the Initial Purchaser, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchaser may reasonably request. In rendering such opinion, Willkie Farr &
Gallagher shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(c) The Initial Purchaser shall have received from the Independent
Accountants a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance satisfactory to counsel for the Initial Purchaser.
(d) The representations and warranties of the Issuers contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date; the statements
of the officers of the Issuers made pursuant to any certificate delivered in
accordance with the provisions hereof shall be true and correct on and as of the
date made and on and as of the Closing Date; the Issuers shall have performed
all covenants and agreements and satisfied all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date; and, except as
described in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), subsequent to the date of the most recent
financial statements in such Final Memorandum, there shall have been no event or
development, and no information shall have become known, that, individually or
in the
25
<PAGE>
aggregate, has or would be reasonably expected to have a Material Adverse
Effect.
(e) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), none of the Issuers shall have sustained any loss or interference
with respect to its business or properties from fire, flood, hurricane, accident
or other calamity, whether or not covered by insurance, or from any strike,
labor dispute, slow down or work stoppage or from any legal or governmental
proceeding, order or decree, which loss or interference, individually or in the
aggregate, has or would be reasonably expected to have a Material Adverse
Effect.
(g) The Initial Purchaser shall have received a certificate of the
Issuers, dated the Closing Date, signed on behalf of each of the Issuers by its
Chairman of the Board, President or any Senior Vice President and the Chief
Financial Officer, or other executive officers (as defined in the Exchange Act)
to the effect that:
(i) The representations and warranties of the Issuers
contained in this Agreement are true and correct on and as of the date
hereof and on and as of the Closing Date, and each of the Issuers has
performed all covenants and agreements and satisfied all conditions on
their part to be performed or satisfied hereunder at or prior to the
Closing Date;
(ii) At the Closing Date, since the date hereof or since
the date of the most recent financial statements in the Final
Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), no event or development has occurred, and no information
has become known, that, individually or in the aggregate, has or would
be reasonably expected to have a Material Adverse Effect; and
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(h) On the Closing Date, the Initial Purchaser shall have received
the Registration Rights Agreement executed by the Issuers and such agreement
shall be in full force and effect.
(i) The Indenture shall have been duly executed and delivered by the
Issuers and the Trustee, and the Securities
26
<PAGE>
shall have been duly executed and delivered by the Issuers and duly
authenticated by the Trustee.
(j) The Initial Purchaser shall have received a true and correct copy
of the Credit Facility, copies of which have previously been provided to the
Initial Purchaser by the Company, and there shall have been no material
amendments, alterations, modifications or waivers of any provisions of the
Credit Facility, and there shall exist as of the date hereof and on and as of
the Closing Date (after giving effect to the transactions contemplated by this
Agreement and the application of the proceeds received by the Issuers) no
condition that would constitute a Default or an Event of Default (each as
defined in the Credit Facility) under the Credit Facility.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Issuers as they shall have
theretofore reasonably requested.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchaser and counsel for the Initial Purchaser. The Issuers shall
furnish to the Initial Purchaser such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchaser shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. (a) The Initial
-------------------------------------------
Purchaser represents and warrants that it is a QIB. The Initial Purchaser
agrees that (i) it has not and will not solicit offers for, or offer or sell,
the Notes by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act; and (ii) it has
and will solicit offers for the Notes only from, and will offer the Notes only
to (A) in the case of offers inside the United States, (x) persons whom the
Initial Purchaser reasonably believes to be QIBs or, if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to the Initial
Purchaser that each such account is a QIB, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A or (y) a limited number of other institutional
investors reasonably believed by the Initial Purchaser to be Accredited
Investors that, prior to their
27
<PAGE>
purchase of the Notes, deliver to the Initial Purchaser a letter containing the
representations and agreements set forth in Appendix A to the Final Memorandum
and (B) in the case of offers outside the United States, to persons other than
U.S. persons ("foreign purchasers," which term shall include dealers or other
------------------
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)); provided,
--------
however, that, in the case of this clause (B), in purchasing such Notes such
- -------
foreign purchasers are deemed to have represented and agreed as provided under
the caption "Transfer Restrictions" contained in the Final Memorandum (or, if
the Final Memorandum is not in existence, in the most recent Memorandum).
(b) The Initial Purchaser represents and warrants with respect to
offers and sales outside the United States that (i) it has and will comply with
all applicable laws and regulations in each jurisdiction in which it acquires,
offers, sells or delivers Notes or has in its possession or distributes any
Memorandum or any such other material, in all cases at its own expense; (ii) the
Notes have not been and will not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Act or pursuant to an exemption from the registration
requirements of the Act; (iii) it has offered the Notes and will offer and sell
the Notes (A) as part of its distribution at any time and (B) otherwise until 40
days after the later of the commencement of the offering and the Closing Date,
only in accordance with Rule 903 of Regulation S and, accordingly, neither it
nor any persons acting on its behalf have engaged or will engage in any directed
selling efforts (within the meaning of Regulation S) with respect to the Notes,
and any such persons have complied and will comply with the offering
restrictions requirement of Regulation S; and (iv) it agrees that, at or prior
to confirmation of sales of the Notes, it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases Notes from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and
may not be offered and sold within the United States or to, or
for the account or benefit of, U.S. persons (i) as part of the
distribution of the Securities at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering
and the closing date of the offering, except in either case in
accordance with Regulation S (or Rule 144A if available) under
the Securities Act. Terms used above have the meaning given to
them in Regulation S."
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<PAGE>
Terms used in this Section 8 and not defined in this Agreement have the meanings
given to them in Regulation S.
9. Indemnification and Contribution. (a) The Issuers, jointly and
--------------------------------
severally, agree to indemnify and hold harmless the Initial Purchaser, and each
person, if any, who controls the Initial Purchaser within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Initial Purchaser or such controlling person
may become subject under the Act, the Exchange Act or otherwise, insofar as any
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or
supplement thereto or any application or other document, or any
amendment or supplement thereto, or based upon written information
furnished by or on behalf of any of the Issuers filed in any
jurisdiction in order to qualify the Notes under the securities or
"Blue Sky" laws thereof (each an "Application"); or
-----------
(ii) the omission or alleged omission to state, in any
Memorandum or any amendment or supplement thereto or any Application,
a material fact required to be stated therein or necessary to make the
statements therein not, in light of the circumstances under which they
were made, misleading,
and shall reimburse, as incurred, the Initial Purchaser and each such
controlling person for any legal or other expenses incurred by the Initial
Purchaser or such controlling person in connection with investigating, defending
against or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or action; provided, however, the Issuers shall not be
-------- -------
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Memorandum or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information furnished to the Issuers by the Initial
Purchaser specifically for use therein; provided further, however, that the
-------- ------- -------
Issuers shall not be liable to any Initial Purchaser or any controlling person
of such Initial Purchaser from whom the person asserting any such losses,
claims, damages or liabilities purchased Notes, if a copy of the Offering
Memorandum (as then amended or supplemented if the Issuers shall have furnished
any amendment or supplement thereto) was not sent or given by or on behalf of
such Initial Purchaser to such
29
<PAGE>
person, at or prior to the written confirmation of the sale of the Notes, and
the Offering Memorandum (as so amended or supplemented) would have cured the
defect giving rise to such losses, claims, damages or liabilities. This
indemnity agreement will be in addition to any liability that the Issuers may
otherwise have to the indemnified parties. The Issuers shall not be liable under
this Section 9 for any settlement of any claim or action effected without their
prior written consent, which shall not be unreasonably withheld, unless (i) such
settlement is entered into more than 30 days after receipt by the Issuers of a
request for indemnification and (ii) the Issuers shall not have reimbursed the
Initial Purchaser in accordance with such request prior to the date of such
settlement or, if the Issuers in good faith dispute the amount of such
reimbursement due to the Initial Purchaser and the Issuers shall have failed to
provide the Initial Purchaser with reasonable security for payment of such
disputed amounts.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Issuers, their directors, officers, employees, agents and representatives and
each person, if any, who controls the Issuers within the meaning of Section 15
of the Act or Section 20 of the Exchange Act against any losses, claims, damages
or liabilities to which the Issuers or any such director, officer, employee,
agent, representative or controlling person may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Memorandum or any amendment or supplement thereto or any Application, or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in any Memorandum or any amendment or supplement thereto
or any Application, or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information, furnished to the Issuers by the
Initial Purchaser specifically for use therein; and subject to the limitation
set forth immediately preceding this clause, shall reimburse, as incurred, any
legal or other expenses incurred by the Issuers or any such director, officer,
employee, agent, representative or controlling person in connection with
investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Initial Purchaser may otherwise have to the indemnified parties. The Initial
Purchaser shall not be liable under this Section 9 for any settlement of any
claim or action effected without its consent, which shall not be unreasonably
withheld. The Issuers shall not,
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<PAGE>
without the prior written consent of the Initial Purchaser, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which the Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by the Initial Purchaser, unless such settlement
either (i) both (A) includes an unconditional written release of the Initial
Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser, from all liability on claims that are the subject matter of such
proceeding, and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of the Initial Purchaser, or both
(ii) (A) such settlement is entered into more than 30 days after receipt by the
Initial Purchaser of a request for indemnification and (B) the Initial Purchaser
shall not have reimbursed the Issuers in accordance with such request prior to
the date of such settlement or, if the Initial Purchaser in good faith disputes
the amount of such reimbursement due o the Issuers and the Initial Purchaser
shall have failed to provide the Issuers with reasonable security for payment of
such disputed amounts.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a) and (b) above. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if (i) the use of counsel chosen by the indemnifying
- -------- -------
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time
31
<PAGE>
after receipt by the indemnifying party of notice of the institution of such
action, then, in each such case, the indemnifying party shall not have the right
to direct the defense of such action on behalf of such indemnified party or
parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties at the expense of the indemnifying party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, the indemnifying party shall not be liable to such
indemnified party under this Section 9 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchaser in the case of paragraph (a) of this Section
9 or the Issuers in the case of paragraph (b) of this Section 9, representing
the indemnified parties under such paragraph (a) or paragraph (b), as the case
may be, who are parties to such action or actions) or (ii) the indemnifying
party has authorized in writing the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, except as otherwise expressly
provided in the last sentence of Section 9(a) or 9(b), the indemnifying party
shall not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld).
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the
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<PAGE>
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefits received by
the Issuers on the one hand and the Initial Purchaser on the other shall be
deemed to be in the same proportion as the total proceeds from the Offering
(before deducting expenses) received by the Issuers bear to the total discounts
and commissions received by the Initial Purchaser. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Issuers
on the one hand, or the Initial Purchaser on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances. The parties agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), the Initial Purchaser shall not be obligated to
make contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by the Initial Purchaser under this
Agreement, less the aggregate amount of any damages that the Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact, and
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph (d),
each person, if any, who controls the Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Initial Purchaser, and each director of the
Issuers, each officer, employee, agent or representative of the Issuers and each
person, if any, who controls the Issuers within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Issuers.
10. Survival Clause. The respective representations, warranties,
---------------
agreements, covenants, indemnities and other statements of the Issuers, their
officers and the Initial Purchaser set forth in this Agreement or made by or on
behalf of them pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Issuers, any of
their respective officers or directors,
33
<PAGE>
the Initial Purchaser or any controlling person referred to in Section 9 hereof
and (ii) delivery of and payment for the Notes. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9, 15 and
16 hereof shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
-----------
discretion of the Initial Purchaser by notice to the Issuers given prior to the
Closing Date in the event that the Issuers shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on their part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
(i) any of the Issuers or their Subsidiaries shall have
sustained any loss or interference with respect to its businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor
dispute, slow down or work stoppage or any legal or governmental
proceeding, which loss or interference, in the sole judgment of the
Initial Purchaser, has had or has a Material Adverse Effect, or there
shall have been, in the sole judgment of the Initial Purchaser, any
event or development that, individually or in the aggregate, has or
could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of any of the
Issuers), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities of the Company or in securities
generally on the New York Stock Exchange, American Stock Exchange or
the NASDAQ National Market shall have been suspended or minimum or
maximum prices shall have been established on any such exchange or
market;
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the Initial Purchaser, makes it
34
<PAGE>
impracticable or inadvisable to proceed with the offering or the
delivery of the Notes as contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded
or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The statements
---------------------------------------------
set forth in the last paragraph on the front cover page and in the last two
sentences of the third paragraph, the second and third sentence of the fifth
paragraph, and the sixth and seventh paragraphs under the heading "Private
Placement" in the Final Memorandum (to the extent such statements relate to the
Initial Purchaser) constitute the only information furnished by the Initial
Purchaser to the Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
-------
if sent to the Initial Purchaser, shall be mailed or delivered to BT Alex. Brown
Incorporated, Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006,
with a copy to: Willkie Farr & Gallagher, 757 Seventh Avenue, New York, New
York; or if sent to the Issuers, shall be mailed or delivered to them at 101
North Scoville, Oak Park, Illinois 60302: Chief Financial Officer, with a copy
to Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661 Attention: Alan M. Berry, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the Initial Purchaser and the Issuers and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Issuers contained in Section 9 of this
35
<PAGE>
Agreement shall also be for the benefit of any person or persons who control the
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Issuers, their officers, agents, representatives and employees and any
person or persons who control the Issuers within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act. No purchaser of Notes from the
Initial Purchaser will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
--------------
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY
--------------------
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT.
17. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
36
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
the Subsidiary Guarantors and the Initial Purchaser.
Very truly yours,
EVEREST HEALTHCARE SERVICES CORPORATION
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
CON-MED SUPPLY COMPANY, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
CONTINENTAL HEALTH CARE, LTD.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
DIALYSIS SPECIALISTS OF CORPUS CHRISTI,
L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
-37-
<PAGE>
DUPAGE DIALYSIS LTD.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
EVEREST MANAGEMENT, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
HEMO DIALYSIS OF AMARILLO L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
HOME DIALYSIS OF AMERICA, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
HOME DIALYSIS OF DAYTON, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
LAKE AVENUE DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
MERCY DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
-38-
<PAGE>
NEW YORK DIALYSIS MANAGEMENT, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
NORTH BUCKNER DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
NORTHWEST INDIANA DIALYSIS, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
OHIO VALLEY DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
WSKC DIALYSIS SERVICES, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT ALEX. BROWN INCORPORATED,
as Initial Purchaser
By: /s/ STANLEY B. BLAYLOCK
-----------------------------
Name: Stanley B. Blaylock
Title:
-39-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Notes
Underwriter To Be Purchased
----------- ----------------
<S> <C>
BT Alex. Brown Incorporated $100,000,000
------------
Total...................... $100,000,000
------------
</TABLE>
40
<PAGE>
EXHIBIT 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of May __, 1998
By and Among
EVEREST HEALTHCARE SERVICES CORPORATION,
THE GUARANTORS SIGNATORY HERETO
and
BT ALEX. BROWN INCORPORATED
as Initial Purchaser
__% Senior Subordinated Notes due 2008
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS........................................................... 1
2. EXCHANGE OFFER........................................................ 4
3. SHELF REGISTRATION.................................................... 8
4. ADDITIONAL INTEREST................................................... 10
5. REGISTRATION PROCEDURES............................................... 12
6. REGISTRATION EXPENSES................................................. 20
7. INDEMNIFICATION....................................................... 21
8. RULES 144 AND 144A.................................................... 25
9. UNDERWRITTEN REGISTRATIONS............................................ 25
10. MISCELLANEOUS......................................................... 26
(a) No Inconsistent Agreements........................................ 26
(b) Adjustments Affecting Registrable Notes........................... 26
(c) Amendments and Waivers............................................ 26
(d) Notices........................................................... 27
(e) Successors and Assigns............................................ 28
(f) Counterparts...................................................... 28
(g) Headings.......................................................... 28
(h) Governing Law..................................................... 28
(i) Severability...................................................... 28
(j) Securities Held by the Issuers or their Affiliates................ 28
(k) Third Party Beneficiaries......................................... 29
</TABLE>
(i)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
---------
May 5, 1998, by and among EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware
corporation (the "Company"), the guarantors signatory hereto (the "Guarantors,"
------- ----------
and together with the Company, the "Issuers"), and BT ALEX. BROWN INCORPORATED
-------
(the "Initial Purchaser").
-----------------
This Agreement is entered into in connection with the Purchase
Agreement, dated as of April 30, 1998, by and among the Issuers and the Initial
Purchaser (the "Purchase Agreement") relating to the sale by the Company to the
------------------
Initial Purchaser of $100,000,000 aggregate principal amount of its 9-3/4%
Senior Subordinated Notes due 2008 (the "Notes"). In order to induce the Initial
-----
Purchaser to enter into the Purchase Agreement, the Issuers have agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchaser and its direct and indirect transferees. The execution
and delivery of this Agreement is a condition to the Initial Purchaser's
obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
-------------------
Advice: See the last paragraph of Section 5 hereof.
------
Agreement: See the introductory paragraphs hereto.
---------
Applicable Period: See Section 2(b) hereof.
-----------------
Company: See the introductory paragraphs hereto.
-------
Effectiveness Date: With respect to (i) the Exchange Offer
------------------
Registration Statement, the 120th day after the Issue Date and (ii) any Shelf
Registration Statement, the 90th day after the Filing Date with respect thereto.
Effectiveness Period: See Section 3(a) hereof.
--------------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
<PAGE>
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Offer Registration Statement: See Section 2(a) hereof.
-------------------------------------
Filing Date: (A) If no Registration Statement has been filed by the
-----------
Issuers pursuant to this Agreement, the 45th day after the Issue Date; and (B)
in any other case (which may be applicable notwithstanding the consummation of
the Exchange Offer), the 30th day after the delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: means the Indenture, dated as of the Issue Date, by and
---------
among the Issuers, and American National Bank and Trust Company of Chicago, as
trustee, relating to the Notes as it may be amended or supplemented from time to
time.
Initial Purchaser: See the introductory paragraphs hereto.
-----------------
Initial Shelf Registration: See Section 3(a) hereof.
--------------------------
Inspectors: See Section 5(n) hereof.
----------
Issue Date: May 5, 1998, the date of original issuance of the Notes.
----------
NASD: See Section 5(s) hereof.
----
Notes: See the introductory paragraphs hereto.
-----
Participant: See Section 7(a) hereof.
-----------
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, limited
------
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as
-2-
<PAGE>
part of an effective registration statement in reliance upon Rule 430A under the
Securities Act and any term sheet filed pursuant to Rule 434 under the
Securities Act), as amended or supplemented by any prospectus supplement, and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereto.
------------------
Records: See Section 5(n) hereof.
-------
Registrable Notes: Each Note upon its original issuance and at all
-----------------
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under federal securities
laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may
be, ceases to be outstanding for purposes of the Indenture or (iv) such Note,
Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the Issuers
----------------------
that covers any of the Notes, the Exchange Notes or the Private Exchange Notes
filed with the SEC under the Securities Act, including the Prospectus,
amendments and supplements to such registration statement, including post-
effective amendments, all exhibits, and all material incorporated by reference
or deemed to be incorporated by reference in such registration statement.
"Reoffer Condition" shall be deemed to have occurred if either (1) a
-----------------
Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus
contained in the Exchange Offer Registration Statement filed pursuant to Section
2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer that seeks to sell Exchange Notes during the
Applicable Period.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter
-3-
<PAGE>
adopted by the SEC providing for offers and sales of securities made in
compliance therewith resulting in offers and sales by subsequent holders that
are not affiliates of the Issuers of such securities being free of the
registration and prospectus delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission and any successor agency.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration: See Section 3(b) hereof.
------------------
Shelf Registration Statement: Any Registration Statement relating to
----------------------------
a Shelf Registration.
Subsequent Shelf Registration: See Section 3(b) hereof.
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture.
-------
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Issuers are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Issuers shall file with the SEC, no later than the Filing
Date, a Registration Statement (the "Exchange Offer Registration Statement") on
-------------------------------------
an appropriate registration form with respect to a registered offer (the
"Exchange Offer") to exchange any and all of the Registrable Notes for a like
--------------
aggregate principal amount of notes (the "Exchange Notes") of the Issuers that
--------------
are identical in all material respects to the Notes except that the Exchange
Notes shall contain no restrictive legend thereon. The Exchange Offer shall
comply with all applicable tender offer rules and regulations under the Exchange
Act and other applicable laws, including state "Blue Sky" laws. The Issuers
shall use their best efforts (x) to cause the Exchange
-4-
<PAGE>
Offer Registration Statement to be declared effective under the Securities Act
on or before the Effectiveness Date; (y) to keep the Exchange Offer open for at
least 30 days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; and (z) to consummate the
Exchange Offer on or prior to the 30th day following the date on which the
Exchange Offer Registration Statement is declared effective by the SEC. If,
after the Exchange Offer Registration Statement is initially declared effective
by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court, the Exchange Offer
Registration Statement shall be deemed not to have become effective for purposes
of this Agreement.
Each Holder that participates in the Exchange Offer will be required
to represent to the Company that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, and that such Holder
is not an affiliate of the Issuers within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, solely with
respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as
to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating
Broker-Dealers, and the Issuers shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in respect
of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to
Section 3 hereof. No securities other than the Exchange Notes and the
guarantees of the Guarantors with respect thereto shall be included in the
Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
-------------
Broker-Dealer"), whether such positions or policies have been publicly
- -------------
disseminated by the staff of the SEC or such positions or policies represent the
prevailing views of the staff of the SEC. Such "Plan of Distribution" section
shall include all information with respect to the sale of Exchange Notes by
Participating Broker-Dealers that the SEC may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not
-5-
<PAGE>
name any such Participating Broker-Dealer or disclose the amount of Notes held
by any such Participating Broker-Dealer except to the extent required by the
SEC. Such "Plan of Distribution" section shall also expressly permit, to the
extent permitted by applicable policies and regulations of the SEC, the use of
the Prospectus by all Persons subject to the prospectus delivery requirements of
the Securities Act, including, to the extent permitted by applicable policies
and regulations of the SEC, all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Notes in compliance with the Securities Act.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes covered thereby; provided,
--------
however, that such period shall not exceed 180 days after such Exchange Offer
- -------
Registration Statement is declared effective (or such longer period if extended
pursuant to the last paragraph of Section 5 hereof) (the "Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Issuers upon the request of any such Holder shall simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
any such Holder, in exchange (the "Private Exchange") for such Notes held by any
----------------
such Holder, a like principal amount of notes (the "Private Exchange Notes") of
----------------------
the Issuers that are identical in all material respects to the Exchange Notes
(except that they may bear a customary legend with respect to restrictions on
transfer). The Private Exchange Notes shall be issued pursuant to the same
indenture as the Exchange Notes and bear the same CUSIP number as the Exchange
Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date subsequent to the record date for
an interest payment date to occur on or after the date of such exchange and as
to which interest will be paid, the date of such interest payment or (B) if no
interest has been paid on the Notes, from the date of the original issuance of
the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder
-6-
<PAGE>
entitled to participate in the Exchange Offer a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 30 days after the
date that notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer and the Private Exchange,
if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Issuers and
(iii) all governmental approvals shall have been obtained, which approvals the
Issuers deem necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture and which, in either case, has been qualified under the TIA or is
exempt from such
-7-
<PAGE>
qualification and shall provide that the Exchange Notes shall not be subject to
the transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes shall vote and consent together on all matters as one class and that
none of the Exchange Notes, the Private Exchange Notes or the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 150 days
of the Issue Date, (iii) the Initial Purchaser or any holder of Private Exchange
Notes so requests in writing to the Issuers at any time after the consummation
of the Exchange Offer, or (iv) in the case of any Holder that participates in
the Exchange Offer, such Holder does not receive Exchange Notes on the date of
the exchange that may be sold without restriction under federal securities laws
(other than due solely to the status of such Holder as an affiliate of any of
the Issuers within the meaning of the Securities Act) and so notifies the
Issuers within 30 days after such Holder first becomes aware of such
restrictions, in the case of each of clauses (i) to and including (iv) of this
sentence, then the Issuers shall promptly deliver to the Holders and the Trustee
written notice thereof (the "Shelf Notice") and shall file a Shelf Registration
------------
pursuant to Section 3 hereof.
3. Shelf Registration
------------------
If at any time a Shelf Notice is delivered as contemplated by Section
2(c) hereof, then:
(a) Shelf Registration. The Issuers shall file with the SEC a
------------------
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not permitted to be exchanged
in the Exchange Offer in accordance with the terms of this Agreement, Private
Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable
(the "Initial Shelf Registration"). The Issuers shall use their best efforts
--------------------------
to file with the SEC the Initial Shelf Registration on or before the applicable
Filing Date. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Issuers shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration (as defined below).
The Issuers shall use their best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep
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<PAGE>
the Initial Shelf Registration continuously effective under the Securities Act
until the date which is two years from the Issue Date, subject to extension
pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"),
--------------------
or such shorter period ending when all Registrable Notes covered by the Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration or, if applicable, a Subsequent Shelf Registration;
provided, however, that the Effectiveness Period in respect of the Initial
- -------- -------
Shelf Registration shall be extended to the extent required to permit dealers to
comply with the applicable prospectus delivery requirements of Rule 174 under
the Securities Act and as otherwise provided herein.
No holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such holder furnishes to the Issuers in writing, after receipt of a
request therefor, such information as the Issuers may reasonably request for use
in connection with any Shelf Registration Statement or Prospectus or preliminary
prospectus included therein. No Holder shall be entitled to Additional Interest
pursuant to Section 4 hereof unless and until such Holder shall have provided
all such reasonably requested information. Each Holder as to which any Shelf
Registration Statement is being effected will be required to agree to furnish
promptly to the Issuers all information required to be disclosed in order to
make information previously furnished to the Issuers by such Holder not
materially misleading.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
------------------------------
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period (other than because of the sale of all
of the securities registered thereunder), the Issuers shall, in addition to
fulfilling their obligations under (d) below, within 30 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional Shelf Registration Statement pursuant to Rule 415 covering all of the
Registrable Notes covered by and not sold under the Initial Shelf Registration
or an earlier Subsequent Shelf Registration (each, a "Subsequent Shelf
----------------
Registration"). If a Subsequent Shelf Registration is filed, the Issuers shall
- ------------
use their best efforts to cause the Subsequent Shelf Registration to be declared
effective under the Securities Act as soon as practicable after such filing and
to keep such subsequent Shelf Registration continuously effective for a period
equal to the number of days in the Effectiveness Period less the aggregate
number of days during which the Initial Shelf Registration or any Subsequent
Shelf Registration was previously continuously effective. As used herein the
term "Shelf Registration" means the Initial Shelf Registration and any
------------------
Subsequent Shelf Registration.
-9-
<PAGE>
(c) Supplements and Amendments. The Issuers shall promptly supplement
--------------------------
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
(d) Withdrawal of Stop Orders. If the Shelf Registration ceases to be
-------------------------
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), the Issuers
shall use their best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
4. Additional Interest
-------------------
(a) The Issuers and the Initial Purchaser agree that the Holders will
suffer damages if the Issuers fail to fulfill their obligations under Section 2
or Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Issuers agree to pay, as
liquidated damages, additional interest on the Notes ("Additional Interest")
-------------------
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration has been filed on or prior to the Filing
Date applicable thereto or (B) notwithstanding that the Issuers have
consummated or will consummate the Exchange Offer, the Issuers are required
to file a Shelf Registration and such Shelf Registration is not filed on or
prior to the Filing Date applicable thereto, then, commencing on the day
after any such Filing Date, Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the first 90
days immediately following such applicable Filing Date, and such Additional
Interest rate shall increase by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration is declared effective by the SEC on or prior
to the Effectiveness Date applicable thereto or (B) notwithstanding that
the Issuers have consummated or will consummate the Exchange Offer, the
Issuers are required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior to the
Effectiveness Date applicable to such Shelf Registration, then, commencing
on the day after such Effectiveness Date, Additional Interest shall accrue
on the principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days immediately following the day after
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<PAGE>
such Effectiveness Date, and such Additional Interest rate shall increase
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 30th day after the date on which the Exchange
Offer Registration Statement relating thereto was declared effective or (B)
if applicable, a Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the first 90
days commencing on the (x) 31st day after such effective date, in the case
of (A) above, or (y) the day such Shelf Registration ceases to be effective
in the case of (B) above, and such Additional Interest rate shall increase
by an additional 0.50% per annum at the beginning of each such subsequent
90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
- -------- -------
at any one time in the aggregate 1.0% per annum; provided, further, however,
-------- ------- -------
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the Exchange Notes for all Notes tendered (in the case of clause
(iii)(A) of this Section 4), or upon the effectiveness of the applicable Shelf
Registration Statement which had ceased to remain effective (in the case of
(iii)(B) of this Section 4), Additional Interest on the Notes in respect of
which such events relate as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
----------
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 shall be
payable in cash semi-annually on each interest payment date with respect to the
Notes (to the Holders of record on the record date with respect thereto),
commencing with the first such date occurring after any such Additional Interest
commences to accrue. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve
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<PAGE>
30-day months and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Issuers shall effect such registrations to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder, the
Issuers shall:
(a) Prepare and file with the SEC prior to the applicable Filing Date,
a Registration Statement or Registration Statements as prescribed by Sections 2
or 3 hereof, and use their best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
--------
however, that, if (1) such filing is pursuant to Section 3 hereof or (2) a
- -------
Prospectus contained in the Exchange Offer Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period relating thereto, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Issuers shall furnish
to and afford the Holders of the Registrable Notes covered by such Registration
Statement or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(in each case at least five business days prior to such filing, or such later
date as is reasonable under the circumstances). The Issuers shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto if
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement, their counsel, or the managing
underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period or until consummation of the Exchange Offer, as the case may be; cause
the related Prospectus to be supplemented by any Prospectus supplement required
by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act applicable
to it with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented
and with respect to the subsequent
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<PAGE>
resale of any securities being sold by a Participating Broker-Dealer covered by
any such Prospectus. The Issuers shall be deemed not to have used their diligent
best efforts to keep a Registration Statement effective during the Effective
Period or the Applicable Period, as the case may be, relating thereto if the
Issuers voluntarily take any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless (i) such action is required by
applicable law or (ii) the Issuers comply with this Agreement, including without
limitation, the provisions of Section 5(k) or the last paragraph of this Section
5.
(c) If the Reoffer Condition has occurred, notify the selling Holders
of Registrable Notes, or each Participating Broker-Dealer from whom the Issuers
has received written notice that it will be a Participating Broker-Dealer in the
Exchange Offer, as the case may be, their counsel and the managing underwriters,
if any, promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
under the Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Issuers, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference therein and exhibits), (ii) of the issuance by
the SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation of any proceedings for that purpose, (iii) if at
any time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Notes or resales of Exchange Notes by
Participating Broker-Dealers the representations and warranties of the Issuers
contained in any agreement (including any underwriting agreement) contemplated
by Section 5(m) hereof cease to be true and correct in all material respects,
(iv) of the receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition or
any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it
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<PAGE>
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(vi) of the determination by any of the Issuers that a post-effective amendment
to a Registration Statement would be appropriate.
(d) If the Reoffer Condition has occurred, use its best efforts to
prevent the issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating Broker-
Dealer, for sale in any jurisdiction, and, if any such order is issued, to use
its best efforts to obtain the withdrawal of any such order at the earliest
possible date.
(e) If the Reoffer Condition has occurred, and if requested by the
managing underwriter or underwriters (if any), the Holders of a majority in
aggregate principal amount of the Registrable Notes being sold in connection
with an underwritten offering or any Participating Broker-Dealer, (i) promptly
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters (if any),
such Holders, any Participating Broker-Dealer or counsel for any of them
reasonably request to be included therein, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable after the Issuers have received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement.
(f) If the Reoffer Condition has occurred, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer who so
requests and to counsel and each managing underwriter, if any, at the sole
expense of the Issuers, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If the Reoffer Condition has occurred, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their respective counsel, and the underwriters, if any, at the sole
expense of the Issuers, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by
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<PAGE>
reference therein as such Persons may reasonably request; and, subject to the
last paragraph of this Section 5, the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Notes or each such Participating Broker-Dealer, as the
case may be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by, or
the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or underwriters
reasonably request in writing; provided, however, that where Exchange Notes held
-------- -------
by Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Registrable Notes covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to (A) qualify
- -------- -------
generally to do business in any jurisdiction where it is not then so qualified,
(B) take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction where it
is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or
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<PAGE>
underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Issuers will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals.
(k) If the Reoffer Condition has occurred, upon the occurrence of any
event contemplated by paragraph 5(c)(iii), 5(c)(v) or 5(c)(vi) hereof, as
promptly as practicable prepare and (subject to Section 5(a) hereof) file with
the SEC, at the sole expense of the Issuers, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes or Exchange Notes, as the case may be, in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Registrable Notes or Exchange Notes, as the case may be.
(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes in
form and substance reasonably satisfactory to the Issuers and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or the
disposition of such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters with
respect to the business of the Issuers and its subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same in writing if and when requested in form and
substance
-16-
<PAGE>
reasonably satisfactory to the Issuers; (ii) obtain the written opinions of
counsel to the Issuers and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
reasonably requested in underwritten offerings and such other matters as may be
reasonably requested by the managing underwriter or underwriters; (iii) use its
best efforts to obtain "cold comfort" letters and updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the Issuers
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Issuers or of any business acquired by the Issuers for which
financial statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to the
underwriter, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such other
matters as reasonably requested by the managing underwriter or underwriters as
permitted by the Statement on Auditing Standards No. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the sellers and underwriters, if
any, than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents, if any). The above shall be done at each
closing under such underwriting agreement, or as and to the extent required
thereunder.
(n) If the Reoffer Condition has occurred, make available for
inspection by any selling Holder of such Registrable Notes being sold, or each
such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
----------
reasonable business hours, all financial and other records, pertinent corporate
documents and instruments of the Issuers and their subsidiaries (collectively,
the "Records") as shall be reasonably necessary to enable them to exercise any
-------
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Issuers and their subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement and Prospectus. Each Inspector shall agree in writing that it will
keep the Records confidential and that it will not disclose any of the Records
unless (i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement or Prospectus, (ii) the
release of such
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<PAGE>
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) disclosure of such information is necessary or
advisable, in the opinion of counsel for any Inspector, in connection with any
action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon, relating
to, or involving this Agreement or the Purchase Agreement, or any transactions
contemplated hereby or thereby or arising hereunder or thereunder, or (iv) the
information in such Records has been made generally available to the public.
Each selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Issuers
unless and until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer will
be required to further agree that it will provide prior written notice to the
Issuers of the disclosure of any information by such Inspector pursuant to
Section 5(n)(i), (ii) or (iii) and allow the Issuers to undertake appropriate
action to prevent disclosure of the Records deemed confidential at the Issuers'
expense, including, without limitation, obtaining a protective order from a
court of competent jurisdiction.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its best efforts to cause such trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to their respective securityholders consolidated
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period (or
90 days after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Issuers after the effective date of
a Registration Statement, which statements shall cover said 12-month periods.
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<PAGE>
(q) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to such
other Person as directed by the Issuers) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Issuers shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(r) If not then rated, use its best efforts to cause the Registrable
Notes covered by a Registration Statement or the Exchange Notes, as the case may
be, to be rated with the appropriate rating agencies, if so requested by the
Holders of a majority in aggregate principal amount of Registrable Notes covered
by such Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
----
(t) Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Exchange Notes and/or Registrable Notes
covered by a Registration Statement contemplated hereby.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, that, upon actual
receipt of any notice from the Issuers of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder shall forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Issuers that the use of the
------
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Issuers shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be,
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<PAGE>
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
---------------------
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers (except for any underwriting fees,
commissions or discounts) shall be borne by the Issuers whether or not the
Exchange Offer Registration Statement or any Shelf Registration Statement is
filed or becomes effective or the Exchange Offer is consummated, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or in respect of Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, as the
case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Issuers and, in the case of a Shelf
Registration, reasonable fees and disbursements of one special counsel for all
of the sellers of Registrable Notes (exclusive of any counsel retained pursuant
to Section 7 hereof), (v) fees and disbursements of all independent certified
public accountants referred to in Section 5(m)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Issuers desire such insurance, (vii) fees and expenses of all
other Persons retained by the Issuers, (viii) internal expenses of the Issuers
(including, without limitation, all salaries and expenses of officers and
employees of the Issuers performing legal or accounting duties), (ix) the
expense of any annual audit, (x) the fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
and the obtaining of a rating of the securities, in each case, if applicable,
and (xi) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, indentures and
-20-
<PAGE>
any other documents necessary in order to comply with this Agreement.
7. Indemnification
---------------
(a) The Issuers jointly and severally agree to indemnify and hold
harmless each Holder of Registrable Notes and each Participating Broker-Dealer
selling Exchange Notes during the Applicable Period, the officers, directors,
employees and agents of each such Person, and each Person, if any, who controls
any such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and against any and
-----------
all losses, claims, damages, judgments, liabilities and expenses (including,
without limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Issuers shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, including, without limitation, any document
incorporated by reference therein, or caused by, arising out of or based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the case of the
Prospectus in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
------
caused by, arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Participant furnished to the Issuers in writing
by such Participant expressly for use therein; provided, however, that the
Issuers will not be liable if such untrue statement or omission or alleged
untrue statement or omission was contained or made in any preliminary prospectus
and corrected in the final Prospectus or any amendment or supplement thereto and
any such loss, liability, claim, or damage or expense suffered or incurred by
the Participant resulted from any action, claim or suit by any Person who
purchased Registrable Notes or Exchange Notes which are the subject thereof from
such Participant and it is established in the related proceeding that such
Participant failed to deliver or provide a copy of the final Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Notes or Exchange Notes sold to such Person if required
by applicable law, unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) was a result of noncompliance by the
Issuers with Section 5 of this Agreement.
(b) Each Participant will, as a condition to the inclusion of its
Notes in any Shelf Registration, be required to and shall be deemed to agree,
severally and not jointly, to indemnify and hold harmless the Issuers, their
respective
-21-
<PAGE>
directors, officers, employees and agents who sign the Registration Statement
and each Person who controls the Issuers within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only with
reference to information furnished to the Issuers in writing by such Participant
expressly for use in any Registration Statement or Prospectus, any amendment or
supplement thereto, or any preliminary prospectus. The liability of any
Participant under this paragraph shall in no event exceed the proceeds received
by such Participant from sales of Registrable Notes or Exchange Notes giving
rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Persons against whom such indemnity may be sought (the "Indemnifying
------------
Persons") in writing, and the Indemnifying Persons, upon request of the
- -------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Persons shall not relieve any of them of any obligation or
liability which any of them may have hereunder or otherwise except to the extent
it is materially prejudiced by such failure. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Persons and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Persons shall have failed
within a reasonable period of time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both any Indemnifying Person and the
Indemnified Person or any affiliate thereof and representation of both parties
by the same counsel would be inappropriate due to actual or potential
conflicting interests between them. It is understood that, unless there exists
a conflict among Indemnified Persons, the Indemnifying Persons shall not, in
connection with such proceeding or separate but substantially similar related
proceeding in the same jurisdiction arising out of the same general allegations,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any such separate
firm for the Participants and such control Persons of Participants shall be
designated in writing by Participants who sold a majority in interest of
Registrable Notes and Exchange Notes sold by all such Participants and any such
separate firm for the
-22-
<PAGE>
Issuers, their respective directors, officers, employees and agents and such
control Persons of the Issuers shall be designated in writing by the Company and
shall be reasonably acceptable to the Holders. The Indemnifying Persons shall
not be liable for any settlement of any proceeding effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed),
but if settled with such consent or if there be a final non-appealable judgment
for the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to this Agreement, each of the Indemnifying Persons
agrees to indemnify and hold harmless each Indemnified Person from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if either (x) the Indemnifying Persons shall have failed
within a reasonable period of time to retain counsel reasonably satisfactory to
the Indemnified Person, or (y) an Indemnified Person is entitled to retain
separate counsel at the expense of the Indemnifying Person pursuant to this
paragraph 7(c) and at any time such Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for reasonable fees and
expenses actually incurred by counsel as contemplated by the third sentence of
this paragraph, the Indemnifying Persons agree that they shall be liable for any
settlement of any proceeding effected without their written consent if (i) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement; provided, however, that the Indemnifying Person shall
-------- -------
not be liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Person is contesting, in good faith, the request
for reimbursement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in clauses (a) and (b) of this
Section 7 is for any reason unavailable to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified
-23-
<PAGE>
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other from the offering of the Notes or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, not
only such relative benefits but also the relative fault of the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and the Participants on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (net of discounts and commissions but
before deducting expenses) of the Notes received by the Issuers bears to the
total proceeds received by such Participant from the sale of Registrable Notes
or Exchange Notes, as the case may be, as set forth in the table on the cover
page of the Offering Memorandum dated April 30, 1998 in respect of the sale of
the Notes. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers on the one hand or such
Participant or such other Indemnified Person, as the case may be, on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the
-24-
<PAGE>
Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuers set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Issuers and their respective directors, officers, employees or
agents or any person controlling the Issuers, and (ii) any termination of this
Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
The Issuers covenant and agree that, so long as Registrable Notes
remain outstanding, they will file the reports required to be filed by them
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder in a timely manner in accordance with the
requirements of the Securities Act and the Exchange Act and, if at any time an
Issuer is not required to file such reports, such Issuer will, upon the request
of any Holder or beneficial owner of Registrable Notes, make publicly available
annual reports and such information, documents and other reports of the type
specified in Sections 13 and 15(d) of the Exchange Act. The Issuers further
covenant for so long as any Registrable Notes remain outstanding, to make
available to any Holder or beneficial owner of Registrable Notes in connection
with any sale thereof and any prospective purchaser of such Registrable Notes
from such Holder or beneficial owner the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Issuers.
No Holder of Registrable Notes may participate in any
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<PAGE>
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. As of the date hereof, the Issuers
--------------------------
have not entered into any agreement with respect to any of their securities that
is inconsistent with the rights granted to the Holders of Registrable Notes in
this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of any of the Issuers' other
issued and outstanding securities. As of the date hereof, the Issuers have not
entered into any agreement with respect to any of their securities which will
grant to any Person piggy-back registration rights with respect to any
Registration Statement required to be filed by the Issuers pursuant to this
Agreement.
(b) Adjustments Affecting Registrable Notes. The Issuers shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Issuers and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and (B)
in circumstances that would adversely affect the Participating Broker-Dealers,
the Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers;
provided, however, that Section 7 and this Section 10(c) may not be amended,
- -------- -------
modified or supplemented without the prior written consent of each Holder and
each Participating Broker-Dealer (including any person who was a Holder or
Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case
may be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof (other than Sections 7 and
10(c)) with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or
-26-
<PAGE>
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal amount of the Registrable
Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including,
-------
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchaser as specified in Section 10(d)(ii);
(ii) if to the Initial Purchaser, as follows:
BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Facsimile No: (212) 728-8111
Attention: William J. Grant, Jr.
(iii) if to the Issuers, at the address as follows:
Everest Healthcare Services Corporation
101 North Scoville
Oak Park, IL 60302
Facsimile No: (708) 386-1711
Attention: John B. Bourke
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, IL 60661
Facsimile No: (312) 902-1061
Attention: Marguerite M. Elias
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail,
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<PAGE>
postage prepaid, if mailed; one business day after being timely delivered to a
next-day air courier; and upon receiving confirmation receipt by the addressee,
if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties hereto,
the Holders and the Participating Broker-Dealers, provided that nothing herein
--------
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Notes in violation of the terms of the Purchase Agreement or the
Indenture.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Issuers or their Affiliates. Whenever the
--------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuers or any of their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or
-28-
<PAGE>
approval was given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EVEREST HEALTHCARE SERVICES CORPORATION
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
AMARILLO ACUTE DIALYSIS SPECIALISTS, L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
CON-MED SUPPLY COMPANY, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
CONTINENTAL HEALTH CARE, LTD.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
DIALYSIS SPECIALISTS OF CORPUS CHRISTI,
L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
DUPAGE DIALYSIS LTD.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
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<PAGE>
EVEREST MANAGEMENT, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
HEMO DIALYSIS OF AMARILLO L.L.C.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
HOME DIALYSIS OF AMERICA, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
HOME DIALYSIS OF DAYTON, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
LAKE AVENUE DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
MERCY DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
NEW YORK DIALYSIS MANAGEMENT, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
NORTH BUCKNER DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
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<PAGE>
NORTHWEST INDIANA DIALYSIS, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
OHIO VALLEY DIALYSIS CENTER, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
WSKC DIALYSIS SERVICES, INC.
By: /s/ CRAIG W. MOORE
------------------------
Name: Craig W. Moore
Title:
BT ALEX. BROWN INCORPORATED
By:________________________
Name:
Title:
<PAGE>
EXHIBIT 4.6
================================================================================
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF MAY 18, 1998
AMONG
EVEREST HEALTHCARE SERVICES CORPORATION,
HARRIS TRUST AND SAVINGS BANK,
individually and as Agent
and
the Lenders
which are or become parties hereto
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. THE CREDITS.......................................................... 1
Section 1.1. Revolving Credit................................................. 1
Section 1.2. Revolving Loans.................................................. 2
Section 1.3. Letters of Credit................................................ 2
(a) General Terms.................................................... 2
(b) Applications..................................................... 2
(c) The Reimbursement Obligation..................................... 3
(d) The Participating Interests...................................... 4
(e) Indemnification.................................................. 5
Section 1.4. Acquisition Financing Credit..................................... 5
Section 1.5. Supplemental Revolving Credit.................................... 6
Section 1.6. Manner of Borrowing Loans........................................ 8
(a) Generally........................................................ 8
(b) Reimbursement Obligation......................................... 8
(c) Agent Reliance on Bank Funding................................... 8
(d) Reliance......................................................... 9
Section 1.7. Commitment Conversion Option..................................... 9
SECTION 2. INTEREST............................................................. 9
Section 2.1. Options.......................................................... 9
Section 2.2. Domestic Rate Portion............................................ 10
Section 2.3. LIBOR Portions................................................... 10
Section 2.4. Manner of Rate Selection......................................... 11
Section 2.5. Change of Law.................................................... 11
Section 2.6. Unavailability of Deposits or Inability to Ascertain the
Adjusted LIBOR Rate.............................................. 11
Section 2.7. Taxes and Increased Costs........................................ 12
Section 2.8. Funding Indemnity................................................ 13
Section 2.9. Lending Branch................................................... 13
Section 2.10. Discretion of Lenders as to Manner of Funding.................... 13
Section 2.11. Computation of Interest.......................................... 14
Section 2.12. Capital Adequacy................................................. 14
SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND
NOTATIONS............................................................ 14
Section 3.1. Revolving Credit Commitment Fee.................................. 14
Section 3.2. Acquisition Financing Commitment Fee............................. 14
Section 3.3. Letter of Credit Fees............................................ 15
Section 3.4. Audit Fees....................................................... 15
Section 3.5. Agent's Fee...................................................... 15
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Section 3.6. Voluntary Prepayments............................................ 15
Section 3.7. Mandatory Prepayments............................................ 16
Section 3.8. Terminations..................................................... 17
Section 3.9. Place and Application............................................ 19
Section 3.10. Notations and Requests........................................... 20
SECTION 4. THE COLLATERAL AND GUARANTIES........................................ 21
Section 4.1. Collateral....................................................... 21
Section 4.2. Guaranties....................................................... 21
Section 4.3. Further Assurances............................................... 21
Section 4.4. Liens on After-Acquired Real Property............................ 21
Section 5. REPRESENTATIONS AND WARRANTIES....................................... 21
Section 5.1. Organization and Qualification................................... 22
Section 5.2. Subsidiaries..................................................... 22
Section 5.3. Corporate Authority and Validity of Obligations.................. 22
Section 5.4. Use of Proceeds; Margin Stock.................................... 23
Section 5.5. Financial Reports................................................ 23
Section 5.6. No Material Adverse Change....................................... 24
Section 5.7. Full Disclosure.................................................. 24
Section 5.8. Trademarks, Franchises, and Licenses............................. 24
Section 5.9. Governmental Authority and Licensing............................. 24
Section 5.10. Good Title....................................................... 24
Section 5.11. Litigation and Other Controversies............................... 24
Section 5.12. Taxes............................................................ 25
Section 5.13. Approvals........................................................ 25
Section 5.14. Affiliate Transactions........................................... 25
Section 5.15. Investment Company; Public Utility Holding Company............... 25
Section 5.16. ERISA............................................................ 25
Section 5.17. Compliance with Laws............................................. 26
Section 5.18. Other Agreements................................................. 26
Section 5.19. No Default....................................................... 26
Section 5.20. Solvency......................................................... 26
SECTION 6. CONDITIONS PRECEDENT................................................. 26
Section 6.1. All Advances..................................................... 26
Section 6.2. Initial Advance.................................................. 27
SECTION 7. COVENANTS............................................................ 29
Section 7.1. Maintenance of Business.......................................... 29
Section 7.2. Maintenance of Properties........................................ 29
Section 7.3. Taxes and Assessments............................................ 29
Section 7.4. Insurance........................................................ 29
Section 7.5. Financial Reports................................................ 30
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Section 7.6. Inspection....................................................... 32
Section 7.7. Current Ratio.................................................... 32
Section 7.8. Total Senior Funded Debt to Total Capitalization................. 32
Section 7.9. Leverage Ratios.................................................. 32
Section 7.10. Net Worth........................................................ 33
Section 7.11. Fixed Charge Coverage Ratio...................................... 33
Section 7.12. Dialysis Patients................................................ 33
Section 7.13. Indebtedness for Borrowed Money.................................. 34
Section 7.14. Liens............................................................ 35
Section 7.15. Investments, Acquisitions, Loans, Advances and Guaranties........ 36
Section 7.16. Mergers, Consolidations and Sales................................ 39
Section 7.17. Maintenance of Subsidiaries...................................... 39
Section 7.18. Dividends and Certain Other Restricted Payments.................. 40
Section 7.19. ERISA............................................................ 41
Section 7.20. Compliance with Laws............................................. 41
Section 7.21. Burdensome Contracts with Affiliates............................. 41
Section 7.22. No Changes in Fiscal Year........................................ 41
Section 7.23. Formation of Subsidiaries........................................ 41
Section 7.24. Change in the Nature of Business................................. 41
Section 7.25. Subordinated Debt................................................ 42
Section 7.26. Use of Loan Proceeds............................................. 42
Section 7.27. Assets and Earnings Concentrations............................... 42
Section 7.28. No Restrictions on Subsidiary Distributions...................... 42
SECTION 8. EVENTS OF DEFAULT AND REMEDIES....................................... 42
Section 8.1. Events of Default................................................ 42
Section 8.2. Non-Bankruptcy Remedies.......................................... 44
Section 8.3. Bankruptcy Remedies.............................................. 45
Section 8.4. Collateral for Undrawn Letters of Credit......................... 45
SECTION 9. DEFINITIONS; INTERPRETATIONS......................................... 45
Section 9.1. Definitions...................................................... 45
Section 9.2. Interpretation................................................... 60
SECTION 10. THE AGENT............................................................ 61
Section 10.1. Appointment and Authorization.................................... 61
Section 10.2. Rights as a Lender............................................... 61
Section 10.3. Standard of Care................................................. 61
Section 10.4. Costs and Expenses............................................... 62
Section 10.5. Indemnity........................................................ 62
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SECTION 11. MISCELLANEOUS........................................................ 63
Section 11.1. Withholding Taxes................................................ 63
(a) Payments Free of Withholding..................................... 63
(b) U.S Withholding Tax Exemptions................................... 63
(c) Inability of Lender to Submit Forms.............................. 64
Section 11.2. Non-Business Days................................................ 64
Section 11.3. No Waiver, Cumulative Remedies................................... 64
Section 11.4. Waivers, Modifications and Amendments............................ 64
Section 11.5. Costs and Expenses............................................... 64
Section 11.6. Documentary Taxes................................................ 66
Section 11.7. Survival of Representations...................................... 66
Section 11.8. Construction..................................................... 66
Section 11.9. Notices.......................................................... 66
Section 11.10. Lender's Obligations Several..................................... 67
Section 11.11. Headings......................................................... 67
Section 11.12. Severability of Provisions....................................... 67
Section 11.13. Counterparts..................................................... 67
Section 11.14. Binding Nature and Governing Law................................. 67
Section 11.15. Entire Understanding............................................. 67
Section 11.16. Extension of the Revolving Credit Commitments.................... 67
Section 11.17. Participations................................................... 68
Section 11.18. Assignment Agreements............................................ 68
Section 11.19. Confidentiality.................................................. 69
Section 11.20. Reaffirmation of Collateral Documents............................ 70
Section 11.21. Submission to Jurisdiction; Waiver of Jury Trial................. 70
Signature Page.......................................................................... 71
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EXHIBIT A - Revolving Credit Note
EXHIBIT B - Notice of Payment Request
EXHIBIT C - Acquisition Financing Note
EXHIBIT D - Term Note
EXHIBIT E - Supplemental Revolving Credit Note
EXHIBIT F - Borrowing Base Certificate
EXHIBIT G - Compliance Certificate
EXHIBIT H - Opinion of Counsel
EXHIBIT I - Assignment and Acceptance
SCHEDULE 5.2 - Subsidiaries
SCHEDULE 5.12 - Tax Matters
SCHEDULE 5.14 - Affiliate Transactions
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
and the other Lenders from time to time party hereto
Ladies and Gentlemen:
The undersigned, Everest Healthcare Services Corporation, a Delaware
corporation (the "Company"), refers to that certain Credit Agreement dated as of
April 16, 1996, as amended and restated by that certain Amended and Restated
Credit Agreement dated as of May 15, 1997, as amended, currently in effect among
the Company, Harris Trust and Savings Bank, as agent, and the lenders party
thereto (the "Original Credit Agreement"). The Company hereby requests that the
aggregate commitments available under the Original Credit Agreement be
increased, that certain additional amendments be made to the Original Credit
Agreement and, for the sake of clarity and convenience, that the Original Credit
Agreement be restated in its entirety as so amended. This Second Amended and
Restated Credit Agreement amends and replaces in its entirety the Original
Credit Agreement, and from the Effective Date all references made to the
Original Credit Agreement in any Loan Document or in any other instrument or
document shall, without more, be deemed to refer to this Second Amended and
Restated Credit Agreement. This Second Amended and Restated Credit Agreement
shall become effective as of May 18, 1998 (the "Effective Date"), and supersedes
all provisions of the Original Credit Agreement as of such date, upon the
execution of this Second Amended and Restated Credit Agreement by each of the
parties hereto and the fulfillment of the conditions precedent contained in
Section 6.2 hereof.
SECTION 1. THE CREDITS.
Section 1.1. Revolving Credit. Subject to the terms and conditions hereof,
each Lender, by its acceptance hereof, severally agrees to extend a revolving
credit (the "Revolving Credit") to the Company in the aggregate amount of such
Lender's commitment to extend the Revolving Credit as set forth on the
applicable signature page hereof or pursuant to Section 11.18 hereof (its
"Revolving Credit Commitment" and cumulatively for all Lenders the "Revolving
Credit Commitments") (subject to any reductions thereof pursuant to the terms
hereof) prior to the Termination Date. The Revolving Credit, subject to all of
the terms and conditions hereof, may be utilized by the Company in the form of
Revolving Loans and Letters of Credit, all as more fully hereinafter set forth;
provided, however, that the aggregate principal amount of the Revolving Loans
and L/C Obligations outstanding at any one time shall not at any time exceed the
lesser of (i) the Revolving Credit Commitments then in effect and (ii) the
Borrowing Base as then determined and computed. During the period from and
including the date thereof to but not including the Termination Date, the
Company may use the Revolving Credit Commitments by borrowing, repaying and
reborrowing Revolving Loans in whole or in part and/or by having the Agent issue
Letters of Credit, having such Letters of Credit expire or otherwise terminate
without
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having been drawn upon or, if drawn upon, reimbursing the Agent for each such
drawing, and having the Agent issue new Letters of Credit, all in accordance
with the terms and conditions of this Agreement. For all purposes of this
Agreement, where a determination of the unused or available amount of the
Revolving Credit Commitments is necessary, the Revolving Loans and L/C
Obligations shall all be deemed to utilize the Revolving Credit Commitments. The
obligations of the Lenders hereunder are several and not joint, and no Lender
shall under any circumstances be obligated to extend credit hereunder in excess
of its Revolving Credit Commitment.
Section 1.2. Revolving Loans. Subject to the terms and conditions hereof,
the Revolving Credit may be availed of in the form of loans (individually a
"Revolving Loan" and collectively the "Revolving Loans"). Each Borrowing of
Revolving Loans shall be made ratably by the Lenders in accordance with their
Percentages. Each Borrowing of Revolving Loans shall be in an amount of $50,000
or such greater amount which is an integral multiple of $50,000; provided,
however, that (i) a Borrowing made to repay a Reimbursement Obligation may be
made in the amount thereof and (ii) a Borrowing of Revolving Loans, or any part
thereof, which bears interest with reference to the Adjusted LIBOR Rate shall be
in such greater amount as is required by Section 2 hereof. All Revolving Loans
made by a Lender shall be evidenced by a single Revolving Credit Note of the
Company (individually a "Revolving Credit Note" and collectively the "Revolving
Credit Notes", which shall include the Revolving Credit Notes issued pursuant to
Section 11.18 hereof) payable to the order of such Lender in the amount of its
Revolving Credit Commitment, each Revolving Credit Note to be in the form (with
appropriate insertions) attached hereto as Exhibit A. Each Revolving Credit
Note shall be dated the date of issuance thereof, be expressed to bear interest
as set forth in Section 2 hereof, and be expressed to mature on the Termination
Date. Without regard to the principal amount of each Revolving Credit Note
stated on its face, the actual principal amount at any time outstanding and
owing by the Company on account thereof shall be the sum of all Revolving Loans
then or theretofore made thereon less all payments of principal actually
received thereon.
Section 1.3. Letters of Credit.
(a) General Terms. Subject to the terms and conditions hereof, as part of
the Revolving Credit, the Agent shall issue standby letters of credit (each a
"Letter of Credit") for the account of the Company in U.S. Dollars in an
aggregate undrawn face amount up to the amount of the L/C Commitment. Each
Letter of Credit shall be issued by the Agent, but each Lender shall be
obligated to reimburse the Agent for such Lender's Percentage of the amount of
each draft drawn under a Letter of Credit and, accordingly, each Letter of
Credit shall be deemed to utilize the Revolving Credit Commitment of each Lender
pro rata in accordance with its Percentage thereof.
(b) Applications. At any time before the Termination Date, the Agent
shall, at the request of the Company, issue one or more Letters of Credit to or
for the account of the Company in a form satisfactory to the Agent, with
expiration dates no later than 12 months from the date of issuance (or be
cancelable not later than 12 months from the date of issuance and each renewal),
in an aggregate face amount as set forth above, upon the receipt
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of an application for the relevant Letter of Credit in the form then customarily
prescribed by the Agent duly executed by the Company (each an "Application").
For purposes of this Agreement and the other Loan Documents, Harris Trust and
Savings Bank Standby Letter of Credit SPL no. 33769 issued for the account of
WSKC Dialysis Services, Inc. (f/k/a West Suburban Kidney Center, S.C.) in favor
of BankAmerica Trust & Banking Corporation (Cayman) Limited shall be deemed a
Letter of Credit issued under this Agreement, and the Company agrees that from
and after the date of this Agreement the Company shall be jointly and severally
liable with WSKC Dialysis Services, Inc. for all obligations owing to Harris
Trust and Savings Bank with respect to such Letter of Credit, including all
reimbursement obligations arising under or relating to that certain Application
and Agreement for Irrevocable Standby Letter of Credit dated December 8, 1989,
as amended, with respect thereto (which agreement shall be deemed an Application
for all purposes of this Agreement and the other Loan Documents). On the
Termination Date, the Company shall pay to the Agent an amount equal to the
aggregate amounts undrawn on all Letters of Credit which are outstanding on that
date to be held as cash collateral for the Obligations of the Company with
respect to such Letters of Credit. Notwithstanding anything contained in any
Application to the contrary, (i) the obligation of the Company to pay fees in
connection with each Letter of Credit shall be as set forth in Section 3.3
hereof and (ii) except during the existence of an Event of Default, the Agent
will not call for the funding by the Company of any amount under a Letter of
Credit, or any other form of collateral security for the obligations of the
Company in connection with such Letter of Credit, before being presented with a
drawing thereunder other than the collateral security contemplated by this
Agreement and the Collateral Documents. The Agent will promptly notify the
Lenders of each issuance by the Agent of a Letter of Credit. If the Agent issues
any Letter of Credit with an expiration date that is automatically extended
unless the Agent gives notice that the expiration date will not so extend beyond
its then scheduled expiration date, the Agent will give such notice of non-
renewal before the time necessary to prevent such automatic extension if, before
such required notice date, (i) the expiration date of such Letter of Credit if
so extended would be after the Termination Date, (ii) the Revolving Credit
Commitments have been terminated or (iii) a Default or an Event of Default has
occurred and is continuing and the Required Lenders have given the Agent
instructions not to so permit the extension of the expiration date of such
Letter of Credit. The Agent agrees to issue amendments to the Letter(s) of
Credit increasing the amount, or extending the expiration date, thereof at the
request of the Company subject to the conditions of Section 6 and the other
terms of this Section 1.3. Without limiting the generality of the foregoing, the
Agent will not issue, amend or extend the expiration date of any Letter of
Credit if any Lender notifies the Agent of any failure to satisfy or otherwise
comply with the conditions and terms of Section 6 and of this Section 1.3 and
directs the Agent not to take such action.
(c) The Reimbursement Obligation. Subject to Section 1.3(b) hereof, the
obligation of the Company to reimburse the Agent for all drawings under a Letter
of Credit (a "Reimbursement Obligation") shall be governed by the Application
related to such Letter of Credit, except that (i) reimbursement of each drawing
shall be made in immediately available funds at the Agent's principal office in
Chicago, Illinois by no later than 12:00 noon Chicago time on the date when such
drawing is paid if the Company has been informed of such drawing by the Agent on
or before 11:30 a.m. Chicago time on the date when such
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drawing is paid or, if notice of such drawing is given to Company after 11:30
a.m. Chicago time on the date when such drawn is paid, by the end of such day
and (ii) the Company's Reimbursement Obligation shall bear interest (which the
Company hereby promises to pay), whether before or after judgment, until payment
in full thereof at the rate per annum equal to 2% plus the Applicable Margin for
Revolving Loans plus the Domestic Rate as in effect from time to time. If the
Company does not make any such reimbursement payment on the date due and the
Participating Lenders fund their participations therein in the manner set forth
in Section 1.3(d) below, then all payments thereafter received by the Agent in
discharge of any of the relevant Reimbursement Obligations shall be distributed
in accordance with Section 1.3(d) below.
(d) The Participating Interests. Each Lender (other than the Lender then
acting as Agent in issuing Letters of Credit), by its acceptance hereof,
severally agrees to purchase from the Agent, and the Agent hereby agrees to sell
to each such Lender (a "Participating Lender"), an undivided percentage
participating interest (a "Participating Interest"), to the extent of its
Percentage, in each Letter of Credit issued by, and each Reimbursement
Obligation owed to, the Agent. Upon any failure by the Company to pay any
Reimbursement Obligation in respect of a Letter of Credit at the time required
on the date the related drawing is paid, as set forth in Section 1.3(c) above,
or if the Agent is required at any time to return to the Company or to a
trustee, receiver, liquidator, custodian or other Person any portion of any
payment of any Reimbursement Obligation, each Participating Lender shall, not
later than the Business Day it receives a certificate in the form of Exhibit B
hereto from the Agent to such effect, if such certificate is received before
2:00 p.m. Chicago time, or not later than the following Business Day, if such
certificate is received after such time, pay to the Agent an amount equal to
such Lender's Percentage of such unpaid or recaptured Reimbursement Obligation
together with interest on such amount accrued from the date the related payment
was made by the Agent to the date of such payment by such Participating Lender
at a rate per annum equal to (i) from the date the related payment was made by
the Agent to the date 2 Business Days after payment by such Participating Lender
is due hereunder, the Federal Funds Rate for each such day and (ii) from the
date 2 Business Days after the date such payment is due from such Participating
Lender to the date such payment is made by such Participating Lender, the
Domestic Rate in effect for each such day. Each such Participating Lender shall
thereafter be entitled to receive its Percentage of each payment received in
respect of the relevant Reimbursement Obligation and of interest paid thereon,
with the Agent retaining its Percentage as a Lender hereunder.
The several obligations of the Participating Lenders to the Agent under
this Section 1.3 shall be absolute, irrevocable and unconditional under any and
all circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Participating Lender may have or
have had against the Company, the Agent, any other Lender or any other Person
whatsoever. Without limiting the generality of the foregoing, such obligations
shall not be affected by any Default or Event of Default or by any reduction or
termination of any Revolving Credit Commitment of any Lender, and each payment
by a Participating Lender under this Section 1.3 shall be made without any
offset, abatement, withholding or reduction whatsoever. The Agent shall be
entitled to offset amounts received
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for the account of a Lender under this Agreement against unpaid amounts due from
such Lender to the Agent hereunder (whether as fundings of participations,
indemnities or otherwise), but shall not be entitled to offset against amounts
owed to the Agent by any Lender arising outside this Agreement.
(e) Indemnification. The Participating Lenders shall, to the extent of
their respective Percentages, indemnify the Agent (to the extent not reimbursed
by the Company) against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from the Agent's gross negligence or willful misconduct) that the Agent may
suffer or incur in connection with any Letter of Credit. The obligations of the
Participating Lenders under this Section 1.3(e) and all other parts of this
Section 1.3 shall survive termination of this Agreement, the Applications, and
all drafts and any other documents presented in connection with a drawing under
any Letter of Credit.
Section 1.4. Acquisition Financing Credit. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make on or after the date of
this Agreement one or more loans (individually an "Acquisition Financing Loan"
and collectively the "Acquisition Financing Loans") to the Company in the
aggregate amount of such Lender's commitment to make its Acquisition Financing
Loans as set forth on the applicable signature page hereof or pursuant to
Section 11.18 hereof (its "Acquisition Financing Commitment" and cumulatively
for all Lenders the "Acquisition Financing Commitments") (subject to increases
thereof pursuant to Section 1.7 hereof and to any reductions thereof pursuant to
the terms hereof) prior to the Acquisition Financing Termination Date. Each
Borrowing of Acquisition Financing Loans shall be made ratably by the Lenders in
accordance with their Percentages. Each Borrowing of Acquisition Financing Loans
shall be in an amount of $250,000 or such greater amount which is an integral
multiple of $100,000; provided, however, that a Borrowing of Acquisition
Financing Loans, or any part thereof, which bears interest with reference to the
Adjusted LIBOR Rate shall be in such greater amount as is required by Section 2
hereof. The principal amount of each Acquisition Financing Loan shall
permanently reduce the amount available to the Company under each Lender's
Acquisition Financing Commitment, and no amount repaid or prepaid on any
Acquisition Financing Loan may be borrowed again. The proceeds of each
Acquisition Financing Loan shall be used solely for the purposes set forth in
Section 5.4(d) hereof. All Acquisition Financing Loans made by a Lender to the
Company shall initially be evidenced by a single Acquisition Financing Note of
Company (individually an "Acquisition Financing Note" and collectively the
"Acquisition Financing Notes", which shall include the Acquisition Financing
Notes issued pursuant to Section 11.18 hereof) payable to the order of such
Lender in the amount of its Acquisition Financing Commitment, each Acquisition
Financing Note to be in the form (with appropriate insertions) attached hereto
as Exhibit C. Each Acquisition Financing Note shall be dated the date of
issuance thereof, be expressed to bear interest as set forth in Section 2
hereof, and be expressed to mature on the Acquisition Financing Termination
Date. Without regard to the principal amount of each Acquisition Financing Note
stated on its face, the actual principal amount at any time outstanding and
owing by the Company on account thereof shall be the sum of all Acquisition
Financing Loans then or theretofore made thereon less all payments of principal
actually received
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thereon and all amounts refinanced and evidenced by a Term Note as provided in
Section 1.4(b) below. The obligations of the Lenders hereunder are several and
not joint, and no Lender shall under any circumstances be obligated to extend
credit hereunder in excess of its Acquisition Financing Commitment.
(b) Subject to the terms and conditions hereof, the Company shall have the
option on or prior to the Acquisition Financing Termination Date to convert all
or any part of the outstanding Acquisition Financing Loans into one or more term
loans (individually a "Term Loan" and collectively the "Term Loans"). Each
Borrowing of Term Loans shall be made ratably by the Lenders in accordance with
their Percentages of the outstanding Acquisition Financing Loans being
converted. Each Borrowing of Term Loans shall be in an amount of $5,000,000 or
such greater amount which is an integral multiple of $1,000,000; provided,
however, that (i) a Borrowing made in connection with the conversion of all then
outstanding Acquisition Financing Loans and which is accompanied by the
termination in whole of the Acquisition Financing Commitments may be made in the
amount of the outstanding Acquisition Financing Loans being so converted and
(ii) a Borrowing of Term Loans, or any part thereof, which bears interest with
reference to the Adjusted LIBOR Rate shall be in such greater amount as is
required by Section 2 hereof. Each Term Loan made by a Lender shall be
evidenced by a Term Note of the Company (individually a "Term Note" and
collectively the "Term Notes", which shall include the Term Notes issued
pursuant to Section 11.18 hereof) payable to the order of such Lender in an
amount equal to such Lender's Percentage of the Acquisition Financing Loans
converted, each Term Note to be in the form (with appropriate insertions)
attached hereto as Exhibit D. Each Term Note shall be dated the date of
issuance thereof, be expressed to bear interest as set forth in Section 2
hereof, and be expressed to mature in 20 consecutive quarterly principal
installments, with the first 19 principal installments of a Term Note to be in
an amount equal to 1/28th of the original principal amount of the Term Loan
evidenced thereby, commencing on the date which is three calendar months after
the date on which the relevant Acquisition Financing Loans are converted into
such Term Loan and continuing on the same date of each and every third calendar
month thereafter (or if no such date exists for any one or more of such
installments, then on the last day of such third calendar month), with a final
payment of both principal and interest not sooner paid due on the fifth
anniversary date of the date on which the relevant Acquisition Financing Loans
were converted into the relevant Borrowing of Term Loans. The principal amount
of each Term Loan made by Lender hereunder shall concurrently reduce by like
amount the amount outstanding under its Acquisition Financing Note, and no
amount repaid or prepaid on any Term Loan may be borrowed again. Any
Acquisition Financing Loans which are not converted into Term Loans pursuant to
this Section 1.4(b) shall be due and payable on the Acquisition Financing
Termination Date.
Section 1.5. Supplemental Revolving Credit. (a) Subject to the terms and
conditions hereof, and only for so long as the Acquisition Financing Commitments
remain outstanding, each Lender, by its acceptance hereof, severally agrees to
extend a supplemental revolving credit (the "Supplemental Revolving Credit") to
the Company in the aggregate amount of such Lender's commitment to extend the
Supplemental Revolving Credit as set forth on the applicable signature page
hereof or pursuant to Section 11.18 hereof (its "Supplemental Revolving Credit
Commitment" and cumulatively for all Lenders the "Supplemental
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Revolving Credit Commitments") (subject to any reductions thereof pursuant to
the terms hereof) prior to the Supplemental Revolving Credit Termination Date.
The Supplemental Revolving Credit, subject to all of the terms and conditions
hereof, may be utilized by the Company in the form of loans (individually a
"Supplemental Revolving Loan" and collectively the "Supplemental Revolving
Loans"), all as more fully hereinafter set forth; provided, however, that:
(i) the aggregate principal amount of the Supplemental Revolving
Loans outstanding at any one time shall not at any time exceed the
difference between (x) the Supplemental Revolving Credit Commitments then
in effect minus (y) the aggregate amount of loans and advances made by the
Company or any Restricted Subsidiary to, and guarantees made by the Company
or any Restricted Subsidiary in respect of the obligations of, any Person
(other than Restricted Subsidiaries) in which the Company, directly or
indirectly, holds an equity interest in (determined in accordance with
Section 7.15 hereof, but determined exclusive of any such loans or advances
financed with the proceeds of a Supplemental Revolving Loan); and
(ii) the sum of the aggregate principal amount of the Supplemental
Revolving Loans at any one time outstanding plus the original principal
amount of all Acquisition Financing Loans made hereunder (without regard to
any subsequent payments of principal thereon) shall not at any time exceed
the difference of (i) $65,000,000 plus any portion (up to $5,000,000) of
the Revolving Credit Commitments converted into Acquisition Financing
Commitments pursuant to Section 1.7 hereof minus (ii) all amounts of the
Acquisition Financing Commitments voluntarily terminated pursuant to
Section 3.8 hereof.
The proceeds of each Supplemental Revolving Loan shall be used solely for the
purposes set forth in Section 5.4(b) hereof. During the period from and
including the date thereof to but not including the Supplemental Revolving
Credit Termination Date, the Company may use the Supplemental Revolving Credit
Commitments by borrowing, repaying and reborrowing Supplemental Revolving Loans
in whole or in part, all in accordance with the terms and conditions of this
Agreement.
(b) Each Borrowing of Supplemental Revolving Loans shall be made ratably by
the Lenders in accordance with their Percentages. Each Borrowing of Supplemental
Revolving Loans shall be in an amount of $50,000 or such greater amount which is
an integral multiple of $50,000; provided, however, that a Borrowing of
Supplemental Revolving Loans, or any part thereof, which bears interest with
reference to the Adjusted LIBOR Rate shall be in such greater amount as is
required by Section 2 hereof. All Supplemental Revolving Loans made by a Lender
shall be evidenced by a single Supplemental Revolving Credit Note of the Company
(individually a "Supplemental Revolving Credit Note" and collectively the
"Supplemental Revolving Credit Notes", which shall include the Supplemental
Revolving Credit Notes issued pursuant to Section 11.18 hereof) payable to the
order of such Lender in the amount of its Supplemental Revolving Credit
Commitment, each Supplemental Revolving Credit Note to be in the form (with
appropriate insertions) attached hereto as Exhibit E. Each Supplemental
Revolving Credit Note shall be dated the date of issuance thereof, be
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expressed to bear interest as set forth in Section 2 hereof, and be expressed to
mature on the Supplemental Revolving Credit Termination Date. Without regard to
the principal amount of each Supplemental Revolving Credit Note stated on its
face, the actual principal amount at any time outstanding and owing by the
Company on account thereof shall be the sum of all Supplemental Revolving Loans
then or theretofore made thereon less all payments of principal actually
received thereon. The obligations of the Lenders hereunder are several and not
joint, and no Lender shall under any circumstances be obligated to extend credit
hereunder in excess of its Supplemental Revolving Credit Commitment.
Section 1.6. Manner of Borrowing Loans.
(a) Generally. The Company shall give the Agent notice (which may be
written or oral, but if oral, promptly confirmed in writing, including notice by
telecopy) by 10:00 a.m. Chicago time on any Business Day of each request for any
Borrowing of Loans, in each case specifying the amount of each such Borrowing,
the type of Loan being requested, and the date such Borrowing is to be made
(which shall be a Business Day). The Agent shall notify each Lender of its
receipt of each such notice by 12:00 noon Chicago time on the Business Day any
Borrowing of Loans constituting the Domestic Rate Portion is to be made and by
12:00 noon Chicago time on the Business Day it receives such a request for any
Borrowing of Loans constituting a LIBOR Portion. Each Borrowing shall initially
constitute part of the relevant Domestic Rate Portion except to the extent the
Company has timely elected that such Borrowing, or any part thereof, constitute
part of a LIBOR Portion as provided in Section 2 hereof. Not later than 2:00
p.m. Chicago time on the date specified for any Borrowing of Loans to be made
hereunder, each Lender shall make the proceeds of its Loan comprising part of
such Borrowing available in immediately available funds to the Agent in Chicago,
Illinois, except in the case of the Term Loans, in which case each Lender shall
record the Term Loan made by it as part of the conversion of the Acquisition
Financing Loans, or such portion thereof, held by it into such Term Loan on its
books and records and shall effect the repayment in whole or in part, as
appropriate, of the Acquisition Financing Loans through the proceeds of such
Term Loan. Subject to all of the terms and conditions hereof, the proceeds of
each Lender's Loan shall be made available to the Company in accordance with the
instruction of the Company at the office of the Agent in Chicago, Illinois and
in funds there current.
(b) Reimbursement Obligation. In the event the Company fails to give
notice pursuant to Section 1.6(a) above of a Borrowing equal to the amount of a
Reimbursement Obligation and has not notified the Agent by 11:30 a.m. Chicago
time on the day such Reimbursement Obligation becomes due that the Company
intends to repay such Reimbursement Obligation through funds not borrowed under
this Agreement, the Company shall be deemed to have requested a Borrowing of
Revolving Loans constituting part of the Domestic Rate Portion on such day in
the amount of the Reimbursement Obligation then due, subject to Section 6
hereof, which Borrowing shall be applied to pay the Reimbursement Obligation
then due.
(c) Agent Reliance on Bank Funding. Unless the Agent shall have been
notified by a Lender before the date on which such Lender is scheduled to make
payment to the Agent
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of the proceeds of a Loan (which notice shall be effective upon receipt) that
such Lender does not intend to make such payment, the Agent may assume that such
Lender has made such payment when due and the Agent may in reliance upon such
assumption (but shall not be required to) make available to the Company the
proceeds of the Loan to be made by such Lender and, if any Lender has not in
fact made such payment to the Agent, such Lender shall, on demand, pay to the
Agent the amount made available to the Company attributable to such Lender
together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Company and ending
on (but excluding) the date such Lender pays such amount to the Agent at a rate
per annum equal to the Federal Funds Rate. If such amount is not received from
such Lender by the Agent immediately upon demand, the Company will, on demand,
repay to the Agent the proceeds of the Loan attributable to such Lender with
interest thereon at a rate per annum equal to the interest rate applicable to
the relevant Loan, but without such payment being considered a payment or
prepayment of a Loan under Section 2.8 hereof, so that the Company will have no
liability under Section 2.8 with respect to such payment.
(d) Reliance. All requests for Borrowings and selection of interest rates
to be applicable thereto may be written or oral, including by telephone or
telecopy. The Company agrees that the Agent may rely on any such notice given
by any person the Agent in good faith believes is an Authorized Representative
without the necessity of independent investigation (the Company hereby
indemnifying the Agent and Lenders from any liability or loss ensuing from such
reliance), and in the event any such telephonic or other oral notice conflicts
with any written confirmation, such oral or telephonic notice shall govern if
the Agent has acted in reliance thereon.
Section 1.7. Commitment Conversion Option. At any time prior to the
Acquisition Financing Termination Date, the Company shall have the option from
time to time to convert up to $5,000,000 of the Revolving Credit Commitments in
the aggregate into Acquisition Financing Commitments provided that (a) the
Company shall give the Agent and the Lenders not less than five (5) Business
Days prior written notice of the Company's exercise of such option, (b) the
minimum amount of Revolving Credit Commitments converted at any one time into
Acquisition Financing Commitments pursuant hereto shall not be less than
$1,000,000 at such time, or such greater amount which is an integral multiple of
$1,000,000, (c) the Revolving Credit Commitments shall be permanently reduced by
the amount so converted to Acquisition Financing Commitments, which reduction
shall be applied ratably among the Lenders in accordance with their Percentages,
and (d) after giving effect to the conversion, the Revolving Loans and L/C
Obligations then outstanding must not exceed the lesser of the Borrowing Base
then outstanding or the Revolving Credit Commitments in effect after giving
effect to such conversion.
SECTION 2. INTEREST.
Section 2.1. Options. Subject to all of the terms and conditions of this
Section 2, portions of the principal indebtedness evidenced by the Notes (all of
the indebtedness evidenced by Notes of the same type and, with respect to the
Term Notes, relating to the same Borrowing, and bearing interest at the same
rate for the same period of time being
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hereinafter referred to as a "Portion") may, at the option of the Company, bear
interest with reference to the Domestic Rate ("Domestic Rate Portions") or with
reference to the Adjusted LIBOR Rate ("LIBOR Portions"), and Portions may be
converted from time to time from one basis to the other. All of the indebtedness
evidenced by the Notes of the same type and, with respect to the Term Notes,
relating to the same Borrowing, which is not part of a LIBOR Portion shall
constitute a single Domestic Rate Portion. All of the indebtedness evidenced by
the Notes of the same type and, with respect to the Term Notes, relating to the
same Borrowing, which bears interest with reference to a particular Adjusted
LIBOR Rate for a particular Interest Period shall constitute a single LIBOR
Portion. Anything contained herein to the contrary notwithstanding, there shall
not be more than 6 LIBOR Portions applicable to Notes of the same type and, with
respect to the Term Notes, relating to the same Borrowing, outstanding at any
one time and each Lender shall have a ratable interest in each Portion. The
Company hereby promises to pay interest on each Portion applicable to it at the
rates and times specified in this Section 2.
Section 2.2. Domestic Rate Portion. Each Domestic Rate Portion shall bear
interest (which the Company hereby promises to pay at the times herein provided)
at the rate per annum determined by adding the Applicable Margin to the Domestic
Rate as in effect from time to time, provided that if a Domestic Rate Portion is
not paid when due (whether by lapse of time, acceleration or otherwise), such
Portion shall bear interest (which the Company hereby promises to pay at the
times hereinafter provided), whether before or after judgment, and until payment
in full thereof, at the rate per annum determined by adding 2% to the sum of the
Applicable Margin plus the Domestic Rate as in effect from time to time.
Interest on the Domestic Rate Portions shall be payable on the last day of each
March, June, September and December in each year and at maturity of the
applicable Notes, and interest after maturity shall be due and payable upon
demand.
Section 2.3. LIBOR Portions. Each LIBOR Portion shall bear interest (which
the Company hereby promises to pay at the times herein provided) for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable Margin to the Adjusted LIBOR Rate for such Interest Period, provided
that if any LIBOR Portion is not paid when due (whether by lapse of time,
acceleration or otherwise), such Portion shall bear interest (which the Company
hereby promises to pay at the times hereinafter provided), whether before or
after judgment, and until payment in full thereof, through the end of the
Interest Period then applicable thereto at the rate per annum determined by
adding 2% to the interest rate otherwise applicable thereto and effective at the
end of such Interest Period, such LIBOR Portion shall automatically be converted
into and added to the applicable Domestic Rate Portion and shall thereafter bear
interest at the interest rate applicable to such Domestic Rate Portion after
default. Interest on each LIBOR Portion shall be due and payable on the last day
of each Interest Period applicable thereto (provided that if any Interest Period
is longer than three months, then interest on the LIBOR Portion having such
Interest Period shall be due and payable on the date occurring every three
months after the date such Interest Period began and on the last day of such
Interest Period), and interest after maturity shall be due and payable upon
demand. The Company shall notify the Agent on or before 10:00 a.m. Chicago time
on the third Business Day preceding the end of an Interest Period applicable to
a LIBOR Portion whether such LIBOR Portion is to continue as a
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LIBOR Portion, in which event the Company shall notify the Agent of the new
Interest Period selected therefor, and in the event the Company shall fail to so
notify the Agent, such LIBOR Portion shall automatically be converted into and
added to the applicable Domestic Rate Portion as of and on the last day of such
Interest Period. The Agent shall promptly notify each Lender of each notice
received from the Company pursuant to the foregoing provisions. Each LIBOR
Portion shall be in an amount equal to $500,000 or such greater amount which is
an integral multiple of $100,000. Anything contained herein to the contrary
notwithstanding, the obligation of the Lenders to create, continue or effect by
conversion any LIBOR Portion shall be conditioned upon the fact that at the time
no Default or Event of Default shall have occurred and be continuing.
Section 2.4. Manner of Rate Selection. The Company shall notify the Agent
by 10:00 a.m. Chicago time at least 3 Business Days prior to the date upon which
it requests that any LIBOR Portion be created or that any part of the applicable
Domestic Rate Portion be converted into a LIBOR Portion (such notice to specify
in each instance the amount thereof and the Interest Period selected therefor)
and the Agent shall advise each Lender of each such notice by 12:00 noon Chicago
time on the same Business Day it receives such notice. If any request is made
to convert a LIBOR Portion into the applicable Domestic Rate Portion, such
conversion shall only be made so as to become effective as of the last day of
the Interest Period applicable thereto. All requests for the creation,
continuance or conversion of Portions under this Agreement shall, subject to
Section 2.6 hereof, be irrevocable.
Section 2.5. Change of Law. Notwithstanding any other provisions of this
Agreement or the Notes, if at any time a Lender shall determine in good faith
that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Lender to create or continue
to maintain LIBOR Portions, it shall promptly so notify the Agent (which shall
in turn promptly notify the Company and the other Lenders) and the obligation of
such Lender to create, continue or maintain any LIBOR Portion under this
Agreement shall terminate until it is no longer unlawful for such Lender to
create, continue or maintain LIBOR Portions. The Company shall, on demand, if
the continued maintenance of a LIBOR Portion is unlawful, thereupon prepay the
outstanding principal amount of the LIBOR Portion, together with all interest
accrued thereon and all other amounts payable to the affected Lender with
respect thereto under this Agreement; provided, however, that the Company may
instead elect to convert the principal amount of the affected LIBOR Portion into
the applicable Domestic Rate Portion, subject to the terms and conditions of
this Agreement.
Section 2.6. Unavailability of Deposits or Inability to Ascertain the
Adjusted LIBOR Rate. Notwithstanding any other provision of this Agreement or
the Notes, if prior to the commencement of any Interest Period, (a) any Lender
shall inform the Agent that such Lender has determined that United States dollar
deposits in the amount of any LIBOR Portion scheduled to be outstanding during
such Interest Period are not readily available to such Lender in the offshore
interbank market or (b) the Required Lenders shall advise the Agent that LIBOR
as determined by the Agent will not adequately and fairly reflect the cost to
such Lenders of funding such LIBOR Portion for such Interest Period, the Agent
shall
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promptly give notice thereof to the Company and each other Lender and the
obligations of the Lenders to create, continue or effect by conversion any LIBOR
Portion in such amount and for such Interest Period shall terminate until the
circumstances giving rise to such termination no longer exist.
Section 2.7. Taxes and Increased Costs. With respect to the LIBOR Portions,
if any Lender shall determine in good faith that any change in any applicable
law, treaty, regulation or guideline (including, without limitation, Regulation
D of the Board of Governors of the Federal Reserve System) or any new law,
treaty, regulation or guideline, or any interpretation of any of the foregoing
by any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having jurisdiction
over such Lender or its lending branch or the Portions contemplated by this
Agreement (whether or not having the force of law) shall:
(i) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in or
for the account of, or loans by, or any other acquisition of funds or
disbursements by, such Lender which is not in any instance already
accounted for in computing the Adjusted LIBOR Rate;
(ii) subject such Lender, the LIBOR Portions or any Note to the
extent it evidences such Portions, to any tax (including, without
limitation, any United States interest equalization tax or similar tax
however named applicable to the acquisition or holding of debt obligations
and any interest or penalties with respect thereto), duty, charge, stamp
tax, fee, deduction or withholding in respect of this Agreement, any LIBOR
Portion or any Note to the extent it evidences such a Portion, except such
taxes as may be measured by the overall net income or gross receipts of
such Lender or its lending branches and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in which such Lender's
principal executive office or its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to such Lender hereunder or under any Note to
the extent it evidences any LIBOR Portion (other than by a change in
taxation of the overall net income or gross receipts of such Lender or its
lending branches); or
(iv) impose on such Lender any penalty with respect to the foregoing
or any other condition regarding this Agreement, any LIBOR Portion, or any
Note to the extent it evidences any LIBOR Portion;
and such Lender shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to such
Lender of creating or maintaining any LIBOR Portion hereunder or to reduce the
amount of principal or interest received or receivable by such Lender, then the
Company shall pay on demand to the Agent for the account of such Lender from
time to time as specified by such Lender such additional amounts as such Lender
shall reasonably determine are sufficient to compensate and indemnify it for
such increased cost or reduced amount. If a Lender makes such a claim for
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compensation, it shall provide to the Company (with a copy to the Agent) a
certificate setting forth in reasonable detail the computation of the increased
cost or reduced amount as a result of any event mentioned herein and such
certificate shall be deemed prima facie correct.
Section 2.8. Funding Indemnity. In the event any Lender shall incur any
loss, cost or expense (including, without limitation, any loss (including loss
of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
such Lender to fund or maintain its part of any LIBOR Portion or the relending
or reinvesting of such deposits or other funds or amounts paid or prepaid to
such Lender) as a result of:
(i) any payment of a LIBOR Portion on a date other than the last day
of the then applicable Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any
provisions of this Agreement; or
(ii) any failure by any of the Company to create, borrow, continue or
effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement;
then, upon the demand of such Lender, the Company shall pay on demand to the
Agent for the account of such Lender such amount as will reimburse such Lender
for such loss, cost or expense. If a Lender requests such a reimbursement, it
shall provide the Company (with a copy to the Agent) with a certificate setting
forth in reasonable detail the computation of the loss, cost or expense giving
rise to the request for reimbursement and such certificate shall be deemed prima
facie correct.
Section 2.9. Lending Branch. Each Lender may, at its option, elect to
make, fund or maintain its Loans hereunder at the branches or offices specified
on the signature pages hereof or on any Assignment Agreement executed and
delivered pursuant to Section 11.18 hereof or at such other of its branches or
offices as such Lender may from time to time elect. To the extent reasonably
possible, a Lender shall designate an alternative branch or funding office with
respect to its pro rata share of the LIBOR Portions to reduce any liability of
the Company to such Lender under Section 2.7 hereof or to avoid the
unavailability of an interest rate option under Section 2.6 hereof, so long as
such designation is not otherwise disadvantageous to the Lender.
Section 2.10. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Notes in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including
determinations under Sections 2.6, 2.7 and 2.8 hereof) shall be made as if each
such Lender had actually funded and maintained its share of each LIBOR Portion
during each Interest Period applicable thereto through the purchase of deposits
in the offshore interbank market in the amount of its share of such LIBOR
Portion, having a maturity corresponding to such Interest Period and bearing an
interest rate equal to LIBOR for such Interest Period.
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Section 2.11. Computation of Interest. All interest on the Notes, and all
fees, charges and commissions due hereunder, shall be computed on the basis of a
year of 360 days for the actual number of days elapsed, except that interest on
the Domestic Rate Portions of the Notes and on Reimbursement Obligations with
respect to Letters of Credit shall be computed on the basis of a year of 365 or
366 days (as the case may be) for the actual number of days elapsed.
Section 2.12. Capital Adequacy. If any Lender shall determine that any
applicable law, rule or regulation regarding capital adequacy instituted after
the date hereof, or any change in the interpretation or administration of any
applicable law, rule or regulation regarding capital adequacy by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by such Lender (or its
lending office) 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 as a consequence of its obligations hereunder or credit
extended by it hereunder to a level below that which such Lender could have
achieved but for such law, rule, regulation, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, within 15
days after demand by such Lender, the Company shall pay to the Agent for the
account of such Lender such additional amount or amounts as will compensate such
Lender for such reduction. Any Lender claiming compensation under this Section
shall accompany its demand for compensation with a certificate (with a copy to
the Agent) setting forth the additional amount or amounts to be paid to it
hereunder in reasonable detail, which certificate shall be conclusive if
reasonably determined. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND NOTATIONS.
Section 3.1. Revolving Credit Commitment Fee. For the period from the
date hereof to but not including the Termination Date, the Company shall pay to
the Agent for the account of the Lenders in accordance with their Percentages a
commitment fee at the rate per annum equal to 3/8 of 1% per annum on the average
daily unused amount of the Revolving Credit Commitments hereunder. Such fee
shall be payable in arrears on the last day of each March, June, September, and
December in each year (commencing with the first of such dates after the date
hereof) and on the Termination Date.
Section 3.2. Acquisition Financing Commitment Fee. For the period from
the date hereof to but not including the Acquisition Financing Termination Date,
the Company shall pay to the Agent for the account of the Lenders in accordance
with their Percentages a commitment fee at the rate per annum equal to 1/2 of 1%
per annum on the average daily unused amount of the Acquisition Financing
Commitments hereunder. For purposes of this Section, Supplemental Revolving
Loans shall be deemed a utilization of the Acquisition Financing Commitments.
Such fee shall be payable in arrears on the last day of each March, June,
September, and December in each year (commencing with the first of such dates
after the date hereof) and on the date the Acquisition Financing Termination
Date.
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Section 3.3. Letter of Credit Fees. Quarterly in arrears, on the last day
of each March, June, September, and December in each year (commencing on the
first of such dates after the date hereof), the Company shall pay to the Agent,
for the benefit of the Lenders, a letter of credit fee at the rate of 1% per
annum applied to the daily average face amount of Letters of Credit outstanding
during such quarter. In addition, the Company shall pay to the Agent for its own
use and benefit the Agent's standard drawing, negotiation, amendment and other
administrative fees for each Letter of Credit, as such standard fees may be
established by the Agent from time to time.
Section 3.4. Audit Fees. The Company shall pay to the Agent for its own
use and benefit charges for audits of the Collateral by the Agent in such
amounts as the Agent may from time to time request (the Agent acknowledging and
agreeing that such charges shall be computed in the same manner as it at the
time customarily uses for the assessment of charges for similar collateral
audits); provided, however, that in the absence of any Default or Event of
Default, the Company shall not be required to pay the Agent for more than one
such audit per calendar year.
Section 3.5. Agent's Fee. The Company shall pay to the Agent, for its own
use and benefit, such agency and arrangement fees as may from time to time be
mutually agreed upon by the Company and the Agent.
Section 3.6. Voluntary Prepayments. The Company shall have the privilege
of prepaying the Revolving Credit Notes and the Supplemental Revolving Credit
Notes in whole or in part (but if in part, then in a minimum amount of $50,000
or such greater amount which is an integral multiple of $50,000) and the
Acquisition Financing Notes and the Term Notes in whole or in part (but if in
part, then in a minimum amount of $100,000 or such greater amount which is an
integral multiple of $100,000) at any time upon 1 Business Day's prior notice to
the Agent (such notice if received subsequent to 12:00 noon Chicago time on a
given day to be treated as though received at the opening of business on the
next Business Day), which shall promptly so notify the Lenders, by paying to the
Agent for the account of the Lenders the principal amount to be prepaid and (i)
if such a prepayment prepays the Term Notes relating to the same Borrowing in
full, accrued interest thereon to the date of prepayment, (ii) if such a
prepayment prepays the Revolving Credit Notes in full and is accompanied by the
termination in whole of the Revolving Credit Commitments, accrued interest
thereon to the date of prepayment plus any commitment fee which has accrued and
is unpaid plus any prepayment fee due under Section 3.8 hereof, (iii) if such a
prepayment prepays the Acquisition Financing Notes in full and is accompanied by
the termination in whole of the Acquisition Financing Commitments, accrued
interest thereon to the date of prepayment plus any commitment fee which has
accrued and is unpaid plus any prepayment fee due under Section 3.8 hereof, (iv)
if such a prepayment prepays the Supplemental Revolving Credit Notes in full and
is accompanied by the termination in whole of the Supplemental Revolving Credit
Commitments, accrued interest thereon to the date of prepayment plus any
prepayment fee due under Section 3.8 hereof, and (v) any amounts due to the
Lenders under Section 2.8 hereof.
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Section 3.7. Mandatory Prepayments. (a) The Company covenants and agrees
that if at any time the sum of the unpaid principal balance of the Revolving
Loans and the L/C Obligations outstanding at any one time shall be in excess of
the Borrowing Base as then determined and computed, the Company shall
immediately and without notice or demand pay over the amount of the excess to
the Agent for the account of the Lenders as and for a mandatory prepayment on
such Obligations, with each such prepayment first to be applied to the Revolving
Credit Notes until payment in full thereof with any remaining balance to be held
by the Agent as collateral security for the Obligations owing under the
Applications with respect to the Letters of Credit.
(b) On January 31st of each year (commencing January 31, 1999), the
Company shall pay over to the Agent for the account of the Lenders as and for a
mandatory prepayment on the Acquisition Financing Notes and the Term Notes an
amount equal to 50% of Excess Cash Flow for the most recently completed fiscal
year, provided that if the ratio of Total Senior Funded Debt as of the last day
of the fiscal year then ended to Adjusted EBITDA for the fiscal year then ended
is less than 3.0 to 1.0, then the mandatory prepayment due hereunder shall be
reduced to 25% of Excess Cash Flow for such year. Mandatory prepayments of the
Acquisition Financing Notes and Term Notes pursuant to this Section 3.7(b) shall
be applied first to the Term Notes then outstanding (which application shall be
made to the most recent Borrowing of Term Loans made to the Company and applied
to the several installments thereon in the inverse order of maturity) and then
to the Acquisition Financing Notes.
(c) The Company covenants and agrees that if at any time the sum of the
unpaid principal balance of the Supplemental Revolving Loans then outstanding
plus the original principal amount of all Acquisition Financing Loans made
hereunder (determined without regard to any subsequent payments of principal
thereon) shall be in excess of the difference between the sum of $65,000,000
plus any portion (up to $5,000,000) of the Revolving Credit Commitments
converted into Acquisition Financing Commitments pursuant to Section 1.7 hereof,
minus all amounts of the Acquisition Financing Commitments voluntarily
terminated pursuant to Section 3.8 hereof, the Company shall immediately and
without notice or demand pay over the amount of the excess to the Agent for the
account of the Lenders as and for a mandatory prepayment on the Supplemental
Revolving Credit Notes.
(d) If the Company or any Subsidiary shall at any time or from time to
time make or agree to make a Disposition or shall suffer an Event of Loss
resulting in Net Cash Proceeds in excess of $1,000,000 in any fiscal year of the
Company, then (x) the Company shall promptly notify the Agent of such proposed
Disposition or Event of Loss (including the amount of the estimated Net Cash
Proceeds to be received by the Company or such Subsidiary in respect thereof)
and (y) promptly upon, and in no event later than the Business Day after,
receipt by the Company or the Subsidiary of the Net Cash Proceeds of such
Disposition or Event of Loss, the Company shall prepay the Acquisition Financing
Notes and the Term Notes in an aggregate amount equal to 100% of the amount of
such Net Cash Proceeds; provided that in the case of each Disposition and Event
of Loss, if the Company states in its notice of such event that the Company or
the applicable Subsidiary intends to reinvest, within 180 days of the applicable
Disposition or receipt of Net Cash Proceeds from
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an Event of Loss, the Net Cash Proceeds thereof in assets in a Permitted Line of
Business, then so long as no Default or Event of Default then exists, the
Company shall not be required to make a mandatory prepayment under this Section
3.7(d) in respect of such Net Cash Proceeds to the extent such Net Cash Proceeds
are actually reinvested in such similar assets within such 180 day period.
Promptly after the end of such 180-day period, the Company shall notify the
Agent whether the Company or such Subsidiary has reinvested such Net Cash
Proceeds in assets in a Permitted Line of Business, and to the extent such Net
Cash Proceeds have not been so reinvested, the Company shall promptly prepay the
Acquisition Financing Notes and Term Notes in the amount of such Net Cash
Proceeds not so reinvested. The amount of each such prepayment shall be applied
first to the Term Notes then outstanding (which application shall be made to the
most recent Borrowing of Term Loans made to the Company and applied to the
several installments thereon in the inverse order of maturity) and then to the
Acquisition Financing Notes. The Company acknowledges that its performance
hereunder shall not limit the rights and remedies of the Lenders for any breach
of any other provisions of this Agreement.
(e) Notwithstanding anything in Sections 3.7(a), (b), (c) or (d) to the
contrary, prior to the final maturity of the relevant Notes, the Company shall
not be required to make any prepayment of any LIBOR Portions pursuant to Section
3.7(a), (b), (c) or (d) until the last day of the Interest Period with respect
thereto (provided that, in the case of clause (d), any such cash collateral
shall have the same effect as a prepayment of the Loans for purposes of the
Senior Subordinated Notes or any issue of Subordinated Debt requiring that
Subordinated Debt be retired out of the proceeds of any such Disposition or
Event of Loss after giving effect to any mandatory prepayment of the
Obligations) so long as (i) no Default or Event of Default then exists and (ii)
an amount equal to the principal amount of such LIBOR Portions is deposited by
the Company in a segregated cash collateral account with the Agent for the
benefit of the Lenders to be held in such account on terms reasonably
satisfactory to the Agent. The amount held on deposit in such account shall if
and when requested by the Company be invested in direct obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America with a remaining maturity of one
year or less, or other investments mutually satisfactory to the Company and the
Agent. On the last day of such Interest Period, the amount held in such account
shall be applied so as to make such prepayment, and except during the
continuance of any Default or Event of Default, any balance remaining on deposit
in such account after such application shall be remitted to the Company.
Section 3.8. Terminations. (a) Voluntary. The Company shall have the
privilege upon 1 Business Day's prior notice to the Agent (which shall promptly
notify the Lenders) to ratably terminate the Revolving Credit Commitments and/or
the Acquisition Financing Commitments and/or the Supplemental Revolving Credit
Commitments in whole or in part (but if in part then in the amount of $500,000
or such greater amount which is an integral multiple of $500,000) and upon
payment of any prepayment premium required by the terms of the following
sentence. On the effective date of any such termination of the Commitments, or
any part thereof, the Company shall pay as a prepayment premium to the Agent for
the account of the Lenders, as liquidated damages for the loss of bargain and
not as a penalty, an amount equal to 3/8 of 1% per annum, in the case of any
termination of the
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Revolving Credit Commitments, and 1/2 of 1% per annum, in the case of any
termination of the Acquisition Financing Commitments, times the aggregate
Commitments then being terminated multiplied by a fraction, the numerator of
which is the number of days remaining in the initial 12-month term of this
Agreement and the denominator of which is 360 days. No partial terminations of
the Revolving Credit Commitments may be made below the L/C Commitment then in
effect, unless the L/C Commitment is concurrently reduced by a like amount. No
partial terminations of the Acquisition Financing Commitments may be made below
the Supplemental Revolving Credit Commitments then in effect, unless the
Supplemental Revolving Credit Commitments are concurrently reduced by a like
amount. Not later than the termination date stated in such notice, there shall
be made such payments to the Agent as may be necessary to reduce the sum of the
aggregate outstanding principal amount of the relevant Loans to the amount to
which the relevant Commitments have been reduced, together with (x) any amount
due the Lenders under this Section 3.8 and under Section 2.8 hereof and (y) in
the case of a termination in whole, all interest, fees and other amounts due on
the Obligations. The foregoing to the contrary notwithstanding, (i) no
termination of the Revolving Credit Commitment may be effected hereunder if as a
result thereof the outstanding aggregate amount of L/C Obligations would exceed
the L/C Commitment as reduced by such termination and (ii) the relevant
Commitments may not be terminated below $5,000,000 except concurrently with
their termination in whole.
(b) Mandatory Revolving Credit Terminations. If at any time Net Cash
Proceeds remain after the prepayment of the Acquisition Financing Notes and Term
Notes in full pursuant to Section 3.7(d) hereof, the Acquisition Financing
Commitments and the Revolving Credit Commitments shall terminate by an amount
equal to 100% of such excess proceeds (first to the Acquisition Financing
Commitments until reduced to zero and then to the Revolving Credit Commitments).
(c) Mandatory Termination Upon a Change of Control. After the occurrence
of a Change of Control, the Required Lenders may, by written notice to the
Company at any time on or before the date occurring 90 days after the date the
Company notifies the Lenders of such Change of Control, terminate the remaining
Commitments and all other obligations of the Lenders hereunder on the date
stated in such notice (which shall in no event be sooner than 30 days after the
occurrence of such Change of Control). On the date the Commitments are so
terminated, all outstanding Obligations (including, without limitation, all
principal of and accrued interest on the Notes) shall forthwith be due and
payable without further demand, presentment, protest, or notice of any kind and
the Company shall immediately pay to the Lenders the full amount then available
for drawing under each Letter of Credit, such amount to be held by the Agent as
collateral security for the Letters of Credit and the Applications therefor and
any remaining Obligations (the Company agreeing to immediately make such payment
on the date the Commitments are so terminated and acknowledging and agreeing
that the Lenders would not have an adequate remedy at law for the failure by the
Company to honor any such demand and that the Lenders, and the Agent on their
behalf, shall have the right to require the Company to specifically perform such
undertaking whether or not any drawings or other demands for payment have been
made under any of the Letters of Credit).
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(d) Any termination of the Commitments pursuant to this Section may not
be reinstated.
Section 3.9. Place and Application. All payments of principal, interest,
fees and any other Obligations shall be made to the Agent at its office 111 West
Monroe Street, Chicago, Illinois (or at such other place as the Agent may
specify) in immediately available and freely transferable funds at the place of
payment. All such payments shall be made without set-off or counterclaim and
without reduction for, and free from, any and all present or future taxes,
levies, imposts, duties, fees, charges, deductions, withholdings, restrictions
or conditions of any nature imposed by any government or political subdivision
or taxing authority thereof. Payments received by the Agent after 12:00 noon
Chicago time shall be deemed received as of the opening of business on the next
Business Day. Except as herein provided, all payments shall be received by the
Agent for the ratable account of the Lenders and shall be promptly distributed
by the Agent to the Lenders in accordance with their Percentages. Unless the
Company otherwise directs, payments (including prepayments) on any Loans shall
be deemed first applied to the applicable Domestic Rate Portion until payment in
full thereof, with any balance applied to the LIBOR Portions in the order in
which their Interest Periods expire. Any amount prepaid on the Revolving Credit
Notes or Supplemental Revolving Credit Notes may, subject to all of the terms
and conditions hereof, be borrowed, repaid and borrowed again. No amounts
prepaid on the Acquisition Financing Notes or the Term Notes may be reborrowed,
and any partial prepayments (whether voluntary or mandatory) shall be applied to
the several installments of such Notes in the inverse order of maturity. All
payments (whether voluntary or required) shall be accompanied by any amount due
the Lenders under Section 2.8 hereof, but no acceptance of such a payment
without requiring payment of amounts due under Section 2.8 shall preclude a
later demand by the Lenders for any amount due them under Section 2.8 in respect
of such payment.
Anything contained herein to the contrary notwithstanding, all payments and
collections received in respect of the Obligations and all proceeds of the
Collateral received, in each instance, by the Agent or any of the Lenders after
the occurrence and during the continuation of an Event of Default shall be
remitted to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and expenses
incurred by the Agent in monitoring, verifying, protecting, preserving or
enforcing the Liens on the Collateral or by the Agent in protecting,
preserving or enforcing rights under the Loan Documents, and in any event
all costs and expenses of a character which the Company has agreed to pay
under Section 11.5 hereof (such funds to be retained by the Agent for its
own account unless the Agent has previously been reimbursed for such costs
and expenses by the Lenders, in which event such amounts shall be remitted
to the Lenders to reimburse them for payments theretofore made to the
Agent);
(b) second, to the payment of any outstanding interest or other fees
or amounts due under the Notes and the other Loan Documents, in each case
other than for principal or in reimbursement or collateralization of L/C
Obligations, ratably as
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among the Agent and the Lenders in accord with the amount of such interest
and other fees or amounts owing each;
(c) third, to the payment of the principal of the Notes and any
unpaid Reimbursement Obligations and to the Agent to be held as collateral
security for any other L/C Obligations (until the Agent is holding an
amount of cash equal to the then outstanding amount of all such L/C
Obligations), the aggregate amount paid to or held as collateral security
for the Lenders to be allocated pro rata as among the Lenders in accordance
with the then respective aggregate unpaid principal balances of their Loans
and interests in the Letters of Credit;
(d) fourth, to the Agent and the Lenders ratably in accordance with
the amounts of any other indebtedness, obligations or liabilities of the
Company owing to each of them and secured by the Collateral Documents
(other than those described in clause (e) below) unless and until all such
indebtedness, obligations and liabilities have been fully paid and
satisfied;
(e) fifth, to the payment of the Hedging Liability (if any) pro rata
as among the Lenders to whom such Hedging Liability is owed in accordance
with the then respective unpaid amounts of such liability; and
(f) fifth, to the Company or whoever else may be lawfully entitled
thereto.
In the event that the amount of any Hedging Liability is not fixed and
determined at the time any funds are to be allocated thereto pursuant to the
above provisions, such funds so allocated shall be held by the Agent as
collateral security until such Hedging Liability is fixed and determined and the
same shall then be applied to the Hedging Liability, with any surplus
reallocated among the Lenders, to cover any deficiency which would not have
existed had the exact amount of the Hedging Liability been known at the time
such funds were originally distributed.
Section 3.10. Notations and Requests. All Borrowings made against the
Notes, the status of all amounts evidenced by the Notes as constituting part of
the applicable Domestic Rate Portion or LIBOR Portion and the rates of interest
and Interest Periods applicable to such Portions shall be recorded by the
Lenders on their books or, at their option in any instance, endorsed on the
reverse side of the Notes and the unpaid principal balances and status, rates
and Interest Periods so recorded or endorsed by the Lenders shall be prima facie
evidence in any court or other proceeding brought to enforce the Notes of the
principal amount remaining unpaid thereon, the status of such Borrowings and the
interest rates and Interest Periods applicable thereto. Prior to any
negotiation of any Note, the Lender holding such Note shall endorse thereon the
status of all amounts evidenced thereby as constituting part of the Domestic
Rate Portion or LIBOR Portion and the rates of interest and the Interest Periods
applicable thereto.
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SECTION 4. THE COLLATERAL AND GUARANTIES.
Section 4.1. Collateral. The Obligations shall be secured by valid and
enforceable security interests in and liens on all now owned or hereafter
acquired accounts, general intangibles, instruments, documents, chattel paper,
investment property, inventory, equipment, real estate and certain other goods
and assets of the Company and of each Restricted Subsidiary pursuant to one or
more Collateral Documents from such Persons, each in form and substance
satisfactory to the Agent. The Obligations shall also be secured by an
assignment of key-man life insurance owned and benefiting the Company on the
life of Craig Moore for a period of not less than three years, with the amount
of such insurance to be not less than $7,500,000 from the date hereof through
and including December 31, 1998, which assignment and the life insurance policy
subject thereto shall each be in form and substance satisfactory to the Agent.
Section 4.2. Guaranties. The payment and performance of the Obligations
shall at all times be guaranteed by each Restricted Subsidiary pursuant to a
guaranty agreement executed by such Restricted Subsidiary in form and substance
satisfactory to the Agent (individually a "Guaranty" and collectively the
"Guaranties").
Section 4.3. Further Assurances. The Company agrees that it will, and
will cause each Restricted Subsidiary to, from time to time at the request of
the Agent or the Required Lenders, execute and deliver such documents and do
such acts and things as the Agent or the Required Lenders may reasonably request
in order to provide for or perfect or protect such Liens on the Collateral. In
the event the Company or any Restricted Subsidiary forms or acquires any
Restricted Subsidiary after the date hereof, the Company shall within 10
Business Days of such formation or acquisition cause such newly formed or
acquired Restricted Subsidiary to execute a Guaranty and such Collateral
Documents as the Agent may then require, and the Company shall also deliver, or
cause such Restricted Subsidiary to deliver, at the Company's cost and expense,
such other instruments, documents, certificates, and opinions required by the
Agent in connection therewith.
Section 4.4. Liens on After-Acquired Real Property. In the event that the
Company or any Restricted Subsidiary owns or hereafter acquires any real
property, at the request of the Required Lenders, the Company shall, or shall
cause such Restricted Subsidiary to, execute and deliver to the Agent (or a
security trustee therefor) a mortgage or deed of trust acceptable in form and
substance to the Agent for the purpose of granting to the Agent for the benefit
of the Lenders a lien on such real property to secure the Obligations, shall pay
all taxes, costs and expenses incurred by the Agent in recording such mortgage
or deed of trust, and shall at its expense supply to the Agent a Phase I
environmental site assessment, a survey and a mortgagee's policy of title
insurance from a title insurer reasonably acceptable to the Agent insuring the
validity of such mortgage or deed of trust and its status as a first lien
(subject to liens permitted by this Agreement) on the real property encumbered
thereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders as follows:
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Section 5.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware, has full and adequate corporate power to own its
Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying.
Section 5.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying. Schedule 5.2 hereto (as the same may be
deemed amended pursuant to Section 7.15(g) or 7.16 hereof) identifies each
Subsidiary, the jurisdiction of its incorporation or organization, as the case
may be, the percentage of issued and outstanding shares of each class of its
capital stock or other equity interests owned by the Company and the
Subsidiaries and, if such percentage is not 100% (excluding directors'
qualifying shares as required by law), a description of each class of its
authorized capital stock and other equity interests and the number of shares of
each class issued and outstanding. All of the outstanding shares of capital
stock and other equity interests of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares and other
equity interests indicated on Schedule 5.2 (as the same may be deemed amended
pursuant to Section 7.15(g) or 7.16 hereof) as owned by the Company or a
Subsidiary are owned, beneficially and of record, by the Company or such
Subsidiary free and clear of all Liens other than the Liens granted in favor of
the Agent pursuant to the Collateral Documents. Except as disclosed on Schedule
5.2 hereof, there are no outstanding commitments or other obligations of any
Subsidiary to issue, and no options, warrants or other rights of any Person to
acquire, any shares of any class of capital stock or other equity interests of
any Subsidiary.
Section 5.3. Corporate Authority and Validity of Obligations. The Company
has full right and authority to enter into this Agreement and the other Loan
Documents executed by it, to make the borrowings herein provided for, to issue
its Notes in evidence thereof, to grant to the Agent the Liens described in the
Collateral Documents executed by the Company, and to perform all of its
obligations hereunder and under the other Loan Documents executed by it. Each
Restricted Subsidiary has full right and authority to enter into the Loan
Documents executed by it, to guarantee the Obligations, to grant to the Agent
the Liens described in the Collateral Documents executed by such Restricted
Subsidiary, and to perform all of its obligations under the Loan Documents
executed by it. The Loan Documents delivered by the Company and by each of its
Restricted Subsidiaries have been duly authorized, executed and delivered by
such Person and constitute valid and binding obligations of such Person
enforceable in accordance with their terms except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law); and this Agreement and the other Loan Documents
do not, nor does the performance or
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observance by the Company or any Restricted Subsidiary of any of the matters and
things herein or therein provided for, (a) contravene or constitute a default
under any provision of law or any judgment, injunction, order or decree binding
upon the Company or any Restricted Subsidiary or any provision of the charter,
articles of incorporation or by-laws of the Company or any Restricted
Subsidiary, (b) contravene or constitute a default under any covenant, indenture
or agreement of or affecting the Company or any Restricted Subsidiary or any of
its Property, in each case where such contravention or default is reasonably
likely to have a Material Adverse Effect, or (c) result in the creation or
imposition of any Lien on any Property of the Company or any Restricted
Subsidiary other than the Liens granted in favor of the Agent pursuant to the
Collateral Documents.
Section 5.4. Use of Proceeds; Margin Stock. The Company shall use the
proceeds of the Loans and other extensions of credit made available hereunder
solely for its general working capital purposes and for such other legal and
proper purposes as are consistent with all applicable laws, except that (a)
Revolving Loan proceeds shall not be used, directly or indirectly, to invest in,
or make loans or advances to, Persons who are not Restricted Subsidiaries, (b)
Supplemental Revolving Loan proceeds shall only be used by the Company to make
loans and advances, directly or indirectly through a Restricted Subsidiary, to
Persons (other than Restricted Subsidiaries) to the extent permitted by Section
7.15(i) hereof, (c) Letters of Credit shall only be issued in support of
insurance policy obligations of the Company or any Restricted Subsidiary or for
such other purpose as is acceptable to the Agent in its sole discretion and (d)
the proceeds of the Acquisition Financing Loans shall only be used to acquire
the assets or equity interests of another Person in accordance with the terms of
Section 7.15(g) hereof and to finance the acquisition and construction of new
facilities and expansion to existing facilities operating in a Permitted Line of
Business. Neither the Company nor any Subsidiary is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan or any other extension of
credit made hereunder will be used to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock.
Section 5.5. Financial Reports. The consolidated balance sheet of the
Company and its Subsidiaries as at September 30, 1997, and the related
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit report of
Ernst & Young, independent public accountants, and the unaudited interim
consolidated balance sheet of the Company and its Subsidiaries as at February
28, 1998, and the related consolidated statements of income and retained
earnings of the Company and its Subsidiaries for the 5 months then ended,
heretofore furnished to the Lenders, fairly present in all material respects the
consolidated financial condition of the Company and its Subsidiaries as at said
dates and the consolidated results of their operations and cash flows for the
periods then ended in conformity with generally accepted accounting principles
applied on a consistent basis. Neither the Company nor any Subsidiary has
contingent liabilities which are material to it other than as indicated on such
financial statements or,
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with respect to future periods, on the financial statements furnished pursuant
to Section 7.5 hereof.
Section 5.6. No Material Adverse Change. Since February 28, 1998, there
has been no change in the condition (financial or otherwise) or business
prospects of the Company or any Subsidiary, except for the issuance of the
Senior Subordinated Notes and those occurring in the ordinary course of
business, none of which individually or in the aggregate have been materially
adverse.
Section 5.7. Full Disclosure. The statements and information furnished to
the Lenders in connection with the negotiation of this Agreement and the other
Loan Documents and the commitments by the Lenders to provide all or part of the
financing contemplated hereby do not contain any untrue statements of a material
fact or omit a material fact necessary to make the material statements contained
herein or therein not misleading, the Lenders acknowledging that as to any
projections furnished to the Lenders, the Company only represents that the same
were prepared on the basis of information and estimates the Company believed to
be reasonable at the time made.
Section 5.8. Trademarks, Franchises, and Licenses. The Company and its
Subsidiaries own, possess, or have the right to use all necessary patents,
licenses, franchises, trademarks, trade names, trade styles, copyrights, trade
secrets, know how and confidential commercial and proprietary information to
conduct their businesses as now conducted, without known conflict with any
patent, license, franchise, trademark, trade name, trade style, copyright or
other proprietary right of any other Person.
Section 5.9. Governmental Authority and Licensing. The Company and its
Subsidiaries have received all licenses, permits, and approvals of all Federal,
state, local, and foreign governmental authorities, if any, necessary to conduct
their business as now conducted and to receive Medicare and Medicaid
reimbursement and/or payments for health care currently provided by them,
including all certificates of need and other licenses, permits, and approvals,
if any, required to own and/or operate any health care facilities or services
currently owned or operated by them, in each case where the failure to obtain or
maintain the same is reasonably likely to have a Material Adverse Effect. No
investigation or proceeding which, if adversely determined, is reasonably likely
to result in revocation or denial of any material license, permit, or approval,
or of any right to receive reimbursement or payments under Medicare or other
governmental third-party reimbursement or prospective payment program, is
pending or, to the knowledge of the Company, threatened.
Section 5.10. Good Title. The Company and its Subsidiaries each have good
and defensible title to their assets as reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries furnished to the
Lenders (except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as are
permitted by Section 7.14 hereof.
Section 5.11. Litigation and Other Controversies. There is no litigation
or governmental proceeding or labor controversy pending, nor to the knowledge of
the
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Company threatened, against the Company or any Subsidiary which if adversely
determined is reasonably likely to have a Material Adverse Effect.
Section 5.12. Taxes. Except as disclosed on Schedule 5.12 hereof, all tax
returns required to be filed by the Company or any Subsidiary in any
jurisdiction have, in fact, been filed, and all taxes, assessments, fees and
other governmental charges upon the Company or any Subsidiary or upon any of
their respective Properties, income or franchises, which are shown to be due and
payable in such returns, have been paid, except such taxes, assessments, fees
and governmental charges, if any, as are being contested in good faith and by
appropriate proceedings which prevent enforcement of the matter under contest
and as to which adequate reserves established in accordance with GAAP have been
provided. The Company does not know of any proposed additional tax assessment
against the Company or any of its Subsidiaries for which adequate provisions in
accordance with GAAP have not been made on their accounts. Adequate provisions
in accordance with GAAP for taxes on the books of the Company and each
Subsidiary have been made for all open years, and for its current fiscal period.
Section 5.13. Approvals. No authorization, consent, license, or exemption
from, or filing or registration with, any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
the Company, any Subsidiary, or any other Person, is or will be necessary to the
valid execution, delivery or performance by the Company of this Agreement or by
the Company or any Subsidiary of any other Loan Document, except for such
approvals which have been obtained prior to or concurrently with the execution
and delivery of this Agreement and which remain in full force and effect.
Section 5.14. Affiliate Transactions. Except for agreements in effect on
the date hereof and described on Schedule 5.14 attached hereto, neither the
Company nor any Subsidiary is a party to any contracts or agreements with any of
its Affiliates (other than with Wholly-Owned Subsidiaries) on terms and
conditions which are less favorable to the Company or such Subsidiary than would
be usual and customary in similar contracts or agreements between Persons not
affiliated with each other.
Section 5.15. Investment Company; Public Utility Holding Company. Neither
the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 5.16. ERISA. The Company and each other member of its Controlled
Group has fulfilled its obligations under the minimum funding standards of and
is in compliance in all material respects with ERISA and the Code to the extent
applicable to it and has not incurred any liability to the PBGC or a Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA. Neither the Company nor any Subsidiary has any contingent
liabilities with respect to any post-retirement benefits under a
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Welfare Plan, other than liability for continuation coverage described in
article 6 of Title I of ERISA.
Section 5.17. Compliance with Laws. The Company and each of its
Subsidiaries are in compliance with the requirements of all federal, state and
local laws, rules and regulations applicable to or pertaining to their
Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, laws and regulations relating to the providing of health care services,
and laws and regulations establishing quality criteria and standards for air,
water, land and toxic or hazardous wastes and substances), where any such non-
compliance, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect. Neither the Company nor any Subsidiary has received
notice to the effect that its operations are not in compliance with any of the
requirements of applicable federal, state or local environmental, health and
safety statutes and regulations or are the subject of any governmental
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, where
any such non-compliance or remedial action, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect.
Section 5.18. Other Agreements. Neither the Company nor any Subsidiary is
in default under the terms of any covenant, indenture or agreement of or
affecting the Company, any Subsidiary, or any of their Properties, which default
if uncured is reasonably likely to have a Material Adverse Effect.
Section 5.19. No Default. No Default or Event of Default has occurred and
is continuing.
Section 5.20. Solvency. The Company and its Subsidiaries are solvent,
able to pay their debts as they become due, and have sufficient capital to carry
on their business and all businesses in which they are about to engage.
SECTION 6. CONDITIONS PRECEDENT.
Section 6.1. All Advances. The obligation of the Lenders to make any Loan
or other financial accommodation to the Company hereunder (including the first
such accommodation) shall be subject to the conditions precedent that as of the
time of the making of each such accommodation:
(a) each of the representations and warranties set forth herein and
in the other Loan Documents shall be and remain true and correct as of said
time, except to the extent the same expressly relate to an earlier date;
(b) the Company and each Restricted Subsidiary shall be in
compliance with all of the terms and conditions hereof and of the other
Loan Documents, and no Default or Event of Default shall have occurred and
be continuing;
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(c) after giving effect to such extension of credit, the aggregate
principal amount of all Revolving Loans and L/C Obligations outstanding
under this Agreement shall not exceed the lesser of (i) the Revolving
Credit Commitments then in effect and (ii) the Borrowing Base;
(d) in the case of any Borrowing of Term Loans, the Agent shall have
received for each of the Lenders a duly executed and completed Term Note
for such Lender in the amount of its Term Loan;
(e) in the case of the issuance of any Letter of Credit, the Agent
shall have received a properly completed Application therefor and, in the
case of an extension or increase in the amount of the Letter of Credit, the
Agent shall have received a written request therefor, in a form acceptable
to the Agent, with such Application or written request, in each case to be
accompanied by the fees required by this Agreement; and
(f) such extension of credit shall not violate any order, judgment or
decree of any court or other authority or any provision of law or
regulation applicable to the Agent or any Lender (including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System) as then in effect.
The Company's request for any Loan or Letter of Credit shall constitute its
warranty as to the facts specified in subsections (a) through (e), both
inclusive, above.
Section 6.2. Initial Advance. At or prior to the time of the initial
Loans or other financial accommodation hereunder, the following conditions
precedent shall also have been satisfied:
(a) the Agent shall have received the following for the account of
the Lenders (each to be properly executed and completed) and the same shall
have been approved as to form and substance by the Agent:
(i) the Revolving Credit Notes, Acquisition Financing Notes,
and the Supplemental Revolving Credit Notes;
(ii) a Consent and Reaffirmation of Guaranty and Security
Documents from each Restricted Subsidiary;
(iii) an Amended and Restated Mortgage and Security Agreement
with Assignment of Rents from The Extracorporeal Alliance, L.L.C.
covering certain real property located in Bay County, Florida;
(iv) copies (executed or certified as may be appropriate) of
resolutions of the Board of Directors of the Company and of
resolutions of the Board of Directors (or other governing body) of
each Restricted Subsidiary, in each case authorizing the execution,
delivery and performance of the Loan Documents to which it is a party
and all other documents relating thereto;
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<PAGE>
(v) an incumbency certificate containing the name, title and
genuine signature of the Company's Authorized Representatives and each
authorized signatory of each Restricted Subsidiary;
(vi) a good standing certificate (or its equivalent) for the
Company and each Restricted Subsidiary, dated as of a date no earlier
than 60 days prior to the date hereof, from the appropriate
governmental offices in the state of its incorporation or organization
and in each state in which it is qualified to do business as a foreign
corporation or organization;
(vii) articles of incorporation and by-laws for the Company and
articles of incorporation and by-laws (or equivalent organizational
documents) for each Restricted Subsidiary, in each case certified by
such Person's corporate Secretary or other appropriate officer
acceptable to the Agent; and
(viii) evidence of the maintenance of insurance by the Company
and each Restricted Subsidiary as required hereby or by the Collateral
Documents;
(b) the UCC financing statements requested in connection with the
Collateral Documents shall have been executed and delivered to the Agent;
(c) the Lenders shall have received a borrowing base certificate in
substantially the form of Exhibit F setting forth the computation of the
Borrowing Base at such time and a compliance certificate in substantially
the form of Exhibit G setting forth the computation of the financial
covenants as of such time;
(d) all legal matters incident to the transactions contemplated
hereby shall be acceptable to the Lenders and their counsel, and the Agent
shall have received for the account of the Lenders the favorable written
opinion of counsel to the Company and its Restricted Subsidiaries, in the
form of Exhibit H hereto or in such other form as is acceptable to the
Agent and its counsel;
(e) the Agent shall have received for itself and for the Lenders the
initial fees, if any, called for hereby;
(f) each Lender shall have received such valuations and
certifications as it may require in order to satisfy itself as to the value
of the Collateral, the financial condition of the Company and its
Subsidiaries, and the lack of material contingent liabilities of the
Company and its Subsidiaries;
(g) the Lenders shall have received a certified copy of the Indenture
setting forth the terms and conditions applicable to the Senior
Subordinated Notes;
(h) all loans outstanding under the Original Credit Agreement shall
have been paid and satisfied in full out of the proceeds of the issuance of
the Senior Subordinated
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<PAGE>
Notes and, on the effective date of this Agreement, the outstanding
principal balance of all Loans shall be zero; and
(i) the Agent shall have received for the account of the
Lenders such other agreements, instruments, documents, certificates and
opinions as the Agent may reasonably request.
SECTION 7. COVENANTS.
The Company agrees that, so long as any credit is available to or in use by
the Company hereunder, except to the extent compliance in any case or cases is
waived in writing by the Required Lenders:
Section 7.1. Maintenance of Business. The Company shall, and shall cause
each of its Subsidiaries to, preserve and maintain its existence, except as
otherwise provided in Section 7.16(c) hereof. The Company shall, and shall
cause each of its Subsidiaries to, preserve and keep in force and effect all
licenses, permits, franchises, approvals, patents, trademarks, trade names,
trade styles, copyrights, and other proprietary rights necessary to the proper
conduct of its business (including, without limitation, all such licenses,
permits, franchises, and approvals referred to in Sections 5.8 and 5.9 of this
Agreement) where the failure to do so is reasonably likely to have a Material
Adverse Effect.
Section 7.2. Maintenance of Properties. The Company shall, and shall
cause each of its Subsidiaries to, maintain, preserve and keep its property,
plant and equipment in good repair, working order and condition (ordinary wear
and tear excepted) and shall from time to time make all needful and proper
repairs, renewals, replacements, additions and betterments thereto so that at
all times the efficiency thereof shall be fully preserved and maintained, except
to the extent that, in the reasonable business judgment of the Company, any such
Property is no longer necessary for the proper conduct of the business of such
Person.
Section 7.3. Taxes and Assessments. The Company shall duly pay and
discharge, and shall cause each of its Subsidiaries to duly pay and discharge,
all taxes, rates, assessments, fees and governmental charges upon or against it
or its Properties, in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings which prevent enforcement
of the matter under contest and adequate reserves are provided therefor.
Section 7.4. Insurance. The Company shall insure and keep insured, and
shall cause each of its Subsidiaries to insure and keep insured, with good and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Company shall insure, and shall cause each of its
Subsidiaries to insure, such other hazards and risks (including professional
liability, employers' and public liability risks) with good and responsible
insurance companies as and
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<PAGE>
to the extent usually insured by Persons similarly situated and conducting
similar businesses. The Company shall in any event maintain, and cause each of
its Subsidiaries to maintain, insurance on the Collateral to the extent required
by the Collateral Documents. The Company shall, upon the reasonable request of
the Agent, furnish to the Agent and each Lender a certificate setting forth in
summary form the nature and extent of the insurance maintained pursuant to this
Section.
Section 7.5. Financial Reports. The Company shall, and shall cause each
of its Subsidiaries to, maintain a standard system of accounting in accordance
with GAAP and shall furnish to the Agent, each Lender and each of their duly
authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as the Agent or such
Lender may reasonably request; and without any request, shall furnish to the
Agent and the Lenders:
(a) as soon as available, and in any event within 25 days after the
last day of each calendar month, a Borrowing Base certificate in the form
attached hereto as Exhibit F showing the computation of the Borrowing Base
in reasonable detail as of the close of business on the last day of such
month, prepared by the Company and certified to by the Company's chief
financial officer, or another officer of the Company reasonably acceptable
to the Agent;
(b) as soon as available, and in any event within 45 days after the
close of each fiscal quarter of the Company, a copy of the consolidated and
summary consolidating balance sheet of the Company and its Restricted
Subsidiaries (and of the Company and its Subsidiaries) as of the last day
of such period and the consolidated and summary consolidating statements by
business segments of income, retained earnings and cash flows of the
Company and its Restricted Subsidiaries (and of the Company and its
Subsidiaries) for the fiscal quarter and for the fiscal year-to-date period
then ended, each in reasonable detail showing in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared by the Company in accordance with GAAP and certified to by the
Company's chief financial officer, or another officer of the Company
reasonably acceptable to the Agent;
(c) as soon as available, and in any event within 120 days after the
close of each fiscal year of the Company, a copy of the consolidated
balance sheet of the Company and its Subsidiaries as of the last day of the
period then ended and the consolidated statements of income, retained
earnings and cash flows of the Company and its Subsidiaries for the period
then ended, and accompanying notes thereto, each in reasonable detail
showing in comparative form the figures for the previous fiscal year,
accompanied by an unqualified opinion thereon of Ernst & Young or another
firm of independent public accountants of recognized national standing,
selected by the Company and reasonably satisfactory to the Required
Lenders, to the effect that the financial statements have been prepared in
accordance with GAAP and present fairly, in all material respects, in
accordance with GAAP the consolidated financial condition of the Company
and its Subsidiaries as of the close of such fiscal year and the results of
their operations and cash flows for the fiscal year then ended and that an
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<PAGE>
examination of such accounts in connection with such financial statements
has been made in accordance with generally accepted auditing standards and,
accordingly, such examination included such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances;
(d) promptly after the sending or filing thereof, copies of each
financial statement, report, notice or proxy statement sent by the Company
or any Subsidiary to its stockholders, and copies of each regular, periodic
or special report, registration statement or prospectus filed by the
Company or any of its Subsidiaries with any securities exchange or the
Securities Exchange Commission or any successor agency;
(e) promptly after receipt thereof, a copy of each audit made by any
regulatory agency of the books and records of the Company or any of its
Subsidiaries or of any notice of any such audit or of any notice of
material noncompliance with any applicable law, regulation, or guideline
relating to the Company or any of its Subsidiaries or any of their
respective businesses;
(f) as soon as available, and in any event within 120 days after the
end of each fiscal year of the Company, a copy of the Company's
consolidated and consolidating business plan for the following fiscal year,
such business plan to show the Company's projected consolidated and
consolidating revenues, expenses, and balance sheet on a month-by-month
basis, such business plan to be in reasonable detail prepared by the
Company and in form reasonably satisfactory to the Required Lenders;
(g) promptly after the occurrence thereof, notice of any Change of
Control; and
(h) promptly after knowledge thereof shall have come to the attention
of any responsible officer of the Company, written notice of any threatened
or pending litigation or governmental proceeding or labor controversy
against the Company or any of its Subsidiaries which, if adversely
determined, is reasonably likely to have a Material Adverse Effect or of
the occurrence of any Default or Event of Default hereunder.
Each of the financial statements furnished to the Lenders pursuant to
subsections (b) and (c) of this Section 7.5 shall be accompanied by a written
certificate in the form attached hereto as Exhibit G signed by the chief
financial officer of the Company, or another officer of the Company reasonably
acceptable to the Agent, to the effect that to the best of such officer's
knowledge and belief no Default or Event of Default has occurred during the
period covered by such statements or, if any such Default or Event of Default
has occurred during such period, setting forth a description of such Default or
Event of Default and specifying the action, if any, taken by the Company or any
Subsidiary to remedy the same. Such certificate shall also set forth the
calculations supporting such statements in respect of Sections 7.7, 7.8, 7.9,
7.10, 7.11 and 7.12 of this Agreement.
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<PAGE>
Section 7.6. Inspection. The Company shall, and shall cause each of its
Subsidiaries to, permit the Agent, each Lender and each of their duly authorized
representatives and agents to visit and inspect any of its Properties, corporate
books and financial records, to examine and make copies of its books of accounts
and other financial records, and to discuss its affairs, finances and accounts
with, and to be advised as to the same by, its executive officers, employees and
independent public accountants (and by this provision the Company hereby
authorizes such accountants to discuss with the Agent and such Lenders the
finances and affairs of the Company and of each of its Subsidiaries) at such
reasonable times during business hours and intervals as the Agent or any such
Lender may designate with prior notice to the Company. Confidential information
obtained during any such visit or inspection shall be subject to the provisions
of Section 11.19 hereof.
Section 7.7. Current Ratio. The Company shall at all times maintain a
Current Ratio of not less than 1.0 to 1.0.
Section 7.8. Total Senior Funded Debt to Total Capitalization. The
Company shall not, at any time during each of the periods specified below,
permit the ratio of (a) Total Senior Funded Debt to (b) Total Capitalization to
exceed:
<TABLE>
<CAPTION>
RATIO SHALL NOT BE
FROM AND INCLUDING TO AND INCLUDING GREATER THAN
<S> <C> <C>
the date hereof 9/30/98 .60 to 1.0
10/01/98 9/30/99 .50 to 1.0
10/01/99 and at all times thereafter .45 to 1.0
</TABLE>
Section 7.9. Leverage Ratios. (a) Total Senior Funded Debt to Adjusted
EBITDA. As of the last day of each fiscal quarter of the Company ending during
each of the periods specified below, so long as no portion of the Senior
Subordinated Notes are then outstanding, the Company shall not permit the ratio
of (i) Total Senior Funded Debt as of the last day of such fiscal quarter to
(ii) Adjusted EBITDA for the four fiscal quarters then ended to exceed:
<TABLE>
<CAPTION>
RATIO SHALL NOT BE
FROM AND INCLUDING TO AND INCLUDING GREATER THAN
<S> <C> <C>
the date hereof 9/30/98 3.0 to 1.0
10/01/98 9/30/99 2.5 to 1.0
10/01/99 and at all times thereafter 2.0 to 1.0
</TABLE>
(b) Total Funded Debt to Adjusted EBITDA. As of the last day of each
fiscal quarter of the Company ending during each of the periods specified below,
so long as any
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<PAGE>
portion of the Senior Subordinated Notes are then outstanding, the Company shall
not permit the ratio of (i) Total Funded Debt as of the last day of such fiscal
quarter to (ii) Adjusted EBITDA for the four fiscal quarters then ended to
exceed:
<TABLE>
<CAPTION>
RATIO SHALL NOT BE
FROM AND INCLUDING TO AND INCLUDING GREATER THAN
<S> <C> <C>
the date hereof 9/30/99 4.5 to 1.0
10/01/99 9/30/00 4.0 to 1.0
10/01/00 and at all times thereafter 3.5 to 1.0
</TABLE>
Section 7.10. Net Worth. The Company shall, at all times, maintain Net
Worth of not less than the sum of (a) $59,763,772 plus (b) 75% of Net Income for
each fiscal year of the Company ending after the date hereof (commencing with
the fiscal year ending September 30, 1998) for which such Net Income is a
positive amount (i.e., there shall be no reduction to the amount of Net Worth
required to be maintained hereunder for any fiscal year in which Net Income is
less than zero) plus (c) 100% of the Net Issuance Proceeds from the issuance of
any equity securities by the Company or its Restricted Subsidiaries subsequent
to the date of this Agreement.
Section 7.11. Fixed Charge Coverage Ratio. As of the last day of each
fiscal quarter of the Company ending during the periods specified below, the
Company shall maintain a ratio of EBITDA for the four fiscal quarters of the
Company then ended to Fixed Charges for the same four fiscal quarters then ended
of not less than:
<TABLE>
<CAPTION>
RATIO SHALL NOT
FROM AND INCLUDING TO AND INCLUDING BE LESS THAN
<S> <C> <C>
the date hereof 9/30/99 2.25 to 1.0
10/01/99 and at all times thereafter 2.50 to 1.0
</TABLE>
Section 7.12. Dialysis Patients. The Company and its Restricted
Subsidiaries shall, at all times during the periods set forth below, have on a
combined basis (and without duplication) active renal dialysis care patients of
not less than:
<TABLE>
<CAPTION>
FROM AND TO AND MINIMUM
INCLUDING INCLUDING ACTIVE PATIENTS
<S> <C> <C>
the date hereof 09/29/98 3,325
09/30/98 09/29/99 3,591
09/30/99 09/29/2000 3,878
09/30/2000 09/29/2001 4,189
09/30/2001 09/29/2002 4,524
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
09/30/2002 09/29/2003 4,886
09/30/2003 09/29/2004 5,276
</TABLE>
Section 7.13. Indebtedness for Borrowed Money. The Company shall not, nor
shall it permit any of its Subsidiaries to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing shall not restrict nor operate to prevent:
(a) the Obligations of the Company owing to the Agent and the Lenders
hereunder;
(b) Capitalized Lease Obligations entered into in the ordinary course
of business;
(c) obligations of the Company arising out of interest rate hedging
agreements entered into with financial institutions in the ordinary course
of business;
(d) guaranties expressly permitted by Section 7.15 hereof;
(e) indebtedness from time to time owing by any Restricted Subsidiary
to the Company or to any other Restricted Subsidiary arising in the
ordinary course of business;
(f) indebtedness from time to time owing by any Non-Restricted
Subsidiary to the Company or any Restricted Subsidiary which, in the
aggregate for all Non-Restricted Subsidiaries, does not exceed $15,000,000
at any one time outstanding;
(g) indebtedness from time to time owing by any Non-Restricted
Subsidiary to any Person (other than the Company or any Restricted
Subsidiary), and any renewals or refinancings thereof;
(h) unsecured Subordinated Debt in an aggregate original principal
amount not to exceed $7,000,000 owing by The Extracorporeal Alliance,
L.L.C. ("Alliance") to Bay Extracorporeal Technologies, Inc. ("BeTech"),
Great Lakes Medical Services, Inc. ("Services"), and Great Lakes Perfusion,
Inc. ("Perfusion"), and Michael Hurdle ("Hurdle"), and their successors and
assigns, together with such additional Subordinated Debt issued to such
Persons pursuant to the terms of that certain Agreement for Sale of Assets
and L.L.C. Interests, dated as of November 26, 1996, by and among Alliance,
BeTech, Services, Perfusion, Hurdle, the Company, Rick Kuntz ("Kuntz"),
Chet Czaplicka ("Czaplicka") and Gregory Lewis ("Lewis") (the "Alliance
Purchase Agreement") or the Put/Call Agreements (as such term is defined in
the Alliance Purchase Agreement) executed and delivered in connection
therewith, as reduced from time to time by permitted payments of principal
thereon;
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<PAGE>
(i) unsecured Subordinated Debt consisting of the Senior Subordinated
Notes, as reduced from time to time by permitted payments of principal
thereon; and
(j) other indebtedness of the Company and its Subsidiaries arising in
the ordinary course of business (and not incurred in connection with an
acquisition) in an aggregate amount not to exceed $1,500,000 at any one
time outstanding, provided that, if such indebtedness is secured, the
indebtedness shall only be subject to Liens permitted by Section 7.14(e)
hereof.
Section 7.14. Liens. The Company shall not, nor shall it permit any of
its Subsidiaries to, create, incur or permit to exist any Lien of any kind on
any Property owned by the Company or any of its Subsidiaries; provided, however,
that the foregoing shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith cash deposits in connection with tenders, contracts or
leases to which the Company or any of its Subsidiaries is a party or other
cash deposits required to be made in the ordinary course of business,
provided in each case that the obligation is not for borrowed money and
that the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves have been
established therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers', or
other similar Liens arising in the ordinary course of business with respect
to obligations which are not due or which are being contested in good faith
by appropriate proceedings which prevent enforcement of the matter under
contest;
(c) the pledge of assets for the purpose of securing an appeal, stay
or discharge in the course of any legal proceeding, provided that the
aggregate amount of liabilities of the Company and its Subsidiaries secured
by a pledge of assets permitted under this subsection, including interest
and penalties thereon, if any, shall not be in excess of $500,000 at any
one time outstanding;
(d) the Liens granted in favor of the Agent for the benefit of the
Lenders pursuant to the Collateral Documents;
(e) Liens on property of the Company or any of its Subsidiaries
created solely for the purpose of securing indebtedness permitted by
Section 7.13(b) or 7.13(j) hereof, representing or incurred to finance,
refinance or refund the purchase price of Property, provided that no such
Lien shall extend to or cover other Property of the Company or such
Subsidiary other than the respective Property so acquired, and the
principal amount of indebtedness secured by any such Lien shall at no time
exceed the original purchase price of such Property;
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<PAGE>
(f) Liens on Property of any Non-Restricted Subsidiary securing
indebtedness of such Subsidiary permitted by Section 7.13(f) or 7.13(g)
hereof; and
(g) Liens on limited liability company units in Alliance repurchased
pursuant to the terms of those certain Put/Call Agreements (as defined in
the Alliance Purchase Agreement) executed and delivered in connection with
the Alliance Purchase Agreement, but only to the extent such Liens secure
Subordinated Debt permitted under Section 7.13(h) hereof and which Liens
are at all times junior and subordinate to the Liens of the Agent therein
pursuant to the terms of the relevant subordination agreement relating to
such Subordinated Debt.
Section 7.15. Investments, Acquisitions, Loans, Advances and Guaranties.
The Company shall not, nor shall it permit any of its Subsidiaries to, directly
or indirectly, make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances (other
than for travel advances and other similar cash advances made to employees in
the ordinary course of business) to, any other Person, or acquire all or any
substantial part of the assets or business of any other Person or division
thereof, or be or become liable as endorser, guarantor, surety or otherwise for
any debt, obligation or undertaking of any other Person, or otherwise agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest therein or otherwise assure a creditor of another against loss, or
apply for or become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have to the
claim or demand of any other Person; provided, however, that the foregoing shall
not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of America
or of any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America, provided
that any such obligations shall mature within one year of the date of
issuance thereof;
(b) investments in commercial paper rated at least P-1 by Moody's
Investors Services, Inc. and at least A-1 by Standard & Poor's Corporation
maturing within one year of the date of issuance thereof;
(c) investments in certificates of deposit issued by any Lender or by
any United States commercial bank having capital and surplus of not less
than $100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of commercial
paper received in the ordinary course of business;
(e) the Company's investments from time to time in its Restricted
Subsidiaries, and investments made from time to time by a Restricted
Subsidiary in another Restricted Subsidiary;
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<PAGE>
(f) intercompany advances made from time to time between the Company
and one or more Restricted Subsidiaries or between Restricted Subsidiaries
in the ordinary course of business;
(g) one or more Acquisitions by the Company or any Subsidiary of the
stock or assets of other Persons if and only so long as (i) the Acquired
Business is in a Permitted Line of Business, (ii) the Acquisition is not a
Hostile Acquisition, (iii) forty-five days prior to the consummation of any
such Acquisition, or such shorter period as the Agent may agree to in
writing, the Company shall have notified the Lenders of the proposed
transaction in reasonable detail as to the terms thereof (including sources
and uses of funds therefor) and furnished the Lenders historic and pro
forma financial information and, for a dialysis-related Acquisition,
financial valuation analysis supporting the purchase price per patient and,
for all Acquisitions, compliance calculations reasonably satisfactory to
the Agent demonstrating no Default or Event of Default exists or, on a pro
forma basis, would occur after giving effect to such transaction, (iv) with
respect to any Acquisition occurring after the date of this Agreement when
the cumulative Total Consideration for all Acquisitions occurring after the
date of this Agreement for which the Required Lenders have not given their
prior written consent thereto pursuant to clause (v) below is less than or
equal to $10,000,000, any one of the following shall be satisfied (the
Company, when notifying the Agent and the Lenders of the proposed
Acquisition pursuant to this Section 7.15(g), shall designate which of the
following conditions, A, B or C, is being utilized): (A) with respect to
any dialysis-related Acquisition, the Total Consideration paid for the
Acquired Business shall not exceed the lesser of 6.5 multiplied by
Acquisition EBITDA of the Acquired Business for the four fiscal quarter
period ending immediately proceeding the date of the Acquisition or $65,000
multiplied by the number of dialysis patents of the Acquired Business, (B)
with respect to any perfusion-related Acquisition, (x) the Total
Consideration paid for the Acquired Business shall not exceed the product
of 1.5 multiplied by the net revenues (i.e., gross revenues less
contractual discounts) of the Acquired Business for the four fiscal quarter
period ending immediately preceding the date of the Acquisition, (y) the
projected annual Acquired Business Cash Flow for a period of not less than
three (3) years following the date of the relevant Acquisition (as
reasonably determined by the Company in good faith and established to the
reasonable satisfaction of the Agent) is greater than $1.00 per annum, and
(z) the projected annual internal rate of return of the Acquired Business
for a period of not less than three (3) years following the date of the
relevant Acquisition (expressed as a percentage based on the ratio of
projected annual Acquired Business Cash Flow to Total Consideration paid
for the Acquired Business, all as reasonably determined by the Company in
good faith and established to the reasonable satisfaction of the Agent) is
greater than 15% per annum, or (C) the cumulative Total Consideration for
all Acquisitions occurring after the date of this Agreement and not
qualifying under (A) or (B) above is less than or equal to $3,000,000, (v)
with respect to any Acquisition occurring after the date of this Agreement
when the cumulative Total Consideration for all Acquisitions occurring
after the date of this Agreement for which the Required Lenders have not
given their prior written consent thereto pursuant to this clause (v) is
greater than $10,000,000,
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<PAGE>
the Required Lenders have given their prior written consent to the relevant
Acquisition, (vi) no Default or Event of Default exists or would arise
immediately after giving effect to any such Acquisition, and the Company
shall have provided to the Agent a written certificate attesting to the
Company's compliance with the requirements set forth herein (including,
where relevant, its computation of the purchase price guidelines set forth
in clause (iv) above), and (vii) if such transaction results in a new
Subsidiary, within 10 Business Days of such formation or acquisition, as
the case may be, the Company shall cause such new Subsidiary to execute and
deliver to the Agent (with sufficient number of copies for each Lender) a
Guaranty and such Collateral Documents as the Agent may require, together
with such other instruments, documents, certificates and opinions required
at that time by the Agent, each of which to be in form and substance
satisfactory to the Agent (including, without limitation, Board of Director
resolutions (or their equivalent) of such Subsidiary authorizing the
execution, delivery, and performance of such Loan Documents by such
Subsidiary), and Schedule 4.1 and 5.2 of this Agreement shall from and
after such date be deemed amended to include reference to such Subsidiary;
(h) Guaranties executed by one or more Restricted Subsidiaries in
favor of the Agent and the Lenders;
(i) investments in, loan and advances to, and guarantees in respect
of the obligations of, Non-Restricted Subsidiaries and other Persons (other
than Subsidiaries) in which the Company, directly or indirectly, holds an
equity interest in, aggregating not more than $15,000,000 at any one time
outstanding;
(j) guaranties issued by the Company or any Restricted Subsidiary
guaranteeing or otherwise supporting the repayment of indebtedness of the
Company or a Restricted Subsidiary otherwise permitted by Section 7.13
hereof;
(k) the loan outstanding on the date of this Agreement owing by
Nephrology Associates of Northern Illinois, Ltd. to the Company in the
amount of $6,811,897.34, as the same may be increased by interest payable
thereon and as reduced by repayments of principal thereon;
(l) trade receivables from time to time owing to the Company or any
of its Subsidiaries created or acquired in the ordinary course of its
business;
(m) the purchase on or before June 30, 1998, by the Company or any of
its Restricted Subsidiaries of nine (9) real estate sites commonly known as
101 N. Scoville, Oak Park, Illinois; 3525 N. Lake, Ft. Wayne, Indiana; 7017
S. Anthony, Ft. Wayne, Indiana; 230 Bellmeade, Evansville, Indiana; 3501
North Avenue, Chicago, Illinois; 7723 S. Western Avenue, Chicago, Illinois;
7718 S. Claremont, Chicago, Illinois; 455 Mercy Lane, Aurora, Illinois; and
3514-16 W. Roosevelt, Chicago, Illinois from ARE Partnership for an
aggregate purchase price of not more than $5,000,000; and
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(n) other investments, loans and advances in addition to those
otherwise permitted by this Section in an aggregate amount not to exceed
$500,000 at any one time outstanding.
In determining the amount of investments, acquisitions, loans, advances and
guaranties permitted under this Section, investments and acquisitions shall
always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guaranties shall be taken at
the amount of the obligations guaranteed thereby.
Section 7.16. Mergers, Consolidations and Sales. The Company shall not,
nor shall it permit any of its Subsidiaries to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of all or any part
of its Property, including any disposition of Property as part of a sale and
leaseback transaction, or in any event sell or discount (with or without
recourse) any of its notes or accounts receivable; provided, however, that this
Section shall not apply to nor operate to prevent:
(a) the sale of inventory in the ordinary course of business;
(b) the sale, transfer, lease, or other disposition of Property of
the Company or any Subsidiary to one another in the ordinary course of
its business;
(c) a merger of any Restricted Subsidiary with and into the Company
or any other Restricted Subsidiary; provided that, in the case of any
merger involving the Company, the Company is the corporation surviving
the merger;
(d) the sale, transfer, or other disposition of any tangible personal
property that, in the reasonable business judgment of the Company or its
Subsidiary, has become uneconomical, obsolete, or worn out, and which is
disposed of in the ordinary course of business; and
(e) the sale, transfer, lease, or other disposition of Property of
the Company or any Subsidiary aggregating for the Company and its
Subsidiaries not more than $1,000,000 during any 12-month period.
In the event of any merger permitted by Section 7.16(c) above, the Company shall
give the Agent and the Lenders prior written notice of any such event and,
immediately after giving effect to any such merger, Schedule 5.2 of this
Agreement shall be deemed amended excluding reference to any such Subsidiary
merged out of existence. So long as no Default or Event of Default has occurred
and is continuing or would arise as a result thereof, upon the written request
of the Company, the Agent shall release its Lien on any Property sold pursuant
to subsections (a), (d), or (e) above.
Section 7.17. Maintenance of Subsidiaries. The Company shall not assign,
sell or transfer, or permit any of its Subsidiaries to issue, assign, sell or
transfer, any shares of capital stock of a Subsidiary; provided, however, that
the foregoing shall not operate to
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prevent (w) the Lien on the capital stock of each Subsidiary granted to the
Agent pursuant to the Collateral Documents, (x) the issuance, sale and transfer
to any person of any shares of capital stock of a Subsidiary solely for the
purpose of qualifying, and to the extent legally necessary to qualify, such
person as a director of such Subsidiary, (y) any transaction permitted by
Section 7.16(c) above, and (z) the issuance of capital stock of a Restricted
Subsidiary if after giving effect to such issuance such Subsidiary remains a
Restricted Subsidiary.
Section 7.18. Dividends and Certain Other Restricted Payments. The
Company shall not, nor shall it permit any Subsidiary to, during any fiscal year
(i) declare or pay any dividends on or make any other distributions in respect
of any class or series of its capital stock (other than dividends payable solely
in its capital stock) or (ii) directly or indirectly purchase, redeem or
otherwise acquire or retire any of its capital stock, except that:
(w) nothing herein contained shall prevent the repurchase by (1)
Alliance of its units pursuant to the terms of those certain Put/Call
Agreements (as defined in the Alliance Purchase Agreement) executed and
delivered in connection with the Alliance Purchase Agreement, (2)
Alliance of the units of Tri-State Perfusion, L.L.C. held by Tri-State
Perfusion Services, Inc., pursuant to Section 6.4 of the Limited
Liability Company Agreement of Tri-State Perfusion, L.L.C., (3) Alliance
of the units of Perfusion Resource Association, L.L.C. held by Perfusion
Resource Association, Inc., pursuant to Section 6.5 of the Limited
Liability Company Agreement of Perfusion Resource Association, L.L.C. or
(4) Saint Margaret Mercy Dialysis Centers, L.L.C., of its units (other
than units held by or for the account of the Company) on terms reasonably
acceptable to the Agent and the Required Lenders, provided that in each
case any consideration to be paid therefor (other than consideration in
the form of additional Subordinated Debt permitted by Section 7.13(i)
hereof) shall only be payable so long as no Default or Event of Default
exists prior to or would result after giving effect to such payment;
(x) nothing herein contained shall prevent the making of dividends or
distributions out of earnings by a Wholly-Owned Subsidiary to the
Company;
(y) nothing herein contained shall prevent the making of dividends or
distributions out of earnings by any other Subsidiary ratably to its
equity interest holders so long as no Default or Event of Default exists
prior to or would result after giving effect to any such dividend, except
that any Subsidiary which is either a partnership or limited liability
company may make distributions to the extent necessary to allow each of
its partners or members, as the case may be, to make payment of its
federal and state income tax liability attributable to such Subsidiary's
taxable income regardless of whether or not a Default or Event of Default
then exists; and
(z) the Company may declare and pay dividends on its capital stock in
an aggregate amount during any fiscal year not to exceed 10% of Net
Income of the Company from the immediately preceding fiscal year so long
as no Default or Event of Default exists prior to or would result after
giving effect to any such dividend.
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Section 7.19. ERISA. The Company shall, and shall cause each of its
Subsidiaries to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character which if unpaid or unperformed is reasonably
likely to result in the imposition of a Lien against any of its Properties. The
Company shall, and shall cause each of its Subsidiaries to, promptly notify the
Agent and each Lender of (i) the occurrence of any reportable event (as defined
in ERISA) with respect to a Plan, (ii) receipt of any notice from the PBGC of
its intention to seek termination of any Plan or appointment of a trustee
therefor, (iii) its intention to terminate or withdraw from any Plan, and (iv)
the occurrence of any event with respect to any Plan which would result in the
incurrence by the Company or any of its Subsidiaries of any material liability,
fine or penalty, or any material increase in the contingent liability of the
Company or any of its Subsidiaries with respect to any post-retirement Welfare
Plan benefit.
Section 7.20. Compliance with Laws. The Company shall, and shall cause
each of its Subsidiaries to, comply in all respects with the requirements of all
federal, state and local laws, rules, regulations, ordinances and orders
applicable to or pertaining to its Properties or business operations, where any
such non-compliance, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect or could result in a Lien upon any of their
Property.
Section 7.21. Burdensome Contracts with Affiliates. Except for agreements
in effect on the date hereof described on Schedule 5.14 attached hereto, the
Company shall not, nor shall it permit any of its Subsidiaries to, enter into
any contract, agreement or business arrangement with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts, agreements or business arrangements between
Persons not affiliated with each other.
Section 7.22. No Changes in Fiscal Year. The Company shall not, nor shall
it permit any of its Subsidiaries to, change its fiscal year from its present
basis without the prior written consent of the Required Lenders.
Section 7.23. Formation of Subsidiaries. Except for existing Subsidiaries
designated on Schedule 5.2 hereto, Restricted Subsidiaries formed for the
purpose of acquiring all or substantially all of the assets of, or all or
substantially all of the equity interest of, another Person pursuant to an
acquisition permitted by Section 7.15(g) hereof, or Restricted Subsidiaries (and
any such Restricted Subsidiary's Subsidiaries) acquired pursuant to an
acquisition permitted by Section 7.15(g) hereof, the Company shall not, nor
shall it permit any of its Subsidiaries to, form or acquire any Subsidiary
without the prior written consent of the Required Lenders.
Section 7.24. Change in the Nature of Business. The Company shall not,
nor shall it permit any of its Subsidiaries to, engage in any business or
activity if as a result the general nature of the business of the Company or any
of its Subsidiaries would be changed in any material respect from the general
nature of the business engaged in by it as of the date of this Agreement or as
of the date such Person becomes a Subsidiary hereunder.
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Section 7.25. Subordinated Debt. The Company shall at all times ensure
that all Obligations now existing or hereafter arising constitute "Senior Debt",
or words of like import, under each indenture, instrument, or agreement
evidencing or otherwise setting forth the terms or conditions applicable to any
outstanding Subordinated Debt. Neither the Company nor any Subsidiary shall
amend or modify any of the terms and conditions relating to any Subordinated
Debt or make any voluntary prepayment thereof or affect any voluntary redemption
thereof or make any payment on account of Subordinated Debt which is prohibited
under the terms of any instrument or agreement subordinating the same to the
Obligations; provided, however, that nothing contained herein shall prohibit any
payment obligation under Section 7 of the Alliance Purchase Agreement of Hurdle,
Kuntz, BeTech, Services, Perfusion, Czaplicka or Lewis from being satisfied by
set-off in accordance with the terms of the Alliance Purchase Agreement.
Section 7.26. Use of Loan Proceeds. The Company shall use the credit
extended under this Agreement solely for the purposes set forth in, or otherwise
permitted by, Section 5.4 hereof.
Section 7.27. Assets and Earnings Concentrations. On the last day of each
fiscal quarter of the Company, and on the date of any acquisition permitted by
Section 7.15(g) hereof, and immediately after giving effect thereto, the Company
shall not permit (a) the total assets of its Subsidiaries in which the Company's
ownership interest therein is less than 80% to be more than 15% of the total
consolidated assets of the Company and its Subsidiaries and (b) the total net
income of its Subsidiaries in which the Company's ownership interest therein is
less than 80% to be more than 15% of consolidated net income of the Company and
its Subsidiaries.
Section 7.28. No Restrictions on Subsidiary Distributions. Except as
provided herein, the Company shall not and shall not permit any of its
Restricted Subsidiaries directly or indirectly to create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to: (1) pay dividends or
make any other distribution on any of such Restricted Subsidiary's capital stock
or other equity interests owned by the Company or any Restricted Subsidiary of
the Company; (2) pay any indebtedness owed to the Company or any other
Restricted Subsidiary; (3) make loans or advances to the Company or any other
Restricted Subsidiary or (4) transfer any of its property or assets to the
Company or any other Restricted Subsidiary.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) default in the payment when due of all or any part of the
principal of or interest on any Note (whether at the stated maturity
thereof or at any other time provided for in this Agreement) or of any
Reimbursement Obligation or of any fee or other Obligation payable
hereunder or under any other Loan Document;
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(b) default in the observance or performance of any covenant set
forth in Sections 7.5, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15,
7.16, 7.17, 7.18, 7.25, 7.26 or 7.27 hereof or of any provision in any Loan
Document dealing with the use, disposition or remittance of the proceeds of
Collateral or requiring the maintenance of insurance thereon;
(c) default in the observance or performance of any other provision
hereof or of any other Loan Document which is not remedied within 30 days
after the earlier of (i) the date on which such failure shall first become
known to any officer of the Company or (ii) written notice thereof is given
to the Company by the Agent (provided that the Company shall have an
additional 30 days to cure any such default before the same becomes an
"Event of Default" hereunder if such default is reasonably susceptible to
cure within the additional 30-day period but only so long as the Company
diligently and in good faith works to cure such default during the
additional 30-day period);
(d) any material representation or warranty made herein or in any
other Loan Document or in any certificate furnished to the Agent or the
Lenders pursuant hereto or thereto or in connection with any transaction
contemplated hereby or thereby proves untrue in any material respect as of
the date of the issuance or making or deemed making thereof;
(e) any event occurs or condition exists (other than those described
in subsections (a) through (d) above) which is specified as an event of
default under any of the other Loan Documents, or any of the Loan Documents
shall for any reason not be or shall cease to be in full force and effect,
or any of the Loan Documents is declared to be null and void, or any of the
Collateral Documents shall for any reason fail to create a valid and
perfected first priority Lien in favor of the Agent in any Collateral
purported to be covered thereby except as expressly permitted by the terms
thereof, or any Subsidiary takes any action for the purpose of terminating,
repudiating or rescinding any Loan Document executed by it or any of its
obligations thereunder;
(f) default shall occur under any Indebtedness for Borrowed Money
aggregating in excess of $500,000 issued, assumed or guaranteed by the
Company or any Subsidiary or under any indenture, agreement or other
instrument under which the same may be issued, and such default shall
continue for a period of time sufficient to permit the acceleration of the
maturity of any such Indebtedness for Borrowed Money (whether or not such
maturity is in fact accelerated), or any such Indebtedness for Borrowed
Money shall not be paid when due (whether by demand, lapse of time,
acceleration or otherwise);
(g) any judgment or judgments, writ or writs or warrant or warrants
of attachment, or any similar process or processes in an aggregate amount
in excess of $500,000 in excess of any applicable insurance coverage shall
be entered or filed against any of the Company or any Subsidiary or against
any of its Property and
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which remains undischarged, unvacated, unbonded or unstayed for a period
of 30 days;
(h) the Company or any member of its Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess $500,000 which it
shall have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or notice of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $500,000 (collectively, a
"Material Plan") shall be filed under Title IV of ERISA by the Company or
any other member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against the Company or any member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
(i) the Company or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of creditors, (iv) apply for, seek, consent to,
or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part of
its Property, (v) institute any proceeding seeking to have entered against
it an order for relief under the United States Bankruptcy Code, as amended,
to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action in furtherance of any matter
described in parts (i) through (v) above, or (vii) fail to contest in good
faith any appointment or proceeding described in Section 8.1(j) hereof; or
(j) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Company or any Subsidiary or any
substantial part of any of its Property, or a proceeding described in
Section 8.1(i)(v) shall be instituted against the Company or any
Subsidiary, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of 60 days.
Section 8.2. Non-Bankruptcy Remedies. When any Event of Default described
in subsections 8.1(a) to 8.1(h), both inclusive, has occurred and is continuing,
the Agent shall, upon request of the Required Lenders, by notice to the Company,
take any or all of the following actions:
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(a) terminate the obligations of the Lenders to extend any further
credit hereunder on the date (which may be the date thereof) stated in such
notice;
(b) declare the principal of and the accrued interest on the Notes to
be forthwith due and payable and thereupon the Notes, including both
principal and interest, and all fees, charges and other Obligations payable
hereunder and under the other Loan Documents, shall be and become
immediately due and payable without further demand, presentment, protest or
notice of any kind; and
(c) enforce any and all rights and remedies available to it under the
Loan Documents or applicable law.
Section 8.3. Bankruptcy Remedies. When any Event of Default described in
subsection 8.1(i) or 8.1(j) has occurred and is continuing, then the Notes,
including both principal and interest, and all fees, charges and other
Obligations payable hereunder and under the other Loan Documents, shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, and the obligations of the Lenders to extend further credit
pursuant to any of the terms hereof shall immediately terminate. In addition,
the Agent may exercise any and all remedies available to it under the Loan
Documents or applicable law.
Section 8.4. Collateral for Undrawn Letters of Credit. If and when (x)
any Event of Default, other than an Event of Default described in subsections
(i) or (j) of Section 8.1, has occurred and is continuing, the Company shall,
upon demand of the Agent, and (y) any Event of Default described in subsections
(i) or (j) of Section 8.1 has occurred or any Letter of Credit is outstanding on
the Termination Date (whether or not any Event of Default has occurred), the
Company shall, without notice or demand from the Agent, immediately pay to the
Agent the full amount of each Letter of Credit, the Company agreeing to
immediately make each such payment and acknowledging and agreeing that the Agent
and the Lenders would not have an adequate remedy at law for failure of the
Company to honor any such demand and that the Agent shall have the right to
require the Company to specifically perform such undertaking whether or not any
draws have been made under the Letters of Credit.
SECTION 9. DEFINITIONS; INTERPRETATIONS.
Section 9.1. Definitions. The following terms when used herein have the
following meaning:
"Acquired Business" means the entity or assets acquired by the Company or a
Subsidiary in an Acquisition, whether before or after the date hereof.
"Acquired Business Cash Flow" means, with respect to any period, the amount
(if any) by which (A) the difference (if any) of (i) net income of the Acquired
Business for such period plus the sum of all amounts deducted in arriving at
such net income amount in respect of all charges for depreciation of fixed
assets, amortization of intangible assets, and all other
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non-cash items charged to net income for such period, minus (plus) (ii)
additions (reductions) to non-cash working capital of the Acquired Business for
such period (i.e., the increase or decrease in non-cash current assets minus the
current liabilities (excluding the current maturities of long-term debt) of the
Acquired Business from the beginning to the end of such period) exceeds (B) the
aggregate amount of capital expenditures to be incurred by or in connection with
the Acquired Business during such period, adjusted reflecting the Company's
equity interest therein if the Acquired Business is not operated by a Wholly-
owned Subsidiary.
"Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Borrower or the Subsidiary is the
surviving entity.
"Acquisition EBITDA" means, with reference to any period and any Acquired
Business of a Target, the total net income (as determined in accordance with
GAAP) of such Target arising out of the Acquired Business plus the sum of all
amounts deducted in arriving at such net income amount in respect of (x)
interest expense for such period, (y) federal, state, and local income taxes for
such period, and (z) depreciation of fixed assets and amortization of intangible
assets for such period, and adjusted for non-recurring expenses and non-
recurring revenue reasonably determined by the Company in good faith and
established to the reasonable satisfaction of the Agent.
"Acquisition Financing Commitments" is defined in Section 1.4(a) hereof.
"Acquisition Financing Loans" is defined in Section 1.4(a) hereof.
"Acquisition Financing Notes" is defined in Section 1.4(a) hereof.
"Acquisition Financing Termination Date" means May 15, 1999, or such
earlier date on which the Acquisition Financing Commitments are terminated in
whole pursuant to Sections 3.8, 8.2 or 8.3 hereof.
"Adjusted EBITDA" means, as of the last day of any fiscal quarter of the
Company, the sum (without duplication) of the following:
(i) EBITDA of the Company and is Subsidiaries for the four fiscal
quarters then ended (computed exclusive of that portion of EBITDA
attributable to an Acquired Business acquired during such period); plus
(ii) for each Acquired Business acquired during the fiscal quarter
then ended, Acquisition EBITDA of such Acquired Business for the most
recently completed
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period of four fiscal quarters ending immediately prior to the date of the
relevant Acquisition; plus
(iii) for each Acquired Business acquired prior to the beginning of
the most recently completed fiscal quarter of the Company, but within four
fiscal quarters of the Company then ended, EBITDA of such Acquired Business
for the period from the date of the relevant Acquisition to the last day of
the fiscal quarter then ended multiplied by a fraction, the numerator of
which is 365 and the denominator of which is the number of days elapsed
since the date of the Acquisition and adjusted for non-recurring
Acquisition-related expenses and non-recurring Acquisition-related revenue
for such period as reasonably determined by the Company in good faith and
established to the reasonable satisfaction of the Agent.
"Adjusted LIBOR Rate" means a rate per annum determined by the Agent
pursuant to the following formula:
Adjusted LIBOR Rate = LIBOR
------------------------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing the Adjusted LIBOR
Rate, the maximum rate of all reserve requirements (including, without
limitation, any marginal emergency, supplemental or other special reserves)
imposed by the Board of Governors of the Federal Reserve System (or any
successor) under Regulation D on Eurocurrency liabilities (as such term is
defined in Regulation D) for the applicable Interest Period as of the first day
of such Interest Period, but subject to any amendments to such reserve
requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such Interest Period.
For purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit
for prorations, exemptions, or offsets under Regulation D. "LIBOR" means, for
each Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such
rate is available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetic average of the rate of interest per annum (rounded upwards, if
necessary, to nearest 1/100 of 1%) at which deposits in U.S. dollars in
immediately available funds are offered to the Agent at 11:00 a.m. (London,
England time) 2 Business Days before the beginning of such Interest Period by 3
or more major banks in the interbank eurodollar market selected by the Agent for
a period equal to such Interest Period and in an amount equal or comparable to
the principal amount of the applicable LIBOR Portion scheduled to be made by the
Agent as part of such Borrowing. "LIBOR Index Rate" means, for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a
period equal to such Interest Period, which appears on the Telerate Page 3750 as
of 11:00 a.m. (London, England time) on the day 2 Business Days before the
commencement of such Interest Period. "Telerate Page 3750" means the display
designated as "Page 3750" on the Telerate Service (or such other page as may
replace Page 3750 on that service or such other service as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association Interest Settlement Rates for U.S.
Dollar
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deposits). Each determination of LIBOR made by the Agent shall be
conclusive and binding on the Company and the Lenders absent manifest error.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise.
"Agent" means Harris Trust and Savings Bank and any successor thereto
appointed pursuant to Section 10.1 hereof.
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Alliance" is defined in Section 7.13(h) hereof.
"Alliance Purchase Agreement" is defined in Section 7.13(h) hereof.
"Applicable Margin" means, with respect to Revolving Loans, Acquisition
Financing Loans, Term Loans, and Supplemental Revolving Loans, the rate per
annum specified below:
<TABLE>
<S> <C>
Applicable Margin for Domestic Rate Portion
of Revolving Loans: 0%
Applicable Margin for LIBOR Portions
of Revolving Loans: 2.00%
Applicable Margin for Domestic Rate Portion of
Acquisition Financing Loans, Term Loans, and Supplemental
Revolving Loans: 0.25%
Applicable Margin for LIBOR Portions of
Acquisition Financing Loans, Term Loans, and Supplemental
Revolving Loans: 2.25%
</TABLE>
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provided, however, that the Applicable Margins shall be subject to quarterly
adjustments (commencing with an adjustment with respect to the fiscal quarter
ending June 30, 1998) as follows:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Domestic Rate LIBOR
Portion of Portions of
If as of the Last Day of the Acquisition Acquisition
Most Recently Completed Applicable Applicable Financing Financing
Fiscal Quarter The Ratio of Margin for Margin for Loans, Term Loans, Term
Total Senior Funded Debt Domestic Rate LIBOR Loans and Loans and
then outstanding to Portion of Portions of Supplemental Supplemental
Adjusted EBITDA for the Revolving Revolving Revolving Revolving
4 Fiscal Quarters then Loans is Loans is Loans is Loans is
ended is
<S> <C> <C> <C> <C>
greater than or equal to 2.5 to 1.0 Nil 2.25% .50% 2.50%
less than 2.5 to 1.0 but greater than
or equal to 1.5 to 1.0 Nil 2.00% .25% 2.25%
less than 1.5 to 1.0 Nil 1.75% Nil 2.00%
</TABLE>
provided, further, however, that if the Senior Subordinated Notes are
outstanding on the last day of the most recently completed fiscal quarter of the
Company, the Applicable Margins shall instead be subject to quarterly adjustment
as follows:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin
Domestic Rate for LIBOR
If as of the Last Day of the Portion of Portions of
Most Recently Completed Applicable Applicable Acquisition Acquisition
Fiscal Quarter The Ratio of Margin for Margin for Financing Loans, Financing Loans,
Total Funded Debt then Domestic Rate LIBOR Term Loans and Term Loans and
outstanding to Adjusted Portion of Portions of Supplemental Supplemental
EBITDA for the 4 fiscal Revolving Revolving Revolving Revolving
quarters then ended is Loans is Loans is Loans is Loans is
<S> <C> <C> <C> <C>
greater than or equal to 3.5 to 1.0 Nil 2.25% .50% 2.50%
less than 3.5 to 1.0 but greater than
or equal to 2.5 to 1.0 Nil 2.00% .25% 2.25%
less than 2.5 to 1.0 Nil 1.75% Nil 2.00%
</TABLE>
After the close of each quarterly fiscal period of the Company (the close of
such quarterly fiscal period being hereinafter referred to as the "Margin
Testing Time"), the Agent shall (i) confirm that the financial statements
theretofore furnished to it indicate compliance with the ratios required above
as of the Margin Testing Time and (ii) notify the Company and the Lenders of
such determination and of any change in the Applicable Margin resulting
therefrom. Any change in the Applicable Margin shall be effective on the 3rd
day following the Agent's receipt of the quarterly covenant compliance
certificate called for by Section 7.5
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hereof and with such new Applicable Margin to continue in effect until the
effectiveness of the next redetermination thereof. Any determination by the
Agent of the Applicable Margin shall be conclusive and binding upon the Company
and the Lenders provided that it has been made in good faith and based upon the
financial statements described above.
"Application" is defined in Section 1.3 hereof.
"Authorized Representative" means those persons shown on the list of
individuals provided by the Company pursuant to Section 6.2 hereof or on any
update of any such list provided by the Company to the Agent, or any further or
different individuals so named by an Authorized Representative of the Company in
a written notice to the Agent.
"Borrowing" means the total of Loans of a single type made to the Company
by all the Lenders on a single date, and if such Loans are to be part of a LIBOR
Portion, for a single Interest Period. Borrowings of Loans are made and
maintained ratably from each of the Lenders according to their Percentages of
the relevant Commitment.
"Borrowing Base" means, as of any time it is to be determined, 75% of the
then outstanding unpaid amount of Eligible Accounts; provided that the Borrowing
Base shall be computed only as against and on so much of the Collateral as is
included on the certificates to be furnished from time to time by the Company
pursuant to Section 7.5(a) hereof and, if required by the Agent or the Required
Lenders pursuant to any of the terms hereof or any Collateral Document, as
verified by such other evidence reasonably required to be furnished to the Agent
or the Lenders pursuant hereto or pursuant to any such Collateral Document.
"Business Day" shall mean any day (other than a Saturday or Sunday) on
which banks are not authorized or required to close in Chicago, Illinois and,
when used with respect to LIBOR Portions, a day on which banks are also dealing
in United States Dollar deposits in London, England.
"Capital Lease" means any lease of Property (whether real or personal)
which in accordance with GAAP is required to be capitalized on the balance sheet
of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown on
the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole to any Person or group of
related Persons for purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (a "Group") together with any Affiliates
thereof; (ii) the approval by the holders of capital stock of the Company of any
plan or proposal for the liquidation or dissolution of the Company; (iii) the
acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) in one or more transactions by any Person or Group other than a
Person who is a stockholder of the Company as of the date hereof or Group
comprised solely of such Persons
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(the "Control Group") of either more than 25% of the aggregate ordinary voting
power represented by the issued and outstanding capital stock of the Company or
more than 25% of the aggregate issued and outstanding common stock of the
Company and such beneficial ownership percentage is greater than the beneficial
ownership of the Control Group; (iv) Home Dialysis of America, Inc. or WSKC
Dialysis Services, Inc. cease to be a Restricted Subsidiary and a Wholly-Owned
Subsidiary of the Company; (v) the replacement of a majority of the Board of
Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved; or (vi) any "Change of Control" (or words of like import), as defined
in any instrument, agreement or indenture relating to any issue of Subordinated
Debt, shall occur, the effect of which is to cause the acceleration of any
Subordinated Debt or to enable the holder of any Subordinated Debt to cause the
Company or any Subsidiary to repurchase, redeem, repay, or otherwise retire any
Subordinated Debt.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Collateral" means all properties, rights, interests and privileges from
time to time subject to the Liens granted to the Agent by the Collateral
Documents.
"Collateral Documents" means all security agreements, pledge agreements,
assignments, financing statements and other documents as shall from time to time
secure or relate to the Obligations.
"Commitments" means and includes the Revolving Credit Commitments, the L/C
Commitment, the Acquisition Financing Commitments, and the Supplemental
Revolving Credit Commitments. The parties acknowledge that the aggregate
Commitments available to the Company do not exceed $100,000,000 as of the date
of this Agreement.
"Company" is defined in the introductory paragraph of this Agreement.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Current Ratio" means, at any time the same is to be determined, the ratio
of consolidated current assets of the Company and its Restricted Subsidiaries to
consolidated current liabilities of the Company and its Restricted Subsidiaries,
each as determined in accordance with GAAP.
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"Current Maturities" means, as at any time the same is to be determined,
all payments of principal due within 12 calendar months after that date with
respect to any Indebtedness for Borrowed Money included within the definition of
Total Funded Debt.
"Default" means any event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"Disposition" means the sale, lease, conveyance, or other disposition of
Property, other than sales or other dispositions expressly permitted under
Section 7.16(a) or 7.16(b) hereof.
"Domestic Rate" means a fluctuating interest rate per annum equal at all
times to the greater of (i) the rate of interest announced by the Agent from
time to time as its prime commercial rate as in effect on such day, with any
change in such rate resulting from a change in said prime commercial rate to be
effective as of the date of the relevant change in said prime commercial rate;
and (ii) the sum of (x) the rate determined by the Agent to be the average
(rounded upwards, if necessary, to the next higher 1/100 of 1% of the rates per
annum quoted to the Agent at approximately 10:00 a.m. Chicago time (or as soon
thereafter as is practicable) on such day (or, if such day is not a Business
Day, on the immediately preceding Business Day) by two or more Federal funds
brokers selected by the Agent for the sale to the Agent at face value of Federal
funds in the secondary market in an amount equal or comparable to the principal
amount owed to the Agent for which such rate is being determined, plus (y) 3/8
of 1%.
"Domestic Rate Portions" is defined in Section 2.1(a) hereof.
"EBITDA" means, with reference to any period, Net Income for such period
plus the sum of all amounts deducted in arriving at such Net Income amount in
respect of (w) non-reoccurring acquisition expenses incurred in connection with
an acquisition permitted by Section 7.15(g) hereof, (x) Interest Expense for
such period, (y) federal, state and local income taxes for such period, and (z)
depreciation of fixed assets and amortization of intangible assets for such
period.
"Eligible Account" means each account receivable of the Company and of each
Restricted Subsidiary who has executed and delivered a Guaranty and the
Collateral Documents called for by this Agreement that:
(a) arises out of the sale by the Company or such Subsidiary of goods
delivered to and accepted by, or out of the rendition of services fully
performed by the Company or such Subsidiary and accepted by, the account
debtor on such account receivable;
(b) the account debtor on such account receivable is located within
the United States of America;
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(c) is the valid, binding and legally enforceable obligation of the
account debtor obligated thereon and such account debtor is not (i) an
Affiliate of the Company or such Subsidiary, (ii) a shareholder, director,
officer or employee of the Company or any Subsidiary, (iii) a debtor under
any proceeding under the United States Bankruptcy Code, as amended, or any
other comparable bankruptcy or insolvency law, or (iv) an assignor for the
benefit of creditors;
(d) is not evidenced by an instrument or chattel paper unless the same
has been endorsed and delivered to the Agent;
(e) is an asset of the Company or such Subsidiary to which it has good
and marketable title, is freely assignable, is subject to a perfected,
first priority Lien in favor of the Agent for the benefit of the Lenders,
and is free and clear of any other Lien other than Liens permitted by
Section 7.14(a) and (b) hereof;
(f) is net of any credit or allowance given by the Company or such
Subsidiary to such account debtor;
(g) is not subject to any asserted offset, counterclaim or other
defense with respect thereto;
(h) is not unpaid more than 120 days after the original invoice date
(which must be not more than 5 days subsequent to the shipment date or the
date services were fully performed by the Company or such Subsidiary); and
(i) does not arise from a sale to an account debtor on a bill-and-
hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or any
other repurchase or return basis.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"Event of Default" means any event or condition specified as such in
Section 8.1 hereof.
"Event of Loss" means, with respect to any Property, any of the following:
(a) any loss, destruction or damage of such Property or (b) any condemnation,
seizure, or taking, by exercise of the power of eminent domain or otherwise, of
such Property, or confiscation of such Property or the requisition of the use of
such Property.
"Excess Cash Flow" means, with respect to any period, the amount (if any)
by which (x) EBITDA during such period exceeds (y) the sum of (i) capital
expenditures for the Company and its Restricted Subsidiaries during such period
(computed on a consolidated basis in accordance with GAAP) plus (ii) Current
Maturities of the Company and its Restricted Subsidiaries as of the last day of
such period plus (iii) federal, state and local income taxes of the Company and
its Restricted Subsidiaries actually paid during such period
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plus (iv) interest charges of the Company and its Restricted Subsidiaries
actually paid during such period
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Domestic Rate.
"Fixed Charges" means, with reference to any period, the sum of (a) the
aggregate amount of payments required to be made by the Company and its
Restricted Subsidiaries during such period in respect of principal on all
Indebtedness for Borrowed Money (whether at maturity, as a result of mandatory
sinking fund redemption, mandatory prepayment, acceleration or otherwise), plus
(b) Interest Expense for the same period.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis consistent
with the preparation of the Company's most recent financial statements furnished
to the Lenders pursuant to Section 7.5 hereof.
"Hedging Liability" means the liability of the Company to any of the
Lenders in respect of any interest rate swaps, interest rate caps, interest rate
collars, or other interest rate hedging arrangements as the Company may from
time to time enter into with any one or more of the Lenders party to this
Agreement. Unless and until the amount of the Hedging Liability is fixed and
determined, the Hedging Liability shall be deemed to be 4% per annum of the
notional amount of the hedge from the date of computation to the date the hedge
expires.
"Hostile Acquisition" means the acquisition of the capital stock or other
equity interests of a Person through a tender offer or similar solicitation of
the owners of such capital stock or other equity interests which has not been
approved (prior to such acquisition) by resolutions of the Board of Directors of
such Person or by similar action if such Person is not a corporation, and as to
which such approval has not been withdrawn.
"Indebtedness for Borrowed Money" shall mean for the Company and its
Subsidiaries the sum (without duplication) of (i) all indebtedness of the
Company and each of its Subsidiaries for borrowed money, whether current or
funded, or secured or unsecured, (ii) all indebtedness for the deferred purchase
price of Property or services, (iii) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to Property
acquired by the Company or any of its Subsidiaries (even though the rights and
remedies of the seller or lender under such agreement in the event of a default
are limited to repossession or sale of such Property), (iv) all indebtedness
secured by a purchase money mortgage or other Lien to secure all or part of the
purchase price of Property subject to such mortgage or Lien, (v) all obligations
under leases which shall have been or must be, in accordance with GAAP, recorded
as Capital Leases in respect of which the Company or any of its Subsidiaries is
liable as lessee, (vi) any liability in respect of banker's acceptances or
letters of credit, (vii) any indebtedness, whether or not assumed, secured by
Liens on Property acquired by the Company or any of its Subsidiaries at the time
of acquisition thereof and (viii) all indebtedness referred to in clause (i),
(ii), (iii), (iv), (v),
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(vi) or (vii) above which is directly or indirectly guaranteed by the Company or
any of its Subsidiaries or which any of the foregoing have agreed (contingently
or otherwise) to purchase or otherwise acquire or in respect of which any of
them have otherwise assured a creditor against loss, it being understood that
the term "Indebtedness for Borrowed Money" shall not include trade payables
arising in the ordinary course of business.
"Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations and all amortization of debt discount and expense) of the
Company and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
"Interest Period" means, (a) with respect to any LIBOR Portion of Revolving
Loans, the period commencing on, as the case may be, the creation, continuation
or conversion date with respect to such LIBOR Portion and ending 1, 2, 3 or 6
months thereafter as selected by the Company in its notice as provided herein
and (b) with respect to any LIBOR Portion of Acquisition Financing Loans, Term
Loans or Supplemental Revolving Loans, the period commencing on, as the case may
be, the creation, continuation or conversion date with respect to such LIBOR
Portion and ending 6 or 12 months thereafter as selected by the Company in its
notice as herein provided; provided that, all of the foregoing provisions
relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of
the relevant Notes;
(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment scheduled to
be made during such Interest Period without paying part of a LIBOR Portion
on a date other than the last day of the Interest Period applicable
thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
"L/C Commitment" means $1,000,000, as reduced pursuant to Section 3.8
hereof.
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"L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement Obligations.
"Lenders" means Harris Trust and Savings Bank and all other lenders
becoming parties hereto pursuant to Section 11.18 hereof.
"Letter of Credit" is defined in Section 1.3 hereof.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind or nature in respect of any Property, including the
interest of a vendor or lessor under any conditional sale, Capital Lease or
other title retention arrangement.
"Loan Documents" means this Agreement, the Notes, the Applications, the
Collateral Documents, the Guaranties, and each other instrument or document to
be delivered hereunder or thereunder or otherwise in connection therewith.
"Loans" means and includes Revolving Loans, the Acquisition Financing
Loans, the Term Loans, and the Supplemental Revolving Loans.
"Material Adverse Effect" means (a) a material adverse change in, or
material adverse effect upon, the business, Property, condition (financial or
otherwise), results of operations or business prospects of the Company and its
Subsidiaries taken as a whole, (b) a material adverse effect upon the ability of
the Company or any Restricted Subsidiary to perform its obligations under the
Loan Documents, or (c) a material adverse effect upon the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Agent or the Lenders thereunder.
"Net Cash Proceeds" means, as applicable, (a) with respect to any
Disposition by a Person, cash and cash equivalent proceeds received by or for
such Person's account, net of (i) reasonable direct costs relating to such
Disposition, (ii) sale, use, or other transactional taxes paid or payable by
such Person as a direct result of such Disposition, and (iii) amounts required
to be applied to repay principal of, premium, if any, and interest on any
Indebtedness for Borrowed Money secured by a Lien on the Property (or portion
thereof) sold or otherwise disposed of (other than the Obligations hereunder)
which is required to be and is repaid in connection with such Disposition and
(b) with respect to any Event of Loss of a Person, cash and cash equivalent
proceeds received by or for such Person's account (whether as a result of
payments made under any applicable insurance policy therefor or in connection
with condemnation proceedings or otherwise), net of reasonable direct costs
incurred in connection with the collection of such proceeds, awards or other
payments.
"Net Income" means, with reference to any period, the net income (or net
loss) of the Company and its Restricted Subsidiaries for such period computed on
a consolidated basis in accordance with GAAP.
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"Net Worth" means, at any time the same is to be determined, total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) which would appear on a
consolidated balance sheet of the Company and its Restricted Subsidiaries
prepared on a consolidated basis in accordance with GAAP.
"Net Issuance Proceeds" means, as to any issuance of equity by the Company
or its Restricted Subsidiaries, cash proceeds and non-cash proceeds received or
receivable by such Person in connection therewith, net of reasonable out-of-
pocket costs and expenses paid or incurred in connection therewith.
"Non-Restricted Subsidiary" means any Subsidiary which is not a Restricted
Subsidiary.
"Notes" means and includes the Revolving Credit Notes, the Acquisition
Financing Notes, the Term Notes, and the Supplemental Revolving Credit Notes.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all Reimbursement Obligations owing under the
Applications, all fees and charges payable hereunder, and all other payment
obligations of the Company or any Subsidiary arising under or in relation to any
Loan Document, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Percentage" means, for each Lender, the percentage of the applicable
Commitments represented by such Lender's Commitment or, if the Commitments have
been terminated, the percentage held by such Lender (including through
participation interests in L/C Obligations) of the aggregate principal amount of
all outstanding Obligations.
"Permitted Affiliates" means Nephrology Associates of Northern Illinois,
Ltd., ARE Partnership, and Continental Health Care, Ltd.
"Permitted Line of Business" means any Person in the business of providing
health care services such as delivery of dialysis and nephrology services and
extracorporeal services such as plasmapheresis, intra-operative autotransfusion,
perfusion, physician management and health management services and any other
business line reasonably related thereto consented to in writing by the Required
Lenders, which consent shall not be unreasonably delayed or withheld.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof.
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"Plan" means any employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
either (i) is maintained by a member of the Controlled Group for employees of a
member of the Controlled Group, or (ii) is maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding five
plan years made contributions.
"Portion" is defined in Section 2.1(a) hereof.
"Property" means, as to any Person, all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent balance sheet of such Person and its subsidiaries under GAAP.
"Reimbursement Obligation" is defined in Section 1.3 hereof.
"Required Lenders" means, at any time, Lenders whose Commitments aggregate
66-2/3% or more of the total Commitments or, if at the time no Commitments are
outstanding, Lenders holding 66-2/3% or more of the aggregate outstanding
principal balance of the Notes and the credit risk with respect to the Letters
of Credit.
"Restricted Subsidiary" means each of those existing Subsidiaries listed on
Schedule 4.1 hereof, any other Subsidiary existing as of the date hereof who is
hereafter designated in writing by the Company to the Agent to become a
"Restricted Subsidiary" and who thereafter executes and delivers a Guaranty and
such Collateral Documents required pursuant to Section 4 hereof, and any other
Subsidiaries formed or acquired after the date hereof who are required to
execute and deliver a Guaranty and Collateral Documents pursuant to Section
7.15(g) hereof.
"Revolving Credit Commitments" is defined in Section 1.1 hereof.
"Revolving Credit Notes" is defined in Section 1.2 hereof.
"Revolving Loans" is defined in Section 1.2 hereof.
"Senior Subordinated Notes" means those certain $100,000,000 9.75% Senior
Subordinated Notes due 2008 issued pursuant to that certain Indenture dated May
5, 1998.
"Subordinated Debt" means the Senior Subordinated Notes and any other
Indebtedness for Borrowed Money of the Company or of any Restricted Subsidiary
owing to any Person on terms and conditions, and in such amounts, acceptable to
the Agent and the Required Lenders in their sole discretion and which is
subordinated in right of payment to the prior payment in full of the Obligations
pursuant to written subordination provisions satisfactory to the Agent and the
Required Lenders.
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"subsidiary" means, as to any particular parent corporation or
organization, any other corporation or organization more than 50% of the
outstanding Voting Stock of which is at the time directly or indirectly owned by
such parent corporation or organization or by any one or more other entities
which are themselves subsidiaries of such parent corporation or organization.
The term "Subsidiary" shall mean, when used with reference to the Company, a
subsidiary of, respectively, the Company or any of its direct or indirect
Subsidiaries.
"Supplemental Revolving Credit" is defined in Section 1.5 hereof.
"Supplemental Revolving Credit Commitments" is defined in Section 1.5
hereof.
"Supplemental Revolving Loans" is defined in Section 1.5 hereof.
"Supplemental Revolving Credit Notes" is defined in Section 1.5 hereof.
"Supplemental Revolving Credit Termination Date" means May 15, 1999, or
such earlier date on which the Supplemental Revolving Credit Commitments are
terminated in whole pursuant to Section 3.8, 8.2 or 8.3 hereof.
"Target" means the Persons whose assets or equity interests are the subject
of an Acquisition.
"Term Loans" is defined in Section 1.4(b) hereof.
"Term Notes" is defined in Section 1.4(b) hereof.
"Termination Date" means May 15, 2001, or such earlier date on which the
Revolving Credit Commitments are terminated in whole pursuant to Section 3.8,
8.2 or 8.3 hereof, or such later date to which the Revolving Credit Commitments
are extended pursuant to Section 11.16 hereof.
"Total Capitalization" means, at any time the same is to be determined, the
sum of Total Funded Debt plus Net Worth.
"Total Consideration" means the total amount (but without duplication) of
(a) cash paid in connection with any Acquisition, plus (b) indebtedness payable
to the seller in connection with such Acquisition, plus (c) the fair market
value of any equity securities, including any warrants or options therefor,
delivered in connection with any Acquisition, plus (d) the present value of
covenants not to compete entered into in connection with such Acquisition or
other future payments which are required to be made over a period of time
(discounted at the Domestic Rate), but only to the extent not included in clause
(a), (b), or (c) above, plus (e) the amount of indebtedness assumed in
connection with such Acquisition.
"Total Funded Debt" means, at any time the same is to be determined, the
aggregate of all Indebtedness for Borrowed Money of the Company and its
Restricted Subsidiaries at such time, including all Indebtedness for Borrowed
Money of any other Person which is directly
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or indirectly guaranteed by the Company or any of its Restricted Subsidiaries or
which the Company or any of its Restricted Subsidiaries has agreed (contingently
or otherwise) to purchase or otherwise acquire or in respect of which the
Company or any of its Restricted Subsidiaries has otherwise assured a creditor
against loss.
"Total Senior Funded Debt" means, at any time the same is to be determined,
Total Funded Debt at such time minus the principal balance of Subordinated Debt
then outstanding.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Voting Stock" of any Person means capital stock or other equity interests
of any class or classes (however designated) having ordinary power for the
election of directors or other similar governing body of such Person, other than
stock or other equity interests having such power only by reason of the
happening of a contingency.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued and
outstanding shares of capital stock (other than directors' qualifying shares as
required by law) or other equity interests are owned by the Company and/or one
or more wholly-owned subsidiaries of the Company within the meaning of this
definition.
Section 9.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The
words "hereof", "herein", and "hereunder" and words of like import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All references to time of day herein
are references to Chicago, Illinois time unless otherwise specifically provided.
Where the character or amount of any asset or liability or item of income or
expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, it shall
be done in accordance with GAAP except where such principles are inconsistent
with the specific provisions of this Agreement. For purposes of determining the
"Applicable Margin" and for purposes of computing the covenants set forth in
Section 7.7, 7.8, 7.9, 7.10, 7.11, 7.15(g), and 7.18(z) of this Agreement, the
assets (e.g., amounts due from and investments in affiliates), equity and
earnings attributable to Persons (other than Restricted Subsidiaries and
Permitted Affiliates) in which the Company has an ownership interest therein
shall be excluded in making such determinations and computations, except to the
extent any such earnings are actually received by the Company or a Restricted
Subsidiary in the form of a cash dividend or other cash distribution.
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SECTION 10. THE AGENT.
Section 10.1. Appointment and Authorization. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers hereunder and under the other Loan Documents as are
designated to the Agent by the terms hereof and thereof together with such
powers as are reasonably incidental thereto. The Lenders expressly agree that
the Agent is not acting as a fiduciary of the Lenders in respect of the Loan
Documents, the Company or otherwise, and nothing herein or in any of the other
Loan Documents shall result in any duties or obligations on the Agent or any of
the Lenders except as expressly set forth herein. The Agent may resign at any
time by sending 20 days prior written notice to the Company and the Lenders. In
the event of any such resignation, the Required Lenders may appoint a new agent
after consultation with the Company (and, so long as no Default or Event of
Default exists, the Company's prior written consent) which shall succeed to all
the rights, powers and duties of the Agent hereunder and under the other Loan
Documents. Any resigning Agent shall be entitled to the benefit of all the
protective provisions hereof with respect to its acts as an agent hereunder, but
no successor Agent shall in any event be liable or responsible for any actions
of its predecessor. If the Agent resigns and no successor is appointed, the
rights and obligations of such Agent shall be automatically assumed by the
Required Lenders and (i) the Company shall be directed to make all payments due
each Lender hereunder directly to such Lender and (ii) the Agent's rights in the
Collateral Documents shall be assigned without representation, recourse or
warranty to the Lenders as their interests may appear.
Section 10.2. Rights as a Lender. The Agent has and reserves all of the
rights, powers and duties hereunder and under the other Loan Documents as any
Lender may have and may exercise the same as though it was not the Agent. The
terms "Lender" and "Lenders" as used herein and in all other Loan Documents
shall, unless the context otherwise expressly indicates, include the Agent in
its individual capacity as Lender.
Section 10.3. Standard of Care. The Lenders acknowledge that they have
received and approved copies of the Loan Documents and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Agent makes no
representations or warranties of any kind or character to the Lenders with
respect to the validity, enforceability, genuineness, perfection, value, worth
or collectibility hereof or of the Notes or any of the other Obligations or of
the Loan Documents or of the Liens provided for thereby or of any other
documents called for hereby or thereby or of the Collateral. The Agent need not
verify the worth or existence of the Collateral and may rely exclusively on
reports of the Company with respect thereto. Neither the Agent nor any
director, officer, employee, agent or representative thereof (including any
security trustee therefor) shall in any event be liable for any clerical errors
or errors in judgment, inadvertence or oversight, or for action taken or omitted
to be taken by it or them hereunder or under the Loan Documents or in connection
herewith or therewith except for its or their own gross negligence or willful
misconduct. The Agent shall not incur any liability to the Lenders under or in
respect of this Agreement or any other Loan Documents by acting upon any notice,
certificate, warranty, instruction or statement (oral or written) of anyone
(including anyone in good faith believed by it to be
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authorized to act on behalf of the Company), unless it has actual knowledge of
the untruthfulness of same. The Agent may execute any of its duties hereunder by
or through representatives, employees, agents, and attorneys-in-fact and shall
not be answerable to the Lenders for the default or misconduct of any such
representatives, employees, agents or attorneys-in-fact selected with reasonable
care. The Agent shall be entitled to advice of counsel concerning all matters
pertaining to the agency hereby created and its duties hereunder, and shall
incur no liability to the Lenders and be fully protected in acting upon the
advice of such counsel. The Agent shall be entitled to assume that no Default or
Event of Default exists unless notified to the contrary by a Lender. The Agent
shall in all events be fully protected in acting or failing to act in accordance
with the instructions of the Required Lenders. Upon the occurrence of an Event
of Default hereunder, the Agent shall take such action with respect to the
enforcement of its Liens on the Collateral and the preservation and protection
thereof as it shall be directed to take by the Required Lenders but, unless and
until the Required Lenders have given such direction, the Agent shall take or
refrain from taking such actions as the Agent determines are appropriate and in
the best interest of all Lenders. The Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by the Agent by reason of taking or continuing to take any
such action. The Agent may treat the owner of any Note as the holder thereof
until written notice of transfer shall have been filed with the Agent signed by
such owner in form satisfactory to the Agent. Each Lender acknowledges that it
has independently and without reliance on the Agent or any other Lender and
based upon such information, investigations and inquiries as it deems
appropriate made its own credit analysis and decision to extend credit to the
Company. It shall be the responsibility of each Lender to keep itself informed
as to the creditworthiness of the Company and the Agent shall have no liability
to any Lender with respect thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to reimburse the
Agent for all costs and expenses (including, without limitation, reasonable
attorneys' fees) suffered or incurred by the Agent or any security trustee in
performing its duties hereunder and under the other Loan Documents, or in the
exercise of any right or power imposed or conferred upon the Agent hereby or
thereby, to the extent that the Agent is not promptly reimbursed for same by the
Company after making request of the Company for payment thereof, or out of the
Collateral, all such costs and expenses to be borne by the Lenders ratably in
accordance with their Percentages. If any Lender fails to reimburse the Agent
for its share of any such costs and expenses, such costs and expenses shall be
paid pro rata by the remaining Lenders, but without in any manner releasing the
defaulting Lender from its liability hereunder.
Section 10.5. Indemnity. The Lenders shall ratably indemnify and hold the
Agent, and its directors, officers, employees, agents, representatives or
attorneys-in-fact (including as such any security trustee therefor), harmless
from and against any liabilities, losses, costs or expenses suffered or incurred
by it hereunder or under the other Loan Documents or in connection with the
transactions contemplated hereby or thereby, regardless of when asserted or
arising, except to the extent it is promptly reimbursed for the same by the
Company or out of the Collateral and except to the extent that any event giving
rise to a
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claim was caused by the gross negligence or willful misconduct of the party
seeking to be indemnified. If any Lender defaults in its obligations hereunder,
its share of the obligations shall be paid pro rata by the remaining Lenders,
but without in any manner releasing the defaulting Lender from its liability
hereunder.
SECTION 11. MISCELLANEOUS.
Section 11.1. Withholding Taxes.
(a) Payments Free of Withholding. Except as otherwise required by law
and subject to Section 11.1(b) hereof, each payment by the Company under this
Agreement or the other Loan Documents shall be made without withholding for or
on account of any present or future taxes (other than overall net income taxes
on the recipient) imposed by or within the jurisdiction in which the Company is
domiciled, any jurisdiction from which the Company makes any payment, or (in
each case) any political subdivision or taxing authority thereof or therein. If
any such withholding is so required, the Company shall make the withholding, pay
the amount withheld to the appropriate governmental authority before penalties
attach thereto or interest accrues thereon and forthwith pay such additional
amount as may be necessary to ensure that the net amount actually received by
each Lender and the Agent free and clear of such taxes (including such taxes on
such additional amount) is equal to the amount which that Lender or the Agent
(as the case may be) would have received had such withholding not been made. If
the Agent or any Lender pays any amount in respect of any such taxes, penalties
or interest the Company shall reimburse the Agent or that Lender for that
payment on demand in the currency in which such payment was made. If the Company
pays any such taxes, penalties or interest, it shall deliver official tax
receipts evidencing that payment or certified copies thereof to the Lender or
Agent on whose account such withholding was made (with a copy to the Agent if
not the recipient of the original) on or before the thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Company and the Agent on or before the earlier of the date the
initial Borrowing is made hereunder and 30 days after the date hereof, two duly
completed and signed copies of either Form 1001 (relating to such Lender and
entitling it to a complete exemption from withholding under the Code on all
amounts to be received by such Lender, including fees, pursuant to the Loan
Documents and the Obligations) or Form 4224 (relating to all amounts to be
received by such Lender, including fees, pursuant to the Loan Documents and the
Obligations) of the United States Internal Revenue Service. Thereafter and from
time to time, each Lender shall submit to the Company and the Agent such
additional duly completed and signed copies of one or the other of such Forms
(or such successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (i) requested by the Company in a
written notice, directly or through the Agent, to such Lender and (ii) required
under then-current United States law or regulations to avoid or reduce United
States withholding taxes on payments in respect of all amounts to be received by
such Lender, including fees, pursuant to the Loan Documents or the Obligations.
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(c) Inability of Lender to Submit Forms. If any Lender determines, as a
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Company or Agent any form or certificate that such Lender is obligated to submit
pursuant to subsection (b) of this Section 11.1 or that such Lender is required
to withdraw or cancel any such form or certificate previously submitted or any
such form or certificate otherwise becomes ineffective or inaccurate, such
Lender shall promptly notify the Company and the Agent of such fact and the
Lender shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any affected form or
certificate, as applicable.
Section 11.2. Non-Business Days. If any payment hereunder becomes due and
payable on a day which is not a Business Day, the due date of such payment shall
be extended to the next succeeding Business Day on which date such payment shall
be due and payable. In the case of any payment of principal falling due on a
day which is not a Business Day, interest on such principal amount shall
continue to accrue during such extension at the rate per annum then in effect,
which accrued amount shall be due and payable on the next scheduled date for the
payment of interest.
Section 11.3. No Waiver, Cumulative Remedies. No delay or failure on the
part of the Agent or any Lender in the exercise of any power or right shall
operate as a waiver thereof or as an acquiescence in any default, nor shall any
single or partial exercise of any right preclude any other or further exercise
thereof or the exercise of any other power or right. The rights and remedies
hereunder of the Agent and the Lenders are cumulative to, and not exclusive of,
any rights or remedies which any of them would otherwise have.
Section 11.4. Waivers, Modifications and Amendments. Any provision hereof
or of the other Loan Documents may be amended, modified, waived or released and
any Default or Event of Default and its consequences may be rescinded and
annulled upon the written consent of the Company and the Required Lenders;
provided, however, that without the written consent of each Lender no such
amendment, modification or waiver shall increase the amount or extend the terms
of such Lender's Commitments or reduce the amount of any principal of or
interest rate applicable to, or extend the maturity of, any Obligation owed to
it or reduce the amount of fees or other amounts to which it is entitled
hereunder or release any guaranty of any Obligations or release all or any
substantial (in value) part of the collateral security afforded by the Loan
Documents (except in connection with a sale or other disposition permitted to be
effected by the provisions hereof or of the Loan Documents) or change this
Section 11.4 or change the definition of "Required Lenders" or change the number
of Lenders required to take any action hereunder or under the other Loan
Documents. No amendment, modification or waiver of the Agents' protective
provisions shall be effective without the prior written consent of the Agent.
Section 11.5. Costs and Expenses. (a) The Company agrees to pay on demand
all reasonable costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery of the Loan Documents and in
connection with any one or more assignments of the Obligations and Commitments
(as set forth in Section 11.18 hereof) and
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in connection with any consents hereunder or thereunder and any waivers or
amendments hereto or thereto, including the reasonable fees and expenses of
counsel for the Agent with respect to all of the foregoing, and all recording,
filing, title insurance or other fees, costs and taxes incident to perfecting a
Lien upon the collateral security for the Obligations, and all reasonable costs
and expenses (including reasonable attorneys' fees) incurred by the Agent, the
Lenders or any other holders of the Obligations in connection with a default or
the enforcement of the Loan Documents, and all reasonable costs, fees and taxes
of the types enumerated above incurred in supplementing (and recording or filing
supplements to) the Loan Documents in connection with assignments contemplated
by Section 11.18 hereof if counsel to the Agent believes such supplements to be
appropriate or desirable. The Company agrees to indemnify and save the Lenders,
the Agent and any security trustee for the Agent or the Lenders harmless from
any and all liabilities, losses, costs and expenses incurred by the Lenders or
the Agent in connection with any action, suit or proceeding brought against the
Agent, any security trustee or any Lender by any Person which arises out of the
transactions contemplated or financed by any of the Loan Documents or out of any
action or inaction by the Agent, any security trustee or any Lender thereunder,
including without limitation those caused by the negligence of any party but
except for such thereof as is caused by the gross negligence or willful
misconduct of the party indemnified and except for costs or liabilities incurred
in suits which are exclusively among the Lenders or the Lenders and the Agent.
The provisions of this Section 11.5 and the protective provisions of Section 2
hereof shall survive payment of the Obligations.
(b) The Company unconditionally agrees to forever indemnify, defend and
hold harmless, and covenants not to sue for any claim for contribution against,
the Agent and the Lenders for any damages, costs, loss or expense, including
without limitation, response, remedial or removal costs, arising out of any of
the following: (i) any presence, release, threatened release or disposal of any
hazardous or toxic substance or petroleum by the Company or any Subsidiary or
otherwise occurring on or with respect to its property (whether owned or
leased), (ii) the operation or violation of any environmental law, whether
federal, state, or local, and any regulations promulgated thereunder, by the
Company or any Subsidiary or otherwise occurring on or with respect to its
property (whether owned or leased), (iii) any claim for personal injury or
property damage in connection with the Company or any Subsidiary or otherwise
occurring on or with respect to its property (whether owned or leased), and (iv)
the inaccuracy or breach of any environmental representation, warranty or
covenant by the Company or any Subsidiary made herein or in any promissory note,
mortgage, deed of trust, security agreement or any other instrument or document
evidencing or securing any Obligations or setting forth terms and conditions
applicable thereto or otherwise relating thereto, except for damages arising
from the willful misconduct or gross negligence of, or material breach of the
Loan Documents by, the party claiming indemnification. This indemnification
shall survive the payment and satisfaction of all Obligations and the
termination of this Agreement, and shall remain in force beyond the expiration
of any applicable statute of limitations and payment or satisfaction in full of
any single claim under this indemnification. This indemnification shall be
binding upon the successors and assigns of the Company and shall inure to the
benefit of Agent and the Lenders and their directors, officers, employees,
agents, and collateral trustees, and their successors and assigns.
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Section 11.6. Documentary Taxes. The Company agrees that it will pay any
documentary, stamp or similar taxes payable in respect to any Loan Document,
including interest and penalties, in the event any such taxes are assessed,
irrespective of when such assessment is made and whether or not any credit to it
is then in use or available.
Section 11.7. Survival of Representations. All representations and
warranties made herein and in the other Loan Documents and in certificates given
pursuant hereto or thereto shall survive the execution and delivery of this
Agreement and the other Loan Documents, and shall continue in full force and
effect with respect to the date as of which they were made as long as any credit
is in use or available hereunder.
Section 11.8. Construction. Nothing contained herein shall be deemed or
construed to permit any act or omission which is prohibited by the terms of any
Collateral Document, the covenants and agreements contained herein being in
addition to and not in substitution for the covenants and agreements contained
in the Collateral Documents.
Section 11.9. Notices. Except as otherwise specified herein, all notices
hereunder shall be in writing (including, without limitation, notice by
telecopy) and shall be given to the relevant party at its address or telecopier
number set forth below, in the case of the Company, or on the appropriate
signature page hereof, in the case of the Lenders and the Agent, or such other
address or telecopier number as such party may hereafter specify by notice to
the Agent and the Company given by United States certified or registered mail,
by telecopy or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices hereunder to the Company shall
be addressed to:
Everest Healthcare Services Corporation
101 North Scoville Avenue
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
with a copy of any notice
of default also sent to: Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Ms. Susan B. Schneider
Telephone: (312) 902-5624
Telecopy: (312) 902-1061
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
postage prepaid, addressed as aforesaid or (iii) if given by
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any other means, when delivered at the addresses specified in this Section;
provided that any notice given pursuant to Section 1 or Section 2 hereof shall
be effective only upon receipt.
Section 11.10. Lender's Obligations Several. The obligations of the
Lenders hereunder are several and not joint. Nothing contained in this
Agreement and no action taken by the Lenders pursuant hereto shall be deemed to
constitute the Lenders a partnership, association, joint venture or other
entity.
Section 11.11. Headings. Section headings used in this Agreement are for
convenience of reference only and are not a part of this Agreement for any other
purpose.
Section 11.12. Severability of Provisions. Any provision of this
Agreement which is unenforceable or prohibited in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such unenforceability or
prohibition without invalidating the remaining provisions hereof or affecting
the validity or enforceability of such provision in any other jurisdiction. All
rights, remedies and powers provided in this Agreement and the other Loan
Documents may be exercised only to the extent that the exercise thereof does not
violate any applicable mandatory provisions of law, and all the provisions of
this Agreement and other Loan Documents are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this Agreement or
the other Loan Documents invalid or unenforceable.
Section 11.13. Counterparts. This Agreement may be executed in any number
of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 11.14. Binding Nature and Governing Law. This Agreement shall be
binding upon the Company and its successors and assigns, and shall inure to the
benefit of the Agent and the Lenders and the benefit of their successors and
permitted assigns, including any subsequent holder of an interest of the
Obligations. This Agreement and the rights and duties of the parties hereto
shall be construed and determined in accordance with, and shall be governed by,
the internal laws of the State of Illinois without regard to principles of
conflicts of law. The Company may not assign its rights hereunder without the
written consent of the Agent and the Lenders.
Section 11.15. Entire Understanding. This Agreement, together with the
other Loan Documents, constitute the entire understanding of the parties with
respect to the subject matter hereof and any prior agreements, whether written
or oral, with respect thereto are superseded hereby.
Section 11.16. Extension of the Revolving Credit Commitments. The Company
shall have the option to request a maximum of two one-year extensions to the
Termination Date pursuant to this Section. No less than 120 days prior to, but
no more than 150 days prior to, May 15, 1999 (and, if the Termination Date has
been extended pursuant to this Section, May 15, 2000), the Company may advise
the Agent in writing of the Company's desire to extend the Termination Date for
an additional 12 months and the Agent shall promptly
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notify the Lenders of each such request, provided that the Termination Date
shall in no event be extended pursuant to this Section beyond May 15, 2003. If
the Company makes any such request, each Lender agrees to notify the Company and
the Agent within 60 days of such request stating whether such Lender is
declining or consenting to any such request, or consenting to such request
subject to specified terms and conditions. In the event that a Lender fails to
so notify the Agent and the Company during such period, such Lender shall be
deemed to have refused the requested extension. In the event that each Lender is
agreeable to such extension (it being understood that the Lenders may accept or
decline such a request in their sole discretion and on such terms as they may
elect), the Company and the Lenders shall enter into such documents as the Agent
may reasonably deem necessary or appropriate to reflect such extension, and all
reasonable costs and expenses incurred by the Agent in connection therewith
(including reasonable attorneys' fees) shall be paid by the Company. In the
event any Lender declines a request to extend the Termination Date as provided
above, the Company shall have the option to require, at the Company's expense,
such Lender to assign, at par plus accrued interest and fees, without recourse
all of its interests, rights and obligations hereunder (including all of its
Commitments and the Loans and other amounts at the time owing to it hereunder
and its Notes and its interest in the Letters of Credit) to another Lender or to
another bank, financial institution or other entity specified by the Company
willing to provide such financing, provided that (i) such assignment shall not
conflict with or violate any law, rule or regulation or order of any court or
other governmental authority, (ii) the Company shall have received the written
consent of the Agent to such assignment, which consent shall not be unreasonably
withheld or delayed, (iii) the Company shall have paid to the assigning Lender
all monies other than such principal, interest and fees accrued and owing
hereunder to it, and (iv) the assignment is entered into in accordance with the
requirements of Section 11.18 hereof.
Section 11.17. Participations. Any Lender may grant participations in its
extensions of credit hereunder to any other bank or lending institution (a
"Participant") provided that (i) no Participant shall thereby acquire any direct
rights under this Agreement, (ii) no Lender shall agree with a Participant not
to exercise any of its rights hereunder without the consent of such Participant
except for rights which under the terms hereof may only be exercised by all
Lenders, and (iii) no sale of a participation in extensions of credit shall in
any manner relieve the selling Lender of its obligations hereunder.
Section 11.18. Assignment Agreements. Each Lender may, from time to time
upon at least 5 Business Days' notice to the Agent and the Company, assign to
other banks or lending institutions all or part of its rights and obligations
under this Agreement (including, without limitation, the indebtedness evidenced
by the Notes then owned by such assigning Lender, together with an equivalent
proportion of its obligation to make loans and advances and participate in
Letters of Credit hereunder) pursuant to an Assignment Agreement in the form
attached hereto as Exhibit I (the "Assignment Agreements"); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of the assigning Lender's rights and obligations under this Agreement
and the assignment shall cover the same percentage of such Lender's Commitments,
Loans, Notes and interests in Letters of Credit; (ii) unless the Agent otherwise
consents, the aggregate amount of the Commitments, Loans, Notes and interests in
the Letters of Credit of the assigning Lender
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being assigned pursuant to each such assignment (determined as of the effective
date of the relevant Assignment Agreement) shall in no event be less than
$5,000,000 and shall be an integral multiple of $1,000,000 and, unless the
assigning Lender shall have assigned all of its Commitments, Loans, Notes and
interests in Letters of Credit, the aggregate amount of Commitments, Loans,
Notes, and interests in Letters of Credit retained by the assigning Lender shall
in no event be less than $5,000,000; (iii) the Agent and the Company must each
consent, which consent shall not be unreasonably withheld and shall be evidenced
by execution of a counterpart of the relevant Assignment Agreement in the space
provided thereon for such acceptance, to each such assignment to a party which
was not an original signatory of this Agreement; and (iv) the assigning Lender
must pay to the Agent a processing and recordation fee of $3,000 and any
reasonable out-of-pocket attorney's fees incurred by the Agent in connection
with such Assignment Agreement. Upon the execution of each Assignment Agreement
by the assigning Lender thereunder, the assignee lender thereunder, the Company
and the Agent and payment to such assigning Lender by such assignee lender of
the purchase price for the portion of the indebtedness of the Company being
acquired by it, (i) such assignee lender shall thereupon become a "Lender" for
all purposes of this Agreement with Commitments in the amount set forth in such
Assignment Agreement and with all the rights, powers and obligations afforded a
Lender hereunder, (ii) such assigning Lender shall have no further liability for
funding the portion of its Commitments assumed by such other Lender and (iii)
the address for notices to such assignee Lender shall be as specified in the
Assignment Agreement executed by it. Concurrently with the execution and
delivery of such Assignment Agreement, the Company shall execute and deliver
Notes to the assignee Lender in the respective amounts of its Commitments and
new Notes to the assigning Lender in the respective amounts of its Commitments
after giving effect to the reduction occasioned by such assignment, all such
Notes to constitute "Notes" for all purposes of this Agreement and the other
Loan Documents.
Section 11.19. Confidentiality. Any information disclosed by the Company or
any of its Subsidiaries to the Agent or any Lender which was designated
proprietary or confidential at the time of its receipt by the Agent or such
Lender, and which it is not otherwise in the public domain, shall not be
disclosed by the Agent or such Lender to any other Person except (i) to its
independent accountants and legal counsel (it being understood that the Persons
to whom such disclosure is made will be informed of the confidential nature of
such information and instructed to keep such information confidential), (ii)
pursuant to statutory and regulatory requirements, (iii) pursuant to any
mandatory court order, subpoena or other legal process, (iv) to the Agent or any
other Lender, (v) pursuant to any agreement heretofore or hereafter made between
such Lender and the Company which permits such disclosure, (vi) in connection
with the exercise of any remedy under the Loan Documents, or (vii) subject to an
agreement containing provisions substantially the same as those of this Section,
to any participant in or assignee of, or prospective participant in or assignee
of, any Obligation or Commitment (it being understood that prior to any such
disclosures contemplated by clauses (ii) and (iii) above, the Agent or such
Lender shall, if practicable, give the Company prior written notice of such
disclosure).
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Section 11.20. Reaffirmation of Collateral Documents. The Company has
heretofore executed and delivered to the Agent an Amended and Restated Security
Agreement dated as of May 15, 1997 and an Amended and Restated Pledge Agreement
dated as of May 15, 1997 and certain other Collateral Documents for the benefit
of the Agent and the Lenders. The Company hereby agrees that, notwithstanding
the execution and delivery of this Agreement, all Collateral Documents
heretofore executed and delivered to the Agent shall remain in full force and
effect and shall secure all the Obligations of the Company hereunder and under
the other Loan Documents and that all rights and remedies of the Agent and the
Lenders thereunder, and all Obligations of the Company thereunder and all Liens
created and provided for thereunder, shall be and remain in full force and
effect and shall not be affected, impaired, or discharged hereby. The Company
hereby acknowledges and agrees, and the Agent and the Lenders hereby acknowledge
and agree, that the "Credit Agreement" and the "Notes" referred to in the
Amended and Restated Security Agreement, Amended and Restated Pledge Agreement,
and such other Collateral Documents shall from and after the date hereof be
deemed a reference to this Agreement and the Notes issued hereunder.
Section 11.21. Submission to Jurisdiction; Waiver of Jury Trial. The
Company hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Northern District of Illinois and of any Illinois State
court sitting in the City of Chicago for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Company irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. THE COMPANY, THE AGENT, AND EACH LENDER HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
[SIGNATURE PAGES TO FOLLOW]
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Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall be a contract between us for the purposes hereinabove set forth.
Dated as of this 18th day of May, 1998.
EVEREST HEALTHCARE SERVICES
CORPORATION
By /s/ JOHN B. BOURKE
-----------------------------------
Name John B. Bourke
Title Chief Financial Officer
<PAGE>
Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Each of the Lenders hereby agrees with each other Lender that if it should
receive or obtain any payment (whether by voluntary payment, by realization upon
collateral, by the exercise of rights of set-off or banker's lien, by
counterclaim or cross action, or by the enforcement of any rights under the
Agreement or the other Loan Documents or otherwise) in respect of the
Obligations, in a greater amount than such Lender would have received had such
payment been made to the Agent and been distributed among the Lenders as
contemplated by Section 3.9 hereof, then in that event the Lender receiving such
disproportionate payment shall purchase for cash without recourse from the other
Lenders an interest in the Obligations owed to such Lenders in such amount as
shall result in a distribution of such payment as contemplated by Section 3.9
hereof. In the event any payment made to a Lender and shared with the other
Lenders pursuant to the provisions hereof is ever recovered from such Lender,
the Lenders receiving a portion of such payment hereunder shall restore the same
to the payor Lender, but without interest. In the event any amount paid to the
Agent under the Applications shall ever be recovered from the Agent, each Lender
shall reimburse the Agent for its pro rata share of the amount so recovered.
Amount and Percentage of Commitments:
Revolving Credit Acquisition Financing Harris Trust and Savings Bank
Commitment Commitment
$10,500,000 $19,500,000
Supplemental By: /s/ GLORIA COMPEAN-ENDICOTT
-----------------------------
Revolving Credit Name: Gloria Compean-Endicott
Commitment Title: Vice President
$4,500,000
Address:
111 West Monroe Street, 4E
P.O. Box 755
Chicago, Illinois 60690
Attention: Ms. Gloria Compean-
Endicott
Telephone: (312) 461-2324
Telecopy: (312) 461-7365
<PAGE>
Revolving Credit Acquisition Financing Comerica Bank
Commitment Commitment
$5,600,000 $10,400,000
Supplemental By: /s/ COLLEEN M. MURPHY
-----------------------------
Revolving Credit Name: Colleen M. Murphy
Commitment Title: Assistant Vice President
$2,400,000
Address:
Comerica Bank
Two Mid American Plaza, Suite 616
Oakbrook Terrace, Illinois 60181
Attention: Colleen Murphy
Telephone: (630) 645-7376
Telecopy: (630) 575-2164
<PAGE>
Revolving Credit Acquisition Financing Firstar Bank Illinois
Commitment Commitment
$4,025,000 $7,475,000
Supplemental By: /s/ MICHAEL CONWAY
-----------------------------
Revolving Credit Name: Michael Conway
Commitment Title: Vice President
$1,725,000
Address:
9575 West Higgins Road
Rosemont, Illinois 60018
Attention: Victor Narusis
Telephone: (847) 318-6330
Telecopy: (847) 696-9437
<PAGE>
Revolving Credit Acquisition Financing Mercantile Bank National Association
Commitment Commitment
$4,025,000 $7,475,000
Supplemental By: /s/ MARY ANN LEMONDS
--------------------------------
Revolving Credit Name: Mary Ann Lemonds
Commitment Title: Vice President
$1,725,000
Address:
721 Locust
St. Louis, Missouri 63101
Attention: Mary Ann Lemonds
Telephone: (314) 425-8178
Telecopy: (314) 418-8394
<PAGE>
Revolving Credit Acquisition Financing Bank of America National Trust and
Commitment Commitment Savings Association
$3,850,000 $7,150,000
Supplemental By: /s/ SARAH A. RUSHER
--------------------------------
Revolving Credit Name: Sarah A. Rusher
Commitment Title: Vice President
$1,650,000
Address:
231 S. LaSalle Street
Chicago, Illinois 60697
Attention: Sarah A. Rusher
Telephone: (312) 828-1005
Telecopy: (312) 765-2193
<PAGE>
Revolving Credit Acquisition Financing Key Corporate Capital Inc.
Commitment Commitment
$3,500,000 $6,500,000
Supplemental By: /s/ LAURIE MULLER-GIRARD
------------------------------
Revolving Credit Name: Laurie Muller-Girard
Commitment Title: Vice President
$1,500,000
Address:
Mailcode: OH-01-27-0605
127 Public Square
Cleveland, Ohio 44114
Attention: Laurie Muller-Girard
Telephone: (216) 689-3599
Telecopy: (216) 689-5970
<PAGE>
Revolving Credit Acquisition Financing M&I Marshall & Ilsley Bank
Commitment Commitment
$3,500,000 $6,500,000
Supplemental By: /s/ STEPHEN F. GEIMER
-------------------------------
Revolving Credit Name: Stephen F. Geimer
Commitment Title: Vice President
$1,500,000
Address:
770 N. Water Street
P.O. Box 2035
Milwaukee, Wisconsin 53201
Attention: Stephen F. Geimer
Telephone: (414) 765-7677
Telecopy: (414) 765-7625
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
Chicago, Illinois
$__________ _________________, 19__
On the Termination Date, for value received, the undersigned, Everest
Healthcare Services Corporation, a Delaware corporation (the "Company") hereby
promises to pay to the order of _____________________________________________
(the "Lender"), at the principal office of Harris Trust and Savings Bank in
Chicago, Illinois, the principal sum of (i)____________________________________
________________ Dollars ($_________), or (ii) such lesser amount as may at the
time of the maturity hereof, whether by acceleration or otherwise, be the
aggregate unpaid principal amount of all Revolving Loans owing from the Company
to the Lender under the Credit Agreement hereinafter mentioned.
This Note evidences Revolving Loans constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain Second
Amended and Restated Credit Agreement dated as of May 18, 1998, among the
Company, Harris Trust and Savings Bank, individually and as Agent, and the other
Lenders which are now or may from time to time hereafter become parties thereto
(said Credit Agreement, as the same may from time to time be modified, amended
or restated being referred to herein as the "Credit Agreement") made and to be
made to the Company by the Lender under the Credit Agreement, and the Company
hereby promises to pay interest at the office specified above on each Revolving
Loan evidenced hereby at the rates and times specified therefor in the Credit
Agreement.
Each Revolving Loan made under the Credit Agreement by the Lender to the
Company against this Note, any repayment of principal hereon, the status of each
such loan from time to time as part of the Domestic Rate Portion or a LIBOR
Portion, in the case of any LIBOR Portion, and the interest rates and Interest
Periods applicable thereto shall be endorsed by the holder hereof on the reverse
side of this Note or recorded on the books and records of the holder hereof
(provided that such entries shall be endorsed on the reverse side hereof prior
to any negotiation hereof). The Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the entries so
endorsed on the reverse side hereof or recorded on the books and records of the
Lender shall be prima facie evidence of the unpaid balance of this Note, the
status of each loan from time to time as part of a Domestic Rate Portion or a
LIBOR Portion and, in the case of any LIBOR Portion, the interest rates and
Interest Periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary
<PAGE>
prepayments may be made hereon, and certain prepayments are required to be made
hereon, all in the events, on the terms and with the effects provided in the
Credit Agreement. All capitalized terms used herein without definition shall
have the same meanings herein as such terms have in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
Illinois without regard to principles of conflicts of law.
EVEREST HEALTHCARE SERVICES
CORPORATION
By _______________________________
Name____________________________
Title___________________________
-2-
<PAGE>
EXHIBIT B
NOTICE OF PAYMENT REQUEST
[DATE]
[NAME OF LENDER]
[ADDRESS]
Attention:
Reference is made to the Second Amended and Restated Credit Agreement,
dated as of May __, 1998, among Everest Healthcare Services Corporation, the
Lenders named therein, and Harris Trust and Savings Bank, as Agent (the "Credit
Agreement"). Capitalized terms used herein and not defined herein have the
meanings assigned to them in the Credit Agreement. [THE COMPANY HAS FAILED TO
PAY A REIMBURSEMENT OBLIGATION IN THE AMOUNT OF $__________. YOUR PERCENTAGE OF
THE UNPAID REIMBURSEMENT OBLIGATION IS $___________] OR [HARRIS TRUST AND
SAVINGS BANK HAS BEEN REQUIRED TO RETURN A PAYMENT BY THE COMPANY OF A
REIMBURSEMENT OBLIGATION IN THE AMOUNT OF $__________. YOUR PERCENTAGE OF THE
RETURNED REIMBURSEMENT OBLIGATIONS IS $____________].
Very truly yours,
HARRIS TRUST AND SAVINGS BANK, as Agent
By_____________________________________
Name_________________________________
Title________________________________
<PAGE>
EXHIBIT C
ACQUISITION FINANCING NOTE
Chicago, Illinois
$_________ ___________________,19__
On the Acquisition Financing Termination Date, for value received, the
undersigned, Everest Healthcare Services Corporation, a Delaware corporation
(the "Company"), hereby promises to pay to the order of ______________________
(the "Lender"), at the principal office of Harris Trust and Savings Bank in
Chicago, Illinois, the principal sum of (i) ______________________________
Dollars ($______________), or (ii) such lesser amount as may at the time of
maturity hereof, whether by acceleration or otherwise, be the aggregate unpaid
principal amount of all Acquisition Financing Loans owing from the Company to
the Lender under the Credit Agreement hereinafter mentioned.
This Note evidences Acquisition Financing Loans constituting part of a
"Domestic Rate Portion" and "LIBOR Portions" as such terms are defined in that
certain Second Amended and Restated Credit Agreement dated as of May 18, 1998,
among the Company, Harris Trust and Savings Bank, individually and as Agent
thereunder, and the other Lenders which are now or may from time to time
hereafter become parties thereto (said Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to herein as the
"Credit Agreement") made and to be made to the Company by the Lender under the
Credit Agreement, and the Company hereby promises to pay interest at the office
specified above on each Acquisition Financing Loan evidenced hereby at the rates
and at the times specified therefor in the Credit Agreement.
Each Acquisition Financing Loan made under the Credit Agreement by the
Lender to the Company against this Note, any repayment of principal hereon, the
status of such loan from time to time as part of the Domestic Rate Portion or a
LIBOR Portion and, in the case of any LIBOR Portion, the interest rate and
Interest Period applicable thereto shall be endorsed by the holder hereof on the
reverse side of this Note or recorded on the books and records of the holder
hereof (provided that such entries shall be endorsed on the reverse side of this
Note prior to any negotiation hereof). The Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the entries
so endorsed on the reverse side of this Note or recorded on the books and
records of the holder hereof shall be prima facie evidence of the unpaid balance
of this Note and the status of each loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayment are required to be made hereon,
<PAGE>
all in the events, on the terms and with the effects provided in the Credit
Agreement. All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
Illinois without regard to principles of conflict of law.
EVEREST HEALTHCARE SERVICES
CORPORATION
By___________________________________
Name_______________________________
Title______________________________
-2-
<PAGE>
EXHIBIT D
TERM NOTE
Chicago, Illinois
$________ ___________________, 19__
For Value Received, the undersigned, Everest Healthcare Services
Corporation, a Delaware corporation (the "Company") hereby promises to pay to
the order of _______________________________________________________ (the
"Lender"), at the principal office of Harris Trust and Savings Bank in Chicago,
Illinois, the principal sum of __________________________________________
Dollars ($_________), in twenty (20) consecutive principal installments
commencing on ____________, 199___ and continuing on the ____ day of each
____________, ___________, _____________ and ________ occurring thereafter to
and including ____________, _____________, with the first nineteen principal
installments each to be in an amount equal to 1/28th of the original principal
amount of this Note, with the final installment in the amount of all principal
not sooner paid due on _______________, __________, of the final maturity
hereof.
This Note evidence a Term Loan constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain Second
Amended and Restated Credit Agreement dated as of May 18, 1998, among the
Company, Harris Trust and Savings Bank, individually and as Agent, and the other
Lenders which are now or may from time to time hereafter become parties thereto
(said Credit Agreement, as the same may from time to time be modified, amended
or restated being referred to herein as the "Credit Agreement") made to the
Company by the Lender under the Credit Agreement, and the Company hereby
promises to pay interest at the office specified above on the Term Loan
evidenced hereby at the rates and times specified therefor in the Credit
Agreement.
The Term Loan made under the Credit Agreement by the Lender to the Company
against this Note, any repayment of principal hereon, the status of such loan
from time to time as part of the Domestic Rate Portion or a LIBOR Portion, in
the case of any LIBOR Portion, and the interest rates and Interest Periods
applicable thereto shall be endorsed by the holder hereof on the reverse side of
this Note or recorded on the books and records of the holder hereof (provided
that such entries shall be endorsed on the reverse side hereof prior to any
negotiation hereof). The Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the entries so
endorsed on the reverse side hereof or recorded on the books and records of the
Lender shall be prima facie evidence of the unpaid balance of this Note, the
status of such loan from time to time as part of a Domestic Rate Portion or a
LIBOR Portion and, in the case of any LIBOR Portion, the interest rates and
Interest Periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note
<PAGE>
may be declared to be, or be and become, due prior to its expressed maturity,
voluntary prepayments may be made hereon, and certain prepayments are required
to be made hereon, all in the events, on the terms and with the effects provided
in the Credit Agreement. All capitalized terms used herein without definition
shall have the same meanings herein as such terms have in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
Illinois without regard to principles of conflicts of law.
EVEREST HEALTHCARE SERVICES
CORPORATION
By______________________________
Name__________________________
Title_________________________
-2-
<PAGE>
EXHIBIT E
SUPPLEMENTAL REVOLVING CREDIT NOTE
Chicago, Illinois
$________ ___________________, 19__
On the Supplemental Revolving Credit Termination Date, for value received,
the undersigned, Everest Healthcare Services Corporation, a Delaware corporation
(the "Company") hereby promises to pay to the order of _______________________
_____________________ (the "Lender"), at the principal office of Harris Trust
and Savings Bank in Chicago, Illinois, the principal sum of (i)________________
____________________________________ Dollars ($_________), or (ii) such lesser
amount as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Supplemental
Revolving Loans owing from the Company to the Lender under the Credit Agreement
hereinafter mentioned.
This Note evidences Supplemental Revolving Loans constituting part of a
"Domestic Rate Portion" and "LIBOR Portions" as such terms are defined in that
certain Second Amended and Restated Credit Agreement dated as of May 18, 1998,
among the Company, Harris Trust and Savings Bank, individually and as Agent, and
the other Lenders which are now or may from time to time hereafter become
parties thereto (said Credit Agreement, as the same may from time to time be
modified, amended or restated being referred to herein as the "Credit
Agreement") made and to be made to the Company by the Lender under the Credit
Agreement, and the Company hereby promises to pay interest at the office
specified above on each Supplemental Revolving Loan evidenced hereby at the
rates and times specified therefor in the Credit Agreement.
Each Supplemental Revolving Loan made under the Credit Agreement by the
Lender to the Company against this Note, any repayment of principal hereon, the
status of each such loan from time to time as part of the Domestic Rate Portion
or a LIBOR Portion, in the case of any LIBOR Portion, and the interest rates and
Interest Periods applicable thereto shall be endorsed by the holder hereof on
the reverse side of this Note or recorded on the books and records of the holder
hereof (provided that such entries shall be endorsed on the reverse side hereof
prior to any negotiation hereof). The Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the entries
so endorsed on the reverse side hereof or recorded on the books and records of
the Lender shall be prima facie evidence of the unpaid balance of this Note, the
status of each loan from time to time as part of a Domestic Rate Portion or a
LIBOR Portion and, in the case of any LIBOR Portion, the interest rates and
Interest Periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary
<PAGE>
prepayments may be made hereon, and certain prepayments are required to be made
hereon, all in the events, on the terms and with the effects provided in the
Credit Agreement. All capitalized terms used herein without definition shall
have the same meanings herein as such terms have in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
Illinois without regard to principles of conflicts of law.
EVEREST HEALTHCARE SERVICES
CORPORATION
By___________________________________
Name_______________________________
Title______________________________
-2-
<PAGE>
EXHIBIT F
BORROWING BASE CERTIFICATE
To: Harris Trust and Savings Bank, as Agent
under, and the Lenders party to,the Credit
Agreement described below.
Pursuant to the terms of the Second Amended and Restated Credit Agreement
dated as of May 18, 1998, among us (the "Credit Agreement"), we submit this
Borrowing Base Certificate to you and certify that the information set forth
below and on any attachments to this Certificate is true, correct and complete
as of the date of this Certificate.
A. ACCOUNTS IN BORROWING BASE
1. Gross Accounts ______________
Less
(a) Ineligible sales or services
(i.e., not within the U.S.) ______________
(b) Owed by an account
debtor who is a Subsidiary
or an Affiliate ______________
(c) Owed by an account
debtor who is in an
insolvency or
reorganization proceeding ______________
(d) Credits/allowances/
retainage ______________
(e) Unpaid more than 120
days ______________
(f) Otherwise ineligible ______________
2. Total Deductions
(sum of lines A1a - A1f) ______________
<PAGE>
3. Eligible Accounts
(line A1 minus line A2) ______________
4. Accounts in Borrowing Base
(line A3 x .75) ______________
B. Revolving Credit Advances
1. Revolving Credit Loans ______________
2. Letters of Credit ______________
3. Total Revolving Credit Outstanding
(line B1 plus B2) ______________
C. Unused Availability
(line A4 minus line B3) ______________
Dated as of this ___________ day of __________________, 19____.
EVEREST HEALTHCARE SERVICES
CORPORATION
By______________________________
___________________, ____________
(Print or Type Name) (Title)
-2-
<PAGE>
EXHIBIT G
COMPLIANCE CERTIFICATE
To: Harris Trust and Savings Bank, as Agent
under, and the Lenders party to, the Credit
Agreement described below
This Compliance Certificate is furnished to the Agent and the Lenders
pursuant to that certain Second Amended and Restated Credit Agreement dated as
of May 18, 1998, by and among Everest Healthcare Services Corporation (the
"Company") and you (the "Credit Agreement"). Unless otherwise defined herein,
the terms used in this Compliance Certificate have the meanings ascribed thereto
in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________________________ of the
Company;
2. I have reviewed the terms of the Credit Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Company and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or the occurrence of any event
which constitutes a Default or Event of Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth below;
4. The financial statements required by Section 7.5 of the Credit
Agreement and being furnished to you concurrently with this Certificate are
true, correct and complete as of the date and for the periods covered thereby;
and
5. The Schedule I hereto sets forth financial data and computations
evidencing the Company's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my knowledge,
true, complete and correct and have been made in accordance with the relevant
Sections of the Credit Agreement.
<PAGE>
-2-
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Company has taken, is taking, or proposes to
take with respect to each such condition or event:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this _________ day of
__________________ 19___.
Everest Healthcare Services
Corporation
By_______________________________________
_______________________, ________________
(Print or Type Name) (Title)
<PAGE>
SCHEDULE I
TO COMPLIANCE CERTIFICATE
COMPLIANCE CALCULATIONS
FOR MAY 18, 1998 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
CALCULATIONS AS OF _____________, 199____
================================================================================
A. CURRENT RATIO (SECTION 7.7)
1. Consolidated current assets $___________
2. Consolidated current liabilities $___________
3. Ratio of line A1 to A2 _____: 1.0
4. Line A3 ratio must not be less than 1.0: 1.0
5. The Company is in compliance (circle yes or no) yes/no
B. TOTAL SENIOR FUNDED DEBT TO TOTAL CAPITALIZATION (SECTION 7.8)
1. Total Funded Debt $___________
2. Principal owing on Subordinated Debt ___________
3. Line B1 minus B2 ("Total Senior Funded Debt") ___________
4. Net Worth ___________
5. Sum of Line B1 and B4 ("Total Capitalization") ___________
6. Ratio of Line B3 to B5 ____: 1.0
7. Line B6 ratio not to exceed ____: 1.0
8. The Company is in compliance (circle yes or no) yes/no
C. TOTAL SENIOR FUNDED DEBT TO ADJUSTED EBITDA (SECTION 7.9)
1. Total Funded Debt $___________
2. Principal owing on Subordinated Debt ___________
<PAGE>
-2-
3. Line C1 minus C2 ("Total Senior Funded Debt") ___________
4. Net Income for past 4 quarters ___________
5. Interest Expense for past 4 quarters (relating
to operations owned for 4 quarters then ended) ___________
6. Income Taxes for past 4 quarters (relating to
operations owned for 4 quarters then ended) ___________
7. Depreciation and Amortization Expense for past
4 quarters (relating to operations owned for
4 quarters then ended) ___________
8. Non-recurring acquisition expenses (relating to
operations owned for 4 quarters then ended) ___________
9. Sum of Lines C4, C5, C6, C7 and C8 ___________
10. Net Income arising out of Acquired Business
for past 4 quarters (for Acquired Business owned for
less than 1 quarter) ___________
11. Interest Expense arising out of Acquired Business
for past 4 quarters (for Acquired Business owned
for less than 1 quarter) ___________
12. Income Taxes arising out of Acquired Business
for past 4 quarters (for Acquired Business owned
for less than 1 quarter) ___________
13. Depreciation and Amortization Expense arising
out of Acquired Business for past 4 quarters (for
Acquired Business owned for less than 1 quarter) ___________
14. Non-recurring expenses and revenue arising out
of Acquired Business for past 4 quarters (for
Acquired Business owned for less than 1 quarter) ___________
15. Sum of Lines C10, C11, C12, C13 and C14
("Acquisition EBITDA") ___________
16. Net Income arising out of Acquired Business since
Acquisition (for Acquired Business owned more
than 1 quarter but less than 4 quarters) ___________
<PAGE>
-3-
17. Interest Expense arising out of Acquired Business
since Acquisition (for Acquired Business owned
more than 1 quarter but less than 4 quarters) ___________
18. Income Taxes arising out of Acquired Business
since Acquisition (for Acquired Business owned
more than 1 quarter but less than 4 quarters) ___________
19. Depreciation and Amortization Expense arising
out of Acquired Business since Acquisition (for
Acquired Business owned more than 1 quarter but
less than 4 quarters) ___________
20. Non-recurring expenses and revenue arising out
of Acquired Business since Acquisition (for
Acquired Business owned more than 1 quarter but
less than 4 quarters) ___________
21. Sum of Lines C16, C17, C18, C19 and C20 ___________
22. 365 divided by number of days since Acquisition ___________
23. Line 21 multiplied by Line 22 ___________
24. Sum of Lines 9, 15, 23 ("Adjusted EBITDA") ___________
25. Ratio of Line C3 to C24 ____: 1.0
26. Line C25 ratio must not exceed ____: 1.0
27. The Company is in compliance (circle yes or no) yes/no
D. NET WORTH (SECTION 7.10)
1. Net Worth $___________
2. Line D1 shall not be less than $___________
3. The Company is in compliance (circle yes or no) yes/no
E. FIXED CHARGE COVERAGE RATIO (SECTION 7.11)
1. EBITDA (Line C9 above) for past 4 quarters $___________
<PAGE>
-4-
2. Principal payments on Indebtedness for Borrowed
Money for past 4 quarters $___________
3. Interest Expense for past 4 quarters $___________
4. Sum of Line E2 and E3 ("Fixed Charges") $___________
5. Ratio of Line E1 to Line E4 ____: 1.0
6. Line E5 ratio must not be less than ____: 1.0
7. The Company is in compliance (circle yes or no) yes/no
F. PATIENT TREATMENTS (SECTION 7.12)
1. Active patients as of last day of measurement
period ___________
2. Line F1 must not be less than ___________
3. The Company is in compliance (circle yes or no) yes/no
<PAGE>
EXHIBIT H
OPINION OF COUNSEL
<PAGE>
[LETTERHEAD OF KATTEN MUCHIN & ZAVIS APPEARS HERE]
May 18, 1998
Harris Trust and Savings Bank, as
Agent, and the Lenders who are
or become a party to the Second
Amended and Restated Credit
Agreement referred to below
Ladies and Gentlemen:
We have acted as counsel to EVEREST HEALTHCARE SERVICES CORPORATION, a
Delaware corporation (the "Company"), in connection with that certain Second
Amended and Restated Credit Agreement dated as of MAY 18, 1998 (the "Credit
Agreement") by and among the Company, Harris Trust and Savings Bank,
individually and as agent (in such capacity, the "Agent"), and the Lenders named
therein. Capitalized terms used herein, but not otherwise defined herein, shall
have the meanings ascribed to such terms in the Credit Agreement.
We also have acted as counsel to the following subsidiaries of the Company
in connection with their incurrence of certain obligations arising under or in
connection with the Loan Documents (as defined below):
1. Amarillo Acute Dialysis Specialists, L.L.C., a Texas limited liability
company ("AMARILLO ACUTE");
2. Con-Med Supply Company, Inc., an Illinois corporation ("CON-MED");
3. Continental Health Care, Ltd., an Illinois corporation ("CONTINENTAL");
4. Dialysis Services of Cincinnati, Inc., an Ohio corporation ("CINCINNATI");
5. Dialysis Specialists of Corpus Christi, L.L.C., a Texas limited liability
company ("CORPUS CHRISTI");
6. Dialysis Specialists of South Texas, L.L.C., a Texas limited liability
company ("DSST");
7. DuPage Dialysis, Ltd., an Illinois corporation ("DUPAGE");
8. Everest Management, Inc., a Delaware corporation ("EVEREST MANAGEMENT");
9. Hemo Dialysis of Amarillo, L.L.C., a Texas limited liability company
("HEMO");
10. Home Dialysis of America, Inc., an Arizona corporation ("HDA");
11. Home Dialysis of Dayton, Inc., an Ohio corporation ("HDD");
12. Home Dialysis of Eastgate, Inc., an Ohio corporation ("HDE");
13. Home Dialysis of Mount Auburn, Inc., an Ohio corporation ("HDM");
<PAGE>
[LETTERHEAD OF KATTEN MUCHIN & ZAVIS APPEARS HERE]
Harris Trust and Savings Bank
Re: KMZ Opinion Letter/Everest
May 18, 1998
Page 2
14. Lake Avenue Dialysis Center, Inc., an Indiana corporation ("LAKE AVENUE");
15. Mercy Dialysis Center, Inc., a Wisconsin corporation ("MERCY");
16. New York Dialysis Management, Inc., a New York corporation ("NEW YORK
DIALYSIS");
17. North Buckner Dialysis Center, Inc., a Delaware corporation (NORTH
BUCKNER");
18. Northwest Indiana Dialysis, Inc., an Indiana corporation ("NORTHWEST");
19. Ohio Valley Dialysis Center, Inc., an Indiana corporation ("OHIO VALLEY");
20. Perfusion Resource Association, L.L.C., a Delaware limited liability
company ("PRA");
21. Saint Margaret Mercy Dialysis Centers, L.L.C., an Illinois limited
liability company ("Saint Margaret");
22. The Extracorporeal Alliance, L.L.C., a Delaware limited liability company
("ALLIANCE");
23. Tri-State Perfusion, L.L.C. a Delaware limited liability company ("TRI-
STATE"); and
24. WSKC Dialysis Services, Inc., an Illinois corporation ("WSKC");
(Alliance, Amarillo Acute, Cincinnati, Con-Med, Continental, Corpus Christi,
DSST, DuPage, Everest Management, HDA, HDD, HDE, HDM, Hemo, Lake Avenue, Mercy,
New York Dialysis, North Buckner, Northwest, Ohio Valley, PRA, Saint Margaret,
Tri-State and WSKC hereinafter are referred to individually as a "Subsidiary
Guarantor" and collectively as the "Subsidiary Guarantors"). This opinion is
delivered to you at the request of our clients pursuant to Section 6.2 of the
Credit Agreement.
In rendering the opinion set forth herein, we have examined:
(i) the Credit Agreement;
(ii) the Consent and Reaffirmation of Guaranty and Security Documents;
(iii) the Notes; and
(iv) the Amended and Restated Mortgage and Security Agreement with
Assignment of Rents (Florida).
(the documents described in clauses (i) through (iv) preceding hereinafter are
referred to collectively as the "Loan Documents").
We also have examined and are familiar with:
<PAGE>
[LETTERHEAD OF KATTEN MUCHIN & ZAVIS APPEARS HERE]
Harris Trust and Savings Bank
Re: KMZ Opinion Letter/Everest
May 18, 1998
Page 3
(i) a copy of the Articles or Certificate of Incorporation and bylaws of
each of the Company, Cincinnati, Con-Med, Continental, DuPage, Everest
Management, HDA, HDD, HDE, HDM, Lake Avenue, Mercy, New York Dialysis, North
Buckner, Northwest, Ohio Valley and WSKC (hereinafter referred to individually
as a "Corporate Obligor," and collectively as the "Corporate Obligors"), and a
copy of the Articles of Organization or Certificate of Formation and the
Operating Agreement, or its functional equivalent, of Alliance, Amarillo Acute,
Corpus Christi, DSST, Hemo, PRA, Saint Margaret and Tri-State (hereinafter
referred to individually as an "LLC Obligor" and collectively as the "LLC
Obligors");
(ii) the Certificates of Good Standing for the Company and each of the
Subsidiary Guarantors (hereinafter individually as a "Transaction Party" and
collectively as the "Transaction Parties"); and
(iii) a copy, certified by an appropriate officer of the Company and each
Corporate Obligor, of certain resolutions adopted by the board of directors of
the Company and each such Corporate Obligor.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures (other than those on behalf of any Transaction Party), the
authenticity of the documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as certified,
conformed or reproduced copies.
We have assumed further that:
(i) all natural persons involved in the transaction contemplated by the
Loan Documents (the "Transactions") have sufficient legal capacity to enter into
and perform their respective obligations under the Loan Documents and to carry
out their roles in the Transactions;
(ii) each party to any Loan Document, other than any Transaction Party
(collectively, the "Other Parties"), has satisfied all legal requirements that
are applicable to it to the extent necessary to make such Loan Document
enforceable against it;
(iii) each of the Other Parties has complied with all legal requirements
pertaining to its status as such status relates to its rights to enforce any
Loan Document to which it is a party against any Transaction Party which is a
party thereto;
(iv) the conduct of the parties to any Loan Document complies with any
requirement of good faith, fair dealing and conscionability;
(v) there has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence; and
(vi) all statutes, judicial and administrative decisions, and rules and
regulations of governmental agencies applicable to this opinion generally are
available to lawyers practicing in Illinois and are in a format that makes legal
research reasonably feasible.
<PAGE>
[LETTERHEAD OF KATTEN MUCHIN & ZAVIS APPEARS HERE]
Harris Trust and Savings Bank
Re: KMZ Opinion Letter/Everest
May 18, 1998
Page 4
In rendering this opinion, as to questions of fact material to this
opinion, we have relied, to the extent we have deemed such reliance appropriate,
without investigation, upon certificates and other communications from public
officials, upon a certificate (the "Officer's Certificate") of an officer of
each of the Transaction Parties attached hereto as Exhibit A, and upon
representations of the Transaction Parties set forth in the Loan Documents.
Wherever we indicate that our opinion with respect to the existence or
absence of facts is based on our knowledge, our opinion is based solely on the
current actual knowledge of the attorneys in this firm who are representing the
Transaction Parties in connection with the execution and delivery of the Loan
Documents, and we have conducted no special investigation of factual matters in
connection with this opinion.
The opinion set forth below is subject to the following qualifications:
(i) the effects of bankruptcy, insolvency, reorganization, receivership,
moratorium, fraudulent conveyance and other similar laws affecting the rights
and remedies of creditors generally; and
(ii) the effects of general principles of equity, whether applied by a
court of law or equity, with respect to the performance and enforcement of the
Loan Documents.
Based upon the foregoing and subject to the qualifications stated herein,
we are of the opinion that:
1. Each of the Corporate Obligors is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has the requisite corporate power and authority to carry on its business as
now conducted.
2. Each of the LLC Obligors is a limited liability company duly organized
and validly existing and in good standing under the laws of the state of its
organization and has the requisite power and authority to carry on its business
as now conducted.
3. Each Transaction Party has all requisite power and authority to enter
into, deliver and perform its obligations under the Loan Documents to which such
Person is a party.
4. The execution, delivery and performance by each Transaction Party of
each Loan Document to which such Person is a party have been duly authorized by
all requisite action and such Loan Documents have been duly executed and
delivered by each Transaction Party which is a party thereto.
5. Each Loan Document to which any Transaction Party is a party constitutes
the legal, valid and binding obligation of such Person enforceable against such
Person in accordance with its terms.
6. Except for those already obtained, no order, authorization, consent,
license or exemption of, or filing or registration with, any court or
governmental department, agency, instrumentality or regulatory body, whether
local, state or federal, is or will be required in connection with the lawful
execution and delivery of the Loan Documents to which any Transaction Party is a
party or the observance and performance by such Person of any of the terms
thereof.
<PAGE>
[LETTERHEAD OF KATTEN MUCHIN & ZAVIS APPEARS HERE]
Harris Trust and Savings Bank
Re: KMZ Opinion Letter/Everest
May 18, 1998
Page 5
7. The execution and delivery by each Transaction Party of each Loan
Document to which such Person is a party and the performance by such Person of
such Person's obligations thereunder do not: (i) violate the Articles or
Certificate of Incorporation and bylaws of such Person or the Certificate of
Formation or operating agreement of such Person, as appropriate, or (ii) result
in a breach of any of the terms or conditions of any laws or regulations
applicable to such Person; provided, however, that we express no opinion to the
extent any such performance requires any reassignment of any Medicare or
medicaid receivables.
The opinions expressed above are limited to the laws of the State of
Illinois, the General Corporation Law of the State of Delaware, the Delaware
Limited Liability Company Act and the laws of the United States of America, and
we do not express any opinion herein concerning any other law. In addition, we
express no opinion herein concerning any statutes, ordinances, administrative
decisions, rules or regulations of any county, town, municipality or special
political subdivision (whether created or enabled through legislative action at
the federal, state or regional level) brought to our attention. This opinion is
solely for the information of the addressees hereof and is not to be quoted in
whole or in part or otherwise referred to, nor is it to be filed with any
governmental agency or any other person or entity without our prior written
consent. No one other than the addressees hereof is entitled to rely upon this
opinion. This opinion is rendered solely for the purposes stated herein and
should not be relied upon for any other purpose. This opinion is limited to the
matters set forth herein and no opinion is intended to be implied or may be
inferred beyond those expressly stated herein. This opinion is given as of the
date hereof and we assume no obligation to advise you of changes which hereafter
may be brought to our attention.
Respectfully Submitted,
KATTEN MUCHIN & ZAVIS
/s/ Katten Muchin & Zavis
<PAGE>
OFFICER'S CERTIFICATE
---------------------
THE UNDERSIGNED hereby delivers this Officer's Certificate to Katten Muchin
& Zavis for its use in connection with the delivery of its letter of opinion of
even date herewith (the "KMZ Opinion"), delivered pursuant to that certain
Second Amended and Restated Credit Agreement dated as of May 18, 1998 (the
"Credit Agreement") by and among the Company (all capitalized terms not
otherwise defined herein shall have the meanings given to such terms in the KMZ
Opinion), the Lenders and the Agent. The undersigned hereby certifies to
Katten Muchin & Zavis as follows:
1. The undersigned is an officer of each Transaction Party and is familiar
with the matters set forth herein with respect to each Transaction Party.
2. The correct legal name, together with the state of incorporation or
organization, as applicable, of each Transaction Party, is set forth on
Schedule 1 hereto.
----------
3. Schedule 2 hereto lists all Persons in which any Transaction Party has an
----------
ownership interest of 51% or greater.
By: /s/ John B. Bourke
---------------------------------
John B. Bourke, an authorized
officer of each Transaction Party
<PAGE>
EXHIBIT A
---------
SCHEDULE 1
----------
================================================================================
TRANSACTION STATE OF
PARTY ORGANIZATION
- --------------------------------------------------------------------------------
Amarillo Acute Dialysis Specialists, L.L.C. Texas
- --------------------------------------------------------------------------------
Con-Med Supply Company, Inc. Illinois
- --------------------------------------------------------------------------------
Continental Health Care, Ltd. Illinois
- --------------------------------------------------------------------------------
Dialysis Services of Cincinnati, Inc. Ohio
- --------------------------------------------------------------------------------
Dialysis Specialists of Corpus Christi, L.L.C. Texas
- --------------------------------------------------------------------------------
Dialysis Specialists of South Texas, L.L.C. Texas
- --------------------------------------------------------------------------------
DuPage Dialysis, Ltd. Illinois
- --------------------------------------------------------------------------------
Everest Healthcare Services Corporation Delaware
- --------------------------------------------------------------------------------
Everest Management, Inc. Delaware
- --------------------------------------------------------------------------------
Hemo Dialysis of Amarillo, L.L.C. Texas
- --------------------------------------------------------------------------------
Home Dialysis of America, Inc. Arizona
- --------------------------------------------------------------------------------
Home Dialysis of Dayton, Inc. Ohio
- --------------------------------------------------------------------------------
Home Dialysis of Eastgate, Inc. Ohio
- --------------------------------------------------------------------------------
Home Dialysis of Mount Auburn, Inc. Ohio
- --------------------------------------------------------------------------------
Lake Avenue Dialysis Center, Inc. Indiana
- --------------------------------------------------------------------------------
Mercy Dialysis Center, Inc. Wisconsin
- --------------------------------------------------------------------------------
New York Dialysis Management, Inc. New York
- --------------------------------------------------------------------------------
North Buckner Dialysis Center, Inc. Delaware
- --------------------------------------------------------------------------------
Northwest Indiana Dialysis, Inc. Indiana
- --------------------------------------------------------------------------------
Ohio Valley Dialysis Center, Inc. Indiana
- --------------------------------------------------------------------------------
Perfusion Resource Association, L.L.C. Delaware
- --------------------------------------------------------------------------------
Saint Margaret Mercy Dialysis Centers, L.L.C. Delaware
- --------------------------------------------------------------------------------
The Extracorporeal Alliance, L.L.C. Delaware
- --------------------------------------------------------------------------------
Tri-State Perfusion, L.L.C. Delaware
- --------------------------------------------------------------------------------
WSKC Dialysis Services, Inc. Illinois
================================================================================
<PAGE>
EXHIBIT A
---------
SCHEDULE 2
----------
<TABLE>
<CAPTION>
Percentage of
Ownership Interest in
Transaction Party Subsidiary Subsidiary
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Continental Health Care, Ltd. 100%
DuPage Dialysis, Inc. 100%
Everest Management, Inc. 100%
Home Dialysis of America, Inc. 100%
Lake Avenue Dialysis Center, Inc. 100%
Mercy Dialysis Center, Inc. 100%
Everest Healthcare Services
Corporation New York Dialysis Management, Inc. 100%
North Buckner Dialysis Center, Inc. 100%
Northwest Indiana Dialysis, Inc. 100%
Ohio Valley Dialysis Center, Inc. 100%
Saint Margaret Mercy Dialysis Centers, Inc. 80%
The Extracorporeal Alliance, L.L.C. 80%
WSKC Dialysis Services, Inc. 100%
- ---------------------------------------------------------------------------------------------------------
Amarillo Acute Dialysis Specialists, L.L.C. 100%
Dialysis Services of Cincinnati, Inc. 65%
Dialysis Specialists of Corpus Christi, L.L.C. 100%
Dialysis Specialists of South Texas, L.L.C. 100%
Home Dialysis of America, Inc. Hemo Dialysis of Amarillo, L.L.C. 100%
Home Dialysis of Dayton, Inc. 100%
Home Dialysis of Eastgate, Inc. 60.9%
Home Dialysis of Mount Auburn, Inc. 80.5%
- ---------------------------------------------------------------------------------------------------------
Continental Health Care, Ltd. Con-Med Supply Company, Inc. 100%
- ---------------------------------------------------------------------------------------------------------
Perfusion Resource Association, L.L.C. 70%
The Extracorporeal Alliance, L.L.C. Tri-State Perfusion, L.L.C. 51%
=========================================================================================================
</TABLE>
<PAGE>
EXHIBIT I
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19_____
Reference is made to the Second Amended and Restated Credit Agreement dated
as of May 18, 1998 (the "Credit Agreement") among Everest Healthcare Services
Corporation, a Delaware corporation (the "Company"), the Lenders (as defined in
the Credit Agreement) and Harris Trust and Savings Bank, as Agent for the
Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein
with the same meaning.
_____________________________________________________ (the "Assignor") and
_________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a _______% interest in
and to all of the Assignor's rights and obligations under the Credit Agreement
as of the Effective Date (as defined below), including, without limitation, such
percentage interest in the Assignor's Commitments as in effect on the Effective
Date and the Loans, if any, owing to the Assignor on the Effective Date and the
Assignor's Percentage of any outstanding L/C Obligations, if any.
2. The Assignor (i) represents and warrants that as of the date hereof
(A) its Revolving Credit Commitment is $____________, its Acquisition Financing
Commitment is $____________, and its Supplemental Revolving Credit Commitment is
$____________, (B) the aggregate outstanding principal amount of Loans made by
it under the Credit Agreement that have not been repaid is $____________
($____________ Revolving Loans, $___________ Term Loan, $_____________
Acquisition Financing Loans, and $______________ Supplemental Revolving Loans)
and a description of the interest rates and interest periods for such Loans is
attached as Schedule I hereto, and (C) the aggregate principal amount of
Assignor's outstanding L/C Obligations is $___________; (ii) represents and
warrants that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim, lien, or encumbrance of any kind; (iii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; and (iv) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or any
Subsidiary or the performance or observance by the Company or any Subsidiary of
any of their respective obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered to the Lenders pursuant to in Section 7.5(b) and (c) thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (ii)
agrees that it will, independently and without reliance upon
<PAGE>
the Agent, the Assignor 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 the Credit Agreement;
(iii) appoints and authorizes the Agent to take such action as Agent on its
behalf and to exercise such powers under the Credit Agreement as are delegated
to the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender; and (v) specifies as its lending
offices (and address for notices) the offices set forth beneath its name on the
signature pages hereof.
4. As consideration for the assignment and sale contemplated in Section 1
hereof, the Assignee shall pay to the Assignor on the date hereof in Federal
funds an amount equal to $________________./*/ It is understood that commitment
and/or Letter of Credit fees accrued to the date hereof with respect to the
interest assigned hereby are for the account of the Assignor and such fees
accruing from and including the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it receives any
amount under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to the
extent of such other party's interest therein and shall promptly pay the same to
such other party.
5. The effective date for this Assignment and Acceptance shall be
_____________, 19__ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Company for its
acceptance on behalf of the Company and to the Agent for acceptance and
recording by the Agent.
6. Upon such acceptance and recording, as of the Effective Date, (i) the
Assignee shall be a party to the Credit Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
7. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments under the Credit Agreement in respect of the
interest assigned hereby (including, without limitation, all payments of
principal, interest and commitment fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in payments
under the Credit Agreement for periods prior to the Effective Date directly
between themselves.
8. In accordance with Section 11.18 of the Credit Agreement, the Assignor
and the Assignee request and direct that the Agent prepare and cause the Company
to execute and deliver to the Assignee Notes payable to the Assignee in the
amount of its Commitments and new Notes to the Assignor in the amount of its
Commitments after giving effect to the assignment hereunder.
______________________
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or
by formula rather than as a fixed sum.
-2-
<PAGE>
9. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
[ASSIGNOR LENDER]
By_________________________________
Name_____________________________
Title____________________________
[ASSIGNEE LENDER]
By_________________________________
Name_____________________________
Title____________________________
Lending Office (and
address for notices):
Accepted and consented this _____ day of
___________, 19__
Everest Healthcare Services Corporation
By ___________________________________
Name_______________________________
Title______________________________
Accepted and consented to by the Agent
this ______ day of ___________, 19__
Harris Trust and Savings Bank, as Agent
By ___________________________________
Name_______________________________
Title______________________________
-3-
<PAGE>
SCHEDULE I
PRINCIPAL TYPE OF LAST DAY OF
AMOUNT LOAN INTEREST RATE INTEREST PERIOD
<PAGE>
SCHEDULE 4.1
RESTRICTED SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE
NAME OF ORGANIZATION OWNERSHIP
<S> <C> <C>
WSKC Dialysis Services, Inc. Illinois 100%/1/
Ohio Valley Dialysis Center, Inc. Indiana 100%/1/
Northwest Indiana Dialysis, Inc. Indiana 100%/1/
New York Dialysis Management, Inc. New York 100%/1/
Mercy Dialysis Center, Inc. Wisconsin 100%/1/
DuPage Dialysis, Ltd. Illinois 100%/1/
Lake Avenue Dialysis Center, Inc. Indiana 100%/1/
Home Dialysis of America, Inc. Arizona 100%/1/
Amarillo Acute Dialysis Specialists, L.L.C. Texas 100%/2/
Dialysis Specialists of Corpus Christi, L.L.C. Texas 100%/2/
Home Dialysis of Eastgate, Inc. Ohio 95%/2/
Dialysis Services of Cincinnati, Inc. Ohio 65%/2/
Saint Margaret Mercy Dialysis Centers, L.L.C. Illinois 80%/1/
Everest Management, Inc. Delaware 100%/1/
The Extracorporeal Alliance, L.L.C. Delaware 80%/1/
Continental Health Care, Ltd. Illinois 100%/1/
</TABLE>
_____________
/1/ owned by Everest Healthcare Services Corporation
/2/ owned by Home Dialysis of America. Inc
-1-
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE
NAME OF ORGANIZATION OWNERSHIP
<S> <C> <C>
Con-Med Supply Company, Inc. Illinois 100%/3/
North Buckner Dialysis Center, Inc. Delaware 100%/1/
Home Dialysis of Mount Auburn, Inc. Ohio 80.5%/2/
Dialysis Specialists of South Texas, L.L.C. Texas 100%/4/
Hemo Dislyais of Amarillo, L.L.C. Texas 100%/2/
Tri-State Perfusion, L.L.C. Delaware 51%/5/
Perfusion Resource Association, L.L.C. Delaware 70%/5/
Home Dialysis of Dayton, Inc. Ohio 100%/2/
</TABLE>
________________
/3/ owned by Continental Health Care, Ltd
/4/ owned 77.8% by Home Dialysis of America, Inc.; 22.2% by Everest Healthcare
Services Corporation
/5/ owned by The Extracorporeal Alliance, L.L.C.
<PAGE>
SCHEDULE 5.2
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION
OF PERCENTAGE
NAME ORGANIZATION OWNERSHIP
<S> <C> <C>
WSKC Dialysis Services, Inc. Illinois 100%/1/
Ohio Valley Dialysis Center, Inc. Indiana 100%/1/
Northwest Indiana Dialysis, Inc. Indiana 100%/1/
New York Dialysis Management, Inc. New York 100%/1/
Mercy Dialysis Center, Inc. Wisconsin 100%/1/
DuPage Dialysis, Ltd. Illinois 100%/1/
Lake Avenue Dialysis Center, Inc. Indiana 100%/1/
Home Dialysis of America, Inc. Arizona 100%/1/
Amarillo Acute Dialysis Specialists, L.L.C. Texas 100%/2/
Dialysis Specialists of Corpus Christi, L.L.C. Texas 100%/2/
Home Dialysis of Eastgate, Inc. Ohio 95%/2/
Dialysis Specialists of Marietta, Ltd. Ohio 51%/2/
Dialysis Services of Cincinnati, Inc. Ohio 65%/2/
Saint Margaret Mercy Dialysis Centers, L.L.C. Illinois 80%/1/
Everest Management, Inc. Delaware 100%/1/
</TABLE>
________________
/1/ owned by everest Healthcare Services Corporation
/2/ owned by Home Dialysis of America, Inc.
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION
OF PERCENTAGE
NAME ORGANIZATION OWNERSHIP
<S> <C> <C>
The Extracorporeal Alliance, L.L.C. Delaware 80%/1/
Continental Health Care, Ltd. Illinois 100%/1/
Con-Med Supply Company, Inc. Illinois 100%/3/
North Buckner Dialysis Center, Inc. Delaware 100%/1/
Home Dialysis of Mount Auburn, Inc. Ohio 80.5%/2/
Dialysis Specialists of South Texas, L.L.C. Texas 100%/4/
Hemo Dialysis of Amarillo, L.L.C. Texas 100%/2/
Tri-State Perfusion, L.L.C. Delaware 51%/5/
Perfusion Resource Association, L.L.C. Delaware 70.%/5/
Home Dialysis of Dayton, Inc. Ohio 100%/2/
Dialysis Specialists of Northeast Ohio, Ltd. Ohio 51%/1/
</TABLE>
_____________________
/3/ owned by Continental Health Care, Ltd.
/4/ owned 77.8% by Home Dialysis of America, Inc.; 22.2% by Everest Healthcare
Services Corporation
/5/ owned by The Extracorporeal Alliance, L.L.C.
<PAGE>
SCHEDULE 5.12
TAX MATTERS
AS OF MAY 18, 1998, EXTENSIONS WERE IN EFFECT FOR THE FOLLOWING TAX RETURNS OF
EACH OF THE FOLLOWING ENTITLES:
<TABLE>
====================================================================================================
<S> <C>
EVEREST HEALTHCARE SERVICES, INC. NEW YORK DIALYSIS MANAGEMENT, INC.
--------------------------------- ----------------------------------
FEDERAL INCOME TAX RETURN (CONSOLIDATED) NEW YORK CORPORATE RETURN
ILLINOIS INCOME TAX RETURN (CONSOLIDATED) NEW YORK MTA SURCHARGE RETURN
INDIANA INCOME TAX RETURN NEW YORK CITY GENERAL CORPORATE TAX
LOUISIANA INCOME TAX RETURN
NEBRASKA CORPORATE INCOME TAX RETURN
OHIO FRANCHISE / INCOME TAX RETURN
MERCY DIALYSIS CENTER, INC.
---------------------------
WISCONSIN INCOME TAX RETURN
HOME DIALYSIS OF EASTGATE, INC.
-------------------------------
OHIO INCOME TAX RETURN
CINCINNATI INCOME TAX RETURN OHIO VALLEY DIALYSIS CENTER, INC.
---------------------------------
INDIANA INCOME TAX RETURN
AMARILLO ACUTE DIALYSIS SPECIALISTS. L.L.C. DUPAGE DIALYSIS, LTD.
------------------------------------------- ---------------------
TEXAS FRANCHISE RETURN INDIANA INCOME TAX RETURN
DIALYSIS SPECIALISTS OF CORPUS CHRISTI. L.L.C. *DIALYSIS SPECIALISTS OF SOUTH TEXAS, L.L.C.
---------------------------------------------- -------------------------------------------
TEXAS FRANCHISE RETURN TEXAS FRANCHISE RETURN
NORTHWEST INDIANA DIALYSIS, INC. HOME DIALYSIS OF MOUNT AUBURN, INC.
------------------------------- -----------------------------------
INDIANA INCOME TAX RETURN OHIO FRANCHISE / INCOME TAX RETURN
LAKE AVENUE DIALYSIS CENTER, INC. HOME DIALYSIS OF AMARILLO, L.L.C.
--------------------------------- ---------------------------------
INDIANA INCOME TAX RETURN TAXES FRANCHISE RETURN
WEST SUBURBAN KIDNEY CENTER, INC. DIALYSIS SERVICES OF CINCINNATI, INC.
--------------------------------- -------------------------------------
INDIANA INCOME TAX RETURN OHIO FRANCHISE / INCOME TAX RETURN
====================================================================================================
</TABLE>
* Since no payments will be required, the filing of an extension is not
necessary.
* * *
OTHER TAXES ASSESSMENTS, FEES AND GOVERNMENTAL CHARGES
AS OF
MAY 18, 1998
NONE
<PAGE>
SCHEDULE 5.14
AFFILIATE TRANSACTIONS
1. NANI-IL. Nephrology Associates of Northern Illinois, Ltd. ("NANI-IL") is a
medical service corporation that provides dialysis and dialysis related
services.
. Company pays NANI-IL consulting fee of $1,284,920 per year (plus an
incentive fee of no greater than $80,080 per year).
. Under a management services agreement between NANI-IL and the Company,
NANI-IL pays the Company an annual fee of $825,000 for certain
administrative services.
. NANI-IL has a loan payable to the Company of approximately
$6,811,897.34 (as of March 31, 1998). The loan payable bears interest
at the prime rate plus 1% per annum and is due on demand.
2. ARE Partnership. The founding directors of the Company, along with two of
its shareholders, are partners in the ARE Partnership. ARE owns real
property which it leases to the Company and certain of its subsidiaries.
The Company is in the process of purchasing the real estate owned by ARE.
3. Three M&L Partnership. Three M&L Partnership, owned by one of the Company's
directors and one of the Company's shareholders, owns three properties on
which certain dialysis facilities of the Company and certain of its
subsidiaries are located. They are:
Location Lease Term Rent
-------- ---------- ----
3501-3 North Avenue, Chicago expired February 1, 1997 $2,979 per month
(month to month)
7718 Claremont, Chicago expired August 31, 1993 $2,050 per month
(month to month)
7723 S. Western, Chicago expires August 31, 1998 $1,053 per month
4. Security General. Security General is a partnership owned by the Company's
founding directors and the Company's chief financial officer. Security
General owns a 6.67% interest in an insurance company which provides
property, casualty and worker compensation insurance to the Company and its
subsidiaries.
<PAGE>
Exhibit 4.7
REVOLVING CREDIT NOTE
Chicago, Illinois
$10,500,000.00 May 18, 1998
On the Termination Date, for value received, the undersigned, EVEREST
HEALTHCARE SERVICES CORPORATION, a Delaware corporation (the "Company") hereby
promises to pay to the order of HARRIS TRUST AND SAVINGS BANK (the "Lender"), at
the principal office of Harris Trust and Savings Bank in Chicago, Illinois, the
principal sum of (i) Ten Million Five Hundred Thousand Dollars ($10,500,000.00),
or (ii) such lesser amount as may at the time of the maturity hereof, whether by
acceleration or otherwise, be the aggregate unpaid principal amount of all
Revolving Loans owing from the Company to the Lender under the Credit Agreement
hereinafter mentioned.
This Note evidences Revolving Loans constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain Second
Amended and Restated Credit Agreement dated as of May 18, 1998, among the
Company, Harris Trust and Savings Bank, individually and as Agent, and the
other Lenders which are now or may from time to time hereafter become parties
thereto (said Credit Agreement, as the same may from time to time be modified,
amended or restated being referred to herein as the "Credit Agreement") made and
to be made to the Company by the Lender under the Credit Agreement, and the
Company hereby promises to pay interest at the office specified above on each
Revolving Loan evidenced hereby at the rates and times specified therefor in the
Credit Agreement.
Each Revolving Loan made under the Credit Agreement by the Lender to the
Company against this Note, any repayment of principal hereon, the status of each
such loan from time to time as part of the Domestic Rate Portion or a LIBOR
Portion, in the case of any LIBOR Portion, and the interest rates and Interest
Periods applicable thereto shall be endorsed by the holder hereof on the reverse
side of this Note or recorded on the books and records of the holder hereof
(provided that such entries shall be endorsed on the reverse side hereof prior
to any negotiation hereof). The Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the entries so
endorsed on the reverse side hereof or recorded on the books and records of the
Lender shall be prima facie evidence of the unpaid balance of this Note, the
status of each loan from time to time as part of a Domestic Rate Portion or a
LIBOR Portion and, in the case of any LIBOR Portion, the interest rates and
Interest Periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made hereon, all
in the events, on the terms and with the effects provided in the Credit
Agreement. All
<PAGE>
capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
Illinois without regard to principles of conflicts of law.
Everest Healthcare Services
Corporation
By /s/ John B. Bourke
-----------------------------
Name John B. Bourke
-----------------------
Title CFO
-----------------------
-2-
<PAGE>
Exhibit 4.8
Acquisition Financing Note
Chicago, Illinois
$19,500,000.00 May 18, 1998
On the Acquisition Financing Termination Date, for value received, the
undersigned, Everest Healthcare Services Corporation, a Delaware corporation
(the "Company"), hereby promises to pay to the order of Harris Trust and Savings
Bank (the "Lender), at the principal office of Harris Trust and Savings Bank in
Chicago, Illinois, the principal sum of (i) Nineteen Million Five Hundred
Thousand Dollars ($19,500,000.00), or (ii) such lesser amounts as may at the
time of maturity hereof, whether by acceleration or otherwise, be the aggregate
unpaid principal amount of all Acquisition Financing Loans owing from the
Company to the Lender under the Credit Agreement hereinafter mentioned.
This Note evidences Acquisition Financing Loans constituting part of a
"Domestic Rate Portion" and "LIBOR Portions" as such terms are defined in that
certain Second Amended and Restated Credit Agreement dated as of May 18, 1998,
among the Company, Harris Trust and Savings Bank, individually and as Agent
thereunder, and the other Lenders which are now or may from time to time
hereafter become parties thereto (said Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to herein as the
"Credit Agreement") made and to be made to the Company by the Lender under the
Credit Agreement, and the Company hereby promises to pay interest at the office
specified above on each Acquisition Financing Loan evidenced hereby at the rates
and at the times specified therefor in the Credit Agreement.
Each Acquisition Financing Loan made under the Credit Agreement by the
Lender to the Company against this Note, any repayment of principal hereon, the
status of such loan from time to time as part of the Domestic Rate Portion or a
LIBOR Portion and, in the case of any LIBOR Portion, the interest rate and
Interest Period applicable thereto shall be endorsed by the holder hereof on
the reverse side of this Note or recorded on the books and records of the holder
hereof (provided that such entries shall be endorsed on the reverse side of this
Note prior to any negotiation hereof). The Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the entries
so endorsed on the reverse side of this Note or recorded on the books and
records of the holder hereof shall be prima facie evidence of the unpaid balance
of this Note and the status of each loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayment are required to be made hereon, all
in the events, on the terms and with the effects provided in the Credit
Agreement. All
<PAGE>
capitalized terms used herein without definition shall have the same meanings
herein as such terms are defined in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
Illinois without regard to principles of conflicts of law.
Everest Healthcare Services
Corporation
By /s/ John B. Bourke
-----------------------------
Name John B. Bourke
-----------------------
Title CFO
-----------------------
-2-
<PAGE>
Exhibit 4.9
SUPPLEMENTAL REVOLVING CREDIT NOTE
Chicago, Illinois
$4,500,000.00 May 18, 1998
On the Supplemental Revolving Credit Termination Date, for value received,
the undersigned, Everest Healthcare Services Corporation, a Delaware corporation
(the "Company") hereby promises to pay to the order of HARRIS TRUST AND SAVINGS
BANK (the "Lender"), at the principal office of Harris Trust and Savings Bank in
Chicago, Illinois, the principal sum of (i) Four Million Five Hundred Thousand
Dollars ($4,500,000.00), or (ii) such lesser amount as may at the time of the
maturity hereof whether by acceleration or otherwise, be the aggregate unpaid
principal amount of all Supplemental Revolving Loans owing from the Company to
the Lender under the Credit Agreement hereinafter mentioned.
This Note evidences Supplemental Revolving Loans constituting part of a
"Domestic Rate Portion" and "LIBOR Portions" as such terms are defined in that
certain Second Amended and Restated Credit Agreement dated as of May 18, 1998,
among the Company, Harris Trust and Savings Bank, individually and as Agent, and
the other Lenders which are now or may from time to time hereafter become
parties thereto (said Credit Agreement, as the same may from time to time be
modified, amended or restated being referred to herein as the "Credit
Agreement") made and to be made to the Company by the Lender under the Credit
Agreement, and the Company hereby promises to pay interest at the office
specified above on each Supplemental Revolving Loan evidenced hereby at the
rates and times specified therefor in the Credit Agreement.
Each Supplemental Revolving Loan made under the Credit Agreement by the
Lender to the Company against this Note, any repayment of principal hereon, the
status of each such loan from time to time as part of the Domestic Rate Portion
or a LIBOR Portion, in the case of any LIBOR Portion, and the interest rates and
Interest Periods applicable thereto shall be endorsed by the holder hereof on
the reverse side of this Note or recorded on the books and records of the holder
hereof (provided that such entries shall be endorsed on the reverse side hereof
prior to any negotiation hereof). The Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the entries
so endorsed on the reverse side hereof or recorded on the books and records of
the Lender shall be prima facie evidence of the unpaid balance of this Note, the
status of each loan from time to time as part of a Domestic Rate Portion or a
LIBOR Portion and, in the case of any LIBOR Portion, the interest rates and
Interest Periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made hereon, all
of the events, on the terms and with the effects provided in the Credit
Agreement. All
<PAGE>
capitalized terms used herein without definition shall have the same meanings
herein as such terms are defined in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
Illinois without regard to principles of conflicts of law.
Everest Healthcare Services
Corporation
By /s/ John B. Bourke
-----------------------------
Name John B. Bourke
-----------------------
Title CFO
-----------------------
-2-
<PAGE>
Exhibit 4.10
Amended and Restated Security Agreement
This Amended and Restated Security Agreement (the "Agreement") is dated as
of May 15, 1997, by and among Everest Healthcare Services Corporation, a
Delaware corporation (the "Company"), and the other parties executing this
Agreement under the heading "Debtors" (the Company and such other parties, along
with any parties who execute and deliver to the Agent an agreement attached
hereto as Schedule D, being hereinafter referred to collectively as the
"Debtors" and individually as a "Debtor"), each with its mailing address as set
forth on its signature page hereto, and Harris Trust and Savings Bank, an
Illinois banking corporation ("Harris"), with its mailing address at 111 West
Monroe Street, P.O. Box 755, Chicago, Illinois 60690, acting as agent hereunder
for the Lenders hereinafter identified and defined (Harris acting as such agent
and any successor or successors to Harris acting in such capacity being
hereinafter referred to as the "Agent");
Preliminary Statements
A. The Company and Harris, individually and as agent, have entered into
an Amended and Restated Credit Agreement dated as of even date herewith (such
Amended and Restated Credit Agreement as the same may be amended, modified or
restated from time to time being hereinafter referred to as the "Credit
Agreement"), pursuant to which Harris and other lenders which from time to time
become party to the Credit Agreement (Harris and such other lenders which from
time to time hereafter become party to the Credit Agreement being hereinafter
referred to collectively as the "Lenders" and individually as a "Lender") have
agreed, subject to certain terms and conditions, to extend credit and make
certain other financial accommodations available to the Company.
B. The Company may from time to time enter into one or more interest rate
exchange, cap, collar, floor or other agreements with one or more of the Lenders
party to the Credit Agreement for the purpose of hedging or otherwise protecting
the Company against changes in interest rates (the liability of the Company in
respect of such agreements with such Lenders being hereinafter referred to as
the "Hedging Liability").
C. As a condition to extending credit to the Company under the Credit
Agreement, the Lenders have required, among other things, that (i) each Debtor,
other than the Company, guarantee all indebtedness, obligations and liabilities,
whether now existing or hereafter arising, of the Company under or arising out
of the Credit Agreement pursuant to that certain Amended and Restated Guaranty
Agreement dated as of even date herewith between such Debtors and the Agent, as
the same may be amended, modified, supplemented and/or restated from time to
time (the "Guaranty") and (ii) each Debtor, including the Company, grant to the
Agent a lien on and
<PAGE>
security interest in the personal property of such Debtor described herein
subject to the terms and conditions hereof.
D. The Company owns, directly or indirectly, all or substantially all of
the equity interests in each other Debtor and the Company provides each other
Debtor with financial, management, administrative, and technical support which
enables such Debtor to conduct its business in an orderly and efficient manner
in the ordinary course.
E. Each Debtor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Lenders to the Company.
Now, Therefore, for and in consideration of the execution and delivery by
the Lenders of the Credit Agreement, and other good and valuable consideration,
receipt whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Terms defined in Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Debtor" and "Debtors" as used herein
shall mean and include the Debtors collectively and also each individually, with
all grants, representations, warranties and covenants of and by the Debtors, or
any of them, herein contained to constitute joint and several grants,
representations, warranties and covenants of and by the Debtors; provided,
however, that unless the context in which the same is used shall otherwise
require, any grant, representation, warranty or covenant contained herein
related to the Collateral shall be made by each Debtor only with respect to the
Collateral owned by it or represented by such Debtor as owned by it.
Section 2. Grant of Security Interest in the Collateral; Obligations
Secured. (a) Each Debtor hereby grants to the Agent for the benefit of itself
and the other Lenders a lien on and security interest in, and right of set-off
against, and acknowledges and agrees that the Agent has and shall continue to
have for the benefit of itself and the other Lenders a continuing lien on and
security interest in, and right of set-off against, any and all right, title and
interest of each Debtor, whether now owned or existing or hereafter created,
acquired or arising, in and to the following:
(i) Receivables. All Receivables, whether now owned or existing or
hereafter created, acquired or arising, and however evidenced or acquired,
or in which such Debtor now has or hereafter acquires any rights (the term
"Receivables" means and includes all accounts, accounts receivable,
contract rights, instruments, notes, drafts, acceptances, documents,
chattel paper, any right of such Debtor to payment for goods sold or leased
or for services rendered, whether or not earned by performance, and all
other forms of obligations owing to such Debtor, and all of such Debtor's
rights to any merchandise or
-2-
<PAGE>
other goods (including without limitation any returned or repossessed goods
and the right of stoppage in transit) which is represented by, arises from
or is related to any of the foregoing);
(ii) General Intangibles. All General Intangibles, whether now
owned or existing or hereafter created, acquired or arising, or in which
such Debtor now has or hereafter acquires any rights (the term "General
Intangibles" means and includes all general intangibles, all patents,
patent applications, patent licenses, trademarks, trademark registrations,
trademark licenses, trade styles, trade names, copyrights, copyright
registrations, copyright licenses and other licenses and similar
intangibles, all customer, client and supplier lists (in whatever form
maintained), all rights in leases and other agreements relating to real or
personal property, all causes of action and tax refunds of every kind and
nature, all privileges, franchises, immunities, licenses, permits and
similar intangibles, all rights to receive payments in connection with the
termination of any pension plan or employee stock ownership plan or trust
established for the benefit of employees of such Debtor and all other
personal property (including things in action) not otherwise covered by
this Agreement;
(iii) Inventory. All Inventory, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights and all documents of title at any time
evidencing or representing any part thereof (the term "Inventory" means and
includes all inventory and other goods which are held for sale or lease or
are to be furnished under contracts of service or consumed in such Debtor's
business, all goods which are raw materials, work-in-process, finished
goods, materials or supplies of every kind and nature, in each case used or
usable in connection with the acquisition, manufacture, processing, supply,
servicing, storing, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and any constituents or ingredients thereof, and
all goods which are returned or repossessed goods);
(iv) Equipment. All Equipment, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights (the term "Equipment" means and includes all
equipment and other machinery, tools, fixtures, trade fixtures, furniture,
furnishings, office equipment, vehicles (including vehicles subject to a
certificate of title law) and all other goods now or hereafter used or
usable in connection with such Debtor's business, together with all parts,
accessories and attachments relating to any of the foregoing);
(v) Investment Property. All Investment Property, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "Investment
Property" means and includes all
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<PAGE>
investment property and all other securities (whether certificated or
uncertificated), security entitlements, securities accounts, commodity
contracts, and commodity accounts, including all substitutions and
additions thereto, all dividends, distributions and sums distributable or
payable from, upon, or in respect of such property, and all rights and
privileges incident to such property);
(vi) Deposits and Property in Possession. All deposit accounts
(whether general, specific or otherwise) of such Debtor maintained with the
Agent or any of the Lenders and all sums now or hereafter on deposit
therein or payable thereon, and any and all other property and interests in
property which now is or may from time to time hereafter come into the
possession, custody or control of the Agent or any of the Lenders, or any
agent of any of them, in any way and for any purpose (whether for
safekeeping, custody, pledge, transmission, collection or otherwise);
(vii) Records. All supporting evidence and documents relating to
any of the above-described property, including, without limitation,
computer programs, disks, tapes and related electronic data processing
media, and all rights of such Debtor to retrieve the same from third
parties, written applications, credit information, account cards, payment
records, correspondence, delivery and installation certificates, invoice
copies, delivery receipts, notes and other evidences of indebtedness,
insurance certificates and the like, together with all books of account,
ledgers and cabinets in which the same are reflected or maintained, all
whether now existing or hereafter arising;
(viii) Accessions and Additions. All accessions and additions to
and substitutions and replacements of any and all of the foregoing, whether
now existing or hereafter arising; and
(ix) Proceeds and Products. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof, whether
now existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "Collateral".
All terms which are used herein which are defined in the Uniform Commercial Code
of the State of Illinois ("UCC") shall have the same meanings herein as such
terms are defined in the UCC, unless this Agreement shall otherwise specifically
provide.
(b) This Agreement is made and given to secure, and shall secure, the
prompt payment and performance of (i) any and all indebtedness, obligations and
liabilities of the Debtors, of any of them, to the Agent and the Lenders, and
any of them, under or in connection with or evidenced by the Credit Agreement,
the Notes of the Company heretofore or hereafter
-4-
<PAGE>
issued under the Credit Agreement and the obligations of the Company to
reimburse the Agent and the Lenders for the amount of all drawings on all
Letters of Credit issued for the account of the Company pursuant to the Credit
Agreement, and all other obligations of the Company under any and all
applications for Letters of Credit, or under or in connection with or otherwise
evidenced by the Guaranty or any of the other Loan Documents, or under or in
connection with or otherwise evidenced by agreements with any one or more of the
Lenders with respect to Hedging Liability, in each case whether now existing or
hereafter arising (and whether arising before or after the filing of a petition
in bankruptcy), due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired and (ii) any and all
expenses and charges, legal or otherwise, suffered or incurred by the Agent and
the Lenders, and any of them, in collecting or enforcing any of such
indebtedness, obligations and liabilities or in realizing on or protecting or
preserving any security therefor, including, without limitation, the lien and
security interest granted hereby (all of the indebtedness, obligations,
liabilities, expenses and charges described above being hereinafter referred to
as the "Obligations"). Notwithstanding anything in this Agreement to the
contrary, the right of recovery against any Debtor (other than the Company to
which this limitation shall not apply) under this Agreement shall not exceed
$1.00 less than the amount which would render such Debtor's obligations under
this Agreement void or voidable under applicable law, including fraudulent
conveyance law.
Section 3. Covenants, Agreements, Representations and Warranties.
The Debtors hereby covenant and agree with, and represent and warrant to, the
Agent and the Lenders that:
(a) Each Debtor is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization,
is the sole and lawful owner of the Collateral granted by it hereunder and
has the power and authority to enter into this Agreement and to perform
each and all of the matters and things herein provided for. Each Debtor's
Federal tax identification number is set forth under its name under Column
1 on Schedule A.
(b) Each Debtor's respective chief executive office is at the
location listed under Column 2 on Schedule A attached hereto opposite such
Debtor's name; and such Debtor has no other executive offices or places of
business other than those listed under Column 3 on Schedule A attached
hereto opposite such Debtor's name. The Collateral owned or leased by each
Debtor is and shall remain in such Debtor's possession or control at the
locations listed under Columns 2 and 3 on Schedule A attached hereto
opposite such Debtor's name (collectively for each Debtor, the "Permitted
Collateral Locations"). If for any reason any Collateral is at any time
kept or located at a location other than a Permitted Collateral Location,
the Agent shall nevertheless have and retain a lien on and security
interest therein. No Debtor shall move its chief executive office or
maintain a place of business at a location other than those specified under
Columns 2 or 3
-5-
<PAGE>
on Schedule A or permit any Collateral to be located at a location other
than a Permitted Collateral Location, in each case without first providing
the Agent 30 days prior written notice of the Debtor's intent to do so;
provided that each Debtor shall at all times maintain its chief executive
office and places of business and Permitted Collateral Locations in the
United States of America and, with respect to any new chief executive
office or place of business or location of Collateral, such Debtor shall
have taken all action reasonably requested by the Agent to maintain the
lien and security interest of Agent in the Collateral at all times fully
perfected and in full force and effect.
(c) The Collateral and every part thereof is and shall be free and
clear of all security interests, liens (including, without limitation,
mechanics', laborers' and statutory liens), attachments, levies and
encumbrances of every kind, nature and description and whether voluntary or
involuntary, except for the lien and security interest of the Agent therein
and other Liens permitted by Section 7.14 of the Credit Agreement (herein,
the "Permitted Encumbrances"). Each Debtor shall warrant and defend the
Collateral against any claims and demands of all persons at any time
claiming the same or any interest in the Collateral adverse to the Agent or
any Lender.
(d) Each Debtor will promptly pay when due all taxes, assessments
and governmental charges and levies upon or against it or its Collateral,
in each case before the same become delinquent and before penalties accrue
thereon, unless and to the extent that the same are being contested in good
faith by appropriate proceedings which prevent foreclosure on or other
realization upon any Collateral and preclude interference with the
operation of its business in the ordinary course and such Debtor shall have
established adequate reserves therefor.
(e) Each Debtor agrees it will not waste or destroy the Collateral
or any part thereof and will not be negligent in the care or use of any
Collateral. Each Debtor agrees it will not use, manufacture, sell or
distribute any Collateral in violation of any statute, ordinance or other
governmental requirement. Each Debtor will perform in all material
respects its obligations under any contract or other agreement constituting
part of the Collateral, it being understood and agreed that the Agent and
the Lenders have no responsibility to perform such obligations.
(f) Subject to Sections 4(b), 5(a), 6(b), 6(c), and 7(c) hereof and
the terms of the Credit Agreement (including, without limitation, Section
7.16 thereof), each Debtor agrees it will not, without the Agent's prior
written consent, sell, assign, mortgage, lease or otherwise dispose of the
Collateral or any interest therein.
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<PAGE>
(g) Each Debtor will insure its Collateral which is insurable
against such risks and hazards as other companies similarly situated insure
against, and including in any event loss or damage by fire, theft,
burglary, pilferage, and loss in transit, in amounts and under policies
containing loss payable clauses to the Agent as its interest may appear
(and, if the Agent requests, naming the Agent and the Lenders as additional
insureds therein) by insurers reasonably acceptable to the Agent. All
premiums on such insurance shall be paid by the Debtors and the policies of
such insurance (or certificates therefor) delivered to the Agent. All
insurance required hereby shall provide that any loss shall be payable
notwithstanding any act or negligence of the relevant Debtor, shall provide
that no cancellation thereof shall be effective until at least 30 days
after receipt by the relevant Debtor and the Agent of written notice
thereof, and shall be reasonably satisfactory to the Agent in all other
respects. In case of any material loss, damage to or destruction of the
Collateral or any part thereof, the relevant Debtor shall promptly give
written notice thereof to the Agent and the Lenders generally describing
the nature and extent of such damage or destruction. In case of any loss,
damage to or destruction of the Collateral or any part thereof, the
relevant Debtor, whether or not the insurance proceeds, if any, received on
account of such damage or destruction shall be sufficient for that purpose,
at such Debtor's cost and expense, will promptly repair or replace the
Collateral so lost, damaged or destroyed, except to the extent such
Collateral is not necessary to the conduct of such Debtor's business in the
ordinary course and such Collateral and all other Collateral lost, damaged
or destroyed during the immediately preceding twelve (12) calendar months
had an aggregate fair market value, prior to its loss, damage or
destruction, of less than $250,000. In the event any Debtor shall receive
any proceeds of such insurance, such Debtor will immediately pay over such
proceeds to the Agent; provided that, in the absence of any continuing
Event of Default, such Debtor shall be entitled to such insurance proceeds
to the extent and in the manner provided for in this Section 3(g). Each
Debtor hereby authorizes the Agent, at the Agent's option, to adjust,
compromise and settle any losses under any insurance afforded at any time
after the occurrence and during the continuation of any Event of Default,
and such Debtor does hereby irrevocably constitute the Agent, its officers,
agents and attorneys, as such Debtor's attorneys-in-fact, with full power
and authority after the occurrence and during the continuation of any Event
of Default to effect such adjustment, compromise and/or settlement and to
endorse any drafts drawn by an insurer of the Collateral or any part
thereof and to do everything necessary to carry out such purposes and to
receive and receipt for any unearned premiums due under policies of such
insurance. Unless the Agent elects to adjust, compromise or settle losses
as aforesaid, any adjustment, compromise and/or settlement of any losses
under any insurance shall be made by the relevant Debtor subject to final
approval of the Agent (regardless of whether or not an Event of Default
shall have occurred) in the case of losses exceeding $250,000. Net
insurance proceeds received by the Agent under the provisions hereof or
under any policy
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or policies of insurance covering the Collateral or any part thereof
pursuant to the terms hereof shall be applied to the reduction of the
Obligations (whether or not then due); provided, however, that the Agent
agrees to release such insurance proceeds to the relevant Debtor for
replacement or restoration of the portion of the Collateral lost, damaged
or destroyed required by this Agreement to be so replaced or restored if,
but only if, (i) at the time of release no Event of Default exists
hereunder, (ii) written application for such release is received from such
Debtor within 30 days of receipt of, or in the event received by the Agent
notice of Agent's receipt of, such proceeds and (iii) the Agent has
received evidence reasonably satisfactory to it that the Collateral lost,
damaged or destroyed has been or will be replaced. All insurance proceeds
shall be subject to the lien and security interest of the Agent hereunder.
Unless the Debtors provide the Agent with evidence of the insurance
coverage required by this Agreement, the Agent may purchase insurance at
the Debtors' expense to protect the Agent's interests in the Collateral.
This insurance may, but need not, protect any debtor's interests in the
Collateral. The coverage purchased by the Agent may not pay any claims
that any Debtor makes or any claim that is made against such Debtor in
connection with the Collateral. The Debtors may later cancel any such
insurance purchased by the Agent, but only after providing the Agent with
evidence that the Debtors have obtained insurance as required by this
Agreement. If the Agent purchases insurance for the Collateral, the
Debtors will be responsible for the costs of that insurance, including
interest and any other charges that the Agent may impose in connection with
the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance
may be added to the Obligations secured hereby. The costs of the insurance
may be more than the cost of insurance the Debtors may be able to obtain on
their own.
(h) Each Debtor will, at all times allow the Agent, any Lender, and
their respective representatives free access to and right of inspection of
the Collateral; provided, however, that in the absence of any continuing
Event of Default any such access or inspection shall only be required at
reasonable times during such Debtor's normal business hours upon prior
written notice to such Debtor and otherwise in accordance with Section 7.6
of the Credit Agreement.
(i) If any Collateral is in the possession or control of any agents
or processors of a Debtor and the Agent so requests, such Debtor agrees to
notify such agents or processors in writing of the Agent's security
interest therein and instruct them to hold all
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such Collateral for the Agent's account and subject to the Agent's
instructions. Each Debtor will, upon request of the Agent, authorize and
instruct all bailees and any other parties (except patients in possession
of Collateral consisting of supplies for such person's patient care
treatments), if any, at any time processing, labeling, packaging, holding,
storing, shipping or transferring all or any part of the Collateral to
permit the Agent, any Lender and their respective representatives to
examine and inspect any of the Collateral then in such party's possession
and to verify from such party's own books and records any information
concerning the Collateral or any part thereof which the Agent, any Lender
or their respective representatives may seek to verify. As to any premises
not owned by a Debtor wherein any of the Collateral is located, if any,
such Debtor shall, upon the Agent's request, use reasonable efforts to
cause each party having any right, title or interest in, or lien on, any of
such premises to enter into an agreement (any such agreement to contain a
legal description of such premises) whereby such party disclaims any right,
title and interest in, and lien on, the Collateral, allowing the removal of
such Collateral by the Agent or by the Lenders and otherwise in form and
substance reasonably acceptable to the Agent.
(j) Each Debtor agrees from time to time to deliver to the Agent and
any Lender such evidence of the existence, identity and location of its
Collateral and of its availability as collateral security pursuant hereto
(including, without limitation, schedules describing all Receivables
created or acquired by such Debtor, copies of customer invoices or the
equivalent and original shipping or delivery receipts for all merchandise
and other goods sold or leased or services rendered by it, together with
such Debtor's warranty of the genuineness thereof, and reports stating the
book value of its Inventory and Equipment by major category and location),
in each case as the Agent or such Lender may reasonably request. The Agent
shall have the right to verify all or any part of the Collateral in any
manner, and through any medium, which the Agent considers appropriate
(including, without limitation, the verification of Collateral by use of a
fictitious name), and each Debtor agrees to furnish all assistance and
information, and perform any acts, which the Agent may reasonably require
in connection therewith, provided that, unless an Event of Default has
occurred and is continuing, the Agent shall not contact any account debtor
with respect to any of the foregoing matters without the relevant Debtor's
prior written consent.
(k) Each Debtor will comply in all material respects with the terms
and conditions of any and all leases, easements, right-of-way agreements
and other agreements binding upon such Debtor or affecting the Collateral,
in each case which cover the premises wherein the Collateral is located,
and any orders, ordinances, laws or statutes of any city, state or other
governmental entity, department or agency having jurisdiction with respect
to such premises or the conduct of business thereon.
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(l) No Debtor has invoiced Receivables or otherwise transacted
business, and does not invoice Receivables or otherwise transact business,
under any trade names other than its name set forth on its signature page
to this Agreement or as otherwise set forth on Exhibit B hereto. Each
Debtor agrees it will not change its name or transact business under any
other trade name, in each case without first giving the Agent 30 days'
prior written notice of its intent to do so.
(m) Each Debtor agrees to execute and deliver to the Agent such
further agreements, assignments, instruments and documents, and to do all
such other things, as the Agent may reasonably deem necessary or
appropriate to assure the Agent its lien and security interest hereunder,
including without limitation, (i) executing such financing statement or
other instruments and documents as the Agent may from time to time
reasonably require to comply with the UCC and (ii) executing such patent,
trademark, and copyright agreements as the Agent may from time to time
reasonably require to comply with the filing requirements of the United
States Patent and Trademark Office and the United States Copyright Office.
Each Debtor hereby agrees that a carbon, photographic or other reproduction
of this Agreement or any such financing statement is sufficient for filing
as a financing statement by the Agent without prior notice thereof to such
Debtor wherever the Agent in its sole discretion desires to file the same
(and Agent agrees to provide the relevant Debtor notice after any such
filing is made pursuant to this provision, provided the failure to give
such notice shall not affect the validity or enforceability of the relevant
filing). In the event for any reason the law of any jurisdiction other
than Illinois becomes or is applicable to the Collateral or any part
thereof, or to any of the Obligations, each Debtor agrees to execute and
deliver all such instruments and documents and to do all such other things
as the Agent reasonably deems necessary or appropriate to preserve, protect
and enforce the security interest of the Agent under the law of such other
jurisdiction. Each Debtor agrees to mark its corporate records to reflect
the security interest of the Agent in such Debtor's Collateral.
(n) On failure of a Debtor to perform any of the covenants and
agreements herein contained, the Agent may at its option, after two
Business Days' prior notice to such Debtor (unless in the reasonable
judgment of the Agent immediate payment or performance is necessary to
protect or preserve the Collateral or the Agent's interest therein),
perform the same and in so doing may expend such sums as the Agent
reasonably deems advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any
taxes, liens and encumbrances (except to the extent the relevant Pledgor is
contesting the same in good faith in accordance with the terms of Section
7.3 of the Credit Agreement), expenditures made in defending against any
adverse claims, and all other expenditures which the Agent may be compelled
to make by operation of law or which the Agent may make by agreement or
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otherwise for the protection of the security hereof. All such sums and
amounts so expended shall be repayable by such Debtor immediately without
notice or demand, shall constitute additional Obligations secured
hereunder, and shall bear interest from the date said amounts are expended
at the rate per annum (computed on the basis of a year of 365 or 366 days,
as the case may be, for the actual number of days elapsed) determined by
adding 2% to the Domestic Rate from time to time in effect with any change
in such rate per annum as so determined by reason of a change in such
Domestic Rate to be effective on the date of such change in said Domestic
Rate (such rate per annum as so determined being hereinafter referred to as
the "Default Rate"). No such performance of any covenant or agreement by
the Agent on behalf of a Debtor, and no such advancement or expenditure
therefor, shall relieve any Debtor of any default under the terms of this
Agreement or in any way obligate the Agent or any Lender to take any
further or future action with respect thereto. The Agent in making any
payment hereby authorized may do so according to any bill, statement or
estimate procured from the appropriate public office or holder of the claim
to be discharged without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax assessment, sale, forfeiture,
tax lien or title or claim. The Agent in performing any act hereunder
shall be the sole judge (which judgment shall be reasonably exercised) of
whether the relevant Debtor is required to perform the same under the terms
of this Agreement. The Agent is hereby authorized to charge any depository
or other account of any Debtor maintained with the Agent for the amount of
such sums and amounts so expended.
Section 4. Special Provisions Re: Receivables. (a) As of the time
any Receivable becomes subject to the security interest provided for hereby and
at all times thereafter, each Debtor shall be deemed to have warranted as to
each and all of its Receivables that all warranties of such Debtor set forth in
this Agreement are true and correct with respect to each such Receivable; that
each of its Receivable and all papers and documents relating thereto are genuine
and in all respects what they purport to be; that each of its Receivable is
valid and existing and, if such Receivable is an account, arises out of a bona
fide sale of goods sold and delivered by such Debtor to, or in the process of
being delivered to, or out of and for services theretofore actually rendered by
such Debtor to, the account debtor named therein; that no such Receivable is
evidenced by any instrument or chattel paper unless such instrument or chattel
paper has theretofore been endorsed by such Debtor and delivered to the Agent
(except to the extent the aggregate unpaid amount of such instruments and
chattel paper not so endorsed and delivered is less than $100,000 at any one
time outstanding); that no surety bond was required or given in connection with
such Receivable or the contracts or purchase orders out of which the same arose;
and that if said Receivable is scheduled, listed or referred to on any
certificate evidencing the Borrowing Base or is otherwise a Receivable which
such Debtor wants the Lenders to consider an Eligible Account, that said
Receivable qualifies as an Eligible Account. If any Receivable arises out of a
contract with the United States of America or any of its departments, agencies
or
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instrumentalities, after the occurrence and during the continuance of any
Event of Default, the relevant Debtor agrees to notify the Agent and, at the
request of the Agent or the Required Lenders, execute whatever instruments and
documents are required by the Agent in order that such Receivable shall be
assigned to the Agent and that proper notice of such assignment shall be given
under the federal Assignment of Claims Act (or any successor statute) or any
similar statute relating to the assignment of such Receivables.
(b) Unless and until an Event of Default hereunder occurs and is
continuing, any merchandise or other goods which are returned by a customer or
account debtor or otherwise recovered may be resold by the relevant Debtor in
the ordinary course of its business as presently conducted in accordance with
Section 6(b) hereof; upon the occurrence and during the continuation of any
Event of Default hereunder, such merchandise and other goods shall be set aside
at the request of the Agent and held by such Debtor as trustee for the Agent and
the Lenders and shall remain part of the Collateral. Unless and until an Event
of Default hereunder occurs and is continuing, the relevant Debtor may settle
and adjust disputes and claims with its customers and account debtors, handle
returns and recoveries and grant discounts, credits and allowances in the
ordinary course of its business as presently conducted for amounts and on terms
which such Debtor in good faith considers advisable. Upon the occurrence and
during the continuation of any Event of Default hereunder, unless the Agent
requests otherwise, each Debtor shall notify the Agent promptly of all returns
and recoveries and, on the Agent's request, deliver any such merchandise or
other goods to the Agent. Upon the occurrence and during the continuation of
any Event of Default hereunder, unless the Agent requests otherwise, each Debtor
shall also notify the Agent promptly of all disputes and claims and settle or
adjust them at no expense to the Agent or the Lenders hereunder, but no
discount, credit or allowance other than on normal trade terms in the ordinary
course of business as presently conducted shall be granted to any customer or
account debtor and no returns of merchandise or other goods shall be accepted by
any Debtor without the Agent's consent. The Agent may, at all times upon the
occurrence and during the continuation of any Event of Default hereunder, settle
or adjust disputes and claims directly with customers or account debtors for
amounts and upon terms which the Agent considers advisable.
Section 5. Collection of Receivables. (a) Except as otherwise
provided in this Agreement, each Debtor shall make collection of all of its
Receivables and may use the same to carry on its business in accordance with
sound business practice and otherwise subject to the terms hereof.
(b) Upon the occurrence and during the continuation of any Event of
Default hereunder, whether or not the Agent has exercised any or all of its
rights under other provisions of this Section 5, in the event the Agent requests
any Debtor to do so:
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(i) all instruments and chattel paper at any time constituting part
of the Receivables (including any postdated checks) shall, upon receipt by
such Debtor, be immediately endorsed to and deposited with Agent; and/or
(ii) such Debtor shall instruct all of its customers and account
debtors to remit all payments in respect of its Receivables to a lockbox or
lockboxes under the sole custody and control of Agent and which are
maintained at post offices selected by the Agent.
(c) Upon the occurrence and during the continuation of any Event of
Default hereunder, whether or not the Agent has exercised any or all of its
rights under other provisions of this Section 5, the Agent or its designee may
notify the relevant Debtor's customers and account debtors at any time that
Receivables have been assigned to the Agent or of the Agent's security interest
therein, and either in its own name, or such Debtor's name, or both, demand,
collect (including, without limitation, through a lockbox analogous to that
described in Section 5(b)(ii) hereof), receive, receipt for, sue for, compound
and give acquittance for any or all amounts due or to become due on Receivables,
and in the Agent's discretion file any claim or take any other action or
proceeding which the Agent may deem reasonably necessary or appropriate to
protect and realize upon the security interest of the Agent in the Receivables.
(d) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of Sections
5(b) or 5(c) hereof may be handled and administered by the Agent in and through
a remittance account or accounts maintained at the Agent or by the Agent at a
commercial bank or banks selected by the Agent (collectively the "Depositary
Banks" and individually a "Depositary Bank"), and each Debtor acknowledges that
the maintenance of such remittance accounts by the Agent is solely for the
Agent's convenience and that the Debtors do not have any right, title or
interest in such remittance accounts or any amounts at any time standing to the
credit thereof. The Agent may apply all or any part of any proceeds of
Receivables or other Collateral received by it from any source to the payment of
the Obligations (whether or not then due and payable), such applications to be
made in such amounts, in such manner and order and at such intervals as the
Agent may from time to time in its discretion determine, but not less often than
once each week. The Agent need not apply or give credit for any item included
in proceeds of Receivables or other Collateral until the Depositary Bank has
received final payment therefor at its office in cash or final solvent credits
current at the site of deposit acceptable to the Agent and the Depositary Bank
as such. However, if the Agent does permit credit to be given for any item
prior to a Depositary Bank receiving final payment therefor and such Depositary
Bank fails to receive such final payment or an item is charged back to the Agent
or any Depositary Bank for any reason, the Agent may at its election in either
instance charge the amount of such item back against any such remittance
accounts or any depository account of any Debtor maintained with the Agent,
together
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with interest thereon at the Default Rate. Concurrently with each transmission
of any proceeds of Receivables or other Collateral to any remittance account,
the relevant Debtor shall furnish the Agent with a report in such form as Agent
shall reasonably require identifying the particular Receivable or such other
Collateral from which the same arises or relates. Each Debtor hereby indemnifies
the Agent and the Lenders from and against all liabilities, damages, losses,
actions, claims, judgments, and all reasonable costs, expenses, charges and
attorneys' fees suffered or incurred by the Agent or any Lender because of the
maintenance of the foregoing arrangements; provided, however, that no Debtor
shall be required to indemnify the Agent or any Lender for any of the foregoing
to the extent they arise solely from the gross negligence or willful misconduct
of the person seeking to be indemnified. The Agent and the Lenders shall have no
liability or responsibility to any Debtor for the Agent or any other Depositary
Bank accepting any check, draft or other order for payment of money bearing the
legend "payment in full" or words of similar import or any other restrictive
legend or endorsement whatsoever or be responsible for determining the
correctness of any remittance.
Section 6. Special Provisions Re: Inventory and Equipment. (a) Each
Debtor shall at its own cost and expense maintain, keep and preserve its
Inventory in good and merchantable condition and keep and preserve its Equipment
in good repair, working order and condition, ordinary wear and tear excepted,
and, without limiting the foregoing, make all necessary and proper repairs,
replacements and additions to its Equipment so that the efficiency thereof shall
be fully preserved and maintained, except to the extent that, in the reasonable
business judgment of such Debtor, any of such Equipment is no longer necessary
or useful to the conduct of its business in the ordinary course.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume
and sell the Inventory in the ordinary course of its business, but a sale in the
ordinary course of business shall not under any circumstance include any
transfer or sale in satisfaction, partial or complete, of a debt owing by such
Debtor.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell (x)
obsolete, worn out or unusable Equipment which is concurrently replaced with
similar Equipment at least equal in quality and condition to that sold and owned
by such Debtor free of any lien, charge or encumbrance other than the security
interest granted hereby and (y) Equipment to the extent permitted by Section
7.16 of the Credit Agreement.
(d) As of the time any Inventory or Equipment of a Debtor becomes subject
to the security interest provided for hereby and at all times thereafter, such
Debtor shall be deemed to have warranted as to any and all of such Inventory and
Equipment that all warranties of such
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Debtor set forth in this Agreement are true and correct with respect to such
Inventory and Equipment; that all of such Inventory and Equipment is located at
a location set forth pursuant to Section 3(b) hereof. Each Debtor warrants and
agrees that none of its Inventory is or will be consigned to any other person or
entity without the Agent's prior written consent.
(e) Upon the Agent's or the Required Lenders' request, each Debtor shall
at its own cost and expense cause the lien of the Agent in and to any portion of
its Collateral subject to a certificate of title law to be duly noted on such
certificate of title or to be otherwise filed in such manner as is prescribed by
law in order to perfect such lien and will cause all such certificates of title
and evidences of lien to be deposited with the Agent.
(f) Except for Equipment consisting of water treatment systems and other
leasehold improvements, and except for Equipment from time to time located on
the real estate described on Schedule C attached hereto or as otherwise
hereafter disclosed to the Agent and the Lenders in writing, none of the
Equipment is or will be attached to real estate in such a manner that the same
may become a fixture.
(g) If any of the Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the relevant Debtor to the
Agent.
Section 7. Special Provisions Re: Investment Property. (a) Unless
and until an Event of Default has occurred and is continuing and thereafter
until notified to the contrary by the Agent pursuant to Section 9(d) hereof:
(i) Each Debtor shall be entitled to exercise all voting and/or
consensual powers pertaining to its Investment Property or any part
thereof, for all purposes not inconsistent with the terms of this
Agreement, the Credit Agreement or any other document evidencing or
otherwise relating to any Obligations; and
(ii) Each Debtor shall be entitled to receive and retain all cash
dividends paid upon or in respect of its Investment Property.
(b) Certificates for all securities now or at any time constituting
Investment Property and part of the Collateral hereunder shall be promptly
delivered by the relevant Debtor to the Agent duly endorsed in blank for
transfer or accompanied by an appropriate assignment or assignments or an
appropriate undated stock power or powers, in every case sufficient to transfer
title thereto, including, without limitation, all stock received in respect of a
stock dividend or resulting from a split-up, revision or reclassification of the
Investment Property or any part thereof or received in addition to, in
substitution of or in exchange for the Investment Property or any part thereof
as a result of a merger, consolidation or otherwise. With respect to any
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Investment Property held by a securities intermediary, commodity intermediary,
or other financial intermediary of any kind, the relevant Debtor shall execute
and deliver, and shall cause any such intermediary to execute and deliver, an
agreement among such Debtor, the Agent, and such intermediary in form and
substance satisfactory to the Agent which provides, among other things, for the
intermediary's agreement that it will comply with such entitlement orders, and
apply any value distributed on account of any Investment Property maintained in
an account with such intermediary, as directed by the Agent without further
consent by such Debtor at any time after the occurrence and during the
continuation of any Event of Default. The Agent may at any time after the
occurrence and during the continuation of an Event of Default cause to be
transferred into its name or the name of its nominee or nominees any and all of
the Investment Property hereunder.
(c) Unless and until an Event of Default has occurred and is continuing,
each Debtor may sell or otherwise dispose of any of its Investment Property to
the extent permitted by the Credit Agreement, provided that (i) except to the
extent permitted by Section 7.17 of the Credit Agreement, no Debtor shall sell
or otherwise dispose of any capital stock or other equity interest in any direct
or indirect Subsidiary without the prior written consent of the Agent and (ii)
no Debtor shall sell or otherwise dispose of any of its Investment Property
subject to the terms of a separate security agreement in favor of the Agent
unless permitted by the terms of such separate agreement. During the existence
of any Event of Default, no Debtor shall sell all or any part of the Investment
Property without the prior written consent of the Agent.
(d) Each Debtor represents that on the date of this Agreement, none of
its Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except to
the extent such Debtor has delivered to the Agent a duly executed and completed
Form U-1 with respect to such stock. If at any time the Investment Property or
any part thereof consists of margin stock, the relevant Debtor shall promptly so
notify the Agent and deliver to the Agent a duly executed and completed Form U-1
and such other instruments and documents reasonably requested by the Agent in
form and substance satisfactory to the Agent.
Section 8. Power of Attorney. In addition to any other powers of
attorney contained herein, each Debtor hereby appoints the Agent, its nominee,
or any other person whom the Agent may designate as such Debtor's attorney-in-
fact, with full power to sign such Debtor's name on verifications of accounts
and other Collateral; to send requests for verification of Collateral to such
Debtor's customers, account debtors and other obligors; to endorse such Debtor's
name on any checks, notes, acceptances, money orders, drafts and any other forms
of payment or security that may come into the Agent's possession; to endorse the
Collateral in blank or to the order of the Agent or its nominee; to sign such
Debtor's name on any invoice or bill of lading relating to any Collateral, on
claims to enforce collection of any Collateral, on
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notices to and drafts against customers and account debtors and other obligors,
on schedules and assignments of Collateral, on notices of assignment and on
public records; to notify the post office authorities to change the address for
delivery of such Debtor's mail to an address designated by the Agent; to
receive, open and dispose of all mail addressed to such Debtor; and to do all
things necessary to carry out this Agreement. Each Debtor hereby ratifies and
approves all acts of any such attorney and agrees that neither the Agent nor any
such attorney will be liable for any acts or omissions nor for any error of
judgment or mistake of fact or law other than such person's gross negligence or
willful misconduct. The Agent may file one or more financing statements
disclosing its security interest in any or all of the Collateral without any
Debtor's signature appearing thereon, and each Debtor also hereby grants the
Agent a power of attorney to execute any such financing statements, or
amendments and supplements to financing statements, on behalf of such Debtor
without notice thereof to any Debtor (and Agent agrees to provide the relevant
Debtor notice after any such filing is made pursuant to this provision, provided
the failure to give such notice shall not affect the validity or enforceability
of the relevant filing). The foregoing powers of attorney, being coupled with an
interest, are irrevocable until the Obligations have been fully paid and
satisfied and the commitments of the Lenders to extend credit to or for the
account of the Company have expired or otherwise been terminated; provided,
however, that the Agent agrees, as a personal covenant to the relevant Debtor,
not to exercise the powers of attorney set forth in this Section unless an Event
of Default has occurred and is continuing.
Section 9. Defaults and Remedies. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default, the Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the UCC (regardless
of whether the UCC is the law of the jurisdiction where the rights or remedies
are asserted and regardless of whether the UCC applies to the affected
Collateral), and further the Agent may, without demand and without
advertisement, notice, hearing or process of law, all of which each Debtor
hereby waives to the extent permitted by applicable law, at any time or times,
sell and deliver any or all Collateral held by or for it at public or private
sale, for cash, upon credit or otherwise, at such prices and upon such terms as
the Agent deems advisable, in its sole discretion. In the exercise of any such
remedies, the Agent may sell the Collateral as a unit even though the sales
price thereof may be in excess of the amount remaining unpaid on the
Obligations. Also, if less than all the Collateral is sold, the Agent shall
have no duty to marshal or apportion the part of the Collateral so sold as
between the Debtors, or any of them, but may sell and deliver any or all of the
Collateral without regard to which of the Debtors are the owners thereof. In
addition to all other sums due the Agent or any Lender hereunder, each Debtor
shall pay the Agent and the Lenders all reasonable costs and
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expenses incurred by the Agent and such Lenders, including reasonable attorneys'
fees and court costs, in obtaining, liquidating or enforcing payment of
Collateral or the Obligations or in the prosecution or defense of any action or
proceeding by or against the Agent, the Lenders or any Debtor concerning any
matter arising out of or connected with this Agreement or the Collateral or the
Obligations, including, without limitation, any of the foregoing arising in,
arising under or related to a case under the United States Bankruptcy Code (or
any successor statute). Any requirement of reasonable notice shall be met if
such notice is personally served on or mailed, postage prepaid, to the Debtors
in accordance with Section 13(b) hereof at least 10 days before the time of sale
or other event giving rise to the requirement of such notice; provided, however,
no notification need be given to a Debtor if such Debtor has signed, after an
Event of Default hereunder has occurred, a statement renouncing any right to
notification of sale or other intended disposition. The Agent shall not be
obligated to make any sale or other disposition of the Collateral regardless of
notice having been given. The Agent or any Lender may be the purchaser at any
such sale. Each Debtor hereby waives all of its rights of redemption from any
such sale. Subject to the provisions of applicable law, the Agent may postpone
or cause the postponement of the sale of all or any portion of the Collateral by
announcement at the time and place of such sale, and such sale may, without
further notice, be made at the time and place to which the sale was postponed or
the Agent may further postpone such sale by announcement made at such time and
place. In the event any of the Collateral shall constitute restricted securities
within the meaning of any applicable securities laws, any disposition thereof in
compliance with such laws shall not render the disposition commercially
unreasonable.
(c) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default hereunder, the Agent shall have
the right, in addition to all other rights provided herein or by law, to take
physical possession of any and all of the Collateral and anything found therein,
the right for that purpose to enter without legal process any premises where the
Collateral may be found (provided such entry be done lawfully), and the right to
maintain such possession on the relevant Debtor's premises (each Debtor hereby
agreeing, to the extent it may lawfully do so, to lease such premises without
cost or expense to the Agent or its designee if the Agent so requests) or to
remove the Collateral or any part thereof to such other places as the Agent may
desire. Upon the occurrence and during the continuation of any Event of Default
hereunder, the Agent shall have the right to exercise any and all rights with
respect to deposit accounts of each Debtor maintained with the Agent or any
Lender, including, without limitation, the right to collect, withdraw and
receive all amounts due or to become due or payable under each such deposit
account. Upon the occurrence and during the continuation of any Event of
Default hereunder, each Debtor shall, upon the Agent's demand, assemble the
Collateral and make it available to the Agent at a place designated by the
Agent. If the Agent exercises its right to take possession of the Collateral,
each Debtor shall also at its expense perform any and all other steps requested
by the Agent to preserve and protect the security interest hereby granted in
-18-
<PAGE>
the Collateral, such as placing and maintaining signs indicating the security
interest of the Agent, appointing overseers for the Collateral and maintaining
Collateral records.
(d) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default, all rights of a Debtor to
exercise the voting and/or consensual powers which it is entitled to exercise
pursuant to Section 7(a)(i) hereof and/or to receive and retain the
distributions which it is entitled to receive and retain pursuant to Section
7(a)(ii) hereof, shall, at the option of the Agent, cease and thereupon become
vested in the Agent, which, in addition to all other rights provided herein or
by law, shall then be entitled solely and exclusively to exercise all voting and
other consensual powers pertaining to the Investment Property and/or to receive
and retain the distributions which such Debtor would otherwise have been
authorized to retain pursuant to Section 7(a)(ii) hereof and shall then be
entitled solely and exclusively to exercise any and all rights of conversion,
exchange or subscription or any other rights, privileges or options pertaining
to any Investment Property as if the Agent were the absolute owner thereof
including, without limitation, the rights to exchange, at its discretion, any
and all of the Investment Property upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the respective issuer
thereof or upon the exercise by or on behalf of any such issuer or the Agent of
any right, privilege or option pertaining to any Investment Property and, in
connection therewith, to deposit and deliver any and all of the Investment
Property with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Agent may determine.
(e) Without in any way limiting the foregoing, each Debtor hereby grants
to the Agent and the Lenders a royalty-free irrevocable license and right to use
all of such Debtor's patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade names, trade styles, and
similar intangibles in connection with any foreclosure or other realization by
the Agent or the Lenders on all or any part of the Collateral to the extent
permitted by law. The license and right granted the Agent and the Lenders
hereby shall be without any royalty or fee or charge whatsoever.
(f) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Debtor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. Neither the Agent, nor any Lender, nor any party
acting as attorney for the Agent or any Lender, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact or law
other than their gross negligence or willful misconduct. The rights and
remedies of the Agent and the Lenders under this Agreement shall be cumulative
and not exclusive of any other right or remedy which the Agent or the Lenders
may have. For purposes of this Agreement, an Event of Default shall be
construed as continuing
-19-
<PAGE>
after its occurrence until the same is waived in writing by the Lenders or the
Required Lenders, as the case may be, in accordance with the Credit Agreement.
Section 10. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of, or held as
collateral security for, the Obligations in accordance with the terms of the
Credit Agreement. The Debtors shall remain liable to the Agent and the Lenders
for any deficiency. Any surplus remaining after the full payment and
satisfaction of the Obligations shall be returned to the Company, as agent for
the Debtors, or to whomsoever the Agent reasonably determines is lawfully
entitled thereto.
Section 11. Continuing Agreement. This Agreement shall be a
continuing agreement in every respect and shall remain in full force and effect
until all of the Obligations, both for principal and interest, have been fully
paid and satisfied and the commitments of the Lenders to extend credit to or for
the account of the Company under the Credit Agreement have expired or otherwise
terminated. Upon such termination of this Agreement, the Agent shall, upon the
request and at the expense of the Debtors, forthwith release its security
interest hereunder.
Section 12. The Agent. In acting under or by virtue of this
Agreement, the Agent shall be entitled to all the rights, authority, privileges
and immunities provided in Section 10 of the Credit Agreement, all of which
provisions of said Section 10 are incorporated by reference herein with the same
force and effect as if set forth herein in their entirety. The Agent hereby
disclaims any representation or warranty to the Lenders or any other holders of
the Obligations concerning the perfection of the liens and security interests
granted hereunder or in the value of any of the Collateral.
Section 13. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and
security interest in the Collateral and shall be binding upon each Debtor, its
successors and assigns and shall inure, together with the rights and remedies of
the Agent and the Lenders hereunder, to the benefit of the Agent, the Lenders
and their successors and permitted assigns; provided, however, that no Debtor
may assign its rights or delegate its duties hereunder without the Agent's prior
written consent (except for such assignments and assumptions arising as a matter
of law as a result of a merger permitted by Section 7.16(c) of the Credit
Agreement). Without limiting the generality of the foregoing, and subject to
the provisions of the Credit Agreement, any Lender may assign or otherwise
transfer any indebtedness held by it secured by this Agreement to any other
person, and such other person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise.
-20-
<PAGE>
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Debtor when given to the Company in accordance
with Section 11.9 of the Credit Agreement, or if to the Agent or any Lender,
when given to such party in accordance with Section 11.9 of the Credit
Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure or other realization upon any
Collateral subject to this Agreement or for the execution of any trust or power
hereof or for the appointment of a receiver, or for the enforcement of any other
remedy under or upon this Agreement; it being understood and intended that no
one or more of the Lenders shall have any right in any manner whatsoever to
affect, disturb or prejudice the lien and security interest of this Agreement by
its or their action or to enforce any right hereunder, and that all proceedings
at law or in equity shall be instituted, had and maintained by the Agent in the
manner herein provided for the benefit of the Lenders.
(d) In the event that any provision hereof shall be deemed to be invalid
or unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed as
not containing such provision, but only as to such jurisdictions where such law
or interpretation is operative, and the invalidity or unenforceability of such
provision shall not affect the validity of any remaining provisions hereof, and
any and all other provisions hereof which are otherwise lawful and valid shall
remain in full force and effect. Without limiting the generality of the
foregoing, in the event that this Agreement shall be deemed to be valid or
otherwise unenforceable with respect to any Debtor, such invalidity or
unenforceability shall not affect the validity of this Agreement with respect to
the other Debtors.
(e) The lien and security interest herein created and provided for stand
as direct and primary security for the Obligations of the Company arising under
or otherwise relating to the Credit Agreement as well as for any of the other
Obligations secured hereby. No application of any sums received by the Lenders
in respect of the Collateral or any disposition thereof to the reduction of the
Obligations or any part thereof shall in any manner entitle any Debtor to any
right, title or interest in or to the Obligations or any collateral or security
therefor, whether by subrogation or otherwise, unless and until all Obligations
have been fully paid and satisfied and all agreements of the Lenders to extend
credit to or for the account of each Debtor and to or for the account of the
Company have expired or otherwise have been terminated. Each Debtor
acknowledges that the lien and security interest hereby created and provided are
absolute and unconditional and shall not in any manner be affected or impaired
by any acts of omissions whatsoever of the Agent, any Lender or any other holder
of any Obligations, and without limiting the generality of the foregoing, the
lien and security interest hereof shall not be impaired by any acceptance by the
Lenders or any other holder of any Obligations of any other security for
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<PAGE>
or guarantors upon any of the Obligations or by any failure, neglect or omission
on the part of the Agent, any Lender or any other holder of any Obligations to
realize upon or protect any of the Obligations or any collateral or security
therefor. The lien and security interest hereof shall not in any manner be
impaired or affected by (and the Agent and the Lenders, without notice to
anyone, are hereby authorized to make from time to time) any sale, pledge,
surrender, compromise, settlement, release, renewal, extension, indulgence,
alteration, substitution, exchange, change in, modification or disposition of
any of the Obligations or of any collateral or security therefor, or of any
guaranty thereof, or of any instrument or agreement setting forth the terms and
conditions pertaining to any of the foregoing. The Lenders may at their
discretion at any time grant credit to the Company without notice to the other
Debtors in such amounts and on such terms as the Lenders may elect (all of such
to constitute additional Obligations hereby secured) without in any manner
impairing the lien and security interest created and provided for herein. In
order to realize hereon and to exercise the rights granted the Agent and the
Lenders hereunder and under applicable law, there shall be no obligation on the
part of the Agent, any Lender or any other holder of any Obligations at any time
to first resort for payment to the Company or to any other Debtor or to any
guaranty of the Obligations or any portion thereof or to resort to any other
collateral, security, property, liens or any other rights or remedies
whatsoever, and the Agent and the Lenders shall have the right to enforce this
Agreement against any Debtor or any of its Collateral irrespective of whether or
not other proceedings or steps seeking resort to or realization upon or from any
of the foregoing are pending.
(f) Upon the execution and delivery of this Agreement by the Debtors
hereunder, this Agreement shall as of such date supersede all provisions of the
various Security Agreements executed by the Debtors prior to the date hereof
(the "Prior Security Agreements"). The Debtors hereby agree that,
notwithstanding the execution and delivery of this Agreement, the liens and
security interests created and provided for under the Prior Security Agreements
continue in effect under and pursuant to the terms of this Agreement for the
benefit of all of the Obligations secured hereby. Nothing herein contained
shall in any manner affect or impair the priority of the liens and security
interests created and provided for by the Prior Security Agreements as to the
indebtedness and obligations which would otherwise be secured thereby prior to
giving effect to this Agreement.
(g) In the event the Agent and the Lenders shall at any time in their
discretion permit a substitution of Debtors hereunder or a party shall wish to
become a Debtor hereunder, such substituted or additional Debtor shall, upon
executing an agreement in the form attached hereto as Schedule D, become a party
hereto and be bound by all the terms and conditions hereof to the same extent as
though such Debtor had originally executed this Agreement and, in the case of a
substitution, in lieu of the Debtor being replaced. No such substitution shall
be effective absent the written consent of Agent nor shall it in any manner
affect the obligations of the other Debtors hereunder.
-22-
<PAGE>
(h) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(i) Each Debtor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in the City of Chicago for purposes of all legal
proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. Each Debtor
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient form. Each Debtor, the Agent, and
each Lender hereby irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement, any other Loan
Document or the transactions contemplated hereby or thereby.
(j) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same agreement.
[Signature Pages to Follow]
-23-
<PAGE>
In Witness Whereof, each Debtor has caused this Agreement to be duly
executed and delivered in Chicago, Illinois as of the date first above written.
"Debtors"
Everest Healthcare Services Corporation
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
WSKC Dialysis Services, Inc.
/s/ John B. Bourke
By_______________________________________
Asst. Treasurer
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Ohio Valley Dialysis Center, Inc.
/s/ John B. Bourke
By_______________________________________
Secretary/Treasurer
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-24-
<PAGE>
Northwest Indiana Dialysis, Inc.
/s/ John B. Bourke
By_______________________________________
Asst. Treasurer
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
New York Dialysis Management, Inc.
/s/ John B. Bourke
By_______________________________________
Treasurer
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Mercy Dialysis Center, Inc.
/s/ John B. Bourke
By_______________________________________
Asst. Treasurer
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
DuPage Dialysis, Ltd.
/s/ John B. Bourke
By_______________________________________
Asst. Treasurer
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-25-
<PAGE>
Lake Avenue Dialysis Center, Inc.
/s/ John B. Bourke
By_______________________________________
Asst. Treasurer
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Home Dialysis of America, Inc.
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Amarillo Acute Dialysis Specialists,
L.L.C.
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Dialysis Specialists of Corpus Christi,
L.L.C.
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-26-
<PAGE>
Home Dialysis of Eastagate, Inc.
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Dialysis Services of Cincinnati, Inc.
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Dialysis Specialists of Marietta, Ltd.
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Saint Margaret Mercy Dialysis
Centers, L.L.C.
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-27-
<PAGE>
Everest Management, Inc.
By: Everest Management, Inc., as Manager
/s/ John B. Bourke
By_______________________________________
CFO
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
The Extracorporeal Alliance, L.L.C.
/s/ John B. Bourke
By_______________________________________
Secretary
Its____________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-28-
<PAGE>
Accepted and agreed to in Chicago, Illinois as of the date first above
written.
Harris Trust and Savings Bank,
as Agent as aforesaid for the Lenders
/s/ Michael W. Lewis
By_______________________________________
Senior Vice President
Its____________________________________
Address:
111 West Monroe Street, 4E
P.O. Box 755
Chicago, Illinois 60690
Attention: Ms. Gloria Compean
-29-
<PAGE>
Schedule A
Locations
<TABLE>
<CAPTION>
<S> <C> <C>
Column 1 Column 2 Column 3
Name of Debtor Chief
(and Federal Tax Executive Additional Places
I.D. Number) Office of Business
Everest Healthcare Services 101 North Scoville 1. 1201 South Main Street
Corporation Oak Park, IL 60302 Crown Point, IN 46307
Tax ID #36-4045521 2. 8701 Broadway Avenue
Merrillville, IN 46410
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2 COLUMN 3
<S> <C> <C>
NAME OF DEBTOR CHIEF
(AND FEDERAL TAX EXECUTIVE ADDITIONAL PLACES
I.D. NUMBER) OFFICE OF BUSINESS
WSKC Dialysis Services, Inc. 101 North Scoville 1. 516 South Lincoln
Tax ID #36-2668594 Oak Park, IL 60302 Aurora, IL 60505
2. 2310 York Street
Blue Island, IL 60406
3. 0N025 Winfield Road
Winfield, IL 60190
4. 640 West Washington
Chicago, IL 60606
5. 3825 Highland, No. 102
Downers Grove, IL 60515
6. 820 Biesterfield, #220
Elk Grove Village, IL 60007
7. 4248 Commercial Way
Glenview, IL 60025
8. 3501 West North Avenue
Chicago, IL 60647
9. 7531 South Stony Island
Chicago, IL 60649
10. 100 Spalding Drive, No. 108
Naperville, IL 60566
11. 733 Madison Street
Oak Park, IL 60302
12. 7721 South Western Avenue
Chicago, IL 60620
13. Erie at Austin
Oak Park, IL 60302
14. 7718 South Claremont
Chicago, IL
15. 2701 West Washington
Bellwood, IL 60104
Ohio Valley Dialysis Center, Inc. 101 North Scoville 230 Bellemeade Avenue
Tax ID #36-3575844 Oak Park, IL 60302 Evansville, IN 47713
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2 COLUMN 3
<S> <C> <C>
NAME OF DEBTOR CHIEF
[AND FEDERAL TAX EXECUTIVE ADDITIONAL PLACES
I.D. NUMBER) OFFICE OF BUSINESS
Northwest Indiana Dialysis, Inc. 101 North Scoville 569 Tyler Street
Tax ID #36-3372131 Oak Park, IL 60302 Gary, IN 46402
New York Dialysis Management, Inc. 101 North Scoville 1. 1325 Morris Park Avenue
Tax ID #36-3702390 Oak Park, IL 60302 Bronx, NY 10461
2. 3547 Webster
Bronx, NY 10467
Mercy Dialysis Center, Inc. 101 North Scoville 1000 Mineral Point Road
Tax ID #39-1589773 Oak Park, IL 60302 Janesville, WI 53545
DuPage Dialysis, Ltd. 101 North Scoville 1325 Memorial Drive
Tax ID #36-3029873 Oak Park, IL 60302 LaGrange, IL 60525
Lake Avenue Dialysis Center, Inc. 101 North Scoville 1. 3525 Lake Avenue, No. 4
Tax ID #36-3490713 Oak Park, IL 60302 Ft. Wayne, IN 46805
2. 7017 South Anthony Blvd.
Ft. Wayne, IN 46816
Home Dialysis of America, Inc. 101 North Scoville 6300 East El Dorado Plaza,
Tax ID #86-0711476 Oak Park, IL 60302 Suite 100
Tucson, AZ 85715
Amarillo Acute Dialysis 101 North Scoville 7205 I-40 West
Specialists, L.L.C. Oak Park, IL 60302 Suites A, B, and C
Tax ID #75-2600377 Amarillo, TX 79106
Dialysis Specialists of Corpus 101 North Scoville Raintree Plaza Shopping Center
Christi, L.L.C. Oak Park, IL 60302 Corpus Christi, TX 78411
Tax ID #74-2749663
Home Dialysis of Eastgate, Inc. 101 North Scoville 4578 East Tech Drive
Tax ID #31-1417271 Oak Park, IL 60302 Cincinnati, OH 45245
Dialysis Services of Cincinnati, Inc. 101 North Scoville 2925 Vernon Place, Suite 302
Tax ID #31-1374389 Oak Park, IL 60302 Cincinnati, OH 45243
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3
Name of Debtor Chief
(and Federal Tax) Executive Additional Places
I.D. Number) Office of Business
<S> <C> <C>
Dialysis Specialists of Marietta, Ltd. 101 North Scoville 1. 2906 Washington Blvd.
Tax ID #31-1484219 Oak Park, IL 60302 Belpre, OH 45714
2. Washington Shopping Center
Marietta, OH
Saint Margaret Mercy Dialysis 101 North Scoville 1. 8701 Broadway
Centers, L.L.C. Oak Park, IL 60302 Merrillville, IN 46410
Tax ID #36-4104201
2. 1201 South Main Street
Crown Point, IN 46307
Everest Management, Inc. 101 North Scoville None
Tax ID #36-4045521 Oak Park, IL 60302
The Extracorporeal Alliance, L.L.C. 101 North Scoville 1. Oakwood Medical Building
Tax ID #36-4122087 Oak Park, IL 60302 18181 Oakwood Blvd.
Suite 203
Dearborn, MI 48124
2. 736 Jenks Avenue
Panama City, FL 32401
</TABLE>
-4-
<PAGE>
Schedule B
Trade Names
<TABLE>
<CAPTION>
Trade Names of
Name of Debtor Such Debtor
<S> <C>
Everest Healthcare Services Corporation None
WSKC Dialysis Services, Inc. Aurora Dialysis Center
Blue Island Dialysis Center
Central DuPage Dialysis
Chicago Dialysis Center
Chicago Kidney Center
Downers Grove Dialysis Center
Elk Grove Dialysis Center
Glenview Dialysis Center
Humboldt Park Dialysis Center
Jackson Park Dialysis Center
Naperville Dialysis Center
Oak Park Community Dialysis
Oak Park Dialysis Center
South Side Dialysis Center
South Chicago Dialysis
West Suburban Dialysis Center
WSKC Dialysis Services
Ohio Valley Dialysis Center, Inc. None
Northwest Indiana Dialysis, Inc. None
New York Dialysis Management, Inc. None
Mercy Dialysis Center, Inc. None
DuPage Dialysis, Ltd. LaGrange Dialysis Center
Lake Avenue Dialysis Center, Inc. South Anthony Dialysis Center
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Trade Names of
Name of Debtor Such Debtor
<S> <C>
Home Dialysis of America, Inc. Home Dialysis of America
Home Dialysis Specialists of America
Amarillo Acute Dialysis Specialists, L.L.C. None
Dialysis Specialists of Corpus Christi, L.L.C. None
Home Dialysis of Eastgate, Inc. None
Dialysis Services of Cincinnati, Inc. None
Dialysis Specialists of Marrietta, Ltd. Dialysis Specialists of Belpre
Saint Margaret Mercy Dialysis Centers, L.L.C. Saint Margaret Mercy Dialysis Centers
Everest Management, Inc. Everest Management
The Extracorporeal Alliance, L.L.C. None
</TABLE>
-2-
<PAGE>
Schedule C
Real Estate Legal Descriptions
None
<PAGE>
Schedule D
Assumption and Supplemental Security Agreement
This Agreement dated as of this _____ day of ______________, 199___ from
[new debtor], a __________ corporation (the "New Debtor"), to Harris Trust and
Savings Bank ("Harris"), as agent for the Lenders (defined in the Security
Agreement hereinafter identified and defined) (Harris acting as such agent and
any successor or successors to Harris in such capacity being hereinafter
referred to as the "Agent");
Witnesseth that:
Whereas, Everest Healthcare Services Corporation (the "Company") and
certain other parties have executed and delivered to the Agent that certain
Amended and Restated Security Agreement dated as of May 15, 1997 (such Amended
and Restated Security Agreement, as the same may from time to time be modified
or amended, including supplements thereto which add additional parties as
Debtors thereunder, being hereinafter referred to as the "Security Agreement")
pursuant to which such parties (the "Existing Debtors") have granted to the
Agent for the benefit of the Lenders a lien on and security interest in each
such Existing Debtor's Collateral (as such term is defined in the Security
Agreement) to secure the Obligations (as such term is defined in the Security
Agreement) of the Company owing to the Agent and the Lenders arising out of or
related to the Credit Agreement referred to therein; and
Whereas, the Company provides the New Debtor with substantial financial,
managerial, administrative, technical and design support and the New Debtor will
directly and substantially benefit from credit and other financial
accommodations extended and to be extended by the Lenders to the Company;
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Company by
the Lenders from time to time, the New Debtor hereby agrees as follows:
1. The New Debtor acknowledges and agrees that it shall become a "Debtor"
party to the Security Agreement effective upon the date the New Debtor's
execution of this Agreement and the delivery of this Agreement to the Agent, and
that upon such execution and delivery, all references in the Security Agreement
to the terms "Debtor" or "Debtors" shall be deemed to include the New Debtor.
Without limiting the generality of the foregoing, the New Debtor hereby repeats
and reaffirms all grants (including the grant of a lien and security interest),
covenants, agreements, representations and warranties contained in the Security
Agreement as
<PAGE>
amended hereby, each and all of which are and shall remain applicable to the
Collateral from time to time owned by the New Debtor or in which the New Debtor
from time to time has any rights. Without limiting the foregoing, in order to
secure payment of the Obligations, whether now existing or hereafter arising,
the New Debtor does hereby grant to the Agent for the benefit of itself and the
other Lenders, and hereby agrees that the Agent has and shall continue to have
for the benefit of itself and the other Lenders a continuing lien on and
security interest in, among other things, all of the New Debtor's Collateral (as
such term is defined in the Security Agreement), including, without limitation,
all of the New Debtor's Receivables, General Intangibles, Inventory, Equipment,
Investment Property, and all of the other Collateral described in Section 2 of
the Security Agreement, each and all of such granting clauses being incorporated
herein by reference with the same force and effect as if set forth in their
entirety except that all references in such clauses to the Existing Debtors or
any of them shall be deemed to include references to the New Debtor. Nothing
contained herein shall in any manner impair the priority of the liens and
security interests heretofore granted in favor of the Agent under the Security
Agreement.
2. The New Debtor hereby acknowledges and agrees that the Obligations are
secured by all of the Collateral according to, and otherwise on and subject to,
the terms and conditions of the Security Agreement to the same extent and with
the same force and effect as if the New Debtor had originally been one of the
Existing Debtors under the Security Agreement and had originally executed the
same as such an Existing Debtor.
3. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Security Agreement,
except that any reference to the term "Debtor" or "Debtors" and any provision of
the Security Agreement providing meaning to such term shall be deemed a
reference to the Existing Debtors and the New Debtor. Except as specifically
modified hereby, all of the terms and conditions of the Security Agreement shall
stand and remain unchanged and in full force and effect.
4. The New Debtor agrees to execute and deliver such further instruments
and documents and do such further acts and things as the Agent may reasonably
deem necessary or proper to carry out more effectively the purposes of this
Agreement.
5. No reference to this Agreement need be made in the Security Agreement
or in any other document or instrument making reference to the Security
Agreement, any reference to the Security Agreement in any of such to be deemed a
reference to the Security Agreement as modified hereby.
-2-
<PAGE>
6. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law).
[New Debtor]
By
Its____________________________________
Address:
__________________________________________
__________________________________________
Attention:________________________________
Accepted and agreed to as of the date first above written.
Harris Trust and Savings Bank,
as Agent
By
Its____________________________________
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<PAGE>
Exhibit 4.11
Amended and Restated Guaranty Agreement
This Amended and Restated Guaranty Agreement (the "Guaranty") dated as of
this 15 day of May, 1997, by the parties who have executed this Guaranty (such
parties, along with any other parties who execute and deliver to the Agent
hereinafter identified and defined an agreement in the form attached hereto as
Exhibit A, being herein referred to collectively as the "Guarantors" and
individually as a "Guarantor").
Witnesseth:
Whereas, the Guarantors are direct or indirect subsidiaries of Everest
Healthcare Services Corporation, a Delaware corporation ("Company"); and
Whereas, the Company and Harris Trust and Savings Bank ("HTSB"),
individually and as agent (HTSB acting as such agent and any successor or
successors to HTSB in such capacity being hereinafter referred to as the
"Agent") have entered into an Amended and Restated Credit Agreement dated as of
even date herewith (such Amended and Restated Credit Agreement as the same may
from time to time hereafter be modified, amended or restated being hereinafter
referred to as the "Credit Agreement") pursuant to which HTSB and such other
lenders from time to time parties thereto (HTSB and such other lenders being
hereinafter referred to collectively as the "Lenders" and individually as a
"Lender") have extended various credit facilities to the Company (the Agent and
the Lenders being hereinafter referred to collectively as the "Guaranteed
Creditors" and individually as a "Guaranteed Creditor"); and
Whereas, the Company may from time to time enter into one or more interest
rate exchange, cap, collar, floor or other agreements with one or more of the
Lenders party to the Credit Agreement for the purpose of hedging or otherwise
protecting the Company against changes in interest rates (the liability of the
Company in respect of such agreements with such Lenders being hereinafter
referred to as the "Hedging Liability"); and
Whereas, the Company provides each of the Guarantors with substantial
financial, management, administrative, and technical support; and
Whereas, as a condition to extending the credit facilities to the Company
under the Credit Agreement, the Lenders have required, among other things, that
the Guarantors execute and deliver this Guaranty; and
<PAGE>
Whereas, each Guarantor will directly and substantially benefit from credit
and other financial accommodations extended and to be extended by the Lenders to
the Company because, among other things, the Company will reloan all or most of
such credit to the Guarantors; and
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Company by
the Lenders from time to time, each Guarantor hereby makes the following
representations and warranties to the Guaranteed Creditors and hereby covenants
and agrees with the Guaranteed Creditors as follows:
1. All capitalized terms used herein without definition shall have the
same meanings herein as such terms have in the Credit Agreement.
2. Each Guarantor hereby jointly and severally guarantees to the
Guaranteed Creditors, the due and punctual payment when due of (i) any and all
indebtedness, obligations and liabilities owing to the Guaranteed Creditors, and
any of them, by the Company under or in connection with or evidenced by (w) the
Credit Agreement or (x) all notes issued by the Company under the Credit
Agreement and any and all notes issued in extension or renewal thereof or in
substitution or replacement therefor (collectively, the "Notes") or (y) any
instrument or document executed by the Company granting to the Agent a lien on
or security interest in any assets or property of the Company or any Guarantor
in order to secure repayment of all or any part of the indebtedness, obligations
and liabilities owing by the Company or any Guarantor under or in connection
with or evidenced by the Credit Agreement or any of the Notes, Applications,
Letters of Credit, or Hedging Agreements (the "Collateral Documents,") or (z)
any Hedging Liability or any instrument or document executed by the Company in
connection therewith (herein, the "Hedging Agreements"), in each case whether
now existing or hereafter arising (and whether arising before or after the
filing of a petition in bankruptcy), due or to become due, direct or indirect,
absolute or contingent, and howsoever evidenced, held or acquired, (ii) the
obligations of the Company to reimburse the Guaranteed Creditors, and any of
them, for the amount of all drawings on all letters of credit (the "Letters of
Credit") issued for the account of the Company pursuant to the Credit Agreement,
and all other obligations, whether now existing or hereafter arising (and
whether arising before or after the filing of a petition in bankruptcy), of the
Company under any and all applications for such Letters of Credit (each an
"Application"; the Notes, the Letters of Credit, the Credit Agreement, the
Applications, the Collateral Documents, the Hedging Agreements and any guaranty
or security agreement executed by another subsidiary or affiliate of the Company
in connection with any of the foregoing being hereinafter collectively referred
to as the "Credit Documents"), and (iii) any and all expenses and charges, legal
or otherwise, suffered or incurred by the Guaranteed Creditors, and any of them,
in collecting or enforcing any of such indebtedness, obligations and liabilities
or in realizing on or protecting or preserving any security therefor. The
indebtedness, obligations and liabilities described in the immediately preceding
clauses (i), (ii), and (iii) are hereinafter
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<PAGE>
referred to as the "indebtedness hereby guaranteed". In case of failure by the
Company punctually to pay any indebtedness hereby guaranteed, each Guarantor
hereby jointly and severally agrees to make such payment or to cause such
payment to be made punctually as and when the same shall become due and payable,
whether at stated maturity, by acceleration or otherwise, and as if such payment
were made by the Company. Notwithstanding in this Guaranty to the contrary, the
right of recovery against any Guarantor under this Guaranty shall not exceed $1
less the amount which would render such Guarantor's Obligations under this
Guaranty void or voidable under applicable law, including fraudulent conveyance
law.
3. Each Guarantor further jointly and severally agrees to pay all
reasonable expenses, legal and/or otherwise (including court costs and
reasonable attorneys' fees), paid or incurred by any Guaranteed Creditor in
endeavoring to collect the indebtedness hereby guaranteed, or any part thereof,
and in protecting, defending or enforcing this Guaranty in any litigation,
bankruptcy or insolvency proceedings or otherwise.
4. Each Guarantor agrees that upon demand, such Guarantor will then pay
to the Agent for the benefit of the Guaranteed Creditors the full amount of the
indebtedness hereby guaranteed then due whether or not any one or more of the
other Guarantors shall then or thereafter pay any amount whatsoever in respect
to their obligations hereunder.
5. Each of the Guarantors agrees that such Guarantor will not exercise or
enforce any right of exoneration, contribution, reimbursement, recourse or
subrogation available to such Guarantor against any person liable for payment of
the indebtedness hereby guaranteed, or as to any security therefor, unless and
until the full amount owing to the Guaranteed Creditors of the indebtedness
hereby guaranteed has been fully paid and satisfied and each of the commitments
by the Guaranteed Creditors to extend any indebtedness hereby guaranteed shall
have expired or otherwise terminated. The payment by any Guarantor of any
amount or amounts to the Guaranteed Creditors pursuant hereto shall not in any
way entitle any such Guarantor, either at law, in equity or otherwise, to any
right, title or interest (whether by way of subrogation or otherwise) in and to
the indebtedness hereby guaranteed or any part thereof or any collateral
security therefor or any other rights or remedies in any way relating thereto or
in and to any amounts theretofor, then or thereafter paid or applicable to the
payment thereof howsoever such payment may be made and from whatsoever source
such payment may be derived unless and until all of the indebtedness hereby
guaranteed and all costs and expenses suffered or incurred by the Guaranteed
Creditors in enforcing this Guaranty have been paid and satisfied in full and
each of the commitments by the Guaranteed Creditors to extend any indebtedness
hereby guaranteed shall have expired or otherwise terminated and unless and
until such payment in full and termination, any payments made by any Guarantor
hereunder and any other payments from whatsoever source derived on account of or
applicable to the indebtedness hereby guaranteed or
-3-
<PAGE>
any part thereof shall be held and taken to be merely payments in gross to the
Guaranteed Creditors reducing pro tanto the indebtedness hereby guaranteed.
6. To the extent permitted by the Credit Agreement, each Guaranteed
Creditor may, without any notice whatsoever to any of the Guarantors, sell,
assign, or transfer all of the indebtedness hereby guaranteed, or any part
thereof, or grant participations therein, and in that event each and every
immediate and successive assignee, transferee, or holder of all or any part of
the indebtedness hereby guaranteed, shall have the right through the Agent
pursuant to Section 19 hereof to enforce this Guaranty, by suit or otherwise,
for the benefit of such assignee, transferee, or holder as fully as if such
assignee, transferee, or holder were herein by name specifically given such
rights, powers and benefits; but each Guaranteed Creditor through the Agent
pursuant to Section 19 hereof shall have an unimpaired right to enforce this
Guaranty for its own benefit, as to so much of the indebtedness hereby
guaranteed that it has not sold, assigned or transferred.
7. This Guaranty is a continuing, absolute and unconditional Guaranty,
and shall remain in full force and effect until written notice of its
discontinuance executed by the Company and all the Guarantors shall be actually
received by the Guaranteed Creditors, and also until any and all of the
indebtedness hereby guaranteed which was created or existing before receipt of
such notice shall be fully paid and satisfied and each of the commitments by the
Guaranteed Creditors to extend any indebtedness hereby guaranteed shall have
expired or otherwise terminated. The dissolution of any Guarantor shall not
terminate this Guaranty as to such Guarantor until notice of such dissolution
shall have been actually received by the Guaranteed Creditors, nor until all of
the indebtedness hereby guaranteed, created or existing or committed to be
extended in each case before receipt of such notice shall be fully paid and
satisfied. The Guaranteed Creditors may at any time or from time to time
release any Guarantor from its obligations hereunder or effect any compromise
with any Guarantor and no such release or compromise shall in any manner impair
or otherwise affect the obligations hereunder of the other Guarantors. No
release, compromise, or discharge of any one or more of the Guarantors shall
release, compromise or discharge the obligations of the other Guarantors
hereunder.
8. In case of the dissolution, liquidation or insolvency (howsoever
evidenced) of, or the institution of bankruptcy or receivership proceedings
against the Company or any Guarantor, all of the indebtedness hereby guaranteed
which is then existing shall, at the option of the Required Lenders (as defined
in the Credit Agreement), immediately become due or accrued and payable from the
Guarantors. All payments received from the Company or on account of the
indebtedness hereby guaranteed from whatsoever source, shall be taken and
applied as payment in gross, and this Guaranty shall apply to and secure any
ultimate balance that shall remain owing to the Guaranteed Creditors.
-4-
<PAGE>
9. The liability hereunder shall in no way be affected or impaired by
(and the Guaranteed Creditors are hereby expressly authorized to make from time
to time, without notice to any of the Guarantors), any sale, pledge, surrender,
compromise, settlement, release, renewal, extension, indulgence, alteration,
substitution, exchange, change in, modification or other disposition of any of
the indebtedness hereby guaranteed, either express or implied, or of any Credit
Document or any other contract or contracts evidencing any thereof, or of any
security or collateral therefor or any guaranty thereof. The liability
hereunder shall in no way be affected or impaired by any acceptance by the
Guaranteed Creditors of any security for or other guarantors upon any of the
indebtedness hereby guaranteed, or by any failure, neglect or omission on the
part of the Guaranteed Creditors to realize upon or protect any of the
indebtedness hereby guaranteed, or any collateral or security therefor, or to
exercise any lien upon or right of appropriation of any moneys, credits or
property of the Company or any Guarantor, possessed by any of the Guaranteed
Creditors, toward the liquidation of the indebtedness hereby guaranteed, or by
any application of payments or credits thereon. The Guaranteed Creditors shall
have the exclusive right to determine how, when and what application of payments
and credits, if any, shall be made on said indebtedness hereby guaranteed, or
any part of same. In order to hold any Guarantor liable hereunder, there shall
be no obligation on the part of the Guaranteed Creditors, at any time, to resort
for payment to the Company or to any other Guarantor, or to any other person,
its property or estate, or resort to any collateral, security, property, liens
or other rights or remedies whatsoever, and the Guaranteed Creditors shall have
the right to enforce this Guaranty against any Guarantor irrespective of whether
or not other proceedings or steps are pending seeking resort to or realization
upon or from any of the foregoing are pending.
10. In the event the Guaranteed Creditors shall at any time in their
discretion permit a substitution of Guarantors hereunder or a party shall wish
to become Guarantor hereunder, such substituted or additional Guarantor shall,
upon executing an agreement in the form attached hereto as Exhibit A, become a
party hereto and be bound by all the terms and conditions hereof to the same
extent as though such Guarantor had originally executed this Guaranty and in the
case of a substitution, in lieu of the Guarantor being replaced. No such
substitution shall be effective absent the written consent of the Guaranteed
Creditors delivered in accordance with the terms of the Credit Agreement, nor
shall it in any manner affect the obligations of the other Guarantors hereunder.
11. All diligence in collection or protection, and all presentment,
demand, protest and/or notice, as to any and everyone, whether or not the
Company or the Guarantors or others, of dishonor and of default and of non-
payment and of the creation and existence of any and all of said indebtedness
hereby guaranteed, and of any security and collateral therefor, and of the
acceptance of this Guaranty, and of any and all extensions of credit and
indulgence hereunder, are expressly waived.
-5-
<PAGE>
12. No act of commission or omission of any kind, or at any time, upon
the part of the Guaranteed Creditors in respect to any matter whatsoever, shall
in any way affect or impair this Guaranty.
13. The Guarantors waive any and all defenses, claims and discharges of
the Company, or any other obligor, pertaining to the indebtedness hereby
guaranteed, except the defense of discharge by payment in full. Without
limiting the generality of the foregoing, the Guarantors will not assert, plead
or enforce against the Guaranteed Creditors any defense of waiver, release,
discharge in bankruptcy, statute of limitations, res judicata, statue of frauds,
anti-deficiency statute, fraud, incapacity, minority, usury, illegality or
unenforceability which may be available to the Company or any other person
liable in respect of any of the indebtedness hereby guaranteed, or any set-off
available against the Guaranteed Creditors to the Company or any such other
person, whether or not on account of a related transaction. The Guarantors
agree that the Guarantors shall be and remain jointly and severally liable for
any deficiency remaining after foreclosure or other realization on any lien or
security interest securing the indebtedness hereby guaranteed, whether or not
the liability of the Company or any other obligor for such deficiency is
discharged pursuant to statute or judicial decision.
14. If any payment applied by the Guaranteed Creditors to the
indebtedness hereby guaranteed is thereafter set aside, recovered, rescinded or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Company or any other obligor),
the indebtedness hereby guaranteed to which such payment was applied shall for
the purposes of this Guaranty be deemed to have continued in existence,
notwithstanding such application, and this Guaranty shall be enforceable as to
such of the indebtedness hereby guaranteed as fully as if such application had
never been made.
15. The liability of the Guarantors under this Guaranty is in addition
to and shall be cumulative with all other liabilities of the Guarantors after
the date hereof to the Guaranteed Creditors as a Guarantor of the indebtedness
hereby guaranteed, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
16. Any invalidity or unenforceability of any provision or application
of this Guaranty shall not affect other lawful provisions and applications
hereof, and to this end the provisions of this Guaranty are declared to be
severable. Without limiting the generality of the foregoing, any invalidity or
unenforceability against any Guarantor of any provision or application of the
Guaranty shall not affect the validity or enforceability of the provisions or
application of this Guaranty as against the other Guarantors.
-6-
<PAGE>
17. Each of the Guarantors jointly and severally agrees to pay to the
Agent for the benefit of the Guaranteed Creditors all reasonable costs and
expenses (including court costs and reasonable attorneys' fees) suffered or
incurred by the Guaranteed Creditors in enforcing or endeavoring to enforce the
Guarantors' obligations hereunder, or any part thereof, and in protecting,
defending or enforcing the Guarantors' obligations hereunder in any litigation,
bankruptcy or insolvency or proceedings or otherwise.
18. Any demand for payment on this Guaranty or any other notice required
or desired to be given hereunder to any Guarantor shall be in writing
(including, without limitation, notice by telecopy) and shall be given to the
relevant party at its address or telecopier number set forth on the appropriate
signature page hereof, or such other address or telecopier number as such party
may hereafter specify by notice to the Agent given by United States certified or
registered mail, by telecopy or by other telecommunication device capable of
creating a written record of such notice and its receipt. Each such notice,
request or other communication shall be effective (i) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section and a confirmation of such telecopy has been received by the sender,
(ii) if given by mail, five (5) days after such communication is deposited in
the mail, certified or registered with return receipt requested, addressed as
aforesaid or (iii) if given by any other means, when delivered at the addresses
specified in this Section.
19. No Lender shall have the right to institute any suit, action or
proceeding in equity or at law in connection with this Guaranty for the
enforcement of any remedy under or upon this Guaranty; it being understood and
intended that no one or more of the Lenders shall have any right in any manner
whatsoever to enforce any right hereunder, and that all proceedings at law or in
equity shall be instituted, had and maintained by the Agent in the manner herein
provided and for the benefit of the Lenders.
20. This Guaranty shall be governed by and construed according to the
law of the State of Illinois (without regard to principles of conflicts of laws)
in which state it shall be performed by the Guarantors and may not be waived,
amended, released or otherwise changed except by a writing signed by the
Guaranteed Creditors. This Guaranty and every part thereof shall be effective
upon delivery to the Agent, without further act, condition or acceptance by the
Guaranteed Creditors, shall be binding upon the Guarantors and upon the legal
representatives, successors and assigns of the Guarantors, and shall inure to
the benefit of the Guaranteed Creditors, their successors, legal representatives
and assigns. The Guarantors waive notice of the Guaranteed Creditors'
acceptance hereof. This Guaranty may be executed in counterparts and by
different parties hereto on separate counterparts each of which shall be an
original, but all together to be one and the same instrument.
-7-
<PAGE>
21. Upon the execution of this Guaranty by the Guarantors and the Agent,
this Guaranty shall supersede all provisions of that certain Guaranty Agreement
dated as of April 16, 1996, as supplemented, among certain of the Guarantors and
the Agent (the "Prior Guaranty"). The Guarantors agree that, notwithstanding
the execution and delivery of this Guaranty, the obligations of such Guarantors
created and provided for under the Prior Guaranty continue in effect (without
duplication) under and pursuant to the terms of this Guaranty for the benefit of
all of the indebtedness hereby guaranteed.
22. Each Guarantor hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Guaranty, the other Credit
Documents or the transactions contemplated hereby or thereby. Each Guarantor
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such
court has been brought in an inconvenient forum. Each Guarantor, the Agent and
each Guaranteed Creditor hereby irrevocably waives any and all right to trial by
jury in any legal proceeding arising out of or relating to this Guaranty or any
other Credit Document or the transactions contemplated hereby or thereby.
[Signature Pages to follow]
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<PAGE>
In Witness Whereof, the Guarantors have caused this Guaranty to be executed
and delivered as of the date first above written.
"Guarantors"
WSKC Dialysis Services, Inc.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Ohio Valley Dialysis Center, Inc.
/s/ John B. Bourke
By____________________________________
Secretary/Treasurer
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Northwest Indiana Dialysis, Inc.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
-9-
<PAGE>
New York Dialysis Management, Inc.
/s/ John B. Bourke
By____________________________________
Treasurer
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Mercy Dialysis Center, Inc.
/s/ John B. Bourke
By____________________________________
Treasurer
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
DuPage Dialysis, Ltd.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
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<PAGE>
Lake Avenue Dialysis Center, Inc.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Home Dialysis of America, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Amarillo Acute Dialysis Specialists,
L.L.C.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
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<PAGE>
Dialysis Specialists of Corpus Christi,
L.L.C.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Home Dialysis of Eastagate, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Dialysis Services of Cincinnati, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
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<PAGE>
Dialysis Specialists of Marietta, Ltd.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Saint Margaret Mercy Dialysis
Centers, L.L.C.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Everest Management, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
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<PAGE>
The Extracorporeal Alliance, L.L.C.
By: Everest Management, Inc., as Manager
/s/ John B. Bourke
By____________________________________
Secretary
Its_________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Telephone: (708) 386-9076
Telecopy: (708) 386-1711
Accepted and agreed to in Chicago, Illinois as of the date first above written.
Harris Trust and Savings Bank, as Agent
/s/ Michael W. Lewis
By____________________________________
Senior Vice President
Its_________________________________
Address:
111 West Monroe Street, 4E
P.O. Box 755
Chicago, Illinois 60690
Attention: Ms. Gloria Compean
Telephone: (312) 461-2324
Telecopy: (312) 461-7365
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<PAGE>
Exhibit A
to
Guaranty Agreement
Assumption and Supplement to Guaranty Agreement
This Assumption and Supplement to Guaranty Agreement (the "Agreement") is
dated as of this _____ day of ____________, 199___, made by [new guarantor], a
___________ corporation (the "New Guarantor");
Witnesseth that:
Whereas, certain parties have executed and delivered to the Guaranteed
Creditors that certain Amended and Restated Guaranty Agreement dated as of May
15, 1997, (such Amended and Restated Guaranty Agreement, as the same may from
time to time be modified or amended, including supplements thereto which add or
substitute parties as Guarantors thereunder, being hereinafter referred to as
the "Guaranty") pursuant to which such parties (the "Existing Guarantors") have
guaranteed to the Guaranteed Creditors the full and prompt payment of, among
other things, any and all indebtedness, obligations and liabilities of Everest
Healthcare Services Corporation (the "Company") arising under or relating to the
Credit Agreement and the other Credit Documents described therein; and
Whereas, the Company provides the New Guarantor with substantial financial,
managerial, administrative, technical and design support and the New Guarantor
will directly and substantially benefit from credit and other financial
accommodations extended and to be extended by the Lenders to the Company;
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Company by
the Lenders from time to time, the New Guarantor hereby agrees as follows:
1. The New Guarantor acknowledges and agrees that it shall become a
"Guarantor" party to the Guaranty effective upon the date the New Guarantor's
execution of this Agreement and the delivery of this Agreement to the Agent on
behalf of the Guaranteed Creditors, and that upon such execution and delivery,
all references in the Guaranty to the terms "Guarantor" or "Guarantors" shall be
deemed to include the New Guarantor.
2. The New Guarantor hereby assumes and becomes liable (jointly and
severally with all the other Guarantors) for the indebtedness hereby guaranteed
(as defined in the Guaranty) and agrees to pay and otherwise perform all of the
obligations of a Guarantor under
<PAGE>
the Guaranty according to, and otherwise on and subject to, the terms and
conditions of the Guaranty to the same extent and with the same force and effect
as if the New Guarantor had originally been one of the Existing Guarantors under
the Guaranty and had originally executed the same as such an Existing Guarantor.
3. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Guaranty, except that any
reference to the term "Guarantor" or "Guarantors" and any provision of the
Guaranty providing meaning to such term shall be deemed a reference to the
Existing Guarantors and the New Guarantor. Except as specifically modified
hereby, all of the terms and conditions of the Guaranty shall stand and remain
unchanged and in full force and effect.
4. The New Guarantor agrees to execute and deliver such further
instruments and documents and do such further acts and things as the Agent or
the Guaranteed Creditors may deem necessary or proper to carry out more
effectively the purposes of this Agreement.
5. No reference to this Agreement need be made in the Guaranty or in any
other document or instrument making reference to the Guaranty, any reference to
the Guaranty in any of such to be deemed a reference to the Guaranty as modified
hereby.
6. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law) in
which state it shall be performed by the New Guarantor.
[New Guarantor]
By
Its____________________________________
Acknowledged and agreed to in Chicago, Illinois as of the date first above
written.
Harris Trust and Savings Bank, as
Agent
By
Its____________________________________
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<PAGE>
Exhibit 4.12
Amended and Restated Pledge Agreement
This Amended and Restated Pledge Agreement (the "Agreement") is dated as of
May 15, 1997, by and among Everest Healthcare Services Corporation, a Delaware
corporation (the "Company"), and the other parties executing this Agreement
under the heading "Pledgors" (the Company and such other parties, along with any
parties who execute and deliver to the Agent an agreement in the form attached
hereto as Schedule F, being hereinafter referred to collectively as the
"Pledgors" and individually as a "Pledgor"), each with its mailing address as
set forth on its signature page hereto and Harris Trust and Savings Bank, an
Illinois state banking corporation ("Harris"), with its mailing address at 111
West Monroe Street, P.O. Box 755, Chicago, Illinois 60690, acting as agent
hereunder for the Lenders hereinafter identified and defined (Harris acting as
such agent and any successor or successors to Harris acting in such capacity
being hereinafter referred to as the "Agent");
Preliminary Statements
A. The Company and Harris, individually and as agent, have entered into
an Amended and Restated Credit Agreement dated as of even date herewith (such
Amended and Restated Credit Agreement as the same may be amended, modified or
restated from time to time being hereinafter referred to as the "Credit
Agreement"), pursuant to which Harris and other lenders which from time to time
become party to the Credit Agreement (Harris and such other lenders which from
time to time hereafter become party to the Credit Agreement being hereinafter
referred to collectively as the "Lenders" and individually as a "Lender") have
agreed, subject to certain terms and conditions, to extend credit and make
certain other financial accommodations available to the Company.
B. The Company may from time to time enter into one or more interest rate
exchange, cap, collar, floor or other agreements with one or more of the Lenders
party to the Credit Agreement for the purpose of hedging or otherwise protecting
the Company against changes in interest rates (the liability of the Company in
respect of such agreements with such Lenders being hereinafter referred to as
the "Hedging Liability").
C. As a condition to extending credit to the Company under the Credit
Agreement, the Lenders have required, among other things, that (i) each Pledgor,
other than the Company, guarantee all indebtedness, obligations and liabilities,
whether now existing or hereafter arising, of the Company under or arising out
of the Credit Agreement pursuant to that certain Amended and Restated Guaranty
Agreement dated as of even date herewith between such Pledgors and the Agent, as
the same may be amended, modified, supplemented and/or restated from time to
time (the "Guaranty") and (ii) each Pledgor, including the Company, grant to the
Agent for the
<PAGE>
benefit of the Lenders a security interest in certain personal property of such
Pledgor described herein subject to the terms and conditions hereof.
D. The Company owns, directly or indirectly, all or substantially all of
the equity interests in each other Pledgor and the Company provides each other
Pledgor with financial, management, administrative, and technical support which
enables such Pledgor to conduct its business in an orderly and efficient manner
in the ordinary course.
E. Each Pledgor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Lenders to the Company.
Now, Therefore, for and in consideration of the execution and delivery by
the Lenders of the Credit Agreement, and other good and valuable consideration,
receipt whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Terms Defined in Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Pledgor" and "Pledgors" as used herein
shall mean and include the Pledgors collectively and also each individually,
with all grants, representations, warranties and covenants of and by the
Pledgors, or any of them, herein contained to constitute joint and several
grants, representations, warranties and covenants of and by the Pledgors;
provided, however, that unless the context in which the same is used shall
otherwise require, any grant, representation, warranty or covenant contained
herein related to the Collateral shall be made by each Pledgor only with respect
to the Collateral owned by it or represented by such Pledgor as owned by it.
Section 2. Grant of Security Interest in the Collateral. Each Pledgor
hereby grants to the Agent for the benefit of itself and the other Lenders a
lien on and security interest in, and acknowledges and agrees that the Agent has
and shall continue to have for the benefit of itself and the other Lenders a
continuing lien on and security interest in, any and all right, title and
interest of each Pledgor in all equity interests of each of its Subsidiaries,
whether now owned or existing or hereafter created, acquired or arising, and in
whatever form, including, without limitation, any and all right, title, and
interest in and to the following:
(a) Stock Collateral. (i) All shares of the capital stock of each
Subsidiary which is a corporation owned or held by such Pledgor, whether
now owned or hereafter formed or acquired (those shares delivered to and
deposited with the Agent on or prior to the date hereof being listed and
described on Schedule A attached hereto), and all substitutions and
additions to such shares (herein, the "Pledged Securities"), (ii) all
dividends, distributions and sums distributable or payable from, upon or in
respect of the Pledged Securities and (iii) all other rights and privileges
incident to the Pledged
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Securities (all of the foregoing being hereinafter referred to collectively
as the "Stock Collateral");
(b) Partnership Interest Collateral. (i) All partnership or other
equity interests in each Subsidiary which is a partnership (whether general
or limited) owned or held by such Pledgor, whether now owned or hereafter
formed or acquired (each of such equity interests existing on the date
hereof being listed and identified on Schedule B attached hereto) (such
partnerships being hereinafter referred to collectively as the
"Partnerships" and individually as a "Partnership"), (ii) any and all
payments and distributions of whatever kind or character, whether in cash
or other property, at any time made, owing or payable to such Pledgor in
respect of or on account of its present or hereafter acquired interests in
each Partnership, whether due or to become due and whether representing
profits, distributions pursuant to complete or partial liquidation or
dissolution of any such Partnership, distributions representing the
complete or partial redemption of such Pledgor's interest in any such
Partnership or the complete or partial withdrawal of such Pledgor from any
such Partnership, repayment of capital contributions, payment of management
fees or commissions, or otherwise, and the right to receive, receipt for,
use and enjoy all such payments and distributions, and (iii) all other
rights and privileges incident to such Pledgor's interest in each
Partnership (all of the foregoing being hereinafter collectively called the
"Partnership Interest Collateral");
(c) LLC Collateral. (i) All membership or other equity interests in
each Subsidiary which is a limited liability company owned or held by such
Pledgor, whether now owned or hereafter formed or acquired (each of such
equity interests existing on the date hereof being listed and identified on
Schedule C attached hereto (such limited liability companies being
hereinafter referred to collectively as the "LLCs" and individually as a
"LLC"), (ii) any and all payments and distributions of whatever kind or
character, whether in cash or other property, at any time made, owing or
payable to such Pledgor in respect of or on account of its present or
hereafter acquired interests in each LLC, whether due or to become due and
whether representing profits, distributions pursuant to complete or partial
liquidation or dissolution of any such LLC, distributions representing the
complete or partial redemption of such Pledgor's interest in such LLC or
the complete or partial withdrawal of such Pledgor from any such LLC,
repayment of capital contributions, payment of management fees or
commissions, or otherwise, and the right to receive, receipt for, use and
enjoy all such payments and distributions, and (iii) all other rights and
privileges incident to such Pledgor's interest in each LLC (all of the
foregoing being hereinafter referred to as the "LLC Collateral"); and
(d) Proceeds. All proceeds of the foregoing;
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<PAGE>
all of the foregoing being herein sometimes referred to as the "Collateral."
All terms which are used in this Agreement which are defined in the Uniform
Commercial Code of the State of Illinois ("UCC") shall have the same meanings
herein as such terms are defined in the UCC, unless this Agreement shall
otherwise specifically provide.
Section 3. Obligations Hereby Secured. This Agreement is made and
given to secure, and shall secure, the prompt payment and performance of (i) any
and all indebtedness, obligations and liabilities of the Pledgors, of any of
them, to the Agent and the Lenders, and any of them, under or in connection with
or evidenced by the Credit Agreement, the Notes of the Company heretofore or
hereafter issued under the Credit Agreement and the obligations of the Company
to reimburse the Agent and the Lenders for the amount of all drawings on all
Letters of Credit issued for the account of the Company pursuant to the Credit
Agreement, and all other obligations of the Company under any and all
applications for Letters of Credit, or under or in connection with or otherwise
evidenced by the Guaranty or any of the other Loan Documents, or under or in
connection with or otherwise evidenced by agreements with any one or more of the
Lenders with respect to Hedging Liability, in each case whether now existing or
hereafter arising (and whether arising before or after the filing of a petition
in bankruptcy), due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired and (ii) any and all
expenses and charges, legal or otherwise, suffered or incurred by the Agent and
the Lenders, and any of them, in collecting or enforcing any of such
indebtedness, obligations and liabilities or in realizing on or protecting or
preserving any security therefor, including, without limitation, the lien and
security interest granted hereby (all of the indebtedness, obligations,
liabilities, expenses and charges described above being hereinafter referred to
as the "Obligations"). Notwithstanding anything in this Agreement to the
contrary, the right of recovery against any Pledgor (other than the Company to
which this limitation shall not apply) under this Agreement shall not exceed
$1.00 less than the amount which would render such Pledgor's obligations under
this Agreement void or voidable under applicable law, including fraudulent
conveyance law.
Section 4. Covenants, Agreements, Representations and Warranties.
Each Pledgor hereby covenants and agrees with, and represents and warrants to,
the Agent and the Lenders that:
(a) Each Pledgor is and shall be the sole and lawful legal, record
and beneficial owner of its Collateral. Each Pledgor's chief executive
office is at the address listed under such Pledgor's name on Schedule A,
Schedule B and Schedule C hereto, as applicable. Each Pledgor agrees that
it will not change any location set forth on the applicable Schedule hereto
without 30 days prior written notice to the Agent (provided in all cases
such locations shall be within the United States of America). No Pledgor
shall, without the Agent's prior written consent, sell, assign, or
otherwise dispose of the
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<PAGE>
Collateral or any interest therein, except to the extent permitted by
Section 7.17 of the Credit Agreement. The Collateral, and every part
thereof, is and shall be free and clear of all security interests, liens,
rights, claims, attachments, levies and encumbrances of every kind, nature
and description and whether voluntary or involuntary, except for the
security interest of the Agent hereunder and for other Liens permitted by
Section 7.14 of the Credit Agreement. Each Pledgor shall warrant and defend
the Collateral against any claims and demands of all persons at any time
claiming the same or any interest in the Collateral adverse to the Agent or
any Lender.
(b) Each Pledgor agrees to execute and deliver to the Agent such
further agreements, assignments, instruments and documents and to do all
such other things as the Agent may deem reasonably necessary or appropriate
to assure the Agent its lien and security interest hereunder, including
such assignments, acknowledgments (including acknowledgments of collateral
assignment in the form attached hereto as Schedule D), stock powers,
financing statements, instruments and documents as the Agent may from time
to time require in order to comply with the UCC. Each Pledgor hereby
agrees that a carbon, photographic or other reproduction of this Agreement
or any such financing statement is sufficient for filing as a financing
statement by the Agent without prior notice thereof to such Pledgor
wherever the Agent in its discretion desires to file the same (and Agent
agrees to provide the relevant Pledgor notice after any such filing is made
pursuant to this provision, provided the failure to give such notice shall
not affect the validity or enforceability of the relevant filing). In the
event for any reason the law of any jurisdiction other than Illinois
becomes or is applicable to the Collateral or any part thereof, or to any
of the Obligations, each Pledgor agrees to execute and deliver all such
agreements, assignments, instruments and documents and to do all such other
things as the Agent in its discretion deems necessary or appropriate to
preserve, protect and enforce the lien and security interest of the Agent
under the law of such other jurisdiction.
(c) If, as and when any Pledgor (x) delivers any securities for
pledge hereunder in addition to those listed on Schedule A hereto or (y)
pledges interests in any partnership in addition to those listed on
Schedule B hereto or (z) pledges interests in any limited liability company
in addition to those listed on Schedule C hereto, the Pledgors shall
furnish to the Agent a duly completed and executed amendment to such
Schedule in substantially the form (with appropriate insertions) of
Schedule E hereto reflecting the additional securities, partnership
interests or limited liability company interests pledged hereunder after
giving effect to such addition.
(d) None of the Collateral constitutes margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System).
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<PAGE>
(e) On failure of any Pledgor to perform any of the agreements and
covenants herein contained, the Agent may at its option, after two (2)
Business Days prior notice to such Pledgor (unless in the reasonable
judgment of the Agent immediate payment or performance is necessary to
protect or preserve the Collateral or the Agent's interest therein),
perform the same and in so doing may expend such sums as the Agent
reasonably deems advisable in the performance thereof, including, without
limitation, the payment of any taxes, liens and encumbrances (except to the
extent the relevant Pledgor is contesting the same in good faith in
accordance with the terms of Section 7.3 of the Credit Agreement),
expenditures made in defending against any adverse claim, and all other
expenditures which the Agent may be compelled to make by operation of law
or which Agent may make by agreement or otherwise for the protection of the
security hereof. All such sums and amounts so expended shall be repayable
by the Pledgors immediately without notice or demand, shall constitute
additional Obligations secured hereunder and shall bear interest from the
date said amounts are expended at the rate per annum (computed on the basis
of a year of 365 or 366 days, as the case may be, for the actual number of
days elapsed) determined by adding 2% to the Domestic Rate (such rate per
annum as so determined being hereinafter referred to as the "Default
Rate"). No such performance of any covenant or agreement by the Agent on
behalf of such Pledgor, and no such advancement or expenditure therefor,
shall relieve such Pledgor of any default under the terms of this Agreement
or in any way obligate the Agent or any Lender to take any further or
future action with respect thereto. The Agent, in making any payment
hereby authorized, may do so according to any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or
estimate, or into the validity of any tax assessment, sale, forfeiture, tax
lien or title or claim. The Agent, in performing any act hereunder, shall
be the sole judge (which judgment shall be reasonably exercised) of whether
the relevant Pledgor is required to perform the same under the terms of
this Agreement. The Agent is hereby authorized to charge any depository or
other account of any Pledgor maintained with the Agent for the amount of
such sums and amounts so expended.
Section 5. Special Provisions Re: Stock Collateral.
(a) Each Pledgor has the right to vote the Pledged Securities and
there are no restrictions upon the voting rights associated with, or the
transfer of, any of the Pledged Securities, except as provided by federal
and state laws applicable to the sale of securities generally and the terms
of this Agreement.
(b) The certificates for all shares of the Pledged Securities shall
be delivered by the relevant Pledgor to the Agent duly endorsed in blank
for transfer or accompanied
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<PAGE>
by an appropriate assignment or assignments or an appropriate undated stock
power or powers, in every case sufficient to transfer title thereto. The
Agent may at any time after the occurrence of an Event of Default cause to
be transferred into its name or into the name of its nominee or nominees
any and all of the Pledged Securities. The Agent shall at all times have
the right to exchange the certificates representing the Pledged Securities
for certificates of smaller or larger denominations.
(c) The Pledged Securities have been validly issued and, except as
described on Schedule A, are fully paid and non-assessable. Except as set
forth on Schedule A, there are no outstanding commitments or other
obligations of the issuers of any of the Pledged Securities to issue, and
no options, warrants or other rights of any individual or entity to
acquire, any share of any class or series of capital stock of such issuers.
The Pledged Securities listed and described on Schedule A attached hereto
constitute the percentage of the issued and outstanding capital stock of
each series and class of the issuers thereof as set forth thereon owned by
the relevant Pledgor. Each Pledgor further agrees that in the event any
such issuer shall issue any additional capital stock of any series or class
(whether or not entitled to vote) to such Pledgor or otherwise on account
of its ownership interest therein, each Pledgor will forthwith pledge and
deposit hereunder, or cause to be pledged and deposited hereunder, all such
additional shares of such capital stock.
Section 6. Special Provisions Re: Partnership Interest Collateral
and LLC Collateral.
(a) Each Pledgor further represents and warrants to, and agrees
with, the Agent and the Lenders as follows:
(i) each Partnership is a valid and existing entity of the
type listed on Schedule B and is duly organized and existing under
applicable law; and each LLC is duly organized and existing under
applicable law;
(ii) the Partnership Interest Collateral listed and described
on Schedule B attached hereto constitutes the percentage of the equity
interest in each Partnership set forth thereon owned by the relevant
Pledgor; and the LLC Collateral listed and described on Schedule C
attached hereto constitutes the percentage of the equity interest in
each LLC set forth thereon owned by the relevant Pledgor; and
(iii) the copies of the partnership agreements of each
Partnership and the articles of association and operating agreements
of each LLC (each such
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<PAGE>
agreement being hereinafter referred to as "Organizational Agreement")
heretofore delivered to the Agent are true and correct copies thereof
and have not been amended or modified in any respect.
(b) Each Pledgor agrees that it shall not, without the prior written
consent of the Agent, agree to any amendment or modification to any of the
Organizational Agreements which would in any manner adversely affect or
impair the Partnership Interest Collateral or LLC Collateral or reduce or
dilute the rights of such Pledgor with respect to any Partnership or LLC,
any of such done without such prior written consent to be null and void.
The Pledgors shall promptly send to the Agent copies of all notices and
communications with respect to each Partnership and each LLC alleging the
existence of a default by any Pledgor in the performance of any of its
obligations under any Organizational Agreement. Each Pledgor agrees that
it will promptly notify the Agent of any litigation which is reasonably
likely to have a Material Adverse Effect or is reasonably likely to
materially and adversely affect a Partnership or a LLC or any of their
respective properties and of any material adverse change in the operations,
business properties, assets or conditions, financial or otherwise, of any
Pledgor or any Partnership or any LLC. Each Pledgor shall promptly perform
all of its obligations under each Organizational Agreement. In the event
any Pledgor fails to pay or perform any obligation arising under any
Organizational Agreement or otherwise related to any Partnership or any
LLC, the Agent may, but need not, after two (2) Business Days prior notice
to such Pledgor (unless in the reasonable judgment of the Agent immediate
payment or performance is necessary to protect or preserve the Collateral
or the Agent's interest therein), pay or perform such obligation at the
expense and for the account of the Pledgors and all funds expended for such
purposes shall constitute Obligations secured hereby which the Pledgors
promise to pay to the Agent together with interest thereon at the Default
Rate.
(c) The certificates, if any, at any time evidencing any Pledgor's
interest in any Partnership or LLC shall be delivered to the Agent duly
endorsed in blank for transfer or accompanied by an appropriate assignment
or assignments or an appropriate undated stock power or powers, in every
case sufficient to transfer title thereto. The Agent may at any time after
the occurrence of an Event of Default cause to be transferred into its name
or the name of its nominee or nominees, any and all of such Collateral.
The Agent shall at all times have the right to exchange the certificates
representing such Collateral for certificates of smaller or larger
denominations.
(d) Each Pledgor has the right to vote its interest in each
Partnership and LLC (except as set forth herein) and there are no
restrictions upon the voting rights associated with, or the transfer of,
any of the Partnership Interest Collateral or LLC Collateral,
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except as provided by federal and state laws applicable to the sale of
securities generally, the terms of any Organizational Agreement under which
such person is organized and the terms of this Agreement.
(e) Except as set forth on Schedule C, there are no outstanding
commitments or other obligations of any LLC to issue, and no options,
warrants or other rights of any individual or entity to acquire, any
interest in such LLC.
(f) Each Pledgor further agrees that in the event it shall acquire
any additional interests in any Partnership or LLC, such Pledgor will
forthwith pledge and deposit hereunder or cause to be pledged and deposited
hereunder, all such additional interests.
Section 7. Voting Rights and Dividends. Unless and until an Event of
Default hereunder has occurred and is continuing and thereafter until notified
by the Agent pursuant to Section 9(b) hereof:
(a) Each Pledgor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Collateral of such Pledgor, or any part
thereof, for all purposes not inconsistent with the terms of this Agreement
or any other document evidencing or otherwise relating to any of the
Obligations.
(b) Each Pledgor shall be entitled to receive and retain all
dividends and distributions in respect of the Collateral which are paid in
cash of whatsoever nature; provided, however, that such dividends and
distributions representing:
(i) stock or liquidating dividends or a distribution or return
of capital upon or in respect of the Pledged Securities or any part
thereof or resulting from a split-up, revision or reclassification of
the Pledged Securities or any part thereof or received in addition to,
in substitution of or in exchange for the Pledged Securities or any
part thereof as a result of a merger, consolidation or otherwise; or
(ii) distributions in complete or partial liquidation of any
Partnership or LLC or the interest of such Pledgor therein;
in each case, shall be paid, delivered or transferred, as appropriate,
directly to the Agent immediately upon the receipt thereof by such Pledgor
and may, in the case of cash, be applied by the Agent to the Obligations,
whether or not the same may then be due or otherwise adequately secured and
shall, in the case of all other property, together with any cash received
by the Agent and not applied as aforesaid, be held by the Agent
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<PAGE>
pursuant hereto as part of the Collateral pledged under and subject to the
terms of this Agreement.
(c) In order to permit each Pledgor to exercise such voting and/or
consensual powers which it is entitled to exercise under subsection (a)
above and to receive such distributions which such Pledgor is entitled to
receive and retain under subsection (b) above, the Agent will, if
necessary, upon the written request of such Pledgor, from time to time
execute and deliver to such Pledgor appropriate proxies and dividend
orders.
Section 8. Power of Attorney. Each Pledgor hereby appoints the
Agent, its nominee, or any other person whom the Agent may designate as such
Pledgor's attorney-in-fact, with full power and authority to ask, demand,
collect, receive, receipt for, sue for, compound and give acquittance for any
and all sums or properties which may be or become due, payable or distributable
in respect of the Collateral or any part thereof, with full power to settle,
adjust or compromise any claim thereunder or therefor as fully as such Pledgor
could itself do, to endorse or sign the Pledgor's name on any assignments, stock
powers, or other instruments of transfer and on any checks, notes, acceptances,
money orders, drafts, and any other forms of payment or security that may come
into the Agent's possession and on all documents of satisfaction, discharge or
receipt required or requested in connection therewith, and, in its discretion,
to file any claim or take any other action or proceeding, either in its own name
or in the name of such Pledgor, or otherwise, which the Agent deems necessary or
appropriate to collect or otherwise realize upon all or any part of the
Collateral, or effect a transfer thereof, or which may be necessary or
appropriate to protect and preserve the right, title and interest of the Agent
in and to such Collateral and the security intended to be afforded hereby. Each
Pledgor hereby ratifies and approves all acts of any such attorney and agrees
that neither the Agent nor any such attorney will be liable for any such acts or
omissions nor for any error of judgment or mistake of fact or law other than
such person's gross negligence or willful misconduct. The Agent may file one or
more financing statements disclosing its security interest in all or any part of
the Collateral without any Pledgor's signature appearing thereon, and each
Pledgor also hereby grants the Agent a power of attorney to execute any such
financing statements, and any amendments or supplements thereto, on behalf of
such Pledgor without notice thereof to such Pledgor (and Agent agrees to provide
the relevant Pledgor notice after any such filing is made pursuant to this
provision, provided the failure to give such notice shall not affect the
validity or enforceability of the relevant filing). The foregoing powers of
attorney, being coupled with an interest, are irrevocable until the Obligations
have been fully satisfied and all commitments of the Lenders to extend credit to
or for the account of the Company have expired or otherwise been terminated;
provided, however, that the Agent agrees, as a personal covenant to the relevant
Pledgor, not to exercise the powers of attorney set forth in this Section unless
an Event of Default has occurred and is continuing.
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Section 9. Defaults and Remedies. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default, all rights of the Pledgors to receive and retain the distributions
which they are entitled to receive and retain pursuant to Section 7(b) hereof
shall, at the option of the Agent cease and thereupon become vested in the Agent
which, in addition to all other rights provided herein or by law, shall then be
entitled solely and exclusively to receive and retain the distributions which
the Pledgors would otherwise have been authorized to retain pursuant to Section
7(b) hereof and all rights of the Pledgors to exercise the voting and/or
consensual powers which they are entitled to exercise pursuant to Section 7(a)
hereof shall, at the option of the Agent, cease and thereupon become vested in
the Agent which, in addition to all other rights provided herein or by law,
shall then be entitled solely and exclusively to exercise all voting and other
consensual powers pertaining to the Collateral and to exercise any and all
rights of conversion, exchange or subscription and any other rights, privileges
or options pertaining thereto as if the Agent were the absolute owner thereof
including, without limitation, the right to exchange, at its discretion, the
Collateral or any part thereof upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the respective issuer thereof or upon
the exercise by or on behalf of any such issuer or the Agent of any right,
privilege or option pertaining to the Collateral or any part thereof and, in
connection therewith, to deposit and deliver the Collateral or any part thereof
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Agent may determine. In the event
the Agent in good faith believes any of the Collateral constitutes restricted
securities within the meaning of any applicable securities law, any disposition
thereof in compliance with such laws shall not render the disposition
commercially unreasonable.
(c) Upon the occurrence and during the continuation of any Event of
Default, the Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the UCC (regardless
of whether the UCC is the law of the jurisdiction where the rights or remedies
are asserted and regardless of whether the UCC applies to the affected
Collateral), and further the Agent may, without demand and without
advertisement, notice, hearing or process of law, all of which each Pledgor
hereby waives to the extent permitted by applicable law, at any time or times,
sell and deliver any or all of the Collateral held by or for it at public or
private sale, at any securities exchange or broker's board or at any of the
Agent's offices or elsewhere, for cash, upon credit or otherwise, at such prices
and upon such terms as the Agent deems advisable, in its sole discretion. In
the exercise of any such remedies, the Agent may sell the Collateral as a unit
even though the sales price thereof may be in excess of the amount remaining
unpaid on the Obligations. Also, if less than all the Collateral is sold, the
Agent shall have no duty to marshal or apportion the part of the Collateral so
sold as between the
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Pledgors, or any of them, but may sell and deliver any or all of the Collateral
without regard to which of the Pledgors are the owners thereof. In addition to
all other sums due the Agent or any Lender hereunder, each Pledgor shall pay the
Agent and the Lenders all reasonable costs and expenses incurred by the Agent
and such Lenders, including reasonable attorneys' fees and court costs, in
obtaining, liquidating or enforcing payment of Collateral or the Obligations or
in the prosecution or defense of any action or proceeding by or against the
Agent, the Lenders or any Pledgor concerning any matter arising out of or
connected with this Agreement or the Collateral or the Obligations including,
without limitation, any of the foregoing arising in, arising under or related to
a case under the United States Bankruptcy Code (or any successor statute). Any
requirement of reasonable notice shall be met if such notice is personally
served on or mailed, postage prepaid, to the Pledgors in accordance with Section
14(b) hereof at least 10 days before the time of sale or other event giving rise
to the requirement of such notice; provided, however, no notification need be
given to a Pledgor if such Pledgor has signed, after an Event of Default has
occurred, a statement renouncing any right to notification of sale or other
intended disposition. The Agent shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been given. The Agent
or any Lender may be the purchaser at any such sale. Each Pledgor hereby waives
all of its rights of redemption from any such sale. Subject to the provisions of
applicable law, the Agent may postpone or cause the postponement of the sale of
all or any portion of the Collateral by announcement at the time and place of
such sale, and such sale may, without further notice, be made at the time and
place to which the sale was postponed or the Agent may further postpone such
sale by announcement made at such time and place.
Each Pledgor agrees that if any part of the Collateral is sold at any
public or private sale, the Agent may elect to sell only to a buyer who will
give further assurances, satisfactory in form and substance to the Agent,
respecting compliance with the requirements of the Federal Securities Act of
1933, as amended, and a sale subject to such condition shall be deemed
commercially reasonable.
Each Pledgor further agrees that in any sale of any part of the
Collateral, the Agent is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law (including, without
limitation, compliance with such procedures as may restrict the number of
prospective bidders and purchasers and/or further restrict such prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or resale of such Collateral), or in order to obtain any required
approval of the sale or of the Purchaser by any governmental regulatory
-12-
<PAGE>
authority or official, and each Pledgor further agrees that such compliance
shall not result in such sale being considered or deemed not to have been made
in a commercially reasonable manner, nor shall the Agent be liable or
accountable to any Pledgor for any discount allowed by reason of the fact that
such collateral is sold in compliance with any such limitation or restriction.
(d) In the event the Agent shall sell or otherwise dispose of all or any
part of the Partnership Interest Collateral or LLC Collateral, each Pledgor
hereby grants the purchaser of such portion of the Partnership Interest
Collateral or LLC Collateral to the fullest extent of its capacity, the ability
(but not the obligation) to become a partner or member in the relevant
Partnership or LLC, as the case may be (subject to the approval of the relevant
Partnership or LLC, as the case may be, in the exercise of its discretion in
accordance with its Organizational Agreement), in the place and stead of such
Pledgor. To exercise such right, the purchaser shall give written notice to the
relevant Partnership or LLC, as the case may be, of its election to become a
partner or member in such Partnership or LLC. Following such election and
giving of consent by all necessary partners or members of the relevant
Partnership or LLC as to the purchaser becoming a partner or member, the
purchaser shall have the right and powers and be subject to the liabilities of a
partner or member under the relevant Organizational Agreement and the
partnership or limited liability company act governing the Partnership or LLC.
(e) Upon the occurrence and during the continuation of any Event of
Default, in addition to all other rights provided herein or by law, the Agent
shall have the right to cause all or any part of the Partnership Interest
Collateral or LLC Collateral of any of the Pledgors in any one or more of the
Partnerships or LLCs to be redeemed and to cause a withdrawal, in whole or in
part, of any Pledgor from any Partnership or LLC or any of its interest therein.
(f) The powers conferred upon the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose on it any duties to exercise
such powers. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equivalent to that which the Agent accords
its own property, consisting of similar types securities, it being understood,
however, that the Agent shall have no responsibility for (i) ascertaining or
taking any action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters, (ii) taking any necessary
steps to preserve rights against any parties with respect to any Collateral, or
(iii) initiating any action to protect the Collateral or any part thereof
against the possibility of a decline in market value. This Agreement
constitutes an assignment of rights only and not an assignment of any duties or
obligations of the Pledgors in any way related to the Collateral, and the Agent
shall have no duty or obligation to discharge any such duty or obligation. By
its acceptance hereof, the Agent does not undertake to perform or discharge and
shall not be
-13-
<PAGE>
responsible or liable for the performance or discharge of any such duties or
responsibilities and shall not in any event become a "Substituted Limited
Partner" or words of like import (as defined in the relevant Organizational
Agreement) in the relevant Partnership. Neither the Agent nor any Lender, nor
any party acting as attorney for the Agent or any Lender, shall be liable
hereunder for any acts or omissions or for any error of judgment or mistake of
fact or law other than such person's gross negligence or willful misconduct.
(g) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Pledgor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. The rights and remedies of the Agent and the
Lenders under this Agreement shall be cumulative and not exclusive of any other
right or remedy which the Agent or the Lenders may have. For purposes of this
Agreement, an Event of Default shall be construed as continuing after its
occurrence until the same is waived in writing by the Lenders or the Required
Lenders, as the case may be, in accordance with the Credit Agreement.
Section 10. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of, or held as
collateral security for, the Obligations in accordance with the terms of the
Credit Agreement. The Pledgors shall remain liable to the Agent and the Lenders
for any deficiency. Any surplus remaining after the full payment and
satisfaction of the Obligations shall be returned to the Company, as agent for
Pledgors, or to whomsoever the Agent reasonably determines is lawfully entitled
thereto.
Section 11. Continuing Agreement. This Agreement shall be a
continuing agreement in every respect and shall remain in full force and effect
until all of the Obligations, both for principal and interest, have been fully
paid and satisfied and the commitments of the Lenders to extend credit to or for
the account of the Company shall have expired or otherwise terminated. Upon
such termination of this Agreement, the Agent shall, upon the request and at the
expense of the Pledgors, forthwith release all its liens and security interests
hereunder.
Section 12. Primary Security; Obligations Absolute. The lien and
security herein created and provided for stand as direct and primary security
for the Obligations. No application of any sums received by the Agent in
respect of the Collateral or any disposition thereof to the reduction of the
Obligations or any portion thereof shall in any manner entitle any Pledgor to
any right, title or interest in or to the Obligations or any collateral security
therefor, whether by subrogation or otherwise, unless and until all Obligations
have been fully paid and satisfied and all commitments to extend credit
constituting Obligations to the Company shall have expired or
-14-
<PAGE>
otherwise terminated. Each Pledgor acknowledges and agrees that the lien and
security hereby created and provided for are absolute and unconditional and
shall not in any manner be affected or impaired by any acts or omissions
whatsoever of the Agent, any Lender or any other holder of any of the
Obligations, and without limiting the generality of the foregoing, the lien and
security hereof shall not be impaired by any acceptance by the Agent, any Lender
or any other holder of any of the Obligations of any other security for or
guarantors upon any Obligations or by any failure, neglect or omission on the
part of the Agent, any Lender or any other holder of any of the Obligations to
realize upon or protect any of the Obligations or any collateral security
therefor. The lien and security hereof shall not in any manner be impaired or
affected by (and the Agent and the Lenders, without notice to anyone, are hereby
authorized to make from time to time) any sale, pledge, surrender, compromise,
settlement, release, renewal, extension, indulgence, alteration, substitution,
exchange, change in, modification or disposition of any of the Obligations, or
of any collateral security therefor, or of any guaranty thereof, or of any
instrument or agreement setting forth the terms and conditions pertaining to any
of the foregoing. The Lenders may at their discretion at any time grant credit
to the Company without notice to the other Pledgors in such amounts and on such
terms as the Lenders may elect without in any manner impairing the lien and
security hereby created and provided for. In order to realize hereon and to
exercise the rights granted the Agent and the Lenders hereunder and under
applicable law, there shall be no obligation on the part of the Agent, any
Lender or any other holder of any of the Obligations at any time to first resort
for payment to the Company or any other Pledgor or to any guaranty of the
Obligations or any portion thereof or to resort to any other collateral
security, property, liens or any other rights or remedies whatsoever, and the
Agent and the Lenders shall have the right to enforce this Agreement as against
any Pledgor or any of its Collateral irrespective of whether or not other
proceedings or steps seeking resort to or realization upon or from any of the
foregoing are pending.
Section 13. The Agent. In acting under or by virtue of this
Agreement, Agent shall be entitled to all the rights, authority, privileges and
immunities provided in Section 10 of the Credit Agreement, all of which
provisions of said Section 10 are incorporated by reference herein with the same
force and effect as if set forth herein in their entirety. The Agent hereby
disclaims any representation or warranty to the Lenders or any other holders of
the Obligations concerning the perfection of the liens and security interests
granted hereunder or in the value of the Collateral.
Section 14. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and
security interest in the Collateral and shall be binding upon each Pledgor, its
successors and permitted assigns, and shall inure, together with the rights and
remedies of the Agent and the Lenders hereunder, to the benefit of the Agent and
the Lenders, and their successors and assigns; provided, however, that no
Pledgor may assign its rights or delegate its duties hereunder without the
Agent's prior written consent
-15-
<PAGE>
(except for such assignments and assumptions arising as a matter of law as a
result of a merger permitted by Section 7.16(c) of the Credit Agreement).
Without limiting the generality of the foregoing, and subject to the provisions
of the Credit Agreement, any Lender may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other person, and such
other person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise.
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Pledgor when given to the Company in accordance
with Section 11.9 of the Credit Agreement, or if to the Agent or any Lender,
when given to such party in accordance with Section 11.9 of the Credit
Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure or other realization upon any
Collateral subject to this Agreement or for the execution of any trust or power
hereof or for the appointment of a receiver, or for the enforcement of any other
remedy under or upon this Agreement; it being understood and intended that no
one or more of the Lenders shall have any right in any manner whatsoever to
affect, disturb or prejudice the lien and security interest of this Agreement by
its or their action or to enforce any right hereunder, and that all proceedings
at law or in equity shall be instituted, had and maintained by the Agent in the
manner herein provided for the benefit of the Lenders.
(d) In the event that any provision hereof shall be deemed to be invalid
or unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed as
not containing such provision, but only as to such jurisdictions where such law
or interpretation is operative, and the invalidity or unenforceability of such
provision shall not affect the validity of any remaining provision hereof, and
any and all other provisions hereof which are otherwise lawful and valid shall
remain in full force and effect. Without limiting the generality of the
foregoing, in the event that this Agreement shall be deemed to be invalid or
otherwise unenforceable with respect to any Pledgor, such invalidity or
unenforceability shall not affect the validity of this Agreement with respect to
the other Pledgors.
(e) In the event the Agent and the Lenders shall at any time in their
discretion permit a substitution of Pledgors hereunder or a party shall wish to
become a Pledgor hereunder, such substituted or additional Pledgor shall, upon
executing an agreement in the form attached hereto as Schedule F, become a party
hereto and be bound by all the terms and conditions hereof to the same extent as
though such Pledgor had originally executed this Agreement and, in the case of a
substitution, in lieu of the Pledgor being replaced. No such substitution shall
be effective absent
-16-
<PAGE>
the written consent of Agent nor shall it in any manner affect the obligations
of the other Pledgors hereunder.
(f) Upon the execution and delivery of this Agreement by the Pledgors
hereunder, this Agreement shall as of such date supersede all provisions of the
various Pledge Agreements executed by certain Pledgors prior to the date hereof
(the "Prior Pledge Agreements"). The Pledgors hereby agree that,
notwithstanding the execution and delivery of this Agreement, the liens and
security interests created and provided for under the Prior Pledge Agreements
continue in effect under and pursuant to the terms of this Agreement for the
benefit of all of the Obligations secured hereby. Nothing herein contained
shall in any manner affect or impair the priority of the liens and security
interests created and provided for by the Prior Pledge Agreements as to the
indebtedness and obligations which would otherwise be secured thereby prior to
giving effect to this Agreement.
(g) Each Pledgor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in the City of Chicago for purposes of all legal
proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. Each Pledgor
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient form. Each Pledgor, the Agent, and
each Lender hereby irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement, any other Loan
Document or the transactions contemplated hereby or thereby.
(h) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(i) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument.
[Signature Pages to Follow]
-17-
<PAGE>
In Witness Whereof, each Pledgor has caused this Agreement to be duly
executed and delivered as of the date first above written.
"Pledgors"
Everest Healthcare Services
Corporation
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
WSKC Dialysis Services, Inc.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Ohio Valley Dialysis Center, Inc.
/s/ John B. Bourke
By____________________________________
Secretary/Treasurer
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-18-
<PAGE>
Northwest Indiana Dialysis, Inc.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
New York Dialysis Management, Inc.
/s/ John B. Bourke
By____________________________________
Treasurer
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Mercy Dialysis Center, Inc.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
DuPage Dialysis, Ltd.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-19-
<PAGE>
Lake Avenue Dialysis Center, Inc.
/s/ John B. Bourke
By____________________________________
Asst. Treasurer
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Home Dialysis of America, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Amarillo Acute Dialysis Specialists,
L.L.C.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Dialysis Specialists of Corpus Christi,
L.L.C.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-20-
<PAGE>
Home Dialysis of Eastagate, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Dialysis Services of Cincinnati, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Dialysis Specialists of Marietta, Ltd.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Saint Margaret Mercy Dialysis
Centers, L.L.C.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
-21-
<PAGE>
Everest Management, Inc.
/s/ John B. Bourke
By____________________________________
CFO
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
The Extracorporeal Alliance, L.L.C.
/s/ John B. Bourke
By____________________________________
Secretary
Its________________________________
Address:
101 North Scoville
Oak Park, Illinois 60302
Attention: Mr. John B. Bourke
Acknowledged and agreed to in Chicago, Illinois as of the date first above
written.
Harris Trust and Savings Bank, as Agent as
aforesaid for the Lenders
/s/ Michael W. Lewis
By____________________________________
Senior Vice President
Its________________________________
Address:
111 West Monroe Street, 4E
P.O. Box 755
Chicago, Illinois 60390
Attention: Ms. Gloria Compean
-22-
<PAGE>
Schedule A to Pledge Agreement
The Pledged Securities
<TABLE>
<CAPTION>
Percentage of
Name and Name of Issuer Jurisdiction No. of Certificate Issuer's
Location of of Shares Class No. Stock
Pledgor Incorporation
<S> <C> <C> <C> <C> <C> <C>
Everest Healthcare WSKC Dialysis Illinois 315 Common 27 100%
Services Corporation Services, Inc.
101 North Scoville 11,617,200 Preferred 69
Oak Park, IL 60302
Ohio Valley Indiana 1,000 Common 11 100%
Dialysis Center,
Inc.
Northwest Indiana 1,000 Common 12 100%
Indiana Dialysis,
Inc.
New York New York 4,928 Common 43 100%
Dialysis
Management,
Inc.
Mercy Dialysis Wisconsin 56 Common 10 100%
Center, Inc.
DuPage Dialysis, Illinois 1,000 Common 12 100%
Ltd.
Lake Avenue Indiana 117.75 Common 12 100%
Dialysis Center,
Inc.
Home Dialysis of Arizona 25,000 Common 9 100%
America, Inc.
Everest Delaware 1,000 Common 1 100%
Management,
Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Home Dialysis of Home Dialysis of Ohio 95 Common 1 95%
America, Inc. Eastgate, Inc.
6300 East El Dorado
Plaza, Suite 100
Tucson, AZ 85715
Dialysis Services Ohio 75 Common 1 65%
of Cincinnati,
Inc. 120 Common 6
</TABLE>
-2-
<PAGE>
Schedule B to Pledge Agreement
Partnership Interest Collateral
<TABLE>
<CAPTION>
Name and Location of Name of Type of Jurisdiction Percent of
Pledgor Partnership Organization of Organization Ownership
<S> <C> <C> <C> <C>
None
</TABLE>
<PAGE>
Schedule C to Pledge Agreement
LLC Collateral
<TABLE>
<CAPTION>
Percentage of
Equity
Interest Owned
Name and Location of Jurisdiction of by
Pledgor Name of LLC Organization Pledgor
<S> <C> <C> <C> <C>
I. Everest Healthcare Services 1. Saint Margaret Mercy Illinois 80%
Corporation Dialysis Centers, L.L.C.
101 North Scoville
Oak Park, IL 60302 2. The Extracorporeal Delaware 100%
Alliance, L.L.C.
II Home Dialysis of America, 1. Amarillo Acute Dialysis Texas 100%
Inc. Specialists, L.L.C.
6300 East El Dorado Plaza
Suite 100 2. Dialysis Specialists of Texas 100%
Tucson, AZ 85715 Corpus Christi, L.L.C.
3. Dialysis Specialists of Ohio 51%
Marietta, Ltd.
</TABLE>
<PAGE>
Schedule D to Pledge Agreement
Acknowledgment to Collateral Assignment
____________, 199__
_________________________________
_________________________________
_________________________________
_________________________________
Attention:_______________________
Ladies and Gentlemen:
___________________ ("Pledgor") executed an Amended and Restated Pledge
Agreement dated as of May 15, 1997 (the "Pledge Agreement") in favor of Harris
Trust and Savings Bank (the "Agent"), a copy of which you have received.
Pursuant to the Pledge Agreement, Pledgor assigned its equity interests in
___________________ (the "Partnership/LLC") as collateral security for, among
other things, indebtedness and obligations of Everest Healthcare Services
Corporation (the "Company") now or from time to time owing pursuant to that
certain Amended and Restated Credit Agreement dated as of May 15, 1997 (such
Credit Agreement as the same may be amended, modified or restated from time to
time being hereinafter referred to as the "Credit Agreement") among the Company,
the Agent, and various other lenders party thereto.
We ask you, by accepting this letter below on behalf of the Partnership/LLC
and as its general partner/manager, to confirm the following:
1. Pledgor is a partner/member in the Partnership/LLC.
2. You consent to the collateral assignment of Pledgor's interest in
the Partnership/LLC to the Agent, notwithstanding anything to the contrary
contained in the Partnership Agreement/Limited Liability Company Articles
of Association and Operating Agreement. This letter will serve to evidence
the consent to this collateral assignment from the Partnership/LLC and its
general partner/manager.
3. All parties required by the terms of the Partnership Agreement/
Limited Liability Company Articles of Association and Operating Agreement
to approve the
<PAGE>
collateral assignment made by the Pledge Agreement have done so, and the
interest of the Agent by virtue of that assignment has been reflected on
the books and records of the Partnership/LLC.
4. The Partnership/LLC has been formed under the Partnership
Agreement dated as of ______________, 19__/the Articles of Association
dated ______________, 19__, and the Operating Agreement dated as of
________________, 19___ (the "Organizational Documents"), and the
Organizational Documents have not subsequently been modified or amended and
continue in full force and effect. The Organizational Documents shall not
be amended without the consent of the Agent. The Agent agrees with the
Partnership/LLC that the Agent will not unreasonably withhold its consent
to modifications or amendments to the Organizational Documents which do not
adversely affect the interests of the Agent or of the Lenders identified
and defined in the Pledge Agreement.
5. All payments and distributions due and to become due to Pledgor
pursuant to the Organizational Documents shall continue to be paid directly
to such Pledgor, unless and until the Agent notifies the Partnership/LLC in
writing to do otherwise. If the Agent so notifies the Partnership/LLC, the
Partnership/LLC will immediately cease making such payments and
distributions to the Pledgor and will as soon as possible, but in any event
within 5 days after receiving such notice, remit all such payments and
distributions directly to the Agent at 111 West Monroe Street, P.O. Box
755, Chicago, Illinois 60690.
6. By virtue of the Pledge Agreement, the Agent has the right, upon
the occurrence and during the continuation of any Event of Default under
the Credit Agreement, at its option to exercise Pledgor's right (if any) to
withdraw all or any part of such Pledgor's interest in the Partnership/LLC
by so notifying the Partnership/LLC in writing no less than 10 days prior
to the proposed withdrawal date. All payments and distributions due or to
become due under the Organizational Documents to the Pledgor as a result of
such withdrawal shall be remitted directly to the Agent as stated above.
If given at all, the notice provided pursuant to this paragraph may (but
need not) be given concurrently with any notice provided pursuant to the
immediately preceding paragraph.
7. The Pledgor agrees that any such payment to the Agent shall be a
good receipt and acquittance as against it -- that is to say, the
Partnership/LLC should make the payment directly to the Agent and in so
doing, the Partnership/LLC discharges any liability to such Pledgor for
that payment.
-2-
<PAGE>
8. The terms of the Pledge Agreement prohibit Pledgor from making
any transfer of its interest in the Partnership/LLC without the Agent's
prior written consent (except for such transfers arising in connection with
a merger permitted by Section 7.16(c) of the Credit Agreement). You agree
not to honor any such transfer of Pledgor's interest without the Agent's
prior written consent.
The agreements in this letter shall be modified only in a writing signed by
the Agent, the Pledgor and the Partnership/LLC. We acknowledge that the
Partnership/LLC shall be entitled to assume that the Pledge Agreement continues
in full force and effect unless and until the Partnership/LLC receives actual
written notice of a termination of same from the Agent.
Very truly yours,
[Pledgor]
By
Its____________________________________
Harris Trust and Savings Bank, as
Agent
By
Its____________________________________
The undersigned, both as the general partner/manager of the Partnership/LLC
and on behalf of the Partnership/LLC, join in this letter to evidence their
acknowledgment and agreement to the same.
[Partnership/LLC]
-3-
<PAGE>
By
Its____________________________________
[General Partner/Manager of
Partnership]
By
Its____________________________________
-4-
<PAGE>
Schedule E to Pledge Agreement
Amendment to Pledge Agreement
Reference is hereby made to that certain Amended and Restated Pledge
Agreement dated as of May 15, 1997 (as the same may be amended, the "Pledge
Agreement"), from the Pledgors which are signatories thereto to and Harris Trust
and Savings Bank, as Agent. Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Pledge Agreement.
Subsequent to the Pledgors' delivery of the Pledge Agreement, certain
shares of stock, partnership interests or limited liability company interests
have been added as Collateral under the Pledge Agreement. As a result of such
addition, Schedule A of the Pledge Agreement does not accurately describe the
shares of capital stock and/or Schedule B does not accurately describe the
partnership interests and/or Schedule C does not accurately describe the limited
liability company interests, currently held by the Agent as collateral under the
Pledge Agreement.
The Pledgors now desire to amend Schedule A and/or Schedule B and/or
Schedule C to the Pledge Agreement to reflect such addition, and this instrument
shall constitute an agreement between the Pledgors and the Agent amending the
Pledge Agreement in the respects, but only in the respects, hereinafter set
forth:
1. If an Annex A is attached hereto, Schedule A of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex A attached hereto.
2. If an Annex B is attached hereto, Schedule B of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex B attached hereto.
3. If an Annex C is attached hereto, Schedule C of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex C attached hereto.
4. As collateral security for the Obligations, each Pledgor hereby
grants to the Agent a continuing lien on and security interest in, and
acknowledges and agrees that the Agent has and shall continue to have a
continuing lien on and security interest in, all the shares of capital
stock of each issuer listed and described on Annex A attached hereto (if
attached), all of the partnership interests listed and described on Annex B
attached hereto (if attached), all of the limited liability company
interests listed and described on
<PAGE>
Annex C attached hereto (if attached) and all the other properties, rights,
interests and privileges comprising the Collateral (as such term is defined
in the Pledge Agreement after giving effect to this Amendment), to the same
extent and with the same force and effect as if (i) the shares of stock
described on Annex A had originally been included on Schedule A to the
Pledge Agreement, (ii) the partnership interests described on Annex B had
been originally included on Schedule B to the Pledge Agreement and (iii)
the limited liability company interests described on Annex C had been
originally included on Schedule C to the Pledge Agreement. The foregoing
granting clause is in addition to and supplemental of and not in
substitution for the granting clause contained in the Pledge Agreement.
Neither the Pledgors nor the Agent intends by this Amendment to in any way
impair or otherwise affect the lien of the Pledge Agreement on such of the
Collateral which was subject to the Pledge Agreement prior to giving effect
to this Amendment.
5. Each Pledgor hereby repeats and reaffirms all of its covenants,
agreements, representations and warranties contained in the Pledge
Agreement, each and all of which shall be applicable to all of the
properties, rights, interests and privileges subject to the lien of the
Pledge Agreement after giving effect to this Amendment. Each Pledgor hereby
certifies that no Event of Default or event which, with notice or lapse of
time or both, would constitute an Event of Default exists under the Pledge
Agreement after giving effect to this Amendment.
6. No reference to this Amendment need be made in any note,
instrument or other document at any time referring to the Pledge Agreement,
any reference in any of such to the Pledge Agreement to be deemed to
reference to the Pledge Agreement as modified hereby.
7. Except as specifically modified hereby, all the terms and
conditions of the Pledge Agreement shall stand and remain unchanged and in
full force and effect.
Pledgor(s):
[Name of Relevant Pledgors]
By
Its____________________________
-2-
<PAGE>
Acknowledged and agreed to as of the date first above written.
Harris Trust and Savings Bank, as
Agent
By
Its________________________________
-3-
<PAGE>
Annex A
to Amendment to Pledge Agreement
The Pledged Securities
<TABLE>
<CAPTION>
Name and Percentage
Location of Name of Jurisdiction of No. of Certificate of Issuer's
Pledgor Issuer Incorporation Shares Class No. Stock
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
Annex B
to Amendment to Pledge Agreement
Partnership Interests
<TABLE>
<CAPTION>
Name and Location of Name of Type of Jurisdiction Percent of
Pledgor Partnership Organization of Organization Ownership
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
Annex C
to Amendment to Pledge Agreement
<TABLE>
<CAPTION>
Percentage of Equity
Name and Location of Jurisdiction of Interest Owned by
Pledgor Name of LLC Organization Pledgor
<S> <C> <C> <C>
</TABLE>
<PAGE>
Schedule F to Pledge Agreement
Assumption and Supplemental Pledge Agreement
This Agreement dated as of this _____ day of ______________, 199___ from
[new Pledgor], a __________ corporation/partnership/limited liability company
(the "New Pledgor"), to Harris Trust and Savings Bank ("Harris") as agent for
the Lenders (defined in the Pledge Agreement hereinafter identified and defined)
(Harris acting as such agent and any successor or successors to Harris in such
capacity being hereinafter referred to as the "Agent");
Preliminary Statements
A. Everest Healthcare Services Corporation, a Delaware corporation (the
"Company") and certain other Pledgors have executed and delivered to the Agent
that certain Amended and Restated Pledge Agreement dated as of May 15, 1997
(such Amended and Restated Pledge Agreement, as the same may from time to time
be modified or amended, including supplements thereto which add additional
parties as Pledgors thereunder, being hereinafter referred to as the "Pledge
Agreement") pursuant to which such parties (the "Existing Pledgors") have
granted to the Agent for the benefit of itself and the other Lenders a lien on
and security interest in such Existing Pledgors' Collateral (as such term is
defined in the Pledge Agreement) to secure the Obligations (as such term is
defined in the Pledge Agreement);
B. Each Pledgor will benefit, directly and indirectly, from credit and
other financial accommodations extended by the Lenders to the Company.
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Company by
the Lenders from time to time, the New Pledgor hereby agrees as follows:
1. The New Pledgor acknowledges and agrees that it shall become a
"Pledgor" party to the Pledge Agreement effective upon the date the New
Pledgor's execution of this Agreement and the delivery of this Agreement to the
Agent, and that upon such execution and delivery, all references in the Pledge
Agreement to the terms "Pledgor" or "Pledgors" shall be deemed to include the
New Pledgor. Without limiting the generality of the foregoing, the New Pledgor
hereby repeats and reaffirms all grants (including the grant of a lien and
security interest), covenants, agreements, representations and warranties
contained in the Pledge Agreement as amended hereby, each and all of which are
and shall remain applicable to the Collateral from time to time owned by the New
Pledgor or in which the New Pledgor from time to time has any rights. Without
limiting the foregoing, in order to secure payment of the Obligations, whether
<PAGE>
now existing or hereafter arising, the New Pledgor does hereby grant to the
Agent for the benefit of itself and the Lenders, and hereby agrees that the
Agent has and shall continue to have for the benefit of itself and the Lenders a
continuing security interest in, among other things, all of the New Pledgor's
Collateral (as such term is defined in the Pledge Agreement) described in
Section 2 of the Pledge Agreement, each and all of such granting clauses being
incorporated herein by reference with the same force and effect as if set forth
in their entirety except that all references in such clauses to the Existing
Pledgor or any of them shall be deemed to include references to the New Pledgor.
Nothing contained herein shall in any manner impair the priority of the liens
and security interests heretofore granted in favor of the Agent under the Pledge
Agreement.
2. The following information shall be added to Schedules A, B and/or C to
the Pledge Agreement, as applicable:
Schedule A
The Pledged Securities
<TABLE>
<CAPTION>
Percentage
Name and Name of Jurisdiction of No. of Certificate of Issuer's
Location of Issuer Incorporation Shares Class No. Stock
Pledgor
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
-2-
<PAGE>
Or
Schedule B
Partnership Interest Collateral
<TABLE>
<CAPTION>
Name and Location of Name of Type of Jurisdiction Percent of
Pledgor Partnership Organization of Organization Ownership
<S> <C> <C> <C> <C>
</TABLE>
Or
Schedule C
LLC Collateral
<TABLE>
<CAPTION>
Percentage of Equity
Name and Location of Jurisdiction of Interest Owned by
Pledgor Name of LLC Organization Pledgor
<S> <C> <C> <C>
</TABLE>
3. The New Pledgor hereby acknowledges and agrees that the Obligations
are secured by all of the Collateral according to, and otherwise on and subject
to, the terms and conditions of the Pledge Agreement to the same extent and with
the same force and effect as if the New Pledgor had originally been one of the
Existing Pledgors under the Pledge Agreement and had originally executed the
same as such an Existing Pledgor.
4. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Pledge Agreement, except
that any reference to the term "Pledgor" or "Pledgors" and any provision of the
Pledge Agreement providing meaning to such term shall be deemed a reference to
the Existing Pledgors and the New Pledgor. Except as specifically modified
hereby, all of the terms and conditions of the Pledge Agreement shall stand and
remain unchanged and in full force and effect.
5. The New Pledgor agrees to execute and deliver such further instruments
and documents and do such further acts and things as the Agent may reasonably
deem necessary or proper to carry out more effectively the purposes of this
Agreement.
-3-
<PAGE>
6. No reference to this Agreement need be made in the Pledge Agreement or
in any other document or instrument making reference to the Pledge Agreement,
any reference to the Pledge Agreement in any of such to be deemed a reference to
the Pledge Agreement as modified hereby.
7. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law).
[New Pledgor]
By
Its_____________________________________
Acknowledged and agreed to as of the date first above written.
Harris Trust and Savings Bank, as
Agent
By
Its_____________________________________
-4-
<PAGE>
EXHIBIT 9
RESTRICTED STOCK AGREEMENT
BY AND AMONG
ARTHUR MORRIS, M.D.
PAUL BALTER, M.D.
MICHAEL CARBON, M.D.
DOUGLAS MUFUKA, M.D.
ASHUTOSH GUPTA, M.D.
GEORGE DUNEA, M.D.
CRAIG W. MOORE
AND
EVEREST HEALTHCARE II, INC.
NOVEMBER 30, 1997
<PAGE>
RESTRICTED STOCK AGREEMENT
--------------------------
THIS RESTRICTED STOCK AGREEMENT (this "Agreement") is dated this 30th day
---------
of November, 1997, and is made by and among ARTHUR MORRIS, M.D., PAUL BALTER,
M.D., MICHAEL CARBON, M.D., DOUGLAS MUFUKA, M.D., ASHUTOSH GUPTA, M.D., GEORGE
DUNEA, M.D., CRAIG W. MOORE (the "Shareholders") and EVEREST HEALTHCARE II,
------------
INC., a Delaware corporation ("Holding").
-------
WHEREAS, the individual parties hereto were members of Peak Healthcare,
L.L.C., a Delaware limited liability company ("Peak"), which was a shareholder
----
of Everest Healthcare Services Corporation, a Delaware corporation ("Everest");
-------
and
WHEREAS, pursuant to a reorganization (the "Reorganization"), Peak is being
--------------
incorporated into Holding; and
WHEREAS, as a condition to the Shareholders receiving shares of capital
stock of Holding (the "Shares") pursuant to the Reorganization, the Shareholders
------
have agreed to enter into an agreement with respect to any Shares of Holding
owned by the Shareholders, whether acquired pursuant to the Reorganization or
otherwise, in order to provide for (a) certain restrictions on the transfer of
Shares and (b) certain special voting rights, all as more fully described
herein.
NOW THEREFORE, in consideration of the mutual promises contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
ARTICLE I
---------
SHARE TRANSFER RESTRICTIONS
---------------------------
Section 1.01. Prohibition Against Transfers. Reference is hereby made to
------------ -----------------------------
that certain Shareholders Agreement of even date herewith (the "Shareholders
------------
Agreement") among the parties hereto and Peak Liquidating, L.L.C., a Delaware
- ---------
limited liability company ("Liquidating"), Martin Fox, Thomas Creel, Paul
-----------
Zabetakis, Anthony Unruh, and the Shareholders' Agent (as defined therein). The
transfer restrictions of ARTICLE 3 of the Shareholders Agreement are
incorporated herein by this reference and deemed to be fully set forth at this
place.
ARTICLE II
----------
SPECIAL VOTING RIGHTS
---------------------
Section 2.01. General. In the event any of the matters described in this
------------ -------
Article II is put to a vote by the shareholders of Holding or the parties may
otherwise cause any such matters
<PAGE>
to be effected or not effected, the parties hereto agree to vote their shares of
Holding or take such actions as may reasonably and lawfully be taken (including,
without limitation, voting as members of the Voting Committee under the
Shareholders Agreement) in accordance with the provisions of this Article II.
Section 2.02. Morris' Veto Rights. The approval of Arthur Morris shall be
------------ -------------------
required for a sale of the equity securities or assets of Liquidating to a
third-party (a "Sale of a Company") or a sale of the equity securities or assets
of Holding, Everest, or any successor or subsidiary thereof, to a third-party (a
"Sale of an Operating Company") resulting in the fair market value of the
Company's assets minus the Company's liabilities immediately after such sale
plus the amount of any proceeds of such sale distributed to the Interest Holders
which were not already included in the fair market value of such assets, being
less than $62,023,364. Determination of the fair market value of the Company's
net assets shall be made by a majority of the Voting Members (as defined in
Section 2.03) but shall be subject to a request by any such party for an
appraisal pursuant to the procedures set forth in SECTION 4.5 of the Operating
Agreement dated November 30, 1997 (the "Liquidating Operating Agreement") for
-------------------------------
Liquidating. Such determination shall be computed as if Liquidating had not
distributed any stock or assets pursuant to that certain Receivable Distribution
Agreement and that certain Stock Distribution Agreement, each of even date
herewith. All capitalized terms not otherwise defined herein shall be as
defined in the Liquidating Operating Agreement.
Section 2.03. Voting Rights for Special Matters. With respect to each of
------------ ---------------------------------
the situations and matters listed in subsections (i)-(vii) below (collectively,
the "Special Matters"), approval of the Voting Members regarding Special Matters
---------------
shall require approval of Arthur Morris and two other Voting Members or, subject
to the following sentence, approval of a majority of the Voting Members hereto.
Notwithstanding anything herein to the contrary, any Special Matter may be
vetoed by Arthur Morris and any two other Voting Members.
(i) Mergers. A merger, consolidation or reorganization of the
-------
Company or an Operating Company with any Person;
(ii) Dispositions. The sale, assignment, transfer, or other
------------
disposition of more than 10% of the assets of the Company or an Operating
Company (computed on the basis of either book value determined in
accordance with generally accepted accounting principles or fair market
value) in any transaction or series of related transactions;
(iii) Public Offering. The consummation of any public offering of
---------------
equity or debt securities of the Company or an Operating Company;
(iv) Security Issuances. The authorization, issuance or entering
------------------
into any agreement by the Company or an Operating Company providing for the
issuance (other than to a direct or indirect wholly-owned Subsidiary of
Holding) of (a) any notes or debt securities containing equity features, or
(b) any equity securities (or any securities convertible into or
exchangeable for any equity securities) other than the issuance of such
2
<PAGE>
securities in any transaction or series of related transactions to managers
of an Operating Company the percentage of which does not exceed 5% of the
total, fully-diluted, outstanding equity securities of the Company $500,000
on the date of such issuance as reasonably determined by the Voting
Members;
(v) Distributions. Distributions by the Company pursuant to
-------------
SECTION 4.2 or SECTION 4.4 of the Liquidating Operating Agreement and
determination of the "fair market value" of any In-Kind Distribution under
SECTION 4.4 of the Liquidating Operating Agreement;
(vi) Indebtedness and Liens. Incur or permit the existence of, or
----------------------
cause or permit any Operating Company to incur or permit the existence of,
indebtedness for borrowed money in amounts greater than $10,000,000 in the
aggregate, or allow the creation, incurrence or assumption of, or suffering
to exist, any mortgages, pledges, liens, charges or encumbrances on any
existing or future property, asset (including the capital stock of
Subsidiaries), income or rights in any thereof in amounts in excess of
$10,000,000 in the aggregate;
(vii) Liquidation. The liquidation or dissolution of the Company
-----------
or any Operating Company; and
(viii) Related Party Transactions. The entering into, or
--------------------------
permitting any Operating Company to enter into, any material transaction
with any of the Company's members, interest holders, or affiliates.
In the event the number of Voting Members changes to five or less, a
Special Matter may be approved by a majority of the Voting Members (subject to
veto by Arthur Morris and any one other Voting Members) or approved or vetoed by
Arthur Morris and any one other Voting Members. In the event the number of
Voting Members changes to nine or more, a Special Matter may be approved by a
majority of the Voting Members (subject to veto by Arthur Morris and any three
other Voting Members) or approved or vetoed by Arthur Morris and any three other
Voting Members. The provisions of this ARTICLE 2 shall terminate and be of no
further force or effect upon Arthur Morris' no longer being a Voting Member.
For purposes of this Agreement, "Voting Member" shall mean each individual
party hereto so long as such party remains a member of Liquidating and such
individual together with his Permitted Transferees under the Liquidating
Operating Agreement continue to own at least 90% of the common stock of Holding
(or securities into which such stock was converted or exchanged) originally
distributed to such member pursuant to the Stock Distribution Agreement.
Section 2.04. Further Actions. The Voting Members shall take all actions
------------ ---------------
which they can reasonably take to elect the persons who were the original
members of Peak to the board of directors of Holding and Everest.
3
<PAGE>
ARTICLE III
-----------
MISCELLANEOUS
-------------
Section 3.01. Holdback Agreement. The Shareholders (or any successors in
------------ ------------------
interest) of the Shares agree not to effect any public sale or distribution of
equity securities of Holding, or any securities convertible into or exchangeable
or exercisable for such securities, for such period of time prior to and
following any Public Offering, as the Board of Directors of Holding may
determine to be in the best interest of Holding; provided, such period of time
shall not exceed two weeks prior to and one hundred eighty (180) days from the
effective date of such Public Offering. "Public Offering" shall mean any
---------------
offering by Holding of its equity securities to the public pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
or any replacement thereof.
Section 3.02. Agreement to Sell. In the event the Board of Directors of
------------ -----------------
Holding and the Shareholders of Holding (including the Shareholders voting in
accordance with ARTICLE II hereof) approve the sale of substantially all of the
assets of Holding, all of the issued and outstanding capital stock of Holding
(including the Shareholders voting in accordance with ARTICLE II hereof), or a
majority-in-interest of the Shareholders of Holding determine to sell or
exchange for shares of a new corporation greater than fifty percent (50%) of the
outstanding capital stock of Holding held by such Shareholders (in any case, an
"Approved Sale") to a person or group in a single transaction or a series of
-------------
transactions (which may be structured as a merger or otherwise), the
Shareholders agree to consent to and raise no objections to such Approved Sale,
and if the Approved Sale is structured as a sale of the capital stock of
Holding, the Shareholders agree to participate in such Approved Sale, pro rata,
on the same terms and conditions as offered to such other shareholders of
Holding in connection with such Approved Sale. The Shareholders agree to take
all actions which are necessary in connection with the consummation of any
Approved Sale and which are not otherwise inconsistent with the terms hereof.
Section 3.03. Further Assurance. The parties hereto shall from time to
------------ -----------------
time, at any party's request and without further consideration, execute and
deliver or cause to be executed and delivered such additional instruments as may
be necessary to more effectively document or give effect to the undertakings
contemplated by this Agreement.
Section 3.04. Binding Effect. This Agreement shall be binding upon the
------------ --------------
parties hereto and their heirs, executors, administrators, successors, assigns
and any other transferee and the spouse of any individual Shareholder. Each
transferee of Shares shall sign an agreement, prior to the consummation of such
transfer and as a prerequisite to the registration of the Shares in the name of
the transferee, in a form reasonably required by Holding, providing for the
transferee's agreement to be bound by the terms and conditions of this Agreement
to the same extent as such Shareholder, and, if necessary under the laws of the
jurisdiction of such transferee (as determined by counsel to Holding), the
spouse of such transferee shall sign an acknowledgement evidencing consent to
such transfer in the form attached hereto as EXHIBIT A.
4
<PAGE>
Failure of the transferee and the spouse of the transferee to sign shall not,
however, in any way, prevent this Agreement from being binding on the transferee
and the transferee's spouse.
Section 3.05. Shares Covered by this Agreement. This Agreement shall
------------ --------------------------------
apply to all Shares that are now or hereafter registered in Holding's records in
the name of each Shareholder and to all Shares now or hereafter beneficially
owned by such Shareholder and to all Shares now or hereafter beneficially owned
by such Shareholder pursuant to a trust under which such Shareholder is a
beneficiary. It shall also apply to any stock options and any warrants, stock
conversion privileges or any other share rights actually or beneficially now or
hereafter owned by each Shareholder in Holding and all Shares or rights to
Shares of any other corporation into which such Shares may be changed, or for
which they may be exchanged, whether through reorganization, recapitalization,
stock split-up, combinations of Shares, merger or consolidation.
Section 3.06. Waiver. A party's failure to insist on compliance or
------------ ------
enforcement of any provision of this Agreement shall not affect the validity or
enforceability or constitute a waiver of future enforcement of that provision or
of any other provision of this Agreement by that party or any other party.
Section 3.07. Governing Law. This Agreement shall be governed by the laws
------------ -------------
of the State of Delaware, with regard to its principles of conflicts of laws.
Any litigation arising out of this Agreement shall be commenced in Cook County,
Illinois or such other place as determined by Holding.
Section 3.08. Severability. The invalidity or unenforceability of any
------------ ------------
other provision and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision had never been in the Agreement.
Section 3.09. Entire Agreement. The parties hereto expressly acknowledge
------------ ----------------
that this Agreement and the agreements referenced herein constitute the entire
agreement between the parties concerning transfer restrictions of the Shares of
Holding, and that all other oral or written agreements of any nature with
respect to such matter are hereby superseded and revoked.
Section 3.10. Amendment. This Agreement shall not be modified or amended
------------ ---------
except by means of a writing signed by Holding, a majority of the Shareholders
parties hereto and by Arthur Morris.
Section 3.11. Termination. Other than with respect to the agreements set
------------ -----------
forth in Sections 3.01 and 3.12(b), this Agreement shall terminate upon the
occurrence of one or more of the following events, or as otherwise provided by
law:
(a) dissolution, bankruptcy or receivership of Holding;
(b) Holding ceases to conduct any business operation; and
5
<PAGE>
(c) upon the final distribution of Liquidating's assets or which
would have occurred but for the provisions of SECTION 8.2 of the
Liquidating Operating Agreement.
Upon termination, the certificates representing the Shares held by each
Shareholder shall be surrendered to Holding, which shall issue new certificates
for the same number of Shares but without the endorsement required by SECTION
3.13.
Section 3.12. Compliance with Securities Laws.
------------ -------------------------------
(a) Investment Representation. The Shareholders represent that
-------------------------
all Shares have been acquired for investment and not with a view to the
sale or distribution thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act"); and that Shareholders have no
--------------
present intention of selling or otherwise disposing of any of the Shares
for their own account; and that the Shareholders have been advised that the
Shares have not been registered with the Securities and Exchange Commission
and may not be offered, sold or otherwise transferred except in compliance
with the Securities Act.
(b) Covenant to Comply with Securities Laws. By acceptance of a
---------------------------------------
certificate evidencing Shares of Holding, the Shareholders agree that at no
time shall any of the Shares be transferred in the absence of (i) an
effective registration statement under the Securities Act and applicable
state securities laws with respect to such Shares at such time, or (ii) an
opinion of counsel satisfactory to Holding and its counsel, to the effect
that the proposed transfer at such time will not violate the Securities Act
or applicable state securities laws.
Section 3.13. Endorsement on Share Certificates. In addition to any
------------ ---------------------------------
legends required by the Certificate of Incorporation of Holding or pursuant to
federal securities laws, all certificates representing Shares now or hereafter
issued by Holding to the Shareholders shall contain the following statement
which shall be conspicuously printed or typed on the front or back of the
certificate:
"The Shares of stock represented by this Certificate: (1)
are subject to transfer restrictions in accordance with the
terms of the Restricted Stock Agreement dated as of November
30, 1997, a copy of which may be obtained without charge by
the Shareholders on written request to Holding; (2) have not
been registered pursuant to the federal or any applicable
state securities laws and cannot be transferred without an
opinion of counsel satisfactory to Holding's legal counsel
that such transfer will not violate any such securities
laws."
6
<PAGE>
Section 3.14. Counterparts. This Agreement may be executed and delivered
------------ ------------
in any number of counterparts, each of which when executed and delivered shall
be an original instrument, and all of which when taken together shall constitute
one agreement.
Section 3.15. Specific Performance. The Shareholders and Holding hereby
------------ --------------------
declare that it is impossible to measure in money the damages which may accrue
to either of them by reason of the failure of the other party to perform any of
its obligations hereunder. Therefore, if any party hereto shall institute any
action or proceeding to enforce the provisions of this Agreement, any person
(including Holding) against whom such action or proceeding is brought hereby
waives the claim or defense therein that such party has or may have an adequate
remedy at law and agrees not to urge in any such action or proceeding that such
a remedy exists. Furthermore, any party seeking to enforce the provisions of
this Agreement shall have the right to petition a court of competent
jurisdiction for an injunction or other equitable relief.
Section 3.16. Notices. Any and all offers, acceptances, consents, waivers
------------ -------
and other notices required by this Agreement shall be deemed to be sent or
delivered when personally delivered to the recipient or when mailed by certified
or registered mail with proper first class postage attached thereto, to the
parties hereto as follows: (1) in the case of Holding to 101 North Scoville,
Oak Park, Illinois 60302, Attention: President, and (2) in the case of the
Shareholders or their successors in interest, at the Shareholders' addresses
appearing on the books of Holding or at such other address as may be designated
by the Shareholders (or their successors in interest). Any notice required to
be made within a stated period of time shall be considered timely mailed if
postmarked before midnight of the last day of the stated period.
Section 3.17. Business Day. Any reference in this Agreement to "business
------------ ------------ --------
day" means any day except a Saturday, a Sunday or a day on which banks are
- ---
required to be closed in the State of Illinois.
Section 3.18. References to Gender and Number Terms. In construing this
------------ -------------------------------------
Agreement, feminine or neuter pronouns shall be substituted for those masculine
in form and vice versa, and plural terms shall be substituted for singular and
----------
singular for plural in any place in which the context so requires.
Section 3.19. Headings. The Article and Section headings in this
------------ --------
Agreement are inserted for convenience only and are not part of the Agreement.
Section 3.20. No Strict Construction. The language used in this Agreement
------------ ----------------------
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
HOLDING:
EVEREST HEALTHCARE II, INC.
By: /s/ CRAIG W. MOORE
-------------------------------------------
Name: Craig W. Moore
Title: Chairman and Chief Executive Officer
SHAREHOLDERS:
/s/ ARTHUR MORRIS, M.D.
-----------------------------------------------------
Arthur Morris, M.D.
/s/ PAUL BALTER, M.D.
-----------------------------------------------------
Paul Balter, M.D.
/s/ MICHAEL CARBON, M.D.
-----------------------------------------------------
Michael Carbon, M.D.
/s/ DOUGLAS MUFUKA, M.D.
-----------------------------------------------------
Douglas Mufuka, M.D.
/s/ ASHUTOSH GUPTA, M.D.
-----------------------------------------------------
Ashutosh Gupta, M.D.
/s/ GEORGE DUNEA, M.D.
-----------------------------------------------------
George Dunea, M.D.
/s/ CRAIG W. MOORE
-----------------------------------------------------
Craig W. Moore
8
<PAGE>
EXHIBIT A
---------
SPOUSAL CONSENT
---------------
The undersigned, being the spouse of _______________________
("Shareholder") who has duly executed and delivered that certain Restricted
------------
Stock Agreement among ARTHUR MORRIS, M.D., PAUL BALTER, M.D., MICHAEL CARBON,
M.D., DOUGLAS MUFUKA, M.D., ASHUTOSH GUPTA, M.D., GEORGE DUNEA, M.D., CRAIG W.
MOORE and EVEREST HEALTHCARE II, INC., and the Shareholder dated as of November
30, 1997, hereby acknowledges that he or she has read and is familiar with its
provisions and agrees to be bound by the terms of such Restricted Stock
Agreement and to join therein to the extent, if any, that his or her joinder may
be necessary. The undersigned hereby agrees that his or her spouse may join in
any future amendment or modification of the Restricted Stock Agreement without
any further signature, acknowledgement, agreement or consent on his or her part;
and further agrees that any interest which he or she may have in the Shares of
stock in Holding owned directly or beneficially by his or her spouse shall be
subject to the provisions of this Agreement.
_____________________________________
______________________, spouse of the
Shareholder named above
A-1
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
PARTIES: EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware
- -------
corporation (the "Company"), and CRAIG W. MOORE (the
"Employee").
EFFECTIVE DATE: January 1, 1997.
- --------------
PREMISES: The Company and its affiliates provide dialysis and dialysis
- --------
related services and equipment throughout the United States.
CONSIDERATION: The covenants, conditions and agreements hereinafter set
- -------------
forth.
TERMS:
- -----
Section 1. Establishment of Employment. The Employee shall be employed as
--------- ---------------------------
the Chief Executive Officer of the Company. The Employee shall devote all of
his professional time, knowledge and skill to his employment and shall perform
such duties and occupy such positions as the Chief Executive Officer of the
Company may from time to time determine, including without limitation, those
duties and obligations hereinafter set forth in this Agreement. Employee agrees
to such employment and further agrees that during the term of such employment he
will continue to devote such of his time, attention, and energies as are
necessary to complete the duties assigned to him from time to time to the full
and complete satisfaction of the Company.
Section 2. Term of Employment. The term of this Agreement and Employee's
--------- ------------------
employment hereunder shall begin on the Effective Date and shall continue from
year to year thereafter, all subject, however, to termination, with or without
cause, at any time upon forty-eight (48) hours' prior written notice by either
the Company to the Employee or the Employee to the Company unless otherwise
limited by this Agreement. The date of Employee's termination of employment and
the termination of this Agreement are sometimes hereinafter referred to as the
"Date of Termination."
Section 3. Compensation and Other Benefits.
--------- -------------------------------
(a) Salary and Bonus. The Company shall pay Employee a salary at
----------------
the rate of $440,000 per annum ("Basic Annual Salary"), payable in twelve (12)
equal installments on the first day of each month.
(b) Health and Disability Income Insurance. Throughout the term of
--------------------------------------
this Agreement, the Company shall maintain, at its expense:
<PAGE>
(i) Health and major medical insurance coverage for
Employee, his spouse and dependents. This coverage shall be provided
by the group health and major medical insurance policy maintained by
the Company; and
(ii) Disability income insurance which will provide Employee
with a monthly benefit of $5,000.00 beginning with the first day of
the thirteenth month of his "total disability," as defined in such
policy, and continuing until the earlier of the Employee's 65th
birthday or the date he is no longer totally disabled.
(c) Pension and Other Employee Benefit Plans. Employee's
----------------------------------------
participation in any pension or welfare benefit plan or policy now maintained or
hereafter adopted by the Company shall be governed by the terms of such plans or
policies and not by the terms of this Agreement. Any contributions by the
Company to any such plan or policy in respect of or for the Employee and any
payments or benefits thereunder to or for the benefit of the Employee or his
beneficiaries shall be in addition to his compensation provided under Section
3(a), it being intended that such compensation be exclusive of pension and
welfare benefit plan contributions or benefits for the Employee or his
beneficiaries.
Section 4. Additional Death Benefits. In addition to any amounts provided
--------- -------------------------
for herein, within ninety (90) days after the Employee's death while in the
employ of the Company, the Company will pay $5,000.00 to the Employee's spouse,
if Employee is married on the date of his death, or to his estate.
Section 5. Employee Expenses. The Company shall pay or reimburse the
--------- -----------------
Employee for all expenses incurred by the Employee on behalf of the Company or
related to the performance of Employee's duties hereunder, including without
limitation, travel and entertainment expenses and costs of membership in
professional organizations, or for any other expenses incurred by the Employee
on behalf of Company with its approval. All reimbursements pursuant to this
Section 5 shall be made upon the presentation by Employee to the Company of
itemized accounts or receipts satisfactory to the Company. If the Employee
terminates employment for any reason (including death), he (or his estate)
shall, within thirty (30) days thereof, repay to the Company an amount equal to
the unused portion of any expenses paid (or reimbursed) by the Company on his
behalf.
Section 6. Vacation. For each fiscal year of the Company, Employee shall
--------- --------
be entitled to five weeks of vacation and six paid holidays with full
compensation, but the time when vacations may be taken shall be subject to the
approval of the Board of Directors of the Company. Unused vacation time shall
not be carried over to subsequent years. Attendance at professional meetings
(other than those professional meetings at which Employee's attendance is
required by the Board of Directors of the Company) shall be treated as vacation
time.
-2-
<PAGE>
Section 7. Disability.
--------- ----------
(a) Total Disability. If the Employee shall become totally
----------------
disabled, he shall receive, during each month that he is totally disabled, an
amount equal to one-twelfth (1/12th) of his Basic Annual Salary multiplied by
the following percentages:
<TABLE>
<CAPTION>
PERIOD OF TOTAL DISABILITY
DURING WHICH SALARY PAID PERCENTAGE
----------------------------------- ----------------
<S> <C>
First Six Months 100%
Next Three Months 50%
Next Three Months 25%
Thereafter 0%
</TABLE>
The term "total disability" or "totally disabled" as used in this Agreement
shall mean the Employee's inability to perform his duties hereunder due to
physical or mental illness or injury. In addition to the amounts specified
above, the Employee shall be entitled to retain all proceeds received under
disability income insurance policies, the premiums of which have been paid by
the Company.
(b) Partial Disability. If, because of partial disability, the
------------------
Employee fails to devote to his employment at least 90% of the time required by
a full schedule, his Basic Annual Salary for the period of such partial
disability shall be reduced in ratio by the deficiency in time devoted by him to
the full schedule. However, the first six (6) consecutive months of such
partial disability shall not result in any such reduction, unless such partial
disability follows within a six-month period of total or partial disability, and
when taken with the prior period of disability equals six (6) months, in which
case the partial disability reduction herein provided for shall be effective
immediately. Notwithstanding the foregoing, the amount payable under this
Section shall not be less than the amount that would have been payable to the
Employee during the period if he had been totally disabled, for the length of
time that he is partially disabled. If the Employee's partial disability
exceeds 50%, he shall be deemed to be totally disabled and the provisions of
Section 7(a) shall apply.
(c) Miscellaneous Provisions Applicable to Disability. In
-------------------------------------------------
administering this Agreement during any period of disability the following shall
be applicable:
(i) When totally disabled, the Employee shall be excused from
rendering services to, for or on behalf of the Company. Upon
termination of such total disability, the Employee shall be obligated
to render the services required by this Agreement and shall be
entitled to receive his full Basic Annual Salary.
-3-
<PAGE>
(ii) During the period that the Employee is entitled to
receive disability payments pursuant to Section 7(a) and for three
consecutive months thereafter, the Company shall not have the right to
terminate this Agreement. Thereafter, if the Employee continues to be
totally disabled, he shall be deemed to have a Permanent Disability
and his employment shall be automatically terminated.
(iii) If following a period of disability, the Employee shall
be able to perform the services contracted for hereunder, and does so
in accordance with the provisions of this Agreement for a continuous
period of six months or more, any subsequent disability shall be
regarded as a new period of disability, and his rights under Sections
7(a) and 7(b) shall commence again. If said continuous period of
ability to perform said services and the actual performance thereof is
less than six months, any subsequent disability shall be deemed a
continuation of the previous disability, and the entire period of
disability shall be treated as a single period.
Section 8. Termination of Employment.
--------- -------------------------
(a) Accrued Salary and Bonus. Upon the termination of Employee's
------------------------
employment for any reason, the Company shall pay to Employee his accrued Basic
Annual Salary on the date such payments would have been made but for Employee's
termination.
(b) Severance Pay. If, prior to October 1, 1997, this Agreement is
-------------
terminated (i) by the death of Employee, (ii) by reason of his Permanent
Disability (as defined below), or (iii) by the Company, the Company shall pay to
Employee, as severance pay, an amount equal to $900,000. If (i) after October
1, 1997, this Agreement is terminated by the Company for any reason, or (ii)
this Agreement is terminated by Employee at any time upon at least 45 days'
prior written notice to the Company, the Company shall pay to Employee, as
severance pay, an amount equal to $598,833. The severance pay shall be paid in
twelve (12) consecutive equal monthly installments with the first installment
payable on the last day of the month following the month in which his Date of
Termination occurs. In addition, Employee's health and disability insurance
coverage pursuant to Section 3(b) and all other benefits being provided by
Company to Employee on the Date of Termination shall continue for a period of
nine (9) months beginning on the Date of Termination; provided, however, that no
amounts paid to Employee pursuant to Subsection 8(a) or 8(b) shall be considered
as compensation for purposes of any pension and/or profit-sharing plan now
maintained or hereafter established by the Company.
(c) Permanent Disability. Upon Employee's Permanent Disability, his
--------------------
employment shall be terminated. Employee shall be deemed to have a "Permanent
Disability" for purposes of this Agreement if he is totally disabled for a total
period of one hundred eighty (180) days in any three hundred sixty (360) day
period or otherwise pursuant to Section 7(c)(ii). The Board of Directors of the
Company shall determine, according to the facts then available, whether and when
Permanent Disability has occurred. Such determination shall not be arbitrary
-4-
<PAGE>
or unreasonable, and the Board of Directors of the Company shall take into
consideration the opinion of Employee's personal physician.
(d) Death Beneficiaries. If termination of employment occurs
-------------------
because of the death of the Employee or if any amounts pursuant to this Section
8 remain unpaid as of the date of Employee's death, then the amounts payable
pursuant to this Section 8 shall be paid to the Employee's designated
beneficiary; but if none is designated or if none survives the Employee, then
payment will be made to his estate.
Section 9. Acknowledgments. The Company together with its affiliates has
--------- ---------------
developed expertise in providing supplies, equipment and services required in
connection with dialysis and in all aspects of the establishment, management and
operation of dialysis facilities. This expertise has been developed by the
Company, together with its Affiliates and their respective employees, through
their efforts and labor, and such expertise has great value to them. By virtue
of Employee's employment by the Company hereunder, Employee will become familiar
with and possessed of the manner, methods and confidential information
pertaining to the Company's business and operations. Employee acknowledges that
his services are of a special, unique and extraordinary value to the Company and
that the Company will suffer great loss and damage if he enters into Competition
(as hereinafter defined), and accordingly Employee acknowledges and agrees that
the covenants contained in this Agreement are reasonable and are necessary for
the protection of the Company's proprietary interests.
Section 10. Covenant Not To Compete.
---------- -----------------------
(a) Agreement Not to Compete. As consideration for the Company
------------------------
entering into this Agreement and in recognition of the Company's proprietary
interest in its business, the Employee agrees that he shall not enter into
Competition during the period beginning on the Effective Date and ending twenty-
four months after the Employee's Date of Termination.
(b) Competition. The term "Competition," as used herein, means the
-----------
full-time or part-time performance of activities directly related to (i)
dialysis treatments, (ii) the operation of dialysis facilities or (iii)
equipment, supplies, products or services utilized in dialysis treatment or
service, directly or indirectly, alone or with any other person, partnership,
corporation or other entity, as follows: in the following counties in Illinois:
Cook, Will, Kane, DuPage, Lake, and McHenry; in the following counties in
Wisconsin: Milwaukee, Racine, Kenosha, Waukesha; in Lake County in Indiana;
within a 40-mile radius of any dialysis facility owned or operated by the
Company or any Affiliate on the Date of Termination or any location where,
during the preceding nine (9) months, the Company or any Affiliate has been
actively engaged in efforts to establish and/or operate a new dialysis facility
or to acquire or operate an existing dialysis facility. As used in this
Agreement, the term "Affiliate" means any entity which controls, is controlled
by or is under common control with the Company.
(c) Remedy. The Company and Employee acknowledge that it is
------
difficult to compute the amount of loss or damages the Company will sustain if
Employee breaches any of
-5-
<PAGE>
his covenants under this Section 10. The Company and Employee agree that the
measure hereinafter provided represents the product of their good faith
negotiations. Accordingly, if Employee breaches any of his covenants under this
Section 10, Employee agrees to pay the Company $300,000.00 as liquidated damages
on the date he breaches such covenant. Any portion of this amount which is not
paid when due, shall bear interest at two percent (2%) above the floating prime
rate of interest charged by The First National Bank of Chicago. If the Company
is involved in a court or other legal proceeding to enforce the covenants
contained in this Section 10, then in the event the Company prevails in such
proceeding, Employee shall be liable for the payment of reasonable attorneys'
fees, costs and ancillary expenses incurred by the Company in enforcing its
rights hereunder.
Section 11. Covenant to Maintain Confidential Information.
---------- ---------------------------------------------
(a) By Employee. Employee acknowledges that as a result of his
-----------
employment, he will obtain confidential knowledge and information of a private,
confidential or secret nature belonging or entrusted to the Company. Employee
hereby covenants and agrees that he shall receive such knowledge and information
in confidence and shall not during or subsequent to his employment hereunder,
except as required in the conduct of the Company's business or authorized in
writing by the Board of Directors of the Company or as such disclosure may be
required by law or a court order, publish, disclose or make use of any such
information or knowledge which in any way relates to the Business of the Company
or its Affiliates or the services, equipment or products they provide. Employee
acknowledges that it will be difficult if not impossible to compute the amount
of Company's loss and damages if he should breach his covenant under this
Section 11(a), and that by reason of Employee's financial circumstances,
Employee cannot respond in damages in an action at law to compensate the Company
for such loss or damages. Accordingly, the Company is without an adequate legal
remedy in the event Employee violates such covenant. If Employee breaches his
covenant under this Section 11, Employee agrees that in any suit which may be
brought by the Company in any court having jurisdiction, an order may be entered
enjoining him from breaching such covenant, and an order to that effect shall be
entered pending the litigation, as well as a final determination thereof,
without the requirement to post bond, and that such application for such
injunction shall be without prejudice to any other right of action which accrues
to the Company or its successors by reason of the breach of the foregoing
provisions. If the Company is involved in a legal proceeding to enforce the
covenants contained in this Section 11, then in the event the Company prevails
in such proceeding, Employee shall be liable for the payment of reasonable
attorneys' fees, court costs and ancillary expenses incurred by the Company in
enforcing its rights hereunder.
(b) By the Company. The Company acknowledges that as a result of
--------------
the employment of Employee, it will obtain confidential knowledge and
information of a private or confidential nature regarding Employee. The Company
hereby covenants and agrees that it shall receive such knowledge and information
in confidence and shall not during or subsequent to Employee's employment
hereunder, except as required in the conduct of the Company's business or
authorized in writing by Employee, publish, disclose or make use of such
information. If the
-6-
<PAGE>
Company breaches its covenant under this Section 11(b), the Company agrees that
in any suit which may be brought by Employee in any court having jurisdiction,
an order may be entered enjoining the Company from breaching such covenant, and
an order to that effect shall be entered pending the litigation, as well as a
final determination thereof, without the requirement to post bond, and that such
application for such injunction shall be without prejudice to any other right of
action which accrues to Employee by reason of the breach of the foregoing
provisions. If Employee is involved in a legal proceeding to enforce the
covenants contained in Section 11(b), then in the event Employee prevails in
such proceeding, the Company shall be liable for the payment of reasonable
attorneys' fees, court costs and ancillary expenses incurred by Employee in
enforcing its rights hereunder.
Section 12. Remedies. In addition to, and not in lieu of, all other
---------- --------
remedies available to the Company, the Employee and the Company agree that (a)
in the event of a breach by the Employee of the covenants in Section 10, no
amount shall be payable to the Employee pursuant to Section 8(b); and (b) in the
event of a breach by the Employee of the covenants in Section 11(a), no amount
shall be payable to the Employee pursuant to Section 8(b).
Section 13. Arbitration. All disagreements arising out of this Agreement
---------- -----------
shall be resolved by the American Arbitration Association in Chicago, Illinois.
The determination so made shall be binding and conclusive upon the Company, the
Employee and their successors in interest.
Section 14. Governing Law. This Agreement shall be subject to and
---------- -------------
governed by the laws of the State of Illinois, irrespective of the fact that
Employee is or may become a resident of a different state.
Section 15. Prohibition Against Assignment. The Employee agrees on behalf
---------- ------------------------------
of himself and of his executors and administrators, heirs, legatees,
distributees, and any other person or persons claiming any benefit under him by
virtue of this Agreement, that this Agreement and the rights, interests and
benefits hereunder shall not be assigned, transferred, pledged or hypothecated
in any way by Employee or any executor, administrator, heir, legatee,
distributee or other person claiming under Employee by virtue of this Agreement
and shall not be subject to execution, attachment or similar process. Any
attempt to assign, transfer, pledge, hypothecate or otherwise dispose of this
Agreement or of such rights, interests and benefits contrary to the foregoing
provisions, or the levy of any attachment or similar process thereupon shall be
null and void and without effect.
-7-
<PAGE>
Section 16. Notice. Any and all notices, designations, consents, offers,
---------- ------
acceptances, or any other communication provided for herein shall be given in
writing by registered or certified mail, return receipt requested, which shall
be addressed as follows:
To the Company: Everest Healthcare Services Corporation
101 North Scoville
Oak Park, Illinois 60302
Attention: Arthur Morris, President
With copies to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Alan M. Berry, Esq.
Matthew S. Brown, Esq.
To Employee: Craig W. Moore
717 Kennington Terrace
Lake Forest, Illinois 60045
Section 17. Binding Effect. This Agreement shall be binding upon and
---------- --------------
inure to the benefit of the Company and Employee and their respective heirs,
legal representatives, executors, administrators, successors and assigns.
Section 18. Entire Agreement. This Agreement constitutes the entire
---------- ----------------
agreement between the parties and contains all of the agreements between the
parties with respect to the subject matter hereof; this Agreement supersedes any
and all other agreements, either oral or in writing, between the parties hereto
with respect to the subject matter hereof. No change or modification of this
Agreement shall be valid unless the same be in writing and signed by the
Employee and the Company. No waiver of any provision of this Agreement shall be
valid unless in writing and signed by the person or party to be charged.
Section 19. Severability. If any portion or portions of this Agreement
---------- ------------
shall be, for any reason, invalid or unenforceable, the remaining portion or
portions shall nevertheless be valid, enforceable and carried into effect,
unless to do so would clearly violate the present legal and valid intention of
the parties hereto.
Section 20. Headings. The headings of this Agreement are inserted for
---------- --------
convenience only and are not to be considered in construction of the provisions
hereof.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by
its duly authorized officer, and the Employee has hereunto set his hand as of
the day and year first above written.
EVEREST HEALTHCARE SERVICES CORPORATION
By /s/ ARTHUR MORRIS
------------------------------------
Arthur Morris
President
/s/ CRAIG W. MOORE
-----------------------------------------
Craig W. Moore
-9-
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (the "Agreement") is entered
into as of June 20, 1996, by and between Martin Fox, an Arizona resident
("Employee"), and Everest Healthcare Services Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Company, HDA Acquisition Inc., an Arizona corporation, Home
Dialysis of America, Inc., an Arizona corporation ("HDA"), and Employee, Thomas
Creel, an Illinois resident, Paul Zabetakis, a Connecticut resident, and Anthony
Unruh, a Texas resident (collectively, the "Shareholders"), have entered into
that certain Agreement and Plan of Merger, dated as of June 20, 1996 (the
"Merger Agreement"), pursuant to which, among other things, in exchange for
delivery of the Merger Consideration (this and each other term used but not
defined herein shall have the meaning assigned thereto in the Merger Agreement)
by the Company, the Contemplated Transactions shall be consummated in accordance
with the terms of the Merger Agreement;
WHEREAS, Employee is the owner of a significant portion of the capital
stock of HDA;
WHEREAS, Employee expects to derive substantial economic benefit from the
consummation of the Contemplated Transactions;
WHEREAS, Employee has agreed to execute and deliver this Agreement to
induce the Company to execute, deliver and perform its obligations under the
Merger Agreement, and it is a condition to the effectiveness of the Merger
Agreement that Employee executes and delivers this Agreement; and
WHEREAS, the Company has agreed to execute and deliver this Agreement to
induce Employee to execute, deliver and perform its obligations under the Merger
Agreement, and it is a condition to the effectiveness of the Merger Agreement
that Company executes and delivers this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and the
Employee hereby agree as follows:
1. Employment.
----------
1.1 Engagement of Employee. The Company agrees to employ Employee as
----------------------
Executive Vice President and General Manager, Managed Care Business of the
Company, and Employee accepts such employment by the Company, during the period
beginning June 20, 1996 (the "Effective Date"), and ending on the final
Expiration Date (as defined below), unless sooner terminated pursuant to Section
3 hereof (the "Employment Period"). "Expiration Date" shall
<PAGE>
mean the third anniversary of the Effective Date; provided, however, that (i) in
-------- -------
the event the Company on a consolidated basis achieves revenue equal to the
Target Sales Goals on or before the second anniversary of the Effective Date,
the Expiration Date shall mean the fifth anniversary of the Effective Date
unless extended in accordance with the terms hereof, and (ii) the Company shall
have the right, but not the obligation, to offer to extend the Expiration Date,
from time to time (as extended from time to time, each of the applicable
Expiration Dates hereunder are hereinafter referred to as an "Applicable
Expiration Date"; the Expiration Date on which the Employment Agreement finally
expires in accordance with this Section 1.1 is hereinafter referred to as the
"Final Expiration Date"), for a two-year period by offering to the Employee, no
earlier than 12 months and no later than six months prior to the Applicable
Expiration Date, a two-year extension of the Applicable Expiration Date (the
"Extension") at the Base Salary (as defined in Section 2.1) increased by no less
than the Applicable Increase Rate (as defined below), and Employee shall have
the right, but not the obligation, to accept such offer in writing no later than
three months prior to such Applicable Expiration Date (without giving effect to
such proposed Extension) and, if Employee accepts such offer, such Applicable
Expiration Date shall be extended for such two-year period beyond the then
current Applicable Expiration Date, and the Base Salary (as defined below) then
in effect shall be increased by the Applicable Increase Rate during such period.
"Applicable Increase Rate" shall mean no less than (a) 0% for any Extension of
the Applicable Expiration Date, if any, occurring on the third anniversary of
the Effective Date, (b) 10% for any Extension of the Applicable Expiration Date,
if any, occurring on the fifth anniversary of the Effective Date, and (c) 6% for
any Extension of the Applicable Expiration Date, if any, occurring on the
seventh or any later anniversary of the Effective Date.
1.2 Duties and Powers. During the Employment Period, Employee will have
-----------------
such responsibilities, duties and authorities, including duties related to
managed care contracting on a nationwide basis for the Company, and will render
such services of an executive and administrative character to the Company, its
subsidiaries and its affiliates, as the chief executive officer of the Company
(the "CEO") or Board of Directors of the Company (the "Board") may from time to
time direct. Employee will devote his best efforts and his full business time
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company, and
shall perform the duties and carry out the responsibilities assigned to him, to
the best of his ability, in a diligent, businesslike and efficient manner, and
in a manner which does not violate any fiduciary duties Employee owes the
Company under common or statutory law, for the purpose of advancing the Company.
Employee acknowledges that his duties and responsibilities will require his
full-time business efforts and agrees that during the Employment Period he will
not engage in any other business activity or have any business pursuits or
interests except insignificant activities or interests which do not conflict or
compete with the business of the Company and its subsidiaries or interfere with
the performance of Employee's duties hereunder.
1.3 Location and Travel. It is understood and agreed that Employee shall
-------------------
perform his services hereunder principally from offices maintained by the
Company or its affiliates in Tucson, Arizona. Company agrees to maintain such
offices during the Employment Period as
-2-
<PAGE>
they are presently maintained. The Company acknowledges that Employee requires
limited travel resulting in overnight stays outside of Tucson, Arizona. Company
will give due consideration to such desire.
2. Compensation.
------------
2.1 Base Salary. During the Employment Period, the Company will pay
-----------
Employee a base salary at the rate of $205,000 per annum plus any Applicable
Increase Rate (the base salary in effect from time to time, as increased by any
Applicable Increase Rate, is hereinafter referred to as the "Base Salary"),
payable in regular installments in accordance with the Company's general payroll
practices for salaried officers.
2.2 General Bonus Plans. Employee shall participate in the general bonus
-------------------
plans of the Company, on a similar basis as other similarly situated executive
officers of the Company, as the Board shall adopt from time to time to the
extent Employee is eligible to participate therein in accordance with the terms
of such plans. In addition to such bonus plans, the Employee shall participate
in a special bonus plan whereby Employee and the other Shareholders shall be
entitled to receive up to an additional two percent (2%) of the Company's common
stock based on an incentive program to be mutually agreed upon by the
Shareholders and the Company.
2.3 Benefits. In addition to the Base Salary payable to Employee
--------
hereunder, Employee will be entitled to the following benefits during the
Employment Period, including those set forth on Exhibit A, which benefits are
provided to officers of the Company generally as of the date hereof and shall
only be modified to the extent required to provide Comparable Benefits (as
defined below):
(a) Participation in any plan, arrangement or policy of the Company
relating to profit sharing, pensions, life insurance, disability, health
care coverage or education, that the Company has adopted for the benefit of
its officers generally, as such benefits may be changed by the Company from
time to time during the term of this Agreement;
(b) paid vacation each year with salary, consistent with Company
policy for all salaried officers; and
(c) reimbursement for reasonable out-of-pocket business expenses
incurred by Employee in the ordinary course of his duties, subject to the
Company's policies in effect from time to time with respect to travel,
entertainment and other expenses, including, without limitation,
requirements with respect to reporting and documentation of such expenses.
-3-
<PAGE>
3. Termination.
-----------
3.1 Termination By Employee or the Company. The Employment Period (i)
--------------------------------------
shall automatically terminate immediately upon Employee's resignation or death,
or (ii) may be terminated by the Company upon written notice delivered to
Employee for or without Cause (as defined below) or by reason of Employee's
Permanent Disability (as defined below). "Cause" as used herein means the
occurrence of any of the following events:
(a) a material breach by Employee of the terms and conditions of this
Agreement, which breach, provided it is of a nature which is capable of
being cured, is not cured within 30 days after Employee receives written
notification from the Company specifying the nature of such breach; or
(b) the determination by the Board in the exercise of its reasonable
judgment that Employee has (i) committed an act or acts constituting a
felony or other act involving dishonesty, a breach of his fiduciary duties
owed to the Company under common or statutory law or fraud with respect to
the Company or an Affiliated Entity (as defined below) or (ii) willfully
taken or willfully failed to take any action the consequence of which
action or omission is materially damaging to the business, assets or
financial condition of the Company or an Affiliated Entity, unless such
action or failure was taken or omitted in good faith and with the
Employee's reasonable belief that such action or failure was in the
Company's best interest.
"Permanent Disability" shall mean, with respect to the Employee (i) the
suffering of any mental or physical illness, disability or incapacity to the
extent that the Employee shall be unable to perform his duties for a period of
three months during any six-month period, or (ii) the absence of the Employee
from his employment by reason of any mental or physical illness, disability or
incapacity for a period of three months during any six-month period; provided,
however, in either case, that such illness, disability or incapacity shall be
determined to be of a permanent nature by a licensed physician selected by the
Board and reasonably acceptable to the Employee. The Employment Period shall
end in the case of clause (i) and (ii) on the last day of such three-month
period. "Affiliated Entity" shall mean any entity that is controlled by
(including an entity managed by) or is under common control with the Company.
3.2 Compensation After Termination or Expiration.
--------------------------------------------
(a) If the Employment Period is terminated (i) by the Company for
Cause, (ii) due to Employee's death, or (iii) due to Employee's resignation
other than for Good Reason (as defined below), then the Company shall have
no further obligations hereunder or otherwise with respect to Employee's
employment from and after the termination date except payment of Employee's
Base Salary accrued through the date of such termination. "Good Reason"
shall mean (x) a material breach by the Company of the terms and conditions
of this Agreement, which breach, provided it is of a nature which is
capable of being cured, is not cured within 30 days (10 days if such breach
results from the
-4-
<PAGE>
nonpayment of compensation the payment of which is required hereunder)
after the Company receives written notification from Employee specifying
the nature of such breach; (y) a significant demotion or material
diminution in Employee's duties and responsibilities, provided that
Employee voluntarily terminates his employment with Company within 120 days
after such event occurs; or (z) a Change of Control (as defined below),
provided that Employee voluntarily terminates his employment with Company
within 180 days after a Change of Control (as defined below) occurs. Good
Reason shall not be deemed to exist for purposes hereof if (1) in the case
of any event described in clause (y), the Company provides notice to
Employee of any change in his duties or his responsibilities and Employees
fails to provide written notice to the Company within 15 days of being
notified of such change that he objects to such change and that such change
constitutes a significant demotion or material diminution in Employee's
duties and responsibilities hereunder, (2) in the case of any event
described in clause (x) or (y), if Cause then existed for the termination
of Employee's employment hereunder as a result of an act or omission
described in Section 3.1(b) and the Company notifies Employee thereof
during the shorter of (i) two years from the date of such termination, and
(ii) any period during which Employee is entitled to severance pay under
this Section 3.2, or (3) in the case of any event described in clause (x)
or (y), if Cause then existed for the termination of Employee's employment
hereunder as a result of the occurrence of any event described in Section
3.1(a) and the Company notifies Employee thereof within 60 days of
receiving notice from Employee that Employee is resigning for Good Reason,
if any such notice is given, or of such Employee's resignation for Good
Reason, if any such notice is not given. Change of Control shall mean any
Person other than a shareholder of the Company on the date hereof acquiring
in excess of forty percent (40%) of the assets or issued and outstanding
voting stock of the Company other than as a result of, or after the
occurrence of, a sale, in an underwritten public offering registered under
the Securities Act of 1933, as amended, of shares of the Company's common
stock in which the price per share paid by the public for such securities
will be at least $10, reflecting a post-offering market capitalization for
the Company of at least $150 million.
(b) If the Employment Period is terminated (i) by the Company without
Cause, (ii) due to Employee's Permanent Disability, or (iii) due to
Employee's resignation for Good Reason, then Employee (or his designated
beneficiary) shall be entitled to receive as severance pay (A) the Base
Salary for the greater of one year from the date of such termination or the
remainder of the Employment Period without giving effect to such
termination, in regular installments in accordance with the Company's
regular payroll practices for salaried officers, and (B) in the event the
Employment Period is terminated in any fiscal year of the Company after the
sixth month of such fiscal year, an amount equal to any bonus which would
otherwise be payable to Employee in accordance with Section 2.2, prorated
to account for the part of such fiscal year during which the Employment
Period had not been terminated in accordance with the general plans of such
bonus arrangement; provided, however, notwithstanding any provision hereof,
-------- -------
in the event the Employment Period is terminated prior to the second
anniversary of the
-5-
<PAGE>
Effective Date by the Company without Cause or by the Employee for Good
Reason, then Employee (or his designated beneficiary) shall be entitled to
receive as severance pay the Base Salary until the fifth anniversary of the
Effective Date, in regular installments in accordance with the Company's
regular payroll practices for salaried officers, as well as the amount, if
any, payable under clause (B) above.
(c) If the Employment Period expires upon the occurrence of the Final
Expiration Date and the Company has offered to the Employee an Extension of
the Final Expiration Date in accordance with the terms hereof and such
extension has not been accepted in writing in accordance with clause (ii)
of the proviso in Section 1.1 by Employee, then the Company shall have no
further obligations hereunder or otherwise with respect to Employee's
employment from and after the Final Expiration Date, except the payment of
(1) Employee's Base Salary accrued through the Final Expiration Date in
regular installments in accordance with the Company's regular payroll
practices for salaried officers, and (2) any bonus which would otherwise be
payable to Employee in accordance with Section 2.2 through such date.
(d) If the Employment Period expires upon the occurrence of the Final
Expiration Date and the Company has not offered to the Employee an
extension of the Final Expiration Date, then the Company shall have no
further obligations hereunder or otherwise with respect to Employee's
employment from and after the Final Expiration Date except (1) payment of
Employee's Base Salary accrued through the Final Expiration Date in regular
installments in accordance with the Company's regular payroll practices for
salaried officers, (2) payment of Employee's Base Salary during the period
commencing on the Final Expiration Date and ending on the first anniversary
of the Final Expiration Date each in regular installments in accordance
with the Company's regular payroll practices for salaried officers, and (3)
any bonus which would otherwise be payable to Employee in accordance with
Section 2.2 through the Final Expiration Date.
(e) The Employee hereby agrees that the Company may dismiss him for
Cause or without Cause without any liability except for the payments
required to be made by this Section 3.2 and except as otherwise set forth
in Section 3.3(d), and without regard to any general or specific policies
(whether written or oral) of the Company relating to the employment or
termination of its employees. The Company and the Employee acknowledge
that it would be impractical or extremely difficult to fix the Employee's
actual damages in the case of any such termination. Therefore, the Company
and Employee agree that the payments to be paid as provided for in this
Section 3.2 and Section 3.3(d) shall constitute liquidated damages;
provided, however, that the Employee shall be under no duty, however, to
mitigate such liquidated damages. In return for tendering payment of such
liquidated damages, regardless of whether after tender of such payment
Employee accepts it, Employee for itself and his heirs, executors,
administrators and assigns ("Releasors") does hereby remise, release, and
forever discharge as to the Company and any of its affiliated entities and
their respective agents, officers, directors and employees, heirs,
successors, assigns, all manners of action, cause and causes of
-6-
<PAGE>
action, suits, debts, dues, accounts, liabilities, covenants, contracts,
agreements, claims, obligations, damages, injuries and demands whatsoever
of any kind and nature, whether foreseen or unforeseen, contingent or
actual, liquidated or unliquidated, in law or in equity, which any Releasor
has or may have against any of the aforementioned parties except for claims
for breaches by the Company of express provisions of Section 3.2 or 3.3(d)
of this Agreement, the Merger Agreement or the Shareholders Agreement. The
Employee hereby covenants not to sue any such Person relating to any such
action, cause of action, suits, debts, dues, accounts, liabilities,
covenants, contracts, agreements, claims, obligations, damages, injuries or
demands.
(f) Notwithstanding any provision hereof other than Section 3.3(d),
after termination or expiration of the Employment Period (i) the Company
shall continue to have all of its rights hereunder (including, without
limitation, all rights under Section 4 hereof at law or in equity), and
(ii) Employee shall continue to have all of his rights under Sections 3.2
and 3.3 hereof.
3.3 Obligations On Termination.
--------------------------
(a) Upon the expiration or termination of the Employment Period for
any reason, Employee shall be deemed to have resigned from all offices,
directorships, trusteeships, or other positions he may then hold with the
Company or an Affiliate Entity; provided, however, Employee shall remain a
-------- -------
director of the Company as an HDA Director (as defined in the Shareholders
Agreement) in accordance with the Shareholders Agreement if the
Shareholders' Agent shall notify the Company in writing immediately that
this Section 3.3(a) shall not be given effect to such extent in connection
with any such expiration or termination. Such resignation shall be deemed
effective immediately thereupon, without the requirement that a written
resignation be delivered.
(b) Employee agrees that following the expiration or termination of
the Employment Period for any reason, he will provide any services which
the Company may reasonably require to discharge its continuing obligations
to its clients with respect to services performed by Employee for a period
not to exceed 60 days (and so long as such services do not interfere with
any new position or employment of Employee), and in such events Employee
will be entitled to compensation on a per diem basis at his then customary
rate for such services in addition to all other payments due the Employee
by the Company in accordance with the terms hereof. Such rate shall be
negotiated between the parties in good faith.
(c) The Employee hereby acknowledges and agrees that all personal
property and equipment furnished to or prepared by the Employee in the
course of or incident to his employment belong to the Company and shall be
promptly returned to the Company upon termination of the Employment Period.
"Personal property" includes, without limitation, all books, manuals,
records, reports, notes, contracts, lists, blueprints, and other documents,
or materials, or copies thereof, and all other proprietary information
-7-
<PAGE>
relating to the business of the Company; provided, however, that nothing
shall preclude the Employee from retaining or removing (i) his personal
rolodex and calendars; or (ii) information not containing Confidential
Information (as hereinafter defined in Section 4.5) or a trade secret
obtained while in the employ of HDA or the Company. The Employee cannot
retain or remove personal property that is or contains Confidential
Information or a trade secret obtained while in the employ of HDA or the
Company. Prior to retaining or removing any personal property other than
his personal rolodex and calendars, the Employee will inform the Company of
what personal property he intends to retain or remove. If a dispute arises
between the Company and the Employee regarding the right of Employee to
remove any such personal property, the parties shall arbitrate such dispute
in a manner mutually agreeable to them. Following termination, the
Employee will not retain any written or other tangible material containing
any Confidential Information or trade secrets, except as described above.
(d) In the event the Employment Period expires or is terminated (other
than due to the resignation or termination by Employee for the failure of
the Company to (i) pay his Base Salary in accordance with Section 2.1 or
bonus in accordance with Section 2.2, or (ii) pay or make available
Comparable Benefits (as such term is defined below) (the failures included
in clauses (i) and (ii) are hereinafter collectively referred to as the
"Termination Events")), the Company's sole liability to Employee shall be
limited to, and Employee shall only be entitled to sue the Company for, the
compensation due to him in accordance with Section 3.2. In the event the
Employment Period is terminated due to the resignation by Employee for the
occurrence of any Termination Event, Employee shall have the right to
exercise any rights he has in law or equity, including the right to sue for
damages and to render this Agreement of no further force or effect.
"Comparable Benefits" means, for purposes of this Agreement, all employee
benefits including, but not limited to, vacation, disability, death
benefits, healthcare, pension and 401K plans, those benefits provided in
Section 2.3, and other fringe benefits provided to other similarly situated
Company executives ("Company Benefits") with respect to both the financial
effect of such benefits to Employee and the terms and provisions of such
benefits (which benefits must be within a range of no less than 90% of the
Company Benefits).
4. Covenant Not to Compete.
-----------------------
4.1 Employee's Knowledge. Employee acknowledges and agrees that he has
--------------------
occupied a position of trust and confidence with HDA and will occupy a position
of trust and confidence with the Company and in the course of his past
employment by HDA and his engagement hereunder with the Company, has and will
become familiar with HDA's and the Company's trade secrets and other proprietary
and confidential information concerning the Company and HDA. Employee
acknowledges and agrees that his services are of a special, unique and
extraordinary value to the Company and that the Company would be irreparably
damaged if Employee were to provide similar services to any person or entity in
violation of the provisions of this Agreement. Employee further acknowledges
that the Company's relationships with its
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<PAGE>
clients and other business partners are among its most valuable assets which in
many cases have been created over a long period of time and, if lost, could not
be replaced.
4.2 Non-Compete. As consideration for the Company entering into this
-----------
Agreement and the Merger Agreement, and in recognition of the Company's
proprietary interest in its business, Employee agrees that he shall not, during
the Restricted Period (as defined below), directly or indirectly, as employee,
agent, consultant, stockholder, director, co-partner or in any other individual
or representative capacity, own, operate, manage, control, engage in, invest in
or participate in any manner in, act as a consultant or adviser to, render
services for (alone or in association with any person, firm, corporation or
entity), or otherwise assist, any person that engages in or owns, invests in,
operates, manages or controls any venture or enterprise engaging or proposing to
engage in the Business (as defined below) anywhere in the Territory (as defined
below). "Business" shall mean the performance of activities related to:
(i) providing dialysis treatments or services utilized in connection
with any dialysis treatments;
(ii) the purchase, sale, establishment, management or operation of
dialysis facilities;
(iii) practice management; or
(iv) extracorporeal blood handling.
"Restricted Period" shall mean the period commencing on the Effective Date
hereof and ending on:
(i) the later of (i) the seventh anniversary of the Effective Date,
and (ii) the second anniversary of the Final Expiration Date, if
the Employment Period is terminated by the Company for Cause;
(ii) the second anniversary of the date ending the period for which
Employee receives payments in accordance with Section 3.2(b), if
the Employment Period is terminated (A) by the Company without
Cause, (B) by the resignation of the Employee for Good Reason, or
(C) due to the Employee's Permanent Disability;
(iii) the second anniversary of the date ending the period for which
Employee receives payments in accordance with Section 3.2(c), if
the Employment Period expires after an Extension has been offered
to Employee in accordance with clause (ii) of the proviso of
Section 1.1 and not accepted by Employee in accordance with such
clause;
-9-
<PAGE>
(iv) the first anniversary of the date ending the period for which
Employee receives payments in accordance with Section 3.2(d), if
the Employment Period expires after an Extension has not been
offered to Employee in accordance with Section 1.1; and
(v) the second anniversary of the date the Employee resigns for other
than Good Reason, but such period shall not be less than five
years from the Effective Date.
The Restricted Period shall be automatically extended for a period equal to any
period that Employee is in breach of the restrictive covenants set forth in this
Section 4 (the "Restrictive Covenants"). "Territory" shall mean the area
included within a 20 mile radius of any Medicare certified outpatient renal
dialysis facility or any other facility providing any services or engaging in
any activities of the Business and either (x) owned, operated or managed by the
Company or any Affiliated Entity on the Final Expiration Date or the date on
which the Employment Period is otherwise terminated or at any time during the 18
months preceding such date, or (y) for which the Company or any Affiliated
Entity during the nine months preceding the Final Expiration Date or the date on
which the Employment Period is otherwise terminated, was actively engaged in
efforts to establish, acquire, manage or operate (each such facility is
hereinafter referred to as a "Facility"); provided, however, that for purposes
-------- -------
hereof, following termination of Employee's employment with the Company,
Employee shall have the right to engage in any of the activities listed in
clause (i) through (iv) of the definition of Business in any Territory in which
the Company or any Affiliated Entity is not then engaging in or, in the nine
months preceding the Final Expiration Date or the date on which the Employment
Period is otherwise terminated, was not actively engaged in efforts to engage
in, such activity in a Facility located in such Territory. With respect to the
Territory, Employee specifically acknowledges that the Company plans to conduct
the Business throughout the United States and to undertake to expand the
Business throughout the United States.
4.3 Non-Solicitation. Without limiting the generality of the provisions
----------------
of Section 4.2 hereof, Employee hereby agrees that, during the Restricted
Period, he will not, directly or indirectly, solicit, or participate as
employee, agent, consultant, stockholder, director, partner or in any other
individual or representative capacity, in any business which solicits business
from any person, firm, corporation or other entity which was a client or other
business partner of the Company during the term of this Agreement or any
referring physician or any owner of facilities operated by the Company or its
Affiliated Entities and, in each instance, who or which is located in the
Territory, or from any successor in interest to any such person, firm,
corporation or other entity who or which is located in the Territory, for the
purpose of securing business relationships or contracts related to the Business;
provided, however, that nothing contained herein shall be construed to prohibit
or restrict Employee from soliciting business from any such parties on behalf of
the Company in performance of his duties as an employee of the Company required
under and as specifically contemplated by Section 1 above.
-10-
<PAGE>
4.4 Interference with Relationships. During the Restricted Period,
-------------------------------
Employee shall not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner or in any other individual or representative
capacity: (i) except on behalf of the Company, employ or engage, recruit or
solicit for employment or engagement, any person who is or becomes employed or
engaged by the Company or its Affiliated Entities during the Restricted Period
or during the eighteen month period preceding the Restricted Period, or
otherwise seek to influence or alter any such person's relationship with the
Company or its Affiliated Entities, or (ii) solicit or encourage any client or
other business partner of the Company or its Affiliated Entities or any
referring physician or any owner of facilities operated or managed by the
Company or its Affiliated Entities to terminate or otherwise alter his, her or
its relationship with the Company or its Affiliated Entities.
4.5 Confidential Information. The Employee agrees that during the
------------------------
Employment Period or at all times thereafter, he shall not disclose to any
person not employed by the Company and not engaged to render services to the
Company or otherwise use any Confidential Information obtained while in the
employ of the Company, except on behalf of the Company in accordance with its
policies or as such disclosure may be required by law or a court order. As used
in this Agreement, "Confidential Information" shall mean any information
relating to the business or affairs of the Company, Peak, its Affiliated
Entities, or their clients or other business partners, including but not limited
to information relating to financial statements, client or other business
partner identities, potential clients, employees, information, analyses, or
other proprietary information used by the Company, Peak, or its Affiliated
Entities in connection with their businesses; provided, however, that
Confidential Information shall not include any information which is in the
public domain or becomes known in the industry through no wrongful act on the
part of Employee or is approved for disclosure by the Company. Employee
acknowledges that the Confidential Information is vital, sensitive, confidential
and proprietary to the Company and its Affiliated Entities.
4.6 Blue-Pencil. If any court of competent jurisdiction shall at any time
-----------
deem the term of this Agreement or any particular Restrictive Covenant too
lengthy or the Territory too extensive, the other provisions of this Section 4
shall nevertheless stand, the Restricted Period herein shall be deemed to be the
longest period permissible by law under the circumstances and the Territory
herein shall be deemed to comprise the largest territory permissible by law
under the circumstances. The court in each case shall reduce the time period
and/or Territory to permissible duration or size.
4.7 Remedies.
--------
(a) Employee agrees that the recitals to this Agreement are true and
are part of this Agreement. Further, Employee has carefully considered the
nature and extent of the restrictions upon him and the rights and remedies
conferred upon the Company under this Agreement, and Employee hereby
acknowledges and agrees that such restrictions, rights and remedies are
reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to the Company, do not stifle the inherent
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<PAGE>
skill and experience of Employee, would not operate as a bar to Employee's
sole means of support, are fully required to protect the legitimate
interests of the Company following the consummation of the Contemplated
Transactions and do not confer a benefit upon the Company disproportionate
to the detriment to Employee.
(b) Employee acknowledges and agrees that the Restrictive Covenants
are reasonable and necessary for the protection of the Company's business
interests, that irreparable injury will result to the Company if Employee
breaches any of the terms of said Restrictive Covenants, and that in the
event of Employee's actual or threatened breach of any such Restrictive
Covenants, the Company will have no adequate remedy at law. Employee
accordingly agrees that in the event of any actual or threatened breach by
him of any of the Restrictive Covenants, the Company shall be entitled,
upon three days' notice to Employee, to immediate temporary injunctive and
other equitable relief, without bond and without the necessity of showing
actual monetary damages, subject to a hearing as soon thereafter as
possible. Nothing contained herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages which it is able
to prove.
5. Miscellaneous.
-------------
5.1 Notices, Consents, etc. Any notices, consents or other communication
-----------------------
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a recognized
overnight courier service, or (d) sent by facsimile transmission (along with a
copy sent by first-class mail) to the parties at the addresses as set forth
below or at such other addresses as may be furnished in writing.
If to Company: Everest Healthcare Services Corporation
101 North Scoville
Oak Park, Illinois 60302
Attention: Craig W. Moore
Fax: 708/386-1711
With copies to: Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Attention: Matthew S. Brown, Esq.
Fax: 312/902-1061
If to Employee: Martin Fox
3434 N. Wide Loop Drive
Tucson, Arizona 85749
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<PAGE>
with a copy to: Ross & Hardies
150 N. Michigan Avenue
Chicago, IL 60601
Attention: James B. Riley
Fax No.: 312/750-8600
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three (3) days after the date of mailing if sent by certified or
registered mail, (y) one (1) day after date of delivery to the overnight courier
if sent by overnight courier or (z) the next succeeding business day after
transmission by facsimile.
5.2 Severability. The unenforceability or invalidity of any provision of
------------
this Agreement shall not affect the enforceability or validity of any other
provision.
5.3 Entire Agreement. This Agreement and those documents expressly
----------------
referred to herein embody the complete agreement and understanding among the
parties and supersede and preempt any prior (or contemporaneous) understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way, and may not be
contradicted by evidence of any prior or contemporaneous agreement. The parties
further intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative, or other legal proceeding involving
this Agreement.
5.4 Counterparts. This Agreement may be executed on separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
5.5 Assignment. This Agreement will be binding upon and inure to the
----------
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the prior
written consent of the other parties. Notwithstanding anything to the contrary
contained herein, Employee may not assign any of his rights or delegate any of
his responsibilities, liabilities or obligations under this Agreement, without
the written consent of the Company.
5.6 No Strict Construction. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
5.7 Amendment and Waiver. Any provision of this Agreement may be amended,
--------------------
or any provision of this Agreement may be waived, provided that any such
amendment or waiver will be binding on Employee or the Company, only if such
amendment or waiver is set forth in a writing executed by Employee or the
Company, respectively. The waiver by any party hereto
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<PAGE>
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any other breach.
5.8 Construction. This Agreement shall be construed and enforced in
------------
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Illinois, without giving effect to provisions thereof regarding
conflict of laws.
5.9 Consent to Jurisdiction and Service of Process. The Company and
----------------------------------------------
Employee hereby consent to the jurisdiction of any state or federal court
located within the County of Cook, State of Illinois and irrevocably agree that
subject to the Company's election, all actions or proceedings arising out of or
relating to this Agreement shall be litigated in such courts. Employee accepts
for himself and in connection with his properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens, and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement. Service of
all process in any such proceeding in any such court shall be mailed by
registered mail to Employee, except that unless otherwise provided by applicable
law, any failure to mail such copy shall not affect the validity of service of
process. Employee hereby agrees that service upon him by certified mail shall
constitute sufficient notice. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of the
Company to bring proceedings against Employee in the courts of any other
jurisdiction.
5.10 Employee Acknowledgment. The Employee acknowledges (a) that he has
-----------------------
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement and has been advised to do so by the
Company, and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.
5.11 Indemnification and Insurance.
-----------------------------
(a) The Company, to the fullest extent allowed by law, shall indemnify
and hold Employee harmless from any and all expenses (including reasonable
attorney's fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by Employee in connection with any action, suit or
proceeding in which Employee is a defendant and relating to Employee's
employment or performance of his duties hereunder (but not claims brought
by the Company for any breach of this Agreement by Employee) if the
Employee acted in good faith, in accordance with this Agreement and in a
manner the Employee reasonably believed to be in, or not opposed to, the
best interests of the Company and, with respect to any such action or
proceeding of a criminal nature, had no reasonable cause to believe
Employee's conduct was unlawful.
(b) Promptly after receipt by the Employee under Section 5.11(a) of
notice of a claim against it ("Claim"), Employee shall, if a claim is to be
made
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<PAGE>
against the Company under this Section, give notice to the Company of such
Claim, but the failure to notify the Company will not relieve the Company
of any liability that it may have to Employee, except to the extent that
the Company demonstrates that the defense of such action is prejudiced by
Employee's failure to give such notice.
(c) If any Claim referred to in Section 5.11(b) is made against
Employee and it gives notice to the Company of such Claim, the Company will
be entitled to participate in the defense of such Claim and, to the extent
that it wishes (unless (i) the Company is also a party to such Claim and
Employee determines in good faith that joint representation would be
inappropriate, or (ii) the Company fails to provide reasonable assurance to
Employee of its financial capacity to defend such Claim and provide
indemnification with respect to such Claim), to assume the defense of such
Claim with counsel satisfactory to Employee and, after notice from the
Company to Employee of its election to assume the defense of such Claim,
the Company will not, as long as it diligently conducts such defense, be
liable to Employee under such Section for any fees of other counsel or any
other expenses with respect to the defense of such Claim in each case
subsequently incurred by the Employee in connection with the defense of
such Claim, other than reasonable costs of investigation. If the Company
assumes the defense of a Claim (a) it will be conclusively established for
purposes of this Agreement that the claims made in that claim are within
the scope of and subject to indemnification; (b) no compromise or
settlement of such claims may be effected by the Company without the
Employee's consent unless (i) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any
Person and no effect on any other Claims that may be made against the
Employee, and (ii) the sole relief provided is monetary damages that are
paid in full by the Company; and (c) the Employee will have no liability
with respect to any compromise or settlement of such claims effected
without its consent. If notice is given to the Company of a Claim and the
Company does not, within ten (10) days after the Employee's notice is
given, give notice to the Employee of its election to assume the defense of
such Claim, the Company will be bound by any determination with respect to
said Claim or any compromise or settlement effected by the Employee.
(d) The Company shall maintain insurance which would cover Employee in
connection with any liability asserted against Employee for performance of
his duties hereunder or as a result of being an employee of the Company,
whether the Company would be permitted to indemnify the Employee against
such liability under applicable law to the same extent it maintains such
insurance for other officers of the Company.
5.12 Right to Acquire Insurance. If the Employment Period terminates for
--------------------------
any reasons other than the death of the Employee, Employee may, at his option,
acquire any insurance policies on his life owned by Company within 60 days of
such termination. Such policies shall be transferred or assigned to Employee
upon his payment to Company of the cash surrender value of such insurance
policy.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
THE COMPANY:
-----------
EVEREST HEALTHCARE SERVICES
CORPORATION
By: /s/ CRAIG W. MOORE
-----------------------------
Craig W. Moore
EMPLOYEE:
--------
/s/ MARTIN FOX
--------------------------------
Martin Fox
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<PAGE>
EXHIBIT A
---------
Defined Benefit Pension Approximate Contribution: $15,000
401K Plan Match for each Dollar
Contributed by Employee
Life Insurance Policy of up to $300,000 (Beneficiary Named by Employee)
Health Insurance - Family
Vacation Paid No less than 1 month
Holidays Paid 5 days
Sick Paid As needed
Short Term Disability Salary paid until long term
disability benefits commence
Long Term Disability 60% of salary to maximum of $25,000
per month
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (the "Agreement"), is entered
into as of June 20, 1996, by and between Thomas Creel, an Illinois resident
("Employee"), and Everest Healthcare Services Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Company, HDA Acquisition Inc., an Arizona corporation,
Home Dialysis of America, Inc., an Arizona corporation ("HDA"), and Martin
Fox, an Arizona resident, Employee, Paul Zabetakis, a Connecticut resident,
and Anthony Unruh, a Texas resident (collectively, the "Shareholders"),
have entered into that certain Agreement and Plan of Merger, dated as of
June 20, 1996 (the "Merger Agreement"), pursuant to which, among other
things, in exchange for delivery of the Merger Consideration (this and each
other term used but not defined herein shall have the meaning assigned
thereto in the Merger Agreement) by the Company, the Contemplated
Transactions shall be consummated in accordance with the terms of the
Merger Agreement;
WHEREAS, Employee is the owner of a significant portion of the capital
stock of HDA;
WHEREAS, Employee expects to derive substantial economic benefit from
the consummation of the Contemplated Transactions;
WHEREAS, Employee has agreed to execute and deliver this Agreement to
induce the Company to execute, deliver and perform its obligations under
the Merger Agreement, and it is a condition to the effectiveness of the
Merger Agreement that Employee executes and delivers this Agreement; and
WHEREAS, the Company has agreed to execute and deliver this Agreement
to induce Employee to execute, deliver and perform its obligations under
the Merger Agreement, and it is a condition to the effectiveness of the
Merger Agreement that Company executes and delivers this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and the
Employee hereby agree as follows:
1. Employment.
----------
1.1. Engagement of Employee. The Company agrees to employ Employee as Vice
----------------------
President, Business Development-North of the Company, and Employee accepts such
employment by the Company, during the period beginning June 20, 1996 (the
"Effective Date"),
<PAGE>
and ending on the final Expiration Date (as defined below), unless sooner
terminated pursuant to Section 3 hereof (the "Employment Period"). "Expiration
Date" shall mean the third anniversary of the Effective Date; provided, however,
-------- -------
that (i) in the event the Company on a consolidated basis achieves revenue equal
to the Target Sales Goals on or before the second anniversary of the Effective
Date, the Expiration Date shall mean the fifth anniversary of the Effective Date
unless extended in accordance with the terms hereof, and (ii) the Company shall
have the right, but not the obligation, to offer to extend the Expiration Date,
from time to time (as extended from time to time, each of the applicable
Expiration Dates hereunder are hereinafter referred to as an "Applicable
Expiration Date"; the Expiration Date on which the Employment Agreement finally
expires in accordance with this Section 1.1 is hereinafter referred to as the
"Final Expiration Date"), for a two-year period by offering to the Employee, no
earlier than 12 months and no later than six months prior to the Applicable
Expiration Date, a two-year extension of the Applicable Expiration Date (the
"Extension") at the Base Salary (as defined in Section 2.1) increased by no less
than the Applicable Increase Rate (as defined below), and Employee shall have
the right, but not the obligation, to accept such offer in writing no later than
three months prior to such Applicable Expiration Date (without giving effect to
such proposed Extension) and, if Employee accepts such offer, such Applicable
Expiration Date shall be extended for such two-year period beyond the then
current Applicable Expiration Date, and the Base Salary (as defined below) then
in effect shall be increased by the Applicable Increase Rate during such period.
"Applicable Increase Rate" shall mean no less than (a) 0% for any Extension of
the Applicable Expiration Date, if any, occurring on the third anniversary of
the Effective Date, (b) 10% for any Extension of the Applicable Expiration Date,
if any, occurring on the fifth anniversary of the Effective Date, and (c) 6% for
any Extension of the Applicable Expiration Date, if any, occurring on the
seventh or any later anniversary of the Effective Date.
1.2 Duties and Powers. During the Employment Period, Employee will have
-----------------
such responsibilities, duties and authorities, including duties related to
managed care contracting on a nationwide basis for the Company, and will render
such services of an executive and administrative character to the Company, its
subsidiaries and its affiliates, as the chief executive officer of the Company
(the "CEO") or Board of Directors of the Company (the "Board") may from time to
time direct. Employee will devote his best efforts and his full business time
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company, and
shall perform the duties and carry out the responsibilities assigned to him, to
the best of his ability, in a diligent, businesslike and efficient manner, and
in a manner which does not violate any fiduciary duties Employee owes the
Company under common or statutory law, for the purpose of advancing the Company.
Employee acknowledges that his duties and responsibilities will require his
full-time business efforts and agrees that during the Employment Period he will
not engage in any other business activity or have any business pursuits or
interests except insignificant activities or interests which do not conflict or
compete with the business of the Company and its subsidiaries or interfere with
the performance of Employee's duties hereunder.
1.3 Location. It is understood and agreed that Employee shall perform his
--------
services hereunder principally from offices maintained by the Company or its
affiliates in ________,
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<PAGE>
Illinois for no more than the first year after the date hereof, and thereafter
in Chicago, Illinois. Company agrees to maintain such offices during the
relevant periods as they are presently maintained.
2. Compensation.
------------
2.1 Base Salary. During the Employment Period, the Company will pay
-----------
Employee a base salary at the rate of $205,000 per annum plus any Applicable
Increase Rate (the base salary in effect from time to time, as increased by any
Applicable Increase Rate, is hereinafter referred to as the "Base Salary"),
payable in regular installments in accordance with the Company's general payroll
practices for salaried officers.
2.2 General Bonus Plans. Employee shall participate in the general bonus
-------------------
plans of the Company, on a similar basis as other similarly situated executive
officers of the Company, as the Board shall adopt from time to time to the
extent Employee is eligible to participate therein in accordance with the terms
of such plans. In addition to such bonus plans, the Employee shall participate
in a special bonus plan whereby Employee and the other Shareholders shall be
entitled to receive up to an additional two percent (2%) of the Company's common
stock based on an incentive program to be mutually agreed upon by the
Shareholders and the Company.
2.3 Benefits. In addition to the Base Salary payable to Employee
--------
hereunder, Employee will be entitled to the following benefits during the
Employment Period, including those set forth on Exhibit A, which benefits are
provided to officers of the Company generally as of the date hereof and shall
only be modified to the extent required to provide Comparable Benefits (as
defined below):
(a) Participation in any plan, arrangement or policy of the Company
relating to profit sharing, pensions, life insurance, disability, health
care coverage or education, that the Company has adopted for the benefit of
its officers generally, as such benefits may be changed by the Company from
time to time during the term of this Agreement;
(b) paid vacation each year with salary, consistent with Company
policy for all salaried officers; and
(c) reimbursement for reasonable out-of-pocket business expenses
incurred by Employee in the ordinary course of his duties, subject to the
Company's policies in effect from time to time with respect to travel,
entertainment and other expenses, including, without limitation,
requirements with respect to reporting and documentation of such expenses.
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<PAGE>
3. Termination.
-----------
3.1 Termination By Employee or the Company. The Employment Period (i)
--------------------------------------
shall automatically terminate immediately upon Employee's resignation or death,
or (ii) may be terminated by the Company upon written notice delivered to
Employee for or without Cause (as defined below) or by reason of Employee's
Permanent Disability (as defined below). "Cause" as used herein means the
occurrence of any of the following events:
(a) a material breach by Employee of the terms and conditions of this
Agreement, which breach, provided it is of a nature which is capable of
being cured, is not cured within 30 days after Employee receives written
notification from the Company specifying the nature of such breach; or
(b) the determination by the Board in the exercise of its reasonable
judgment that Employee has (i) committed an act or acts constituting a
felony or other act involving dishonesty, a breach of his fiduciary duties
owed to the Company under common or statutory law or fraud with respect to
the Company or an Affiliated Entity (as defined below) or (ii) willfully
taken or willfully failed to take any action the consequence of which
action or omission is materially damaging to the business, assets or
financial condition of the Company or an Affiliated Entity, unless such
action or failure was taken or omitted in good faith and with the
Employee's reasonable belief that such action or failure was in the
Company's best interest.
"Permanent Disability" shall mean, with respect to the Employee (i) the
suffering of any mental or physical illness, disability or incapacity to the
extent that the Employee shall be unable to perform his duties for a period of
three months during any six-month period, or (ii) the absence of the Employee
from his employment by reason of any mental or physical illness, disability or
incapacity for a period of three months during any six-month period; provided,
however, in either case, that such illness, disability or incapacity shall be
determined to be of a permanent nature by a licensed physician selected by the
Board and reasonably acceptable to the Employee. The Employment Period shall
end in the case of clause (i) and (ii) on the last day of such three-month
period. "Affiliated Entity" shall mean any entity that is controlled by
(including an entity managed by) or is under common control with the Company.
3.2 Compensation After Termination or Expiration.
--------------------------------------------
(a) If the Employment Period is terminated (i) by the Company for
Cause, (ii) due to Employee's death, or (iii) due to Employee's resignation
other than for Good Reason (as defined below), then the Company shall have
no further obligations hereunder or otherwise with respect to Employee's
employment from and after the termination date except payment of Employee's
Base Salary accrued through the date of such termination. "Good Reason"
shall mean (x) a material breach by the Company of the terms and conditions
of this Agreement, which breach, provided it is of a nature which is
capable of being cured, is not cured within 30 days (10 days if such breach
results from the
-4-
<PAGE>
nonpayment of compensation the payment of which is required hereunder)
after the Company receives written notification from Employee specifying
the nature of such breach; (y) a significant demotion or material
diminution in Employee's duties and responsibilities, provided that
Employee voluntarily terminates his employment with Company within 120 days
after such event occurs; or (z) a Change of Control (as defined below),
provided that Employee voluntarily terminates his employment with Company
within 180 days after a Change of Control (as defined below) occurs. Good
Reason shall not be deemed to exist for purposes hereof if (1) in the case
of any event described in clause (y), the Company provides notice to
Employee of any change in his duties or his responsibilities and Employees
fails to provide written notice to the Company within 15 days of being
notified of such change that he objects to such change and that such change
constitutes a significant demotion or material diminution in Employee's
duties and responsibilities hereunder, (2) in the case of any event
described in clause (x) or (y), if Cause then existed for the termination
of Employee's employment hereunder as a result of an act or omission
described in Section 3.1(b) and the Company notifies Employee thereof
during the shorter of (i) two years from the date of such termination, and
(ii) any period during which Employee is entitled to severance pay under
this Section 3.2, or (3) in the case of any event described in clause (x)
or (y), if Cause then existed for the termination of Employee's employment
hereunder as a result of the occurrence of any event described in Section
3.1(a) and the Company notifies Employee thereof within 60 days of
receiving notice from Employee that Employee is resigning for Good Reason,
if any such notice is given, or of such Employee's resignation for Good
Reason, if any such notice is not given. Change of Control shall mean any
Person other than a shareholder of the Company on the date hereof acquiring
in excess of forty percent (40%) of the assets or issued and outstanding
voting stock of the Company other than as a result of, or after the
occurrence of, a sale, in an underwritten public offering registered under
the Securities Act of 1933, as amended, of shares of the Company's common
stock in which the price per share paid by the public for such securities
will be at least $10, reflecting a post-offering market capitalization for
the Company of at least $150 million.
(b) If the Employment Period is terminated (i) by the Company without
Cause, (ii) due to Employee's Permanent Disability, or (iii) due to
Employee's resignation for Good Reason, then Employee (or his designated
beneficiary) shall be entitled to receive as severance pay (A) the Base
Salary for the greater of one year from the date of such termination or the
remainder of the Employment Period without giving effect to such
termination, in regular installments in accordance with the Company's
regular payroll practices for salaried officers, and (B) in the event the
Employment Period is terminated in any fiscal year of the Company after the
sixth month of such fiscal year, an amount equal to any bonus which would
otherwise be payable to Employee in accordance with Section 2.2, prorated
to account for the part of such fiscal year during which the Employment
Period had not been terminated in accordance with the general plans of such
bonus arrangement; provided, however, notwithstanding any provision hereof,
-------- -------
in the event the Employment Period is terminated prior to the second
anniversary of the
-5-
<PAGE>
Effective Date by the Company without Cause or by the Employee for Good
Reason, then Employee (or his designated beneficiary) shall be entitled to
receive as severance pay the Base Salary until the fifth anniversary of the
Effective Date, in regular installments in accordance with the Company's
regular payroll practices for salaried officers, as well as the amount, if
any, payable under clause (B) above.
(c) If the Employment Period expires upon the occurrence of the Final
Expiration Date and the Company has offered to the Employee an Extension of
the Final Expiration Date in accordance with the terms hereof and such
extension has not been accepted in writing in accordance with clause (ii)
of the proviso in Section 1.1 by Employee, then the Company shall have no
further obligations hereunder or otherwise with respect to Employee's
employment from and after the Final Expiration Date, except the payment of
(1) Employee's Base Salary accrued through the Final Expiration Date in
regular installments in accordance with the Company's regular payroll
practices for salaried officers, and (2) any bonus which would otherwise be
payable to Employee in accordance with Section 2.2 through such date.
(d) If the Employment Period expires upon the occurrence of the Final
Expiration Date and the Company has not offered to the Employee an
extension of the Final Expiration Date, then the Company shall have no
further obligations hereunder or otherwise with respect to Employee's
employment from and after the Final Expiration Date except (1) payment of
Employee's Base Salary accrued through the Final Expiration Date in regular
installments in accordance with the Company's regular payroll practices for
salaried officers, (2) payment of Employee's Base Salary during the period
commencing on the Final Expiration Date and ending on the first anniversary
of the Final Expiration Date each in regular installments in accordance
with the Company's regular payroll practices for salaried officers, and (3)
any bonus which would otherwise be payable to Employee in accordance with
Section 2.2 through the Final Expiration Date.
(e) The Employee hereby agrees that the Company may dismiss him for
Cause or without Cause without any liability except for the payments
required to be made by this Section 3.2 and except as otherwise set forth
in Section 3.3(d), and without regard to any general or specific policies
(whether written or oral) of the Company relating to the employment or
termination of its employees. The Company and the Employee acknowledge
that it would be impractical or extremely difficult to fix the Employee's
actual damages in the case of any such termination. Therefore, the Company
and Employee agree that the payments to be paid as provided for in this
Section 3.2 and Section 3.3(d) shall constitute liquidated damages;
provided, however, that the Employee shall be under no duty, however, to
mitigate such liquidated damages. In return for tendering payment of such
liquidated damages, regardless of whether after tender of such payment
Employee accepts it, Employee for itself and his heirs, executors,
administrators and assigns ("Releasors") does hereby remise, release, and
forever discharge as to the Company and any of its affiliated entities and
their respective agents, officers, directors and employees, heirs,
successors, assigns, all manners of action, cause and causes of
-6-
<PAGE>
action, suits, debts, dues, accounts, liabilities, covenants, contracts,
agreements, claims, obligations, damages, injuries and demands whatsoever
of any kind and nature, whether foreseen or unforeseen, contingent or
actual, liquidated or unliquidated, in law or in equity, which any Releasor
has or may have against any of the aforementioned parties except for claims
for breaches by the Company of express provisions of Section 3.2 or 3.3(d)
of this Agreement, the Merger Agreement or the Shareholders Agreement. The
Employee hereby covenants not to sue any such Person relating to any such
action, cause of action, suits, debts, dues, accounts, liabilities,
covenants, contracts, agreements, claims, obligations, damages, injuries or
demands.
(f) Notwithstanding any provision hereof other than Section 3.3(d),
after termination or expiration of the Employment Period (i) the Company
shall continue to have all of its rights hereunder (including, without
limitation, all rights under Section 4 hereof at law or in equity), and
(ii) Employee shall continue to have all of his rights under Sections 3.2
and 3.3 hereof.
3.3 Obligations On Termination.
--------------------------
(a) Upon the expiration or termination of the Employment Period for
any reason, Employee shall be deemed to have resigned from all offices,
directorships, trusteeships, or other positions he may then hold with the
Company or an Affiliate Entity; provided, however, Employee shall remain a
-------- -------
director of the Company as an HDA Director (as defined in the Shareholders
Agreement) in accordance with the Shareholders Agreement if the
Shareholders' Agent shall notify the Company in writing immediately that
this Section 3.3(a) shall not be given effect to such extent in connection
with any such expiration or termination. Such resignation shall be deemed
effective immediately thereupon, without the requirement that a written
resignation be delivered.
(b) Employee agrees that following the expiration or termination of
the Employment Period for any reason, he will provide any services which
the Company may reasonably require to discharge its continuing obligations
to its clients with respect to services performed by Employee for a period
not to exceed 60 days (and so long as such services do not interfere with
any new position or employment of Employee), and in such events Employee
will be entitled to compensation on a per diem basis at his then customary
rate for such services in addition to all other payments due the Employee
by the Company in accordance with the terms hereof. Such rate shall be
negotiated between the parties in good faith.
(c) The Employee hereby acknowledges and agrees that all personal
property and equipment furnished to or prepared by the Employee in the
course of or incident to his employment belong to the Company and shall be
promptly returned to the Company upon termination of the Employment Period.
"Personal property" includes, without limitation, all books, manuals,
records, reports, notes, contracts, lists, blueprints, and other documents,
or materials, or copies thereof, and all other proprietary information
-7-
<PAGE>
relating to the business of the Company; provided, however, that nothing
shall preclude the Employee from retaining or removing (i) his personal
rolodex and calendars; or (ii) information not containing Confidential
Information (as hereinafter defined in Section 4.5) or a trade secret
obtained while in the employ of HDA or the Company. The Employee cannot
retain or remove personal property that is or contains Confidential
Information or a trade secret obtained while in the employ of HDA or the
Company. Prior to retaining or removing any personal property other than
his personal rolodex and calendars, the Employee will inform the Company of
what personal property he intends to retain or remove. If a dispute arises
between the Company and the Employee regarding the right of Employee to
remove any such personal property, the parties shall arbitrate such dispute
in a manner mutually agreeable to them. Following termination, the
Employee will not retain any written or other tangible material containing
any Confidential Information or trade secrets, except as described above.
(d) In the event the Employment Period expires or is terminated (other
than due to the resignation or termination by Employee for the failure of
the Company to (i) pay his Base Salary in accordance with Section 2.1 or
bonus in accordance with Section 2.2, or (ii) pay or make available
Comparable Benefits (as such term is defined below) (the failures included
in clauses (i) and (ii) are hereinafter collectively referred to as the
"Termination Events")), the Company's sole liability to Employee shall be
limited to, and Employee shall only be entitled to sue the Company for, the
compensation due to him in accordance with Section 3.2. In the event the
Employment Period is terminated due to the resignation by Employee for the
occurrence of any Termination Event, Employee shall have the right to
exercise any rights he has in law or equity, including the right to sue for
damages and to render this Agreement of no further force or effect.
"Comparable Benefits" means, for purposes of this Agreement, all employee
benefits including, but not limited to, vacation, disability, death
benefits, healthcare, pension and 401K plans, those benefits provided in
Section 2.3, and other fringe benefits provided to other similarly situated
Company executives ("Company Benefits") with respect to both the financial
effect of such benefits to Employee and the terms and provisions of such
benefits (which benefits must be within a range of no less than 90% of the
Company Benefits).
4. Covenant Not to Compete.
-----------------------
4.1 Employee's Knowledge. Employee acknowledges and agrees that he has
--------------------
occupied a position of trust and confidence with HDA and will occupy a position
of trust and confidence with the Company and in the course of his past
employment by HDA and his engagement hereunder with the Company, has and will
become familiar with HDA's and the Company's trade secrets and other proprietary
and confidential information concerning the Company and HDA. Employee
acknowledges and agrees that his services are of a special, unique and
extraordinary value to the Company and that the Company would be irreparably
damaged if Employee were to provide similar services to any person or entity in
violation of the provisions of this Agreement. Employee further acknowledges
that the Company's relationships with its
-8-
<PAGE>
clients and other business partners are among its most valuable assets which in
many cases have been created over a long period of time and, if lost, could not
be replaced.
4.2 Non-Compete. As consideration for the Company entering into this
-----------
Agreement and the Merger Agreement, and in recognition of the Company's
proprietary interest in its business, Employee agrees that he shall not, during
the Restricted Period (as defined below), directly or indirectly, as employee,
agent, consultant, stockholder, director, co-partner or in any other individual
or representative capacity, own, operate, manage, control, engage in, invest in
or participate in any manner in, act as a consultant or adviser to, render
services for (alone or in association with any person, firm, corporation or
entity), or otherwise assist, any person that engages in or owns, invests in,
operates, manages or controls any venture or enterprise engaging or proposing to
engage in the Business (as defined below) anywhere in the Territory (as defined
below). "Business" shall mean the performance of activities related to:
(i) providing dialysis treatments or services utilized in
connection with any dialysis treatments;
(ii) the purchase, sale, establishment, management or operation of
dialysis facilities;
(iii) practice management; or
(iv) extracorporeal blood handling.
"Restricted Period" shall mean the period commencing on the Effective Date
hereof and ending on:
(i) the later of (i) the seventh anniversary of the Effective Date,
and (ii) the second anniversary of the Final Expiration Date,
if the Employment Period is terminated by the Company for
Cause;
(ii) the second anniversary of the date ending the period for which
Employee receives payments in accordance with Section 3.2(b),
if the Employment Period is terminated (A) by the Company
without Cause, (B) by the resignation of the Employee for Good
Reason, or (C) due to the Employee's Permanent Disability;
(iii) the second anniversary of the date ending the period for which
Employee receives payments in accordance with Section 3.2(c),
if the Employment Period expires after an Extension has been
offered to Employee in accordance with clause (ii) of the
proviso of Section 1.1 and not accepted by Employee in
accordance with such clause;
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<PAGE>
(iv) the first anniversary of the date ending the period for which
Employee receives payments in accordance with Section 3.2(d), if
the Employment Period expires after an Extension has not been
offered to Employee in accordance with Section 1.1; and
(v) the second anniversary of the date the Employee resigns for other
than Good Reason, but such period shall not be less than five
years from the Effective Date.
The Restricted Period shall be automatically extended for a period equal to any
period that Employee is in breach of the restrictive covenants set forth in this
Section 4 (the "Restrictive Covenants"). "Territory" shall mean the area
included within a 20 mile radius of any Medicare certified outpatient renal
dialysis facility or any other facility providing any services or engaging in
any activities of the Business and either (x) owned, operated or managed by the
Company or any Affiliated Entity on the Final Expiration Date or the date on
which the Employment Period is otherwise terminated or at any time during the 18
months preceding such date, or (y) for which the Company or any Affiliated
Entity during the nine months preceding the Final Expiration Date or the date on
which the Employment Period is otherwise terminated, was actively engaged in
efforts to establish, acquire, manage or operate (each such facility is
hereinafter referred to as a "Facility"); provided, however, that for purposes
-------- -------
hereof, following termination of Employee's employment with the Company,
Employee shall have the right to engage in any of the activities listed in
clause (i) through (iv) of the definition of Business in any Territory in which
the Company or any Affiliated Entity is not then engaging in or, in the nine
months preceding the Final Expiration Date or the date on which the Employment
Period is otherwise terminated, was not actively engaged in efforts to engage
in, such activity in a Facility located in such Territory. With respect to the
Territory, Employee specifically acknowledges that the Company plans to conduct
the Business throughout the United States and to undertake to expand the
Business throughout the United States.
4.3 Non-Solicitation. Without limiting the generality of the provisions
----------------
of Section 4.2 hereof, Employee hereby agrees that, during the Restricted
Period, he will not, directly or indirectly, solicit, or participate as
employee, agent, consultant, stockholder, director, partner or in any other
individual or representative capacity, in any business which solicits business
from any person, firm, corporation or other entity which was a client or other
business partner of the Company during the term of this Agreement or any
referring physician or any owner of facilities operated by the Company or its
Affiliated Entities and, in each instance, who or which is located in the
Territory, or from any successor in interest to any such person, firm,
corporation or other entity who or which is located in the Territory, for the
purpose of securing business relationships or contracts related to the Business;
provided, however, that nothing contained herein shall be construed to prohibit
or restrict Employee from soliciting business from any such parties on behalf of
the Company in performance of his duties as an employee of the Company required
under and as specifically contemplated by Section 1 above.
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<PAGE>
4.4 Interference with Relationships. During the Restricted Period,
-------------------------------
Employee shall not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner or in any other individual or representative
capacity: (i) except on behalf of the Company, employ or engage, recruit or
solicit for employment or engagement, any person who is or becomes employed or
engaged by the Company or its Affiliated Entities during the Restricted Period
or during the eighteen month period preceding the Restricted Period, or
otherwise seek to influence or alter any such person's relationship with the
Company or its Affiliated Entities, or (ii) solicit or encourage any client or
other business partner of the Company or its Affiliated Entities or any
referring physician or any owner of facilities operated or managed by the
Company or its Affiliated Entities to terminate or otherwise alter his, her or
its relationship with the Company or its Affiliated Entities.
4.5 Confidential Information. The Employee agrees that during the
------------------------
Employment Period or at all times thereafter, he shall not disclose to any
person not employed by the Company and not engaged to render services to the
Company or otherwise use any Confidential Information obtained while in the
employ of the Company, except on behalf of the Company in accordance with its
policies or as such disclosure may be required by law or a court order. As used
in this Agreement, "Confidential Information" shall mean any information
relating to the business or affairs of the Company, Peak, its Affiliated
Entities, or their clients or other business partners, including but not limited
to information relating to financial statements, client or other business
partner identities, potential clients, employees, information, analyses, or
other proprietary information used by the Company, Peak, or its Affiliated
Entities in connection with their businesses; provided, however, that
Confidential Information shall not include any information which is in the
public domain or becomes known in the industry through no wrongful act on the
part of Employee or is approved for disclosure by the Company. Employee
acknowledges that the Confidential Information is vital, sensitive, confidential
and proprietary to the Company and its Affiliated Entities.
4.6 Blue-Pencil. If any court of competent jurisdiction shall at any time
-----------
deem the term of this Agreement or any particular Restrictive Covenant too
lengthy or the Territory too extensive, the other provisions of this Section 4
shall nevertheless stand, the Restricted Period herein shall be deemed to be the
longest period permissible by law under the circumstances and the Territory
herein shall be deemed to comprise the largest territory permissible by law
under the circumstances. The court in each case shall reduce the time period
and/or Territory to permissible duration or size.
4.7 Remedies.
--------
(a) Employee agrees that the recitals to this Agreement are true and
are part of this Agreement. Further, Employee has carefully considered the
nature and extent of the restrictions upon him and the rights and remedies
conferred upon the Company under this Agreement, and Employee hereby
acknowledges and agrees that such restrictions, rights and remedies are
reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to the Company, do not stifle the inherent
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<PAGE>
skill and experience of Employee, would not operate as a bar to Employee's
sole means of support, are fully required to protect the legitimate
interests of the Company following the consummation of the Contemplated
Transactions and do not confer a benefit upon the Company disproportionate
to the detriment to Employee.
(b) Employee acknowledges and agrees that the Restrictive Covenants
are reasonable and necessary for the protection of the Company's business
interests, that irreparable injury will result to the Company if Employee
breaches any of the terms of said Restrictive Covenants, and that in the
event of Employee's actual or threatened breach of any such Restrictive
Covenants, the Company will have no adequate remedy at law. Employee
accordingly agrees that in the event of any actual or threatened breach by
him of any of the Restrictive Covenants, the Company shall be entitled,
upon three days' notice to Employee, to immediate temporary injunctive and
other equitable relief, without bond and without the necessity of showing
actual monetary damages, subject to a hearing as soon thereafter as
possible. Nothing contained herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages which it is able
to prove.
5. Miscellaneous.
-------------
5.1 Notices, Consents, etc. Any notices, consents or other communication
-----------------------
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a recognized
overnight courier service, or (d) sent by facsimile transmission (along with a
copy sent by first-class mail) to the parties at the addresses as set forth
below or at such other addresses as may be furnished in writing.
If to Company: Everest Healthcare Services Corporation
101 North Scoville
Oak Park, Illinois 60302
Attention: Craig W. Moore
Fax: 708/386-1711
With copies to: Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Attention: Matthew S. Brown, Esq.
Fax: 312/902-1061
If to Employee: Thomas Creel
1113 Furlong Drive
Libertyville, Illinois 60048
-12-
<PAGE>
with a copy to: Ross & Hardies
150 N. Michigan Avenue
Chicago, IL 60601
Attention: James B. Riley
Fax No.: 312/750-8600
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three (3) days after the date of mailing if sent by certified or
registered mail, (y) one (1) day after date of delivery to the overnight courier
if sent by overnight courier or (z) the next succeeding business day after
transmission by facsimile.
5.2 Severability. The unenforceability or invalidity of any provision of
------------
this Agreement shall not affect the enforceability or validity of any other
provision.
5.3 Entire Agreement. This Agreement and those documents expressly
----------------
referred to herein embody the complete agreement and understanding among the
parties and supersede and preempt any prior (or contemporaneous) understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way, and may not be
contradicted by evidence of any prior or contemporaneous agreement. The parties
further intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative, or other legal proceeding involving
this Agreement.
5.4 Counterparts. This Agreement may be executed on separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
5.5 Assignment. This Agreement will be binding upon and inure to the
----------
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the prior
written consent of the other parties. Notwithstanding anything to the contrary
contained herein, Employee may not assign any of his rights or delegate any of
his responsibilities, liabilities or obligations under this Agreement, without
the written consent of the Company.
5.6 No Strict Construction. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
5.7 Amendment and Waiver. Any provision of this Agreement may be amended,
--------------------
or any provision of this Agreement may be waived, provided that any such
amendment or waiver will be binding on Employee or the Company, only if such
amendment or waiver is set forth in a writing executed by Employee or the
Company, respectively. The waiver by any party hereto
-13-
<PAGE>
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any other breach.
5.8 Construction. This Agreement shall be construed and enforced in
------------
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Illinois, without giving effect to provisions thereof regarding
conflict of laws.
5.9 Consent to Jurisdiction and Service of Process. The Company and
----------------------------------------------
Employee hereby consent to the jurisdiction of any state or federal court
located within the County of Cook, State of Illinois and irrevocably agree that
subject to the Company's election, all actions or proceedings arising out of or
relating to this Agreement shall be litigated in such courts. Employee accepts
for himself and in connection with his properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens, and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement. Service of
all process in any such proceeding in any such court shall be mailed by
registered mail to Employee, except that unless otherwise provided by applicable
law, any failure to mail such copy shall not affect the validity of service of
process. Employee hereby agrees that service upon him by certified mail shall
constitute sufficient notice. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of the
Company to bring proceedings against Employee in the courts of any other
jurisdiction.
5.10 Employee Acknowledgment. The Employee acknowledges (a) that he has
-----------------------
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement and has been advised to do so by the
Company, and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.
5.11 Indemnification and Insurance.
-----------------------------
(a) The Company, to the fullest extent allowed by law, shall indemnify
and hold Employee harmless from any and all expenses (including reasonable
attorney's fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by Employee in connection with any action, suit or
proceeding in which Employee is a defendant and relating to Employee's
employment or performance of his duties hereunder (but not claims brought
by the Company for any breach of this Agreement by Employee) if the
Employee acted in good faith, in accordance with this Agreement and in a
manner the Employee reasonably believed to be in, or not opposed to, the
best interests of the Company and, with respect to any such action or
proceeding of a criminal nature, had no reasonable cause to believe
Employee's conduct was unlawful.
(b) Promptly after receipt by the Employee under Section 5.11(a) of
notice of a claim against it ("Claim"), Employee shall, if a claim is to be
made
-14-
<PAGE>
against the Company under this Section, give notice to the Company of such
Claim, but the failure to notify the Company will not relieve the Company
of any liability that it may have to Employee, except to the extent that
the Company demonstrates that the defense of such action is prejudiced by
Employee's failure to give such notice.
(c) If any Claim referred to in Section 5.11(b) is made against
Employee and it gives notice to the Company of such Claim, the Company will
be entitled to participate in the defense of such Claim and, to the extent
that it wishes (unless (i) the Company is also a party to such Claim and
Employee determines in good faith that joint representation would be
inappropriate, or (ii) the Company fails to provide reasonable assurance to
Employee of its financial capacity to defend such Claim and provide
indemnification with respect to such Claim), to assume the defense of such
Claim with counsel satisfactory to Employee and, after notice from the
Company to Employee of its election to assume the defense of such Claim,
the Company will not, as long as it diligently conducts such defense, be
liable to Employee under such Section for any fees of other counsel or any
other expenses with respect to the defense of such Claim in each case
subsequently incurred by the Employee in connection with the defense of
such Claim, other than reasonable costs of investigation. If the Company
assumes the defense of a Claim (a) it will be conclusively established for
purposes of this Agreement that the claims made in that claim are within
the scope of and subject to indemnification; (b) no compromise or
settlement of such claims may be effected by the Company without the
Employee's consent unless (i) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any
Person and no effect on any other Claims that may be made against the
Employee, and (ii) the sole relief provided is monetary damages that are
paid in full by the Company; and (c) the Employee will have no liability
with respect to any compromise or settlement of such claims effected
without its consent. If notice is given to the Company of a Claim and the
Company does not, within ten (10) days after the Employee's notice is
given, give notice to the Employee of its election to assume the defense of
such Claim, the Company will be bound by any determination with respect to
said Claim or any compromise or settlement effected by the Employee.
(d) The Company shall maintain insurance which would cover Employee in
connection with any liability asserted against Employee for performance of
his duties hereunder or as a result of being an employee of the Company,
whether the Company would be permitted to indemnify the Employee against
such liability under applicable law to the same extent it maintains such
insurance for other officers of the Company.
5.12 Right to Acquire Insurance. If the Employment Period terminates for
--------------------------
any reasons other than the death of the Employee, Employee may, at his option,
acquire any insurance npolicies on his life owned by Company within 60 days of
such termination. Such policies shall be transferred or assigned to Employee
upon his payment to Company of the cash surrender value of such insurance
policy.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
THE COMPANY:
-----------
EVEREST HEALTHCARE SERVICES
CORPORATION
By: /s/ CRAIG W. MOORE
-----------------------
Craig W. Moore
EMPLOYEE:
--------
/s/ THOMAS CREEL
--------------------------
Thomas Creel
-16-
<PAGE>
EXHIBIT A
---------
Defined Benefit Pension Approximate Contribution: $15,000
401K Plan Match for each Dollar
Contributed by Employee
Life Insurance Policy of up to $300,000 (Beneficiary Named by Employee)
Health Insurance - Family
Vacation Paid No less than 1 month
Holidays Paid 5 days
Sick Paid As needed
Short Term Disability Salary paid until long term
disability benefits commence
Long Term Disability 60% of salary to maximum of $25,000
per month
<PAGE>
EXHIBIT 10.4
EVEREST HEALTHCARE SERVICES CORPORATION
1996 STOCK AWARD PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I ESTABLISHMENT......................... 1
1.1 Purpose......................................... 1
ARTICLE II DEFINITIONS........................... 1
2.1 "Agreement" or "Award Agreement"................ 1
2.2 "Award"......................................... 1
2.3 "Beneficiary"................................... 1
2.4 "Board of Directors" or "Board"................. 1
2.5 "Cause"......................................... 1
2.6 "Code" or "Internal Revenue Code"............... 2
2.7 "Commission".................................... 2
2.8 "Committee"..................................... 2
2.9 "Common Stock".................................. 2
2.10 "Company"....................................... 2
2.11 "Company Affiliate"............................. 2
2.12 "Disability".................................... 2
2.13 "Effective Date"................................ 3
2.14 "Exchange Act".................................. 3
2.15 "Fair Market Value"............................. 3
2.16 "Grant Date".................................... 3
2.17 "Incentive Stock Option"........................ 3
2.18 "Non-Qualified Stock Option".................... 3
2.19 "Option"........................................ 3
2.20 "Option Period"................................. 3
2.21 "Option Price".................................. 3
2.22 "Participant"................................... 3
2.23 "Plan".......................................... 4
2.24 "Representative"................................ 4
2.25 "Restricted Stock".............................. 4
2.26 "Retirement".................................... 4
2.27 "Rule 144"...................................... 4
2.28 "Rule 16b-3"and "Rule 16a-1(c)(3)".............. 4
2.29 "Securities Act"................................ 4
2.30 "Stock Option".................................. 5
2.31 "Subscription Agreement"........................ 5
2.33 "Transfer"...................................... 5
ARTICLE III ADMINISTRATION........................ 5
3.1 Committee Structure and Authority............... 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IV STOCK SUBJECT TO PLAN................ 8
4.1 Number of Shares............................... 8
4.2 Release of Shares.............................. 8
4.3 Restrictions on Shares......................... 8
4.4 Stockholder Rights............................. 9
4.5 Anti-Dilution.................................. 9
ARTICLE V ELIGIBILITY.......................... 10
5.1 Eligibility.................................... 10
ARTICLE VI STOCK OPTIONS........................ 10
6.1 Grant of Stock Options to Participants......... 10
6.2 Terms and Conditions........................... 11
6.3 Termination by Reason of Death................. 14
6.4 Termination by Reason of Disability............ 14
6.5 Other Termination.............................. 14
6.6 Certain Rights upon Termination of Employment
Prior to a Public Offering..................... 14
ARTICLE VII RESTRICTED STOCK..................... 14
7.1 General........................................ 14
7.2 Awards and Certificates........................ 15
7.3 Terms and Conditions........................... 15
ARTICLE VIII PROVISIONS APPLICABLE TO STOCK
ACQUIRED UNDER THE PLAN.............. 16
8.1 Restriction on Disposition..................... 16
8.2 Subscription Agreement......................... 17
8.3 No Company Obligation.......................... 17
8.4 Limited Transfer During Offering............... 17
ARTICLE IX CHANGE IN CONTROL PROVISIONS......... 17
9.1 Impact of Event................................ 17
9.2 Sale of the Company............................ 18
ARTICLE X MISCELLANEOUS........................ 19
10.1 Amendments and Termination..................... 19
10.2 Form and Timing of Payment Under Awards;
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Deferrals............................................... 19
10.3 Status of Awards Under Code Section 162(m).............. 20
10.4 Unfunded Status of Plan; Limits on Transferability...... 20
10.5 General Provisions...................................... 20
10.6 Mitigation of Excise Tax................................ 22
10.7 Rights with Respect to Continuance of Employment........ 22
10.8 Awards in Substitution for Awards Granted by Other
Corporations............................................ 23
10.9 Procedure for Adoption.................................. 23
10.10 Procedure for Withdrawal................................ 23
10.11 Delay................................................... 23
10.12 Headings................................................ 23
10.13 Severability............................................ 23
10.14 Successors and Assigns.................................. 24
10.15 Entire Agreement........................................ 24
</TABLE>
-iii-
<PAGE>
EVEREST HEALTHCARE SERVICES CORPORATION
1996 STOCK AWARD PLAN
ARTICLE I
---------
ESTABLISHMENT
-------------
1.1 Purpose.
-------
The Everest Healthcare Services Corporation 1996 Stock Award Plan ("Plan")
is hereby established by Everest Healthcare Services Corporation ("Company")
effective as of January 15, 1997. The purpose of the Plan is to promote the
overall financial objectives of the Company and its stockholders by motivating
those persons selected to participate in the Plan to achieve long-term growth in
stockholder equity in the Company and by retaining the association of those
individuals who are instrumental in achieving this growth.
ARTICLE II
----------
DEFINITIONS
-----------
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Agreement" or "Award Agreement" means, individually or collectively,
--------- ---------------
any agreement entered into pursuant to the Plan pursuant to which an Award is
granted to a Participant.
2.2 "Award" means any Option or Restricted Stock, together with any other
-----
right or interest, granted to a Participant under the Plan.
2.3 "Beneficiary" means any person, trust or other entity which has been
-----------
designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant's death or to which Awards or other rights are
transferred if and to the extent permitted hereunder. If, upon a Participant's
death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the person, trust or other entity entitled by
will or the laws of descent and distribution to receive such benefits.
2.4 "Board of Directors" or "Board" means the Board of Directors of the
------------------ -----
Company.
2.5 "Cause" shall mean, for purposes of whether and when a Participant has
-----
incurred a Termination of Employment for Cause, any act or an act of omission
which permits the Company or a Company Affiliate to terminate the employment of
the
<PAGE>
Participant by the Company or a Company Affiliate for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause" or
a substantially equivalent term, then Cause shall mean (a) any act or failure to
act deemed to constitute cause under the Company's practices, policies or
guidelines applicable to the Participant or (b) the Participant's act or an act
of omission which constitutes gross misconduct with respect to the Company or a
Company Affiliate in any material respect, including, without limitation, an
act, or act of omission, of a criminal nature, the result of which is
detrimental to the interests of the Company or a Company Affiliate, or conduct,
or the omission of conduct, which constitutes a material breach of a duty the
Participant owes to the Company or a Company Affiliate.
2.6 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
---- ---------------------
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
2.7 "Commission" means the Securities and Exchange Commission or any
----------
successor agency.
2.8 "Committee" means the person or persons appointed to administer this
---------
Plan as further described herein.
2.9 "Common Stock" means the shares of the regular voting Common Stock,
------------
$.01 par value per share, of the Company, whether presently or hereafter issued,
and any other stock or security resulting from adjustment thereof as described
hereinafter or the common stock of any successor to the Company which is
designated for the purpose of the Plan.
2.10 "Company" means Everest Healthcare Services Corporation, a Delaware
-------
corporation, and includes any successor or assignee corporation or corporations
into which the Company may be merged, changed or consolidated; any corporation
for whose securities all or substantially all of the securities of the Company
shall be exchanged; and any assignee of or successor to all or substantially all
of the assets of the Company.
2.11 "Company Affiliate" means any individual, corporation, partnership,
-----------------
limited liability company, association, joint-stock company, trust,
unincorporated association or other entity (other than the Company) that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company including, without
limitation, any member of an affiliated group of which the Company is a common
parent corporation as provided in Section 1504 of the Code.
2.12 "Disability" means any mental or physical illness, disability or
----------
incapacity to the extent that the Participant shall be unable to perform his
duties, or the absence of the Participant with the Company or a Company
Affiliate employment by reason of any mental or physical illness, disability or
incapacity for a period of three months
-2-
<PAGE>
during any six-month period; provided, however, in either case, that such
illness, disability or incapacity shall be determined to be of a permanent
nature by a licensed physician selected by the Committee and reasonably
acceptable to the Participant. Notwithstanding the foregoing, a Disability
shall not qualify under this Plan if it is the result of (i) a willfully self-
inflicted injury or willfully self-induced sickness; or (ii) an injury or
disease contracted, suffered, or incurred while participating in a criminal
offense. The determination of Disability shall be made by the Committee. The
determination of Disability for purposes of this Plan shall not be construed to
be an admission of disability for any other purpose.
2.13 "Effective Date" means January 15, 1997.
--------------
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
2.15 "Fair Market Value" means (a) prior to the date the Common Stock is
-----------------
traded on a regular securities market, the fair market value determined in the
sole discretion of the Committee; and (b) after the date the Common Stock is
traded on a regular securities market, unless otherwise determined by the
Committee, the fair market value per share of Common Stock as of any given date
shall be the closing sale price per share reported on a consolidated basis for
stock listed on the principal stock exchange or market on which Common Stock is
traded on the date as of which such value is being determined or, if there is no
sale on that date, then on the last previous day on which a sale was reported.
2.16 "Grant Date" means the date as of which an Award is granted pursuant
----------
to the Plan.
2.17 "Incentive Stock Option" means any Stock Option intended to be and
----------------------
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.18 "Non-Qualified Stock Option" means an Option to purchase Common Stock
--------------------------
in the Company granted under the Plan, the taxation of which is pursuant to
Section 83 of the Code.
2.19 "Option" means a right, granted to a Participant under Section 6.1
------
hereof, to purchase Common Stock at a specified price during specified time
periods, or at a time based upon criteria determined by the Committee.
2.20 "Option Period" means the period during which an Option shall be
-------------
exercisable in accordance with the related Agreement and Article VI.
2.21 "Option Price" means the price at which the Common Stock may be
------------
purchased under an Option as provided in Section 6.3(b).
-3-
<PAGE>
2.22 "Participant" means a person who satisfies the eligibility conditions
-----------
of Article V and to whom an Award has been granted by the Committee under the
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of
the Participant, a partnership the interest of which is held by or for the
benefit of the Participant, the Participant's parents, spouse or descendants, or
a custodian under a uniform gifts to minors act or similar statute for the
benefit of the Participant's descendants, to the extent permitted by the
Committee and not inconsistent with Rule 16b-3 (if relevant) or the status of
the Option as an Incentive Stock Option, if intended. Notwithstanding the
foregoing, the term "Termination of Employment" shall mean the Termination of
Employment of the person to whom the Award was originally granted.
2.23 "Plan" means the Everest Healthcare Services Corporation 1996 Stock
----
Award Plan, as herein set forth and as may be amended from time to time.
2.24 "Representative" means (a) the person or entity acting as the executor
--------------
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person or who has acquired any right, title or interest in or to the Common
Stock or an Option whether pursuant to community property law or other laws of
any jurisdiction by reason of the death of the Participant, or to whom an Option
has been transferred with the permission of the Committee or by operation of
law; provided that only one of the foregoing shall be the Representative at any
point in time as determined under applicable law and recognized by the
Committee.
2.25 "Restricted Stock" means Common Stock granted to a Participant under
----------------
Section 8.1 hereof that is subject to certain restrictions and to a risk of
forfeiture.
2.26 "Retirement" means the Participant's Termination of Employment after
----------
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or a Company Affiliate, if the Participant is covered by such a
plan, or if the Participant is not covered by such a plan, then age 65, or age
55 with the accrual of 10 years of service.
2.27 "Rule 144" means Rule 144 promulgated under the Securities Act.
--------
2.28 "Rule 16b-3"and "Rule 16a-1(c)(3)" mean Rule 16b-3 and Rule 16a-
---------- ----------------
1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
-4-
<PAGE>
2.29 "Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
2.30 "Stock Option" means a right, granted to a Participant under Sections
------------
6.1 hereof to purchase Common Stock.
2.31 "Subscription Agreement" means an agreement, the execution of which is
----------------------
a condition precedent to the Participant's receipt of any shares of Common Stock
hereunder.
2.32 "Termination of Employment" means the occurrence of any act or event,
-------------------------
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or of
any Company Affiliate, or to be an officer, independent contractor, director or
employee of any entity that provides services to the Company or a Company
Affiliate, including, without limitation, death, Disability, dismissal,
severance at the election of the Participant, Retirement, or severance as a
result of the discontinuance, liquidation, sale or transfer by the Company or
Company Affiliates of all businesses owned or operated by the Company or Company
Affiliates. With respect to any person who is not an employee with respect to
the Company or a Company Affiliate, the Agreement shall establish what act or
event shall constitute a Termination of Employment for purposes of the Plan. A
transfer of employment from the Company to a Company Affiliate, or from a
Company Affiliate to the Company, will not be a Termination of Employment,
unless expressly determined by the Committee. A Termination of Employment shall
occur for an employee who is employed by a Company Affiliate if the Company
Affiliate shall cease to be a Company Affiliate and the Participant shall not
immediately thereafter become an employee of the Company or a Company Affiliate.
2.33 "Transfer" means any sale, disposition, assignment, pledge,
--------
hypothecation, encumbrance, transfer, conveyance, gift, alienation or other
transfer.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
-----------
ADMINISTRATION
--------------
3.1 Committee Structure and Authority. Prior to the date of the first
---------------------------------
registration of an equity security of the Company under the Exchange Act (the
"Registration Date"), the Plan shall be administered by the Board of Directors
or a committee of one or more persons appointed to administer the Plan by the
Board of Directors. From and after the Registration Date, the Plan shall be
administered by a committee comprised of one or more persons, which committee
shall be the
-5-
<PAGE>
compensation committee of the Board of Directors, unless such committee does not
exist or the Board establishes or identifies another committee whose purpose is
the administration of this Plan. Only those members of the Committee who
participate in the decision relative to Awards under this Plan shall be deemed
to be the "Committee" for purposes of this Plan. A majority of the Committee
shall constitute a quorum at any meeting thereof (including by telephone
conference) and the acts of a majority of the members present, or acts approved
in writing by a majority of the entire Committee without a meeting, shall be the
acts of the Committee for purposes of this Plan. The Committee may authorize any
one or more of its members or an officer of the Company to execute and deliver
documents on behalf of the Committee. A member of the Committee shall not
exercise any discretion respecting himself or herself under the Plan. The Board
shall have the authority to remove, replace or fill any vacancy of any member of
the Committee upon notice to the Committee and the affected member. Any member
of the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more of its agents,
such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of this Plan (including, without limitation, Section 9.1):
(a) to select those persons to whom Awards may be granted from time
to time;
(b) to determine whether and to what extent Awards or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration, forfeiture or waiver regarding any Award, any shares of
Common Stock relating thereto, any performance criteria and the
satisfaction of each criteria);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Award, subject to the limitations of Section 10.1;
(f) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be deferred;
(g) to determine under what circumstances an Award may be settled in
cash or Common Stock;
(h) to provide for the forms of Agreements to be utilized in
connection with the Plan;
-6-
<PAGE>
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable to
the Plan, Awards and the issuance of shares of Common Stock under the Plan
and to require of a Participant that appropriate action be taken with
respect to such requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Awards;
(l) to interpret and make final determinations with respect to the
remaining number of shares of Common Stock available under this Plan;
(m) to require, as a condition of the exercise of an Award or the
issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any Federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a
deduction or as may be otherwise required by law;
(n) to determine whether and with what effect a Participant has
incurred a Termination of Employment;
(o) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(p) to determine the restrictions or limitations on the transfer of
Common Stock obtained under the Plan;
(q) to determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Agreement;
(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan, any Award issued under the Plan and any Subscription Agreement and to
otherwise supervise the
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<PAGE>
administration of the Plan. The Committee's policies and procedures may differ
with respect to Awards granted at different times or to different Participants.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan, an Agreement or
Subscription Agreement, at any time thereafter. All decisions made by the
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Participants. No determination shall be
subject to de novo review if challenged in court.
-- ----
ARTICLE IV
----------
STOCK SUBJECT TO PLAN
---------------------
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
----------------
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under the Plan shall be 1.5 million shares of Common Stock
(after giving effect to the stock split effective February 1997.) authorized for
issuance on the Effective Date. Such shares may consist, in whole or in part,
of authorized and unissued shares or treasury shares.
4.2 Release of Shares. Subject to the limitation of Section 4.1, the
-----------------
Committee shall have full authority to determine the number of shares of Common
Stock available for Award, and in its discretion may include (without
limitation) as available for distribution any shares of Common Stock that have
ceased to be subject to an Award, any shares of Common Stock subject to any
Award that are forfeited, any shares of Common Stock subject to any Stock Option
Award that otherwise terminates without issuance of shares of Common Stock being
made to the Participant, or any shares (whether or not restricted) of Common
Stock that are received by the Company in connection with the exercise of an
Award, including the satisfaction of any tax liability or the satisfaction of a
tax withholding obligation. If any shares could not again be available for
Options to a particular Participant under applicable law, such shares shall be
available exclusively for Options to Participants who are not subject to such
limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
----------------------
of a Stock Option as or in conjunction with an Award shall be subject to the
terms and conditions specified herein and to such other terms, conditions and
restrictions as the Committee in its discretion may determine or provide in the
Award Stock Option Agreement or Subscription Agreement. The Company shall not
be required to issue or deliver any certificates for shares of Common Stock,
cash or other property prior to (a) the listing of such shares on any stock
exchange or NASDAQ (or other public market) on which the Common Stock may then
be listed (or regularly traded), (b) the completion of any registration or
qualification of such shares under Federal or
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<PAGE>
state law, or any ruling or regulation of any government body which the
Committee determines to be necessary or advisable, and (c) the satisfaction of
any applicable withholding obligation in order for the Company or a Company
Affiliate to obtain a deduction with respect to the exercise of a Stock Option
or as may otherwise be required by law, and (d) the satisfaction of all other
conditions under this Plan, an Award Agreement or Subscription Agreement. The
Company may cause any certificate for any share of Common Stock to be delivered
to be properly marked with a legend or other notation reflecting the limitations
on transfer of such Common Stock as provided in this Plan or as the Committee
may otherwise require. The Committee may require any person exercising an Award
to make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the shares of Common
Stock in compliance with applicable law or otherwise. All shares of Common Stock
issued to a Participant in connection with an Award shall be subject to the
Subscription Agreement. No person shall have any right regarding the
registration of shares of Common Stock except and only to the extent expressly
provided in the Subscription Agreement and subject to any requirement or
condition imposed by the Company or an underwriter managing an offering of the
Company's securities. Fractional shares shall not be delivered, but shall be
rounded to the next lower whole number of shares with appropriate payment for
such fractional shares as shall reasonably be determined by the Committee.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
------------------
as to shares of Common Stock subject to an Award until, after proper exercise of
the Award and execution of a Subscription Agreement or other action required,
such shares shall have been recorded on the Company's official stockholder
records as having been issued and transferred. Upon exercise of the Award or
any portion thereof, the Company will have a reasonable time in which to issue
the shares, and the Participant will not be treated as a stockholder for any
purpose whatsoever prior to such issuance. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date such
shares are recorded as issued and transferred in the Company's official
stockholder records, except as provided herein or in an Agreement.
4.5 Anti-Dilution. In the event of any Company stock dividend, stock
-------------
split, reverse stock split, combination or exchange of shares, recapitalization
or other change in the capital structure of the Company, corporate separation or
division of the Company (including, but not limited to, a split-up, spin-off,
split-off or distribution to Company stockholders other than a normal cash
dividend), sale by the Company of all or a substantial portion of its assets
(measured on either a stand-alone or consolidated basis), reorganization, rights
offering, a partial or complete liquidation, or any other corporate transaction,
Company stock offering or event involving the Company and having an effect
similar to any of the foregoing, then the Committee may adjust or substitute, as
the case may be, the number of shares of Common Stock available for Awards under
the Plan, the number of shares of Common Stock covered by outstanding Awards,
the maximum number of Awards available for grant to any Participant for a stated
period of time (including the maximum number of Stock Appreciation Rights), the
exercise price per share of outstanding Awards, and
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performance conditions and any other characteristics or terms of the Awards as
the Committee shall deem necessary or appropriate to reflect equitably the
effects of such changes to the Participants; provided, however, that the
Committee may limit any such adjustment so as to maintain the deductibility of
the Awards under Section 162(m) of the Code and that any fractional shares
resulting from such adjustment shall be eliminated by rounding to the next lower
whole number of shares with appropriate payment for such fractional shares as
shall reasonably be determined by the Committee.
ARTICLE V
---------
ELIGIBILITY
-----------
5.1 Eligibility. Except as herein provided, the persons who shall be
-----------
eligible to participate in the Plan and be granted Awards shall be those persons
who are directors, officers, employees, independent contractors, or consultants
of the Company or any subsidiary of the Company or professional corporations or
the equivalent owned by such persons, who shall be in a position, in the opinion
of the Committee, to make contributions to the growth, management, protection
and success of the Company and its subsidiaries. Of those persons described in
the preceding sentence, the Committee may, from time to time, select persons to
be granted Awards and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the Award
with respect to Participants, the Committee may give consideration to the
person's functions and responsibilities, the person's contributions to the
Company and its subsidiaries, the value of the individual's service to the
Company and its subsidiaries and such other factors deemed relevant by the
Committee. The Committee may designate in writing any person who is not
eligible to participate in the Plan if such person would otherwise be eligible
to participate in this Plan.
ARTICLE VI
----------
STOCK OPTIONS
-------------
6.1 Grant of Stock Options to Participants. The Committee shall have
--------------------------------------
authority to grant Stock Options under the Plan at any time or from time to time
to each Participant as the Committee determines. The grant of a Stock Option to
such Participants shall occur as of the date the Committee determines. Stock
Options may be either Incentive Stock Options or Non-Qualified Stock Options.
An Option shall entitle such Participant to receive shares of Common Stock upon
exercise of such Option, subject to the Participant's satisfaction in full of
any conditions, restrictions or limitations imposed in accordance with the Plan
or an Agreement (the terms and provisions of which may differ from other
Agreements), including, without limitation, payment of the Option Price. On or
after Section 162(m) of the Code is applicable to
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<PAGE>
the Company, during any calendar year, Options to purchase no more than 750,000
shares of Common Stock (subject to adjustment under Section 4.5) shall be
granted to any Participant during any fiscal year.
Each Option granted under this Plan shall be evidenced by an Agreement, in
a form approved by the Committee, which shall embody the terms and conditions of
such Option and which shall be subject to the express terms and conditions set
forth in the Plan. Such Agreement shall become effective upon execution by the
Participant. Only a person who is a common-law employee of the Company, any
parent corporation of the Company or a subsidiary (as such terms are defined in
Section 424 of the Code) on the date of grant shall be eligible to be granted an
Option which is intended to be and is an Incentive Stock Option. To the extent
that any Stock Option is not designated as an Incentive Stock Option or even if
so designated does not qualify as an Incentive Stock Option, it shall constitute
a Non-Qualified Stock Option.
6.2 Terms and Conditions. Stock Options shall be subject to such terms
--------------------
and conditions as shall be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Stock Option shall be
-------------
fixed by the Committee; provided that no Stock Option shall be exercisable
more than ten (10) years after the date the Stock Option is granted. In
the case of an Incentive Stock Option granted to an individual who owns
more than ten percent (10%) of the combined voting power of all classes of
stock of the Company, a corporation which is a parent corporation of the
Company or any subsidiary of the Company (each as defined in Section 424 of
the Code), the Option Period shall not exceed five (5) years from the date
of grant. No Option which is intended to be an Incentive Stock Option
shall be granted more than ten (10) years from the date the Plan is adopted
by the Company or the date the Plan is approved by the stockholders of the
Company, whichever is earlier.
(b) Option Price. The Option Price per share of the Common Stock
------------
purchasable under an Option shall be determined by the Committee; provided,
however, that the Option Price per share of an Incentive Stock Option shall
be not less than the Fair Market Value per share on the date the Option is
granted. If an Option is intended to qualify as an Incentive Stock Option
and is granted to an individual who owns or who is deemed to own stock
possessing more than ten percent (10%) of the combined voting power of all
classes of stock of the Company, a corporation which is a parent
corporation of the Company or any subsidiary of the Company (each as
defined in Section 424 of the Code), the Option Price per share shall not
be less than one hundred ten percent (110%) of such Fair Market Value per
share.
(c) Exercisability. Stock Options shall be exercisable at such time
--------------
or times and subject to such terms and conditions as shall be determined by
the Committee. Subject to the Plan and unless otherwise provided in an
Agreement, an Option shall be exercisable only during the Option Period,
and
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only to the extent the Option is fully exercisable as provided in the
Option Agreement. Unless otherwise provided in an Agreement, an Option
shall be exercisable only if the Participant does not incur a Termination
of Employment prior to the date or dates established by the Committee and
set forth in an Agreement except if, the Participant dies or incurs a
Disability prior to a Termination of Employment, and the Participant
satisfies all other conditions in the Plan or an Agreement. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment exercise
provisions, in whole or in part. In addition, the Committee may at any
time accelerate the exercisability of any Stock Option or provide for
acceleration on the satisfaction of performance standards. If the
Committee intends that an Option be an Incentive Stock Option, the
Committee may, in its discretion, provide that the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock as to which such
Incentive Stock Option which is exercisable for the first time during any
calendar year shall not exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI,
------------------
a Participant may exercise Stock Options, in whole or in part, at any time
during the Option Period by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the Company
specifying the number of shares of Common Stock subject to the Stock Option
to be purchased and such other information as requested. Except when
waived by the Committee, such notice shall be accompanied by payment in
full of the purchase price by cash or check or such other form of payment
as the Company may accept. If approved by the Committee (including
approval at the time of exercise), payment in full or in part may also be
made (i) by delivering Common Stock already owned by the Participant having
a total Fair Market Value on the date of such delivery equal to the Option
Price; (ii) by the execution and delivery of a note or other evidence of
indebtedness (and any security agreement thereunder) satisfactory to the
Committee and permitted in accordance with Section 6.2(e); (iii) by
authorizing the Company to retain shares of Common Stock which would
otherwise be issuable upon exercise of the Option having a total Fair
Market Value on the date of delivery equal to the Option Price; (iv) by the
delivery of cash or the extension of credit by a broker-dealer to whom the
Participant has submitted a notice of exercise or otherwise indicated an
intent to exercise an Option (in accordance with Part 220, Chapter II,
Title 12 of the Code of Federal Regulations, so-called "cashless"
exercise); (v) by certifying ownership of Common Stock owned by the
Participant to the satisfaction of the Committee for latter delivery to the
Company as specified by the Committee; or (vi) by any combination of the
foregoing or by any other method permitted by the Committee. If payment of
the Option Price of a Stock Option is made in whole or in part in the form
of Restricted Stock, the number of shares of Common Stock to be received
upon such exercise that is equal to the number of shares of Restricted
Stock used for payment of the Option Price shall be subject to the same
forfeiture restrictions or deferral limitations to which such Restricted
Stock was subject, unless otherwise determined by the
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<PAGE>
Committee. In the case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares of Common Stock of the same
class as the Common Stock subject to the Stock Option may be authorized
only at the time the Stock Option is granted. No shares of Common Stock
shall be issued until full payment therefor, as determined by the
Committee, has been made. Subject to any forfeiture restrictions or
deferral limitations that may apply if a Stock Option is exercised using
Restricted Stock, a Participant shall have all of the rights of a
stockholder of the Company holding the class of Common Stock that is
subject to such Stock Option (including, if applicable, the right to vote
the shares and the right to receive dividends), when the Participant has
given written notice of exercise, has paid in full for such shares and such
shares have been recorded on the Company's official stockholder records as
having been issued and transferred.
(e) Company Loan or Guarantee. Upon the exercise of any Option and
-------------------------
subject to the pertinent Agreement and the discretion of the Committee, the
Company may at the request of the Participant:
(1) lend to the Participant an amount equal to such portion of the
Option Price as the Committee may determine; or
(2) guarantee a loan obtained by the Participant from a third-
party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate and any security interest thereunder and whether the loan
shall be with recourse, shall be determined by the Committee, except that
no extension of credit or guarantee shall obligate the Company for an
amount to exceed the lesser of the aggregate Fair Market Value per share of
the Common Stock on the date of exercise, less the par value of the shares
of Common Stock to be purchased upon the exercise of the Award, or the
amount permitted under applicable laws or the regulations and rules of the
Federal Reserve Board and any other governmental agency having
jurisdiction.
(f) Non-transferability of Options. Except as provided herein or in
------------------------------
an Agreement and then only consistent with the intent that the Option be an
Incentive Stock Option, no Stock Option or interest therein shall be
transferable by the Participant other than by will or by the laws of
descent and distribution or by a designation of Beneficiary effective upon
the death of the Participant.
6.3 Termination by Reason of Death. Unless otherwise provided in an
------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable for a period of ninety
(90) days following the date of the appointment of a Representative or until the
expiration of the Option Period, whichever period is the shorter.
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<PAGE>
6.4 Termination by Reason of Disability. Unless otherwise provided in an
-----------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Stock Option
held by such Participant shall thereafter be fully exercisable by the
Participant for the period of ninety (90) days immediately following the date of
such Termination of Employment or until the expiration of the Option Period,
whichever period is shorter, and the Participant's death at any time following
such Termination of Employment due to Disability shall not affect the foregoing.
In the event of Termination of Employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
6.5 Termination for Cause. Unless otherwise agreed to in writing by the
---------------------
Committee, if the Participant incurs a Termination of Employment for Cause, any
Option granted to the Participant and outstanding shall be cancelled
immediately, no payment of any kind shall be made in respect of the Option and
the Participant shall have no further rights with respect to the Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
-----------------
determined by the Committee, if a Participant incurs a Termination of Employment
for any reason other than death or Disability, any Stock Option held by such
Participant shall thereupon terminate, except that such Stock Option, to the
extent then exercisable, may be exercised for the lesser of the ninety (90) day
period commencing with the date of such Termination of Employment or until the
expiration of the Option Period. Unless otherwise provided in an Agreement or
determined by the Committee, the death or Disability of a Participant after a
Termination of Employment otherwise provided herein shall not extend the time
permitted to exercise an Option.
6.7 Certain Rights upon Termination of Employment. Each Option Agreement
---------------------------------------------
may provide that the Company shall have the right to purchase all or part (as
determined by the Committee) of any Option from the Participant, upon such terms
and conditions as are set forth in the Option Agreement or as agreed to by the
Committee and the Participant. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant violates any covenant regarding
proprietary information or noncompetition, the Option shall be cancelled and no
value shall or may be paid in respect of such Option and the Participant shall
have no further rights with respect to the Option.
ARTICLE VII
-----------
RESTRICTED STOCK
----------------
7.1 General. The Committee shall have authority to grant Restricted Stock
-------
under the Plan at any time or from time to time. Shares of Restricted Stock may
be awarded either alone or in addition to other Awards granted under the Plan.
Restricted Stock may be either granted currently or on a deferred delivery
basis. The
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<PAGE>
Committee shall determine the persons to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares of Restricted
Stock to be awarded to any Participant, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards. Each Award shall be confirmed by, and be subject to the terms of, an
Agreement. The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals by the Participant or by the Company
or a Company Affiliate (including a division or department of the Company or a
Company Affiliate) for or within which the Participant is primarily employed or
upon such other factors or criteria as the Committee shall determine. The
provisions of Restricted Stock Awards need not be the same with respect to any
Participant.
7.2 Awards and Certificates. Notwithstanding the limitations on issuance
-----------------------
of shares of Common Stock otherwise provided in the Plan, each Participant
receiving an Award of Restricted Stock shall be issued a certificate in respect
of such shares of Restricted Stock. Such certificate shall be registered in the
name of such Participant and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award as determined by
the Committee. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.
7.3 Terms and Conditions. Shares of Restricted Stock shall be subject to
--------------------
the following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of the
------------------------------
Plan and the Agreement, during a period set by the Committee commencing
with the date of such Award (the "Restriction Period"), the Participant
shall not be permitted to sell, dispose of, assign, transfer, pledge,
hypothecate, convey, gift, alienate, encumber or otherwise transfer any
interest in shares of Restricted Stock.
(b) Rights. Restricted stock may be granted for any price or no
------
price. Except as provided in Section 7.3(a), the Participant shall have,
with respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Company holding the class of Common Stock that is the
subject of the Restricted Stock, including, if applicable, the right to
vote the shares and the right to receive any cash dividends. Unless
otherwise determined by the Committee and subject to the Plan, cash
dividends on the class of Common Stock that is the subject of the
Restricted Stock shall be automatically deferred and reinvested in
additional Restricted Stock, and dividends on the class of Common Stock
that is the subject of the Restricted Stock payable in Common Stock shall
be paid in the form of Restricted Stock of the same class as the Common
Stock on which such dividend was paid.
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<PAGE>
(c) Acceleration. Based on service, performance by the Participant or
------------
by the Company or a Company Affiliate, including any division or department
for which the Participant is employed, or such other factors or criteria as
the Committee may determine, the Committee may provide for the lapse of
restrictions in installments and may accelerate the vesting of all or any
part of any Award and waive the restrictions for all or any part of such
Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
----------
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and the Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than death or
Disability, all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant, except the Committee shall have the
discretion to waive in whole or in part any or all remaining restrictions
with respect to any or all of such Participant's shares of Restricted
Stock.
(e) Delivery. If and when the Restriction Period expires without a
--------
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates (other than applicable securities law
legends) for such shares shall be delivered to the Participant, except the
Award may provide for deferred delivery.
(f) Election. A Participant may elect to further defer receipt of the
--------
Restricted Stock for a specified period or until a specified event, subject
in each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made one (1) year prior to completion of
the Restriction Period.
ARTICLE VIII
------------
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
------------------------------------------------------
8.1 Restriction on Disposition. Other than in accordance with the terms
--------------------------
and conditions of this Plan, an Agreement or a Subscription Agreement, any
attempted sale, transfer, conveyance, gift, assignment, pledge, encumbrance,
hypothecation, alienation or other disposition of a Stock Option or any of the
shares of Common Stock by the Participant is void and transfers no right, title,
or interest in or to such Stock Option or shares of Common Stock, or any portion
of them, to the purported buyer, transferee, donee, assignee, pledgee or
encumbrance holder. Upon written consent of the Committee (which consent will
not be unreasonably withheld), the Participant may transfer the Option or some
or all of the shares of Common Stock (or any interest therein) to his or her
Representative; provided, however, prior to any such transfer, the Participant
and any such Representative shall execute and deliver to the
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<PAGE>
Company a counterpart of the Stock Option Agreement or Subscription Agreement
indicating the Representative's consent to be bound by its terms to the same
extent as the Participant and the Representative shall be deemed to be bound by
the terms and conditions of the Stock Option Agreement or Subscription Agreement
to the same extent as the Participant.
8.2 Subscription Agreement. Shares of Common Stock issued upon the
----------------------
exercise of an Option shall be subject to the terms and conditions of the
Subscription Agreement which may contain such terms as the Committee may
determine. The Committee may in its sole discretion include in any Subscription
Agreement an obligation that the Participant sell to the Company the
Participant's shares of Common Stock received upon the exercise of an Option,
upon such terms and conditions as the Committee may determine and set forth in a
Subscription Agreement. Notwithstanding any provision herein to the
contrary, the Company may upon determination by the Committee assign its right
to purchase shares of Common Stock, whereupon the assignee of such right shall
have all the rights, duties and obligations of the Company with respect to the
purchase of the shares of Common Stock.
8.3 No Company Obligation. None of the Company, a Company Affiliate or
---------------------
the Committee shall have any duty or obligation to affirmatively disclose to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of any material information regarding the Company or
any Company Affiliate at any time prior to, upon or in connection with receipt
or the exercise of an Award or the Company's purchase of Common Stock or an
Award from such holder in accordance with the terms hereof.
8.4 Limited Transfer During Offering. In the event there is an effective
--------------------------------
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to the exercise of an Award.
ARTICLE IX
----------
CHANGE IN CONTROL PROVISIONS
----------------------------
9.1 Impact of Event. Notwithstanding any other provision of the Plan to
---------------
the contrary, unless otherwise provided in an Agreement, in the event of any
transaction between the Company and any Person pursuant to which such Person
acquires (i) a majority of the issued and outstanding shares of Common Stock, or
(ii) all or substantially all of the Company's assets on a consolidated basis (a
"Sale of the Company") the Committee shall have full discretion to do any or all
of the following with respect to an Award:
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<PAGE>
(a) to provide that any Stock Options outstanding as of the date such
Sale of the Company and not then exercisable shall become fully exercisable
to the full extent of the original grant.
(b) to cause the restrictions and deferral limitations applicable to
any Restricted Stock to lapse, and for such Restricted Stock to become free
of all restrictions and become fully vested and transferable to the full
extent of the original grant.
(c) to cause any Award to be cancelled, provided notice of at least 15
days thereof is provided before the date of cancellation;
(d) to provide that the securities of another entity be substituted
hereunder for the Common Stock and to make equitable adjustment with
respect thereto;
(e) to grant the Participant, by giving notice during a pre-set
period, the right to surrender all or part of a stock-based Award to the
Company and to receive cash in an amount equal to the amount by which the
"Sale of the Company Price" (as defined in Section 9.2) per share of Common
Stock on the date of such election shall exceed the amount which the
Participant must pay to exercise the Award per share of Common Stock (the
"Spread") multiplied by the number of shares of Common Stock granted under
the Award;
(f) to require the assumption of the obligation of the Company under
the Plan subject to appropriate adjustment; and
(g) to take any other action the Committee determines to take.
9.2 Sale of the Company. For purposes of the Plan, "Sale of the Company
-------------------
Price" means the higher of (a) prior to the date the Common Stock is traded on a
regular securities market, the value per share of Common Stock to be received in
connection with the Sale of the Company, and (b) after the date the Common Stock
is traded on a regular securities market (i) the highest reported sales price of
a share of Common Stock in any transaction reported on the principal exchange on
which such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of such sale or (ii) if the Sale of the Company is the result
of a tender or exchange offer, merger, consolidation, liquidation or sale of all
or substantially all of the assets of the Company (in each case a "Corporate
Transaction"), the highest price per share of Common Stock paid in such
Corporate Transaction, except that, in the case of Incentive Stock Options, such
price shall be based only on the Fair Market Value of the Common Stock on the
date any such Incentive Stock Option is exercised. To the extent that the
consideration paid in any such Corporate Transaction consists all or in part of
securities or other non-cash consideration, the value of such securities or
other non-cash consideration shall be determined in the sole discretion of the
Committee.
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<PAGE>
ARTICLE X
---------
MISCELLANEOUS
-------------
10.1 Amendments and Termination. The Board may amend, alter or discontinue
--------------------------
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Award theretofore
granted without the Participant's consent, except such an amendment (a) made to
avoid an expense charge to the Company or a Company Affiliate, (b) made to cause
the Plan to qualify for the exemption provided by Rule 16b-3, (c) to prevent the
Plan from being disqualified from the exemption provided by Rule 16b-3 or (d)
made to permit the Company or a Company Affiliate a deduction under the Code.
The Committee may amend the Plan at any time provided that an amendment
shall be subject to the same limitations (and the exceptions to the limitations
as apply to any amendment by the Board), and any amendment shall be subject to
the approval of the Board.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without the Participant's consent or reduce an Option Price,
except such an amendment (a) made to avoid an expense charge to the Company or a
Company Affiliate, (b) made to cause the Plan to qualify for the exemption
provided by Rule 16b-3, (c) to prevent the Plan from being disqualified from the
exemption provided by Rule 16b-3 or (d) made to permit the Company or a Company
Affiliate a deduction under the Code.
Notwithstanding anything in the Plan to the contrary, if any right under
this Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
Common Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
10.2 Form and Timing of Payment Under Awards; Deferrals. Subject to the
--------------------------------------------------
terms of the Plan and any applicable Agreement, payments to be made by the
Company or a Company Affiliate upon the exercise of an Award or settlement of an
Award may be made in such forms as the Committee shall determine, including,
without limitation, cash, Common Stock, other Awards or other property, and may
be made in a single payment or transfer, in installments, or on a deferred
basis. The settlement of any Award may be accelerated, and cash paid in lieu of
Common Stock in connection with such settlement, in the discretion of the
Committee or upon occurrence of one or more specified events. Installment or
deferred payments may be required by the Committee (subject to Section 13.1 of
the Plan) or permitted at the election of the Participant.
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<PAGE>
10.3 Status of Awards Under Code Section 162(m). After Section 162(m) of
------------------------------------------
the Code applies to the Company, it is the intent of the Company that Awards
granted to persons who are Covered Employees within the meaning of Code Section
162(m) shall constitute "qualified performance-based compensation" satisfying
the requirements of Code Section 162(m). Accordingly, the provisions of the
Plan shall be interpreted in a manner consistent with Code Section 162(m). If
any provision of the Plan or any agreement relating to such an Award does not
comply or is inconsistent with the requirements of Code Section 162(m), such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
10.4 Unfunded Status of Plan; Limits on Transferability. It is intended
--------------------------------------------------
that the Plan be an "unfunded" plan for incentive and deferred compensation.
The Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver Common Stock or make payments;
provided, however, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan. Unless otherwise provided in this Plan or in an Agreement,
no Award shall be subject to the claims of Participant's creditors and no Award
may be transferred, assigned, alienated or encumbered in any way other than by
will or the laws of descent and distribution or to a Representative upon the
death of the Participant.
10.5 General Provisions.
------------------
(a) Representation. The Committee may require each person purchasing
--------------
or receiving shares pursuant to an Award to represent to and agree with the
Company in writing that such person is acquiring the shares without a view
to the distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) No Additional Obligation. Nothing contained in the Plan shall
------------------------
prevent the Company or a Company Affiliate from adopting other or
additional compensation arrangements for its employees. The grant of an
Award shall in no way affect the right of the Company to adjust,
reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer
all or any part of its business or assets.
(c) Withholding. No later than the date as of which an amount first
-----------
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Award, the Participant shall pay to
the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount required in order for the Company or an Affiliate to obtain a
current deduction. Unless otherwise determined by the Committee,
withholding obligations may be settled with
-20-
<PAGE>
Common Stock, including Common Stock that is part of the Award that gives
rise to the withholding requirement provided that any applicable
requirements under Section 16 of the Exchange Act are satisfied. The
obligations of the Company under this Plan shall be conditional on such
payment or arrangements, and the Company and Company Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from
any payment otherwise due to the Participant. If the Participant disposes
of shares of Common Stock acquired pursuant to an Incentive Stock Option in
any transaction considered to be a disqualifying transaction under the
Code, the Participant must give written notice of such transfer and the
Company shall have the right to deduct any taxes required by law to be
withheld from any amounts otherwise payable to the Participant. The
obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company and Company Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from
any payment otherwise due to the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
------------
Restricted Stock at the time of any dividend payment shall be permissible
only if sufficient shares of Common Stock are available under the Plan for
such reinvestment (taking into account then outstanding Options and other
Awards).
(e) Representation. The Committee shall establish such procedures as
--------------
it deems appropriate for a Participant to designate a Representative to
whom any amounts payable in the event of the Participant's death are to be
paid.
(f) Controlling Law. The Plan and all Awards made and actions taken
---------------
thereunder shall be governed by and construed in accordance with the laws
of the State of Illinois (other than its law respecting choice of law)
except to the extent the general corporation law of the State of Delaware
or Federal law would be applicable. The Plan shall be construed to comply
with all applicable law and to avoid liability to the Company, a Company
Affiliate or a Participant, including, without limitation, liability under
Section 16(b) of the Exchange Act.
(g) Offset. Any amounts owed to the Company or a Company Affiliate by
------
the Participant of whatever nature may be offset by the Company from the
value of any shares of Common Stock, cash or other thing of value under
this Plan or an Agreement to be transferred to the Participant, and no
shares of Common Stock, cash or other thing of value under this Plan or an
Agreement shall be transferred unless and until all disputes between the
Company and the Participant have been fully and finally resolved and the
Participant has waived all claims to such against the Company or a Company
Affiliate.
(h) Fail Safe. With respect to persons subject to Section 16 of the
---------
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3), as applicable. To
the
-21-
<PAGE>
extent any provision of the Plan or action by the Committee fails to so
comply,it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated
herein, such provision (other than one relating to eligibility requirements
or the price and amount of Awards) shall be deemed to be incorporated by
reference into the Plan with respect to Participants subject to Section 16.
(i) Right to Capitalize. The grant of an Award shall in no way affect
-------------------
the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate,
dissolve, liquidate, sell or transfer all or any part of its business or
assets.
10.6 Mitigation of Excise Tax. Subject to any agreement between the
------------------------
Participant and the Company or a Company Affiliate, if any payment or right
accruing to a Participant under this Plan (without the application of this
Section 10.6), either alone or together with other payments or rights accruing
to the Participant from the Company or a Company Affiliate ("Total Payments"),
would constitute a "parachute payment" (as defined in Section 280G of the Code
and regulations thereunder), such payment or right shall be reduced to the
largest amount or greatest right that will result in no portion of the amount
payable or right accruing under the Plan being subject to an excise tax under
Section 4999 of the Code or being disallowed as a deduction under Section 280G
of the Code. The determination of whether any reduction in the rights or
payments under this Plan is to apply shall be made by the Committee in good
faith after consultation with the Participant, and such determination shall be
conclusive and binding on the Participant. The Participant shall cooperate in
good faith with the Committee in making such determination and providing the
necessary information for this purpose. The foregoing provisions of this
Section 10.6 shall apply with respect to any person only if, after reduction for
any applicable Federal excise tax imposed by Section 4999 of the Code and
Federal income tax imposed by the Code, the Total Payments accruing to such
person would be less than the amount of the Total Payments as reduced, if
applicable, under the foregoing provisions of the Plan and after reduction for
only Federal income taxes.
10.7 Rights with Respect to Continuance of Employment. Nothing contained
------------------------------------------------
herein shall be deemed to alter the relationship between the Company or a
Company Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or a Company Affiliate if there is a written
contract regarding such relationship. Nothing contained herein shall be
construed to constitute a contract of employment between the Company or a
Company Affiliate and a Participant. The Company or a Company Affiliate and
each of the Participants continue to have the right to terminate the employment
or service relationship at any time for any reason, except as provided in a
written contract. The Company or a Company Affiliate shall have no obligation
to retain the Participant in its employ or service as a result of this Plan.
There shall be no inference as to the length of employment or service hereby,
and the Company or a Company Affiliate reserves the same rights to terminate the
-22-
<PAGE>
Participant's employment or service as existed prior to the individual's
becoming a Participant in this Plan.
10.8 Awards in Substitution for Awards Granted by Other Corporations.
---------------------------------------------------------------
Awards (including cash in respect of fractional shares) may be granted under the
Plan from time to time in substitution for awards held by employees, directors
or service providers of other entities who are about to become officers,
directors or employees of the Company or a Company Affiliate.
10.9 Procedure for Adoption. Any Company Affiliate may by resolution of
----------------------
such Company Affiliate's board of directors, with the consent of the Board of
Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution.
10.10 Procedure for Withdrawal. Any Company Affiliate which has adopted
------------------------
the Plan may, by resolution of the board of directors of such Company Affiliate,
with the consent of the Board of Directors and subject to such conditions as may
be imposed by the Board of Directors, terminate its adoption of the Plan.
10.11 Delay. If at the time a Participant incurs a Termination of
-----
Employment (other than due to Cause) or if at the time of a Sale of the Company,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, whichever is shorter. The Company shall have the right to suspend or
delay any time period described in the Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, a Company Affiliate or a stockholder
of the Company until such time as the action required or permitted shall not
constitute a violation of law or result in liability to the Company, a Company
Affiliate or a stockholder of the Company. The Committee shall have the
discretion to suspend the application of the provisions of the Plan required
solely to comply with Rule 16b-3 if the Committee shall determine that Rule 16b-
3 does not apply to the Plan.
10.12 Headings. The headings contained in this Plan are for reference
--------
purposes only and shall not affect the meaning or interpretation of this Plan.
Except as otherwise indicated by the context, words in the masculine gender used
in the Plan include the feminine gender, the singular shall indicate the plural,
and the plural shall include the singular.
10.13 Severability. If any provision of this Plan shall for any reason be
------------
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
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<PAGE>
10.14 Successors and Assigns. This Plan shall inure to the benefit of and
----------------------
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
10.15 Entire Agreement. This Plan and the Agreement constitute the entire
----------------
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
-24-
<PAGE>
EXHIBIT 10.5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
----------------------------------
PEAK LIQUIDATING, L.L.C.
----------------------------------
OPERATING AGREEMENT
DATED AS OF NOVEMBER 30, 1997
THE INTERESTS REPRESENTED BY THIS OPERATING AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR UNDER ANY OTHER APPLICABLE
SECURITIES LAWS. SUCH INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE
DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS
OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS
ON TRANSFERABILITY SET FORTH HEREIN.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I ORGANIZATIONAL MATTERS....................................... 1
SECTION 1.1. Organization....................................... 1
SECTION 1.2. Name............................................... 1
SECTION 1.3. Purpose............................................ 1
SECTION 1.4. Names and Addresses of Members and Interest
Holders............................................ 1
SECTION 1.5. Term............................................... 1
SECTION 1.6. Principal Place of Business; Registered Agent...... 1
ARTICLE II DEFINITIONS.................................................. 2
ARTICLE III CAPITAL AND CONTRIBUTIONS.................................... 6
SECTION 3.1. Initial Capital Contributions...................... 6
SECTION 3.2. Additional Capital Contributions................... 6
SECTION 3.3. Capital Accounts; Return of Capital................ 7
SECTION 3.4. Loans from Interest Holders........................ 7
ARTICLE IV DISTRIBUTIONS................................................ 7
SECTION 4.1. Distributions Generally............................ 7
SECTION 4.2. Distributions from Operations or Upon Liquidation.. 7
SECTION 4.3. Distributions with Respect to Tax.................. 8
SECTION 4.4. In-Kind Distributions.............................. 9
SECTION 4.5. Appraisal Process.................................. 10
ARTICLE V ALLOCATIONS OF NET INCOME AND NET LOSSES..................... 11
SECTION 5.1. Allocations........................................ 11
SECTION 5.2. Special Allocations................................ 12
SECTION 5.3. Curative Allocations............................... 13
ARTICLE VI MANAGEMENT POWER, RIGHTS AND DUTIES.......................... 14
SECTION 6.1. Management......................................... 14
(a) In General............................................... 14
(b) Authority of Members..................................... 14
(c) Officers................................................. 14
SECTION 6.2. Meetings of and Voting by Members.................. 14
(a) Meetings of Members...................................... 14
(b) Voting In General........................................ 15
(c) Morris' Veto Rights...................................... 15
(d) Voting Rights for Special Matters........................ 15
(e) Further Actions.......................................... 17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 6.3. Personal Services; Compensation..................... 17
SECTION 6.4. Other Business Interests............................ 17
SECTION 6.5. Liability and Indemnification....................... 17
ARTICLE VII TRANSFER OF INTERESTS; ADMISSION OF MEMBERS................... 18
SECTION 7.1. Transfer Restrictions............................... 18
SECTION 7.2. Acceptance of Transfer.............................. 18
SECTION 7.3. Involuntary Withdrawal.............................. 19
ARTICLE VIII DISSOLUTION OF THE COMPANY.................................... 19
SECTION 8.1. Events of Dissolution............................... 19
SECTION 8.2. Allocation and Distribution of Net Assets........... 19
SECTION 8.3. Procedure for Winding Up and Dissolution............ 20
SECTION 8.4. Filing of Certificate of Cancellation............... 20
ARTICLE IX BOOKS AND RECORDS............................................. 20
SECTION 9.1. Bank Accounts....................................... 20
SECTION 9.2. Books and Records................................... 20
SECTION 9.3. Annual Accounting Period............................ 21
SECTION 9.4. Reports............................................. 21
SECTION 9.5. Tax Matters Person.................................. 21
SECTION 9.6. Tax Elections....................................... 21
ARTICLE X AMENDMENT OF AGREEMENT........................................ 22
SECTION 10.1. Amendment........................................... 22
SECTION 10.2. Certificate of Formation............................ 22
ARTICLE XI MISCELLANEOUS................................................. 22
SECTION 11.1. Assurances.......................................... 22
SECTION 11.2. Notifications....................................... 22
SECTION 11.3. Specific Performance................................ 23
SECTION 11.4. Applicable Law...................................... 23
SECTION 11.5. Successors and Assigns.............................. 23
SECTION 11.6. Gender.............................................. 23
SECTION 11.7. Headings............................................ 23
SECTION 11.8. Severability........................................ 23
SECTION 11.9. Counterparts........................................ 23
SECTION 11.10. Entire Agreement.................................... 23
</TABLE>
ii
<PAGE>
OPERATING AGREEMENT
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Act"....................................................... Section 1.1
"Additional Capital Account Deficit"........................ Article II
"Additional Capital Contributions".......................... Article II
"Adjusted Capital Account Deficit".......................... Article II
"Affiliate"................................................. Article II
"Agreement"................................................. Article II
"Approved Transferee"....................................... Section 7.1
"Book Value"................................................ Article II
"Capital Account"........................................... Section 3.3
"Class A Interest".......................................... Article II
"Class B Interest".......................................... Article II
"Class C Interest".......................................... Article II
"Class D Interest".......................................... Article II
"Class E Interest".......................................... Article II
"Class F Interest".......................................... Article II
"Code"...................................................... Article II
"Company"................................................... Section 1.1
"Everest"................................................... Article II
"First Appraisal"........................................... Section 4.5
"Indemnified Parties"....................................... Section 7.6
"Independent Third Party"................................... Article II
"In-Kind Distribution"...................................... Section 4.4
"Initial Capital Contributions"............................. Article II
"Interest".................................................. Article II
"Interest Holder"........................................... Article II
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Involuntary Withdrawal".................................... Article II
"Majority-in-Interest"...................................... Article II
"Member".................................................... Article II
"Minimum Gain".............................................. Article II
"Minority".................................................. Section 4.5
"misallocated item"......................................... Section 5.4
"Net Income"................................................ Article II
"Net Losses"................................................ Article II
"Old Peak".................................................. Section 3.1
"Operating Company"......................................... Article II
"Percentage"................................................ Article II
"Permitted Transferee"...................................... Article II
"pro rata".................................................. Article II
"Public Offering"........................................... Article II
"Sale of the Company"....................................... Article II
"Sale of an Operating Company".............................. Article II
"Special Matters"........................................... Section 6.2(d)
"Subsidiary"................................................ Article II
"Transfer".................................................. Article II
"unallocated item".......................................... Section 5.4
</TABLE>
iv
<PAGE>
OPERATING AGREEMENT
OF
PEAK LIQUIDATING, L.L.C.,
A LIMITED LIABILITY COMPANY
This OPERATING AGREEMENT is entered into as of the 30th day of November,
1997, by and among those persons who from time to time execute, as members,
counterparts of this Agreement (the "Members").
ARTICLE I
---------
ORGANIZATIONAL MATTERS
----------------------
SECTION 1.1. Organization. The parties hereby organize a limited
----------- ------------
liability company (the "Company") under the provisions of the Delaware Limited
Liability Company Act (the "Act") and the provisions of this Agreement and, for
that purpose, shall cause a Certificate of Formation to be executed and filed
with the Delaware Secretary of State.
SECTION 1.2. Name. The name of the Company shall be "PEAK LIQUIDATING,
----------- ----
L.L.C." The Company may do business under that name and under any other name or
names which the Members select.
SECTION 1.3. Purpose. The purpose of the Company shall be to enable the
----------- -------
Members to liquidate and distribute at appropriate times the Company's assets on
an orderly basis, and generally in connection with such liquidation and
distribution to engage in any lawful act or activity for which a company may be
organized under the Act.
SECTION 1.4. Names and Addresses of Members and Interest Holders. The
----------- ---------------------------------------------------
names and business addresses of the Members and Interest Holders are as set
forth in Schedule A attached hereto, as Schedule A may be amended from time to
---------- ----------
time.
SECTION 1.5. Term. The term of the Company shall begin upon the filing
----------- ----
of the Certificate of Formation with the Delaware Secretary of State and shall
continue until December 31, 2045, unless sooner terminated as provided in this
Agreement.
SECTION 1.6. Principal Place of Business; Registered Agent. The
----------- ---------------------------------------------
principal place of business of the Company initially shall be 101 N. Scoville,
Oak Park, Illinois 60302. The address of the Company's registered office and
the address of its registered agent in the State of Delaware is 1209 Orange
Street, Wilmington, Delaware 19801. The name of the Company's registered agent
at such address is the Corporation Trust Company. The Members may change the
principal place of business of the Company or its registered agent at any time
and from time to time. The Members may establish additional places of business
for the Company.
<PAGE>
ARTICLE II
----------
DEFINITIONS
-----------
All terms not otherwise defined in this Agreement shall have the meanings
ascribed to such terms in this ARTICLE II.
"Additional Capital Contributions" means with respect to any Interest
Holder, the aggregate capital contributions of such Interest Holder to the
Company in excess of such Interest Holder's Initial Capital Contribution.
"Adjusted Capital Account Deficit" means with respect to any Capital
Account as of the end of any taxable year of the Company, the amount by which
the balance in such Capital Account is less than zero. For this purpose, such
Person's Capital Account balance shall be:
(i) reduced for any items described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6), and
(ii) increased for any amount such Person is obligated to
contribute or is treated as being so obligated to contribute to the
Company pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c)
(relating to partner liabilities to a partnership) or 1.704-2(g)(1)
and 1.704-2(i) (relating to minimum gain).
"Affiliate" with respect to the Company shall mean: (i) any corporation,
partnership, trust or other entity or person controlling, controlled by or under
common control with the Company (including any partnership in which the Company
serves as a general partner or any corporation in which the Company owns greater
than 5% of the issued and outstanding voting capital stock); and (ii) any
officer, director, trustee, general partner or employee of any corporation,
partnership, trust or other entity so controlling, controlled by or under common
control with the Company.
"Agreement" means this Operating Agreement, as amended, modified or
supplemented from time to time.
"Book Value" means, with respect to any Company property, the Company's
adjusted basis for federal income tax purposes, adjusted from time to time to
reflect the adjustments required or permitted by Treasury Regulation Section
1.704-1(b)(2)(iv) (d) - (g).
"Class A Interest" means an Interest designated as a Class A Interest and
having such rights, preferences and obligations as specified with respect to
Class A Interests in this Agreement.
"Class B Interest" means a Class B-1 Interest or Class B-2 Interest without
regard to class.
2
<PAGE>
"Class B-1 Interest" means an Interest designated as a Class B-1 Interest
and having such rights, preferences and obligations as specified with respect to
Class B-1 Interests in this Agreement.
"Class B-2 Interest" means an Interest designated as a Class B-2 Interest
and having such rights, preferences and obligations as specified with respect to
Class B-2 Interests in this Agreement.
"Class C Interest" means an Interest designated as a Class C Interest and
having such rights, preferences and obligations as specified with respect to
Class C Interests in this Agreement.
"Class D Interest" means an Interest designated as a Class D Interest and
having such rights, preferences and obligations as specified with respect to
Class D Interests in this Agreement.
"Class E Interest" means an Interest designated as a Class E Interest and
having such rights, preferences and obligations as specified with respect to
Class E Interests in this Agreement.
"Class F Interest" means an Interest designated as a Class F Interest and
having such rights, preferences and obligations as specified with respect to
Class F Interests in this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Everest" means Everest Healthcare Services Corporation, a Delaware
corporation.
"Everest Holdings" means Everest Healthcare II, Inc., a Delaware
corporation.
"Independent Third Party" means any Person who, immediately prior to the
contemplated transaction, does not own, directly or indirectly, in excess of 1%
of the Company's Interests on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 1% owner of the Company's
Interests and who is not the spouse or descendent of any such 1% owner of the
Company's Interests.
"Initial Capital Contributions" means the property initially contributed to
the Company by the Interest Holders upon the establishment of the Company.
"Interest" means an interest in the Company's profits, losses,
distributions and other items described herein; provided that any class of
-------- ----
Interests issued shall have such designations, preferences or special rights as
set forth in this Agreement and the Company interest represented
3
<PAGE>
by such class of Interests shall be determined in accordance with such
designations, preferences or special rights.
"Interest Holder" means any Person who holds an Interest, whether as a
Member or as an unadmitted assignee of a Member. For purposes of the Act, any
Interest Holder shall be deemed a member under the Act, but an Interest Holder
who is not also a Member under this Agreement shall have no right to participate
in the management of, and vote on matters coming before the Members of the
Company as provided under this Agreement or the Act.
"Involuntary Withdrawal" means, with respect to any Member, the occurrence
of any of the following events:
(i) the Member (A) makes an assignment for the benefit of
creditors; (B) files a voluntary petition of bankruptcy; (C) is
adjudged bankrupt or insolvent or there is entered against the Member
an order for relief in any bankruptcy or insolvency proceeding; (D)
seeks, consents to, or acquiesces in the appointment of a trustee for,
receiver for, or liquidation of the Member or of all or any
substantial part of the Member's properties; (E) files an answer or
other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any proceeding
described in subsections (A) through (D); or
(ii) if the Member is an individual, the Member's death or
adjudication by a court of competent jurisdiction as incompetent to
manage the Member's personal affairs or property; or
(iii) if the Member is acting as a Member by virtue of being
a trustee of a Revocable Trust as provided in SECTION 7.2, the failure
of such trust to maintain its status as a Revocable Trust, the
termination of the Revocable Trust (unless, as a part of the
termination of the Revocable Trust, the property of the Revocable
Trust is assigned to the Member) or the discontinuation of the
Member's position as trustee of such Revocable Trust.
"Majority-in-Interest" means those Members whose aggregate Class A
Interests, Class B Interests and Class C Interests exceed 50% of all Members'
Class A Interests, Class B Interests and Class C Interests.
"Member" means each Person signing this Agreement and designated as a
Member on Schedule A attached hereto and any Person who subsequently is admitted
----------
as a Member of the Company.
"Minimum Gain" means the partnership minimum gain determined pursuant to
Treasury Regulation Section 1.704-2(d).
4
<PAGE>
"Net Income" and "Net Losses", respectively, means the income or losses of
the Company as determined in accordance with the method of accounting followed
by the Company for Federal income tax purposes, including, for all purposes, any
income exempt from tax and any expenditures of the Company which are described
in Section 705(a)(2)(B) of the Code.
"Operating Company" means Everest or Everest Holdings, any successor to the
business of Everest or Everest Holdings, and any other Subsidiary of Everest
Holdings or Everest.
"Original Members" shall mean the following natural persons who were the
Original Members of the Company: Arthur Morris, Paul Balter, Michael Carbon,
George Dunea, Ashutosh Gupta, Douglas Mufuka, and Craig W. Moore.
"Percentage" means as to each Interest Holder (or Interest Holder holding a
specific class of Interests regarding a vote of such class), a percentage equal
to a fraction, the numerator of which is the number of Interests (or class of
Interests) owned by such Interest Holder and the denominator of which is the
aggregate number of Interests owned by all Interest Holders (or specific class
of Interests), as set forth on Schedule A hereto.
----------
"Permitted Transferee" means (i) an Interest Holder's spouse, parent,
descendant, or (ii) a trust or family partnership solely for the benefit of such
Interest Holder, the Interest Holder's spouse, parent and/or descendants, (iii)
a Revocable Trust, or (iv) such Interest Holder's personal representative for
purposes of administration of such Interest Holder's estate or upon such
Interest Holder's incompetency for the purpose of the protection or management
of such Person's assets; provided, however that if any proposed transferee is
less than 21 years of age at the time of a proposed Transfer to such Person,
then such transfer may only be made to a trustee of a valid trust for the
benefit of such Person, which trust shall not terminate prior to the beneficiary
(or beneficiaries) thereof attaining the age of 21.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or governmental entity, or any
department, agency or political subdivision thereof.
"pro rata" among any specified group or class of Interest Holders means in
--- ----
proportion to the Percentages held by such Interest Holders of a specified group
or class of Interests.
"Public Offering" means any offering by the Company or an Operating Company
of its equity securities, or equity securities into which such Company or
Operating Company securities have been converted or exchanged, to the public
pursuant to an effective registration statement under the Securities Act of
1933, as then in effect, or any comparable statement under any similar federal
statute then in force.
"Revocable Trust" means, with respect to an Original Member, a trust
created during his lifetime which (i) is amendable and revocable solely by such
Original Member, and (ii) in which the Original Member is the sole trustee and
sole beneficiary.
5
<PAGE>
"Sale of an Operating Company" means the sale of an Operating Company to an
Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire, in any transaction or series of
related transactions, (i) all or any part of the equity securities of an
Operating Company (whether by a Public Offering, merger, consolidation or sale,
exchange or transfer of such Operating Company's capital stock) or (ii) assets
of an Operating Company which have a fair market value of over $500,000 in any
twelve (12) month period and were sold other than in the ordinary course of
business.
"Sale of the Company" means the sale of the Company to an Independent Third
Party or affiliated group of Independent Third Parties pursuant to which such
party or parties acquire, in any transaction or series of related transactions,
(i) all or any part of the equity securities of the Company other than a sale or
transfer to a Person who at such time is a Member (whether by a Public Offering,
merger, consolidation or sale, exchange or transfer of such equity securities)
or (ii) assets of the Company which have a fair market value of over $500,000 in
any twelve (12) month period and were sold other than in the ordinary course of
business.
"Subsidiary" means with respect to Everest Holding or Everest, at the time
as of which any determination is being made, any entity controlled by Everest
Holdings or Everest either directly or through one or more Subsidiaries.
"Transfer" means any sale, disposition, assignment, pledge, hypothecation,
encumbrance or other transfer of any Interest in the Company.
ARTICLE III
-----------
CAPITAL AND CONTRIBUTIONS
-------------------------
SECTION 3.1. Initial Capital Contributions. Each of the Members is
----------- -----------------------------
contributing contemporaneously with the execution hereof, or has previously
contributed, to the capital of the Company his currently owned interests in Peak
Healthcare, L.L.C., a Delaware limited liability company ("Old Peak") in the
amounts set forth opposite each Member's name on Schedule A, in exchange for the
----------
Interests specified thereon; such Interests constituting an equivalent class,
number and percentage ownership of Interests in the Company as was held by such
Members in Old Peak immediately prior to the contribution of such interests to
the Company.
SECTION 3.2. Additional Capital Contributions. If at any time the
----------- --------------------------------
Members deem it to be in the best interest of the Company to raise additional
equity capital to properly carry out the Company's business and operations, the
Members shall have the right to raise additional equity capital for infusion
into the Company by causing the Company to issue Interests to one or more
Persons, and to admit such Persons as additional Members or Interest Holders;
provided, however, prior to issuing any Interests ranking senior as to, or pari
----
passu with, any Interest with regard to the right to receive distributions at
- -----
any time (upon liquidation or otherwise) or participate in profits pursuant
hereto, the written consent of at least two-thirds of
6
<PAGE>
the Interest Holders who own such affected Interests must first be obtained.
All such contributions shall be reflected on Schedule A, as amended by the
----------
Members pursuant to SECTION 10.1 below.
SECTION 3.3. Capital Accounts; Return of Capital. The Company shall
----------- -----------------------------------
maintain a separate capital account for each Interest Holder ("Capital
Account"). Each such Capital Account shall be equal to the tax basis of the
property contributed by each Interest Holder to the Company plus such Interest
Holder's share of Company Net Income minus the sum of such Interest Holder's
share of Company Net Losses and such Interest Holder's share of Company
distributions previously made. The Interest Holders agree to furnish the
Company with the tax basis of any property contributed to the Company.
SECTION 3.4. Loans from Interest Holders. Loans by Interest Holders to
----------- ---------------------------
the Company shall not be considered contributions to the capital of the Company
hereunder. If any Interest Holder shall advance funds to the Company in excess
of the amounts required hereunder to be contributed by him to the capital of the
Company, and not in consideration for additional Interests, the making of such
advances shall not result in any increase in the amount of the Capital Account
of such Interest Holder. The amount of any such advances shall be a debt of the
Company to such Interest Holder and shall be payable or collectible in
accordance with the terms and conditions upon which such advances are made.
ARTICLE IV
----------
DISTRIBUTIONS
-------------
SECTION 4.1. Distributions Generally. Subject to the provisions of this
----------- -----------------------
ARTICLE IV, the Members shall have the right to determine whether, and to what
extent, distributions shall be made by the Company to the Interest Holders. All
such distributions shall be made pursuant to this ARTICLE IV. No Interest
Holder shall be entitled to a return of its contributions to the capital of the
Company except in accordance with the provisions of this Agreement and, in any
event, only to the extent that cash or other property of the Company is
available therefor. Interest Holders shall not be paid interest on their
capital contributions to the Company. If an Interest Holder is entitled to
receive a return of a capital contribution, the Interest Holder shall not have
the right to receive anything but cash in return of such Interest Holder's
capital contribution.
SECTION 4.2. Distributions from Operations or Upon Liquidation. When and
----------- -------------------------------------------------
to the extent the Members determine in their sole discretion that, after
providing for the Company's present and anticipated debts and obligations,
capital needs, expenses and reasonable reserves for contingencies, it is
appropriate and in the best interests of the Company to make distributions from
operations, upon consummation of or in connection with a Sale of the Company,
Sale of an Operating Company or in connection with the voluntary or involuntary
liquidation, dissolution
7
<PAGE>
or winding up of the Company or otherwise, such distributions shall be made to
the Interest Holders as follows, as of the day of such determination by the
Members:
(a) first, one hundred percent (100%) to the holders of Class A
Interests pro rata, until the holders of Class A Interests have received
--------
distributions pursuant to this SECTION 4.2(A) which in the aggregate equal
$12,791,939;
(b) second, one hundred percent (100%) to the holders of Class B-1
Interests, pro rata, until the holders of Class B-1 Interests have received
--------
distributions pursuant to this SECTION 4.2(B) which in the aggregate equal
$2,809,331;
(c) third, one hundred percent (100%) to the holders of Class B-2
Interests, pro rata, until the holders of Class B-2 Interests have received
--------
distributions pursuant to this SECTION 4.2(C) which in the aggregate equal
$3,729,291;
(d) fourth, one hundred percent (100%) to the holders of Class C
Interests, pro rata, until the holders of Class C Interests have received
--- ----
distributions pursuant to this SECTION 4.2(D) which in the aggregate equal
$43,142,803;
(e) fifth, one hundred percent (100%) to the holders of Class D
Interests, pro rata, until holders of Class D Interests have received
--- ----
distributions pursuant to this SECTION 4.2(E) which in the aggregate equal
$21,626,250;
(f) sixth, one hundred percent (100%) to the holders of Class E
Interests, pro rata, until the holders of Class E Interests have received
--- ----
distributions pursuant to SECTION 4.2(F) which in the aggregate equal
$86,505,000; and
(g) thereafter, one hundred percent (100%) to the holders of the Class
F Interests, pro rata.
--- ----
The Members acknowledge and agree that immediately after the initial
contribution to the Company of the interests of Old Peak, the Company is
contributing all the interests of Old Peak to Everest Holdings in exchange for
shares of stock in Everest Holdings, and is distributing all but 1,000,000 of
such shares contemporaneously to the Members in accordance with this SECTION
4.2. Notwithstanding the provisions of SECTIONS 4.2(A) - 4.2(G) to the
contrary, the amounts of such distributions shall be reduced by an equivalent
amount of any distributions previously made to the Members as Members of Old
Peak under the corresponding provisions of the Old Peak Operating Agreement.
SECTION 4.3. Distributions with Respect to Tax. To the extent the
----------- ---------------------------------
Company has cash available for distributions, the Company shall distribute
sufficient cash to enable the Interest Holders to pay Federal and state income
taxes arising from Company Net Income allocated to the Interest Holders during a
taxable year, in an amount equal to the net Company taxable income allocated to
each Interest Holder for such year (less the aggregate amount of Net Losses
8
<PAGE>
over the aggregate amount of Net Income for all prior fiscal years allocated to
such Interest Holder) times the highest marginal Federal and applicable state
income tax rates for such year applicable to any Interest Holder (currently
agreed to be 42.6% for Illinois residents). Such distribution shall be paid
with respect to a taxable year of the Company within ninety (90) days after the
end of such taxable year, or at such earlier times and in such amounts as
determined in good faith by the Members to be appropriate to enable the Members
to pay estimated income tax liabilities. Distributions made pursuant to SECTION
4.2 shall serve to discharge the Company's obligations under this SECTION 4.3
and distributions required by this SECTION 4.3 shall reduce amounts
distributable pursuant to SECTIONS 4.2(B) - 4.2(G) (in order), such that the
aggregate amounts distributable to each of the Interest Holders pursuant to
SECTIONS 4.2 and 4.3 shall be equal to the amount that would have been
distributable to each such Interest Holder under SECTION 4.2, as if SECTION 4.3
was not in effect. Amounts distributable to any Interest Holder pursuant to
SECTIONS 4.2(B) - 4.2(F) shall only be intended to allow the Members to pay any
taxes resulting from any allocation of Net Income that has or will result in
distributions under SECTIONS 4.2 (B) - 4.2 (F) and shall not exceed the
percentage of total distributions to such Interest Holder pursuant to such
Sections which equals the highest marginal Federal and applicable state income
tax rates effective at such time applicable to any Interest Holder. No
distributions made pursuant to this SECTION 4.3 are to be made if the effect of
such distribution would be to alter the total amount of distributions reasonably
anticipated to be otherwise distributed to any Member over the life of the
Company pursuant to SECTION 4.2 in the absence of such tax distributions
pursuant to this SECTION 4.3. If, at the time of liquidation of the Company, as
a result of this SECTION 4.3, any Member has received distributions over the
life of the Company in excess of the amount that such Member would have
otherwise received under SECTION 4.2, ARTICLE VIII, or ARTICLE XI, then such
Member shall promptly contribute such excess amount to the Company to be
distributed in accordance with SECTION 8.3.
SECTION 4.4. In-Kind Distributions. At any time, and from time to time,
----------- ---------------------
in the sole discretion of the Members, the Company may distribute to its
Interest Holders securities or other property held by the Company (an "In-Kind
Distribution"); provided, that any In-Kind Distribution other than a
distribution of marketable securities shall not satisfy any of the Company's
obligations pursuant to SECTION 4.3 above and that such In-Kind Distribution
will not be made if it would result in immediate adverse, material federal
income tax consequences to any Member. To the extent the Members determine in
their sole discretion to make an In-Kind Distribution, the property will be
distributed among the Interest Holders in the same proportions as cash equal to
the fair market value of such property (as determined in the reasonable good
faith judgment of the Members) would be distributed among the Interest Holders
pursuant to SECTION 4.2 above. Any Interest Holder receiving any In-Kind
Distributions valued in excess of $50,000 during any six month period other than
the distributions made immediately before or after the capitalization of the
Company may object to the Members' determination of fair market value pursuant
to the appraisal process described in SECTION 4.5 below. The Members may
require as a condition of distribution of securities hereunder that the Interest
Holders execute and deliver such documents as the Members may deem necessary or
appropriate to ensure compliance with all federal and state securities laws
which apply to such distribution and
9
<PAGE>
any further transfer of the distributed securities, and may appropriately legend
the certificates which represent such securities to reflect any restriction on
transfer with respect to such laws.
SECTION 4.5. Appraisal Process. (a) If an appraisal process is (i)
----------- -----------------
requested by an Interest Holder pursuant to SECTION 4.4, or (ii) required by
SECTIONS 6.2(C), or 8.1, the fair market value shall be the value agreed upon by
two qualified independent appraisers, one selected by the Members and one
selected by a majority of the Minority (as defined). The "Minority" shall mean
(i) for an appraisal pursuant to SECTION 4.4, the objecting Interest Holder(s),
(ii) for an appraisal required by SECTION 6.2(C), the Member(s) who requested
the appraisal, or (iii) for an appraisal required by SECTION 8.1, the Member(s)
whose bona fide determination of the fair market value of the Company's net
assets differs most from the majority of the Members' determination as described
in SECTION 8.1(D). In determining the fair market value of the Company's assets
which are equity securities, the appraisers shall apply discounts for lack of
marketability or minority ownership, if appropriate, but shall not apply any
premiums for controlling ownership. The appraisers shall also follow the
instructions set forth on Schedule B attached hereto. If the two selected
----------
appraisers cannot agree upon a value, and the lower of the two appraisers'
valuations does not vary from the higher valuation by greater than 10% of the
higher valuation, then the average of the two valuations shall be the fair
market value. If the two appraisers have not agreed upon a value within 90 days
after the selection of the two appraisers, and if the lower valuation varies
from the higher valuation by greater than 10% of the higher valuation, a third
independent appraiser shall be chosen within ten days thereafter by the mutual
agreement of the first two appraisers. In such case, the fair market value
shall equal the average of the three appraisers' determinations, except if one
appraisal (the "First Appraisal") varies from the middle appraisal by more than
twice the variance of the third appraisal from the middle appraisal, then the
First Appraisal will not be included in the appraisals to be averaged. The cost
of the appraiser selected by the Members shall be borne by the Company and the
other costs of appraisal shall be borne by the Minority, except the Company
shall bear all appraisal costs under the following circumstances:
(i) If the value determined by the appraisers selected by the
Minority is greater than the value initially determined by the Members
(meaning the Minority requested the appraisal because he or they
believed the Members initial determination of value was too low) and
---
the final fair market value is greater than 115% of the value
initially determined by the Members, or
(ii) If the value determined by the appraisers selected by the
Minority is less than the value initially determined by the Members
(meaning the Minority requested the appraisal because he or they
believed the Members initial determination of value was too high) and
---
the final fair market value is less than 85% of the value initially
determined by the Members.
(b) For purposes of determining the valuations pursuant to SECTIONS 6.2(C)
and 8.1, it shall be assumed (whether or not the appraisal process is used) that
the Company has retained all the assets which were distributed to its Interest
Holders immediately before or immediately
10
<PAGE>
after its organization, namely the accounts receivable from Everest or its
Subsidiaries, the proceeds from the sale of Continental Health Care, Ltd.
and ________ shares of common stock of Everest Holdings.
ARTICLE V
---------
ALLOCATIONS OF NET INCOME AND NET LOSSES
----------------------------------------
SECTION 5.1. Allocations.
----------- -----------
(a) Except as otherwise provided in SECTION 5.2, Net Income and Net
Losses for any fiscal year shall be allocated among the Interest Holders in
such manner that, as of the end of such Fiscal Year, the sum of (i) the
Capital Account of each Interest Holder, (ii) such Interest Holder's share
of Minimum Gain (as determined according to Treasury Regulation Section
1.704-2(g)), and (iii) such Interest Holder's partner nonrecourse debt
minimum gain (as defined in Treasury Regulation Section 1.704-2(i)(3))
shall be equal to the respective net amounts, positive or negative, which
would be distributed to them or for which they would be liable to the
Company under this Agreement, determined as if the Company were to (i)
liquidate the assets of the Company for an amount equal to their tax basis,
and (ii) distribute the proceeds of liquidation pursuant to SECTION 4.2.
(b) For purposes of this SECTION 5.1, if Net Income exceeds Net
Losses for a fiscal year, (i) Net Losses shall first be allocated to
Interest Holders whose Capital Accounts are reduced as a result of the
allocations under SECTION 5.1(A), in an amount equal to the amount by which
such Capital Accounts have been reduced, and (ii) Net Income and any
remaining Net Losses shall be allocated to Interest Holders whose Capital
Accounts are increased as a result of the allocations under SECTION 5.1(A),
in the proportion that the amount of the increase in such Interest Holder's
Capital Accounts as a result of the allocations under SECTION 5.1(A) bears
to the aggregate amount of the increase in all such Interest Holders'
Capital Accounts as a result of the allocations under SECTION 5.1(A).
(c) For purposes of this SECTION 5.1, if Net Losses exceed Net Income
for a fiscal year, (i) Net Income shall first be allocated to Interest
Holders whose Capital Accounts are increased as a result of the allocations
under SECTION 5.1(A), in an amount equal to the amount by which such
Capital Accounts have been increased, and (ii) Net Losses and any remaining
Net Income shall be allocated to Interest Holders whose Capital Accounts
are reduced as a result of the allocations under SECTION 5.1(A), in the
proportion that the amount of the reduction in such Interest Holder's
Capital Accounts as a result of the allocations under SECTION 5.1(A) bears
to the aggregate amount of the reduction in all such Interest Holders'
Capital Accounts as a result of the allocations under SECTION 5.2(A).
11
<PAGE>
SECTION 5.2. Special Allocations.
----------- -------------------
(a) Net Losses attributable to partner nonrecourse debt (as defined
in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the
manner required by Treasury Regulation Section 1.704-2(i). If there is a
net decrease during a taxable year in partner nonrecourse debt minimum gain
(as defined in Treasury Regulation Section 1.704-2(i)(3)), Net Income for
such taxable year (and, if necessary, for subsequent taxable years) shall
be allocated to the Interest Holders in the amounts and of such character
as determined according to Treasury Regulation Section 1.704-2(i)(4).
(b) Nonrecourse deductions (as determined under Treasury Regulation
Section 1.704-2(c)) shall be allocated among the Interest Holders according
to their relative Percentage of Class F Interests in the Company. Except
as otherwise provided in SECTION 5.2(A), if there is a net decrease in the
Minimum Gain during any taxable year, each Interest Holder shall be
allocated Net Income for such taxable year (and, if necessary, for
subsequent taxable years) in the amounts and of such character as
determined according to Treasury Regulation Section 1.704-2(f). This
SECTION 5.2(B) is intended to be a minimum gain chargeback provision that
complies with the requirements of Treasury Regulation Section 1.704-2(f),
and shall be interpreted in a manner consistent therewith.
(c) If, any Interest Holder who unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as
of the end of any taxable year, computed after the application of SECTIONS
5.1, 5.2(A) AND 5.2(B) but before the application of any other provision of
this ARTICLE V, then Net Income for such taxable year shall be allocated to
such Interest Holder in proportion to, and to the extent of, such Adjusted
Capital Account Deficit. This SECTION 5.2(C) is intended to be a qualified
income offset provision as described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.
(d) If, and to the extent that, any Interest Holder is deemed to
recognize any item of income, gain, loss, deduction or credit as a result
of any transaction between such Interest Holder and the Company pursuant to
Code Sections 1272-1274, 7872, 483, 482 or any similar provision now or
hereafter in effect, and the Members determine that any corresponding
profit or loss of the Company should be allocated to the Interest Holder
who recognized such item in order to reflect the Interest Holders' economic
interests in the Company, then the Members may so allocate such profit or
loss.
(e) Notwithstanding SECTION 5.1 of this Agreement, if the Company
recognizes Net Income as a result of exercising stock options that the
Company holds in Everest or Everest Holdings and Craig Moore is (i)
employed by the Company, Everest, or Everest Holdings, or (ii) a Member of
the Company, then Craig Moore shall be specially allocated the Net Income
resulting from the exercise of such stock options to the extent
12
<PAGE>
that an allocation of Net Income to Craig Moore would result in Craig Moore
having a Capital Account, after such exercise, equal to the amount he would
receive on a liquidation of the Company in a disposition of all of its
assets at their fair market values. If the entire amount of Net Income
recognized as a result of exercising the options is not allocated to Craig
Moore pursuant to this Section 5.1(e), then such Net Income shall be
allocated to those Interest Holders who hold Class D, E or F Interests so
that their Capital Account related to such D, E, and F Interests equals the
amount they would receive on a liquidation of the Company in a disposition
of all of its assets at their fair market value. For purposes of this
SECTION 5.1(E), the Everest Holdings stock shall be deemed to be disposed
at a fair market value that reflects the Net Income realized by the Company
on the exercise of the Everest Holdings stock options.
(f) Notwithstanding SECTION 5.1 of this Agreement, if the Company
recognizes Net Income as a result of a taxable sale, or other disposition
of securities of an Operating Company (including, but not limited to
redemptions of Company interests in exchange for such securities) then such
Net Income shall be specially allocated to the Interest Holder who realizes
the cash or other proceeds of such taxable sale or other disposition of
such securities except to the extent that such special allocation would
increase the Interest Holder's Capital Account to an amount, in excess of
the amount distributed or distributable to such Interest Holder.
SECTION 5.3. Curative Allocations. If the Members determine, after
----------- --------------------
consultation with counsel experienced in income tax matters, that the allocation
of any item of Company income, gain, loss, deduction or credit is not specified
in this ARTICLE V (an "unallocated item"), or that the allocation of any item
----------------
of Company income, gain, loss, deduction or credit hereunder is clearly
inconsistent with the Interest Holders' economic interests in the Company
(determined by reference to the general principles of Treasury Regulation
Section 1.704-1(b) and the factors set forth in Treasury Regulation Section
1.704-1(b)(3)(ii)) (a "misallocated item"), then the Members may allocate such
-----------------
unallocated items, or reallocate such misallocated items, to reflect such
economic interests; provided that no such allocation will be made without the
-------- ----
prior consent of each Interest Holder which would be affected thereby (which
consent no such Interest Holder may unreasonably withhold).
SECTION 5.4 Intent of Allocation Provisions. The purpose of the tax
----------- --------------------------------
allocation provisions is to allocate taxable income earned by the Company to
those Interest Holders who will receive the economic benefit from the
realization of such income, or conversely, to allocate taxable losses to those
Interest Holders who will bear the burden of such losses. Thus, the taxable
income or taxable loss of the Company for any tax year is allocated to the
Interest Holders so that their respective capital accounts equal the amount of
cash or the fair market value of property that they would receive on the
liquidation of the Company. This method therefore allocates the income for a
year to the Interest Holder who has received or will receive the cash that has
been or should be produced by such income.
13
<PAGE>
ARTICLE VI
----------
MANAGEMENT POWER, RIGHTS AND DUTIES
-----------------------------------
SECTION 6.1. Management.
----------- ----------
(a) In General. The Company shall be managed by the Members. The
----------
day-to-day business of the Company shall be managed under the direction of
the Members.
(b) Authority of Members. Each Member is an agent of and has
--------------------
authority to bind the Company solely by virtue of being a Member. Any
Member who takes any action or binds the Company in violation of this
SECTION 6.2, however, shall be solely responsible for any loss and expense
incurred by the Company as a result of the unauthorized action and shall
indemnify and hold the Company harmless with respect to the loss or
expense.
(c) Officers. The officers of the Company shall be chosen by the
--------
Members and may include a chief executive officer, a president, one or more
vice presidents and a secretary and/or treasurer but shall exercise such
powers and perform such duties only of a ministerial nature on behalf of
the Members. Any number of offices may be held by the same person. The
Members may choose such other officers and agents as they shall deem
necessary who shall hold their offices for such terms and shall exercise
such powers and perform such duties only of a ministerial nature as shall
be determined from time to time by, and on behalf of the Members.
SECTION 6.2. Meetings of and Voting by Members.
----------- ---------------------------------
(a) Meetings of Members. A meeting of the Members may be called at
-------------------
any time by any Member. Meetings of Members shall be held at the Company's
principal place of business or at any other place in Illinois designated by
the Members calling the meeting. Not less than ten (10) nor more than
ninety (90) days before each meeting, the Members calling the meeting shall
give written notice of the meeting to each Member entitled to vote at the
meeting. The notice shall state the time, place and purpose of the
meeting. Notwithstanding the foregoing provisions, each Member who is
entitled to notice waives notice if before or after the meeting the Member
signs a waiver of the notice which is filed with the records of Members'
meetings, or is present at the meeting in person or by proxy. Unless this
Agreement provides otherwise, at a meeting of Members, the presence in
person or by proxy of a number of Members sufficient to approve the matters
before the meeting shall constitute a quorum regarding the voting on such
matters. A Member may vote either in person or by written proxy signed by
the Member or by his duly authorized attorney in fact; provided, however,
such proxy shall not transfer any Member's voting rights with respect to
his Interests to any other person or entity, and will be granted only in
circumstances where such Member is unable to
14
<PAGE>
attend a meeting in person or deliver written notice of his vote to the
Company prior to the meeting.
(b) Voting In General. Except as set forth in SECTION 6.2(C) and (D)
-----------------
or as otherwise provided in this Agreement, the affirmative vote of a
majority of the Members shall be required to approve any matter coming
before the Members. Subject to SECTION 6.2(C) and (D) and in lieu of
holding a meeting, the Members may vote or otherwise take action by a
written instrument indicating the consent of a majority of the Members or
such lesser number as may be allowed pursuant to SECTION 6.2(C) or (D);
provided, all Members receive written notice of such action within a
reasonable period thereafter. Wherever the Act requires unanimous consent
to approve or take any action unless otherwise provided in a limited
liability company's Operating Agreement, that consent shall be given in
writing and, in all cases, shall mean, rather than the consent of all
Members, the consent of a majority of the Members unless otherwise provided
herein.
(c) Morris' Veto Rights. The approval of Arthur Morris shall be
-------------------
required for either (i) the admission of any new Members pursuant to
ARTICLE VII hereof, or (ii) a Sale of the Company or a Sale of an Operating
Company resulting in the fair market value of the Company's assets minus
the Company's liabilities immediately after such sale plus the amount of
any proceeds of such sale distributed to the Interest Holders which were
not already included in the fair market value of such assets, being less
than $62,023,364. Determination of the fair market value of the Company's
net assets shall be made by a majority of the Members but shall be subject
to a request by any Member for an appraisal pursuant to the procedures set
forth in SECTION 4.5.
(d) Voting Rights for Special Matters. With respect to each of the
---------------------------------
situations and matters listed in subsections (i)-(viii) below
(collectively, the "Special Matters"), to the extent the Company may vote
upon or otherwise effect such Special Matters, so long as there are at
least six but less than nine Members, approval of the Members regarding
Special Matters shall require approval of Arthur Morris and two other
Members or, subject to the following sentence, approval of a majority of
the Members. Notwithstanding anything herein to the contrary, so long as
there are at least six but less than nine Members, any Special Matter may
be vetoed by Arthur Morris and any two other Members.
(i) Mergers. A merger, consolidation or reorganization of
-------
the Company or an Operating Company with any Person;
(ii) Dispositions. The sale, assignment, transfer, or other
------------
disposition of more than 10% of the assets of the Company or an
Operating Company (computed on the basis of either book value
determined in accordance with generally accepted accounting principles
or fair market value) in any transaction or series of related
transactions;
15
<PAGE>
(iii) Public Offering. The consummation of any public
---------------
offering of equity or debt securities of the Company or an Operating
Company;
(iv) Security Issuances. The authorization, issuance or
------------------
entering into any agreement by the Company or an Operating Company
providing for the issuance (other than to a direct or indirect wholly-
owned Subsidiary of Everest or Everest Holdings) of (a) any notes or
debt securities containing equity features, or (b) any equity
securities (or any securities convertible into or exchangeable for any
equity securities) other than the issuance of such securities in any
transaction or series of related transactions to managers of an
Operating Company, the percentage of which does not exceed 5% of the
total, fully-diluted, outstanding equity securities of the Company or
$500,000 on the date of such issuance, whichever is lower, as
reasonably determined by the Members;
(v) Distributions. Distributions by the Company pursuant to
-------------
SECTION 4.2 or SECTION 4.4 hereof and determination of the "fair
market value" of any In-Kind Distribution under SECTION 4.4 hereof;
(vi) Indebtedness and Liens. The causing or permitting the
----------------------
existence of, or causing or permitting any Operating Company to incur
or permit the existence of, indebtedness for borrowed money in amounts
greater than $10,000,000 in the aggregate, or permitting the creation,
incurrence or assumption of, or suffering to exist, any mortgages,
pledges, liens, charges or encumbrances on any existing or future
property, asset (including the capital stock of Subsidiaries), income
or rights in any thereof in amounts in excess of $10,000,000 in the
aggregate;
(vii) Liquidation. The liquidation or dissolution of the
-----------
Company or any Operating Company; and
(viii) Related Party Transactions. The entering into, or
--------------------------
permitting any Operating Company to enter into, any material
transaction with any of the Company's Members, Interest Holders, or
Affiliates.
In the event the number of Members changes to five or less, a Special
Matter may be approved by a majority of the Members (subject to veto by
Arthur Morris and any one other Member), or approved or vetoed by Arthur
Morris and any one other Member. In the event the number of Members
changes to nine or more, a Special Matter may be approved by a majority of
the Members (subject to veto by Arthur Morris and any three other Members),
or approved or vetoed by Arthur Morris and any three other Members. The
provisions of this SECTION 6.2(D) shall terminate and be of no further
force or effect upon Arthur Morris, either directly or indirectly, ceasing
to be a Member.
16
<PAGE>
(e) Further Actions. The Members shall take all actions which they
---------------
can reasonably take to elect the persons who are the Original Members to
the board of directors of any Operating Company.
SECTION 6.3. Personal Services; Compensation. No Member shall be
----------- -------------------------------
required to perform services for the Company solely by virtue of being a Member.
Unless approved by the Members, no Member shall perform services for the Company
or be entitled to compensation for services performed for the Company. Each
Member shall be entitled to reimbursement for expenses reasonably incurred in
connection with the activities of the Company.
SECTION 6.4. Other Business Interests. Other than on behalf of the
----------- ------------------------
Company, or any Operating Company, no Interest Holder, or any Affiliate of any
Interest Holder, shall conduct, participate in, or have any ownership or
investment interest in, any entity which is in the business of administering or
operating dialysis facilities; provided, however, this limitation shall not
restrict the ability of any such persons to provide professional services as
doctors to patients or prohibit any Interest Holder or Affiliate of such
Interest Holder from investing in less than 2% of the outstanding capital stock
of such an entity which is listed on a national securities exchange or traded in
the over-the-counter market. The organization of the Company shall otherwise be
without prejudice to the Interest Holders' respective rights (or the rights of
their respective Affiliates) to maintain, expand or diversify other business
interests and activities which do not conflict with the preceding limitation and
to receive and enjoy profits or compensation therefrom and shall not be
accountable to the Company or to any Interest Holder with respect to such
business interests or activities. Each Interest Holder waives any rights the
Interest Holder might otherwise have to share or participate in such other
interests or activities of any other Interest Holder or the Interest Holder's
Affiliates. Each Interest Holder understands and acknowledges that the conduct
of the Company's business may involve business dealings and undertakings with
Interest Holders and their Affiliates. In any of those cases, those dealings
and undertakings may or may not be at arm's length and on commercially
reasonable terms, as determined by the Members pursuant to SECTION 6.2.
SECTION 6.5. Liability and Indemnification. The Members and the officers
----------- -----------------------------
of the Company shall not be liable, responsible, or accountable, in damages or
otherwise, to any Interest Holder or to the Company for any act performed by
them within the scope of the authority conferred on the Members and officers of
the Company by this Agreement, except for fraud, gross negligence, or an
intentional breach of this Agreement. The Company shall indemnify each Member
and each officer of the Company for any act performed by them with respect to
Company matters, as and to the full extent permitted by Section 18-108 of the
Act, but in no event for fraud, gross negligence, or an intentional breach of
this Agreement.
17
<PAGE>
ARTICLE VII
-----------
TRANSFER OF INTERESTS; ADMISSION OF MEMBERS
-------------------------------------------
SECTION 7.1. Transfer Restrictions. An Interest Holder may not, directly
----------- ---------------------
or indirectly, without the prior written consent of a majority of the other
Members, which consent may be withheld in their sole discretion, Transfer all or
any part of his, her or its Interests voluntarily or involuntarily, or permit
such a Transfer by operation of law or otherwise, to any Person other than a
Permitted Transferee. Any such transferee of an Interest who is not a Permitted
Transferee but is approved by a majority of the other Members, shall be referred
to as an "Approved Transferee." All Transfers, including Transfers to Permitted
Transferees, shall be subject to SECTION 7.2 below.
SECTION 7.2. Acceptance of Transfer.
----------- ----------------------
(a) No Transfer of Interest to an Approved Transferee or to a
Permitted Transferee pursuant to this ARTICLE VII shall be deemed
effective, unless and until the transferee shall execute a written
instrument, in a form reasonably satisfactory to counsel for the Company,
agreeing to be bound by all of the terms and provisions of this Agreement
and all amendments and supplements hereto, to the same extent and on the
same terms as the other Interest Holders. In addition and subject to
SECTION 6.2(C), no such transferee, whether a Permitted Transferee or an
Approved Transferee, shall become a Member without the approval of a
majority of the other Members, the granting or denial of which approval
shall be in their sole discretion; provided that upon any Transfer by an
Original Member of all but not less than all of the Interests held by such
Original Member to such Original Member's Revocable Trust, such Original
Member, as Trustee of his Revocable Trust, shall become a Member
automatically without any approval of the other Members. Subject to the
proviso of the preceding question, approval by the Members of a Transfer
shall not, in and of itself, constitute approval by the Members of the
transferee becoming a Member, it being agreed that the Members have the
right, in their sole discretion, to withhold approval of any transferee as
a Member.
(b) Any Person admitted to the Company as a Member shall be subject
to and bound by all the provisions of this Agreement as if originally a
party to this Agreement. Upon the admission to the Company of a Member, the
Members shall amend this Agreement and any schedules hereto to reflect such
admission; provided, that upon any Transfer by an Original Member of his
Interests to his Revocable Trust as provided in SECTION 7.2(A) above, such
Original Member shall provide notice of such Transfer to the Company, which
notice shall set forth the name of the Revocable Trust and the date of such
Transfer, and the signatory of such Original Member hereto, in his
individual capacity, shall be deemed to be in his capacity as trustee of
his Revocable Trust, effective as of the date of such Transfer. A
transferee of an Interest in the Company permitted under the provisions of
this ARTICLE VII who is not admitted as a Member, or
18
<PAGE>
who is not a Member prior to the Transfer, shall become an Interest Holder
but shall not become a Member, and shall have no right to participate in
the management of, or vote on matters coming before the Members of the
Company as provided herein or in the Act.
SECTION 7.3. Involuntary Withdrawal. Immediately upon the occurrence of
----------- ----------------------
an Involuntary Withdrawal, the successor of the withdrawn Member shall thereupon
become an Interest Holder but shall not become a Member, and shall have no right
to participate in the management of, or vote on matters coming before the
members of the Company as provided herein or in the Act.
ARTICLE VIII
------------
DISSOLUTION OF THE COMPANY
--------------------------
SECTION 8.1. Events of Dissolution. The Company shall be dissolved upon
----------- ---------------------
the happening of any of the following events:
(a) when the period fixed for its duration in SECTION 1.5 has expired;
(b) upon the unanimous written agreement of all of the Members;
(c) upon the occurrence of an Involuntary Withdrawal unless, within 90
days after the occurrence of such Involuntary Withdrawal there are at least
two (2) remaining Members and a Majority-in-Interest of the remaining
Members elect to continue the business of the Company pursuant to the terms
of this Agreement; or
(d) if a Public Offering of the Company's or any Operating Company's
equity securities has taken place or a Sale of an Operating Company has
occurred and the Company has received publicly traded securities or cash,
upon written notice to the Company by any Member after the fair market
value of the Company's assets (minus the Company's liabilities) exceeds
$250,000,000 unless such a dissolution would result in immediate, adverse,
material federal income tax consequences to any of the Members.
SECTION 8.2. Allocation and Distribution of Net Assets. If the Company
----------- -----------------------------------------
cannot be dissolved because of immediate, adverse, material federal income tax
consequences to any of the Interest Holders, then the Company shall concurrently
appraise the fair market value of its net assets, including without limitation,
any securities of an Operating Company held by the Company, and allocate such
net assets among the Interest Holders. Each Interest Holder shall be allocated
an amount of net assets equal to (x) that amount which each Interest Holder
would have received if the Company had been liquidated pursuant to SECTION 8.3,
reduced by (y) such Interest Holder's proportionate share, based upon his
applicable Percentage, of any net assets reserved by the Company to cover
current expenses and any remaining warranty or indemnity obligations of the
Company until all applicable warranty and indemnity periods have expired,
19
<PAGE>
all outstanding claims have been settled between the Company and third parties
and all expenses have been paid, at which time the remaining net assets may be
distributed in accordance with the Interest Holders' applicable Percentages.
The fair market value of the Company's net assets shall be determined by
agreement of all of the Interest Holders, or if no agreement is reached within
30 days of receipt of such notice by the Company, pursuant to the procedures set
forth in SECTION 4.5. At such time as any holding period required to avoid such
adverse tax consequences has expired, each Interest Holder may at any time
request that the Company sell on behalf of such Member all or a portion of the
net assets, including without limitation, any shares of Everest stock, allocated
to such Interest Holder pursuant to this SECTION 8.2, less any assets previously
sold on behalf of such Interest Holder, and then distribute the net proceeds of
such sale to such Interest Holder. After receipt of such request, the Company
shall use reasonable efforts to cause such sale of assets and distribution of
proceeds thereof as soon as reasonably practicable.
SECTION 8.3. Procedure for Winding Up and Dissolution. If the Company is
----------- ----------------------------------------
dissolved, the Members shall wind up its affairs. On winding up of the Company,
the assets of the Company shall be distributed, first, to creditors of the
Company, including Interest Holders who are creditors, in satisfaction of the
liabilities of the Company, and then to the Interest Holders in accordance with
SECTION 4.2, or in the event the Company cannot be dissolved because of
immediate, adverse, material federal income tax consequences to any of the
Interest Holders, in accordance with SECTION 8.2.
SECTION 8.4. Filing of Certificate of Cancellation. If the Company is
----------- -------------------------------------
dissolved, the Members shall promptly file a Certificate of Cancellation with
the Delaware Secretary of State. If there are no remaining Members, the
Certificate shall be filed by the last Person to be a Member; if there are no
remaining Members, or a Person who last was a Member, the Certificate shall be
filed by the legal or personal representatives of the Person who last was a
Member.
ARTICLE IX
----------
BOOKS AND RECORDS
-----------------
SECTION 9.1. Bank Accounts. All funds of the Company shall be deposited
----------- -------------
in an account or accounts maintained in the Company's name at banks, brokerage
or other financial institutions. The Members shall determine the institution or
institutions at which the accounts will be opened and maintained, the types of
accounts, and the Persons who will have authority with respect to the accounts
and the funds therein.
SECTION 9.2. Books and Records. The secretary and/or treasurer of the
----------- -----------------
Company shall keep or cause to be kept complete and accurate books and records
of the Company and supporting documentation of the transactions with respect to
the conduct of the Company's business. The records shall include, but not be
limited to, complete and accurate information
20
<PAGE>
regarding the state of the business and financial condition of the Company, a
copy of the Certificate of Formation and this Agreement and all amendments to
the Certificate of Formation and this Agreement; a current list of the names and
last known business, residence, or mailing addresses of all Interest Holders and
officers; and the Company's federal, state or local tax returns. The books and
records shall be maintained in accordance with sound accounting practices and
shall be available at the Company's principal office for examination by any
Interest Holder or officer or the officer's or Interest Holder's duly authorized
representative at any and all reasonable times during normal business hours.
Each Interest Holder shall reimburse the Company for all costs and expenses
incurred by the Company in connection with the Interest Holder's inspection and
copying of the Company's books and records.
SECTION 9.3. Annual Accounting Period. The annual accounting period of
----------- ------------------------
the Company shall be its taxable year. The Company's taxable year shall be the
twelve month period ended December 31 of each year, subject to the requirements
and limitations of the Code.
SECTION 9.4. Reports. As soon as reasonably practicable after the end of
----------- -------
each taxable year of the Company, the secretary and/or treasurer shall cause to
be sent to each Person who was a Interest Holder at any time during the
accounting year then ended: (i) an annual compilation report, prepared by the
Company's independent accountants in accordance with generally accepted
accounting principles; and (ii) a report summarizing the fees and other
remuneration paid by the Company to any Interest Holder, any officer or any
Affiliate in respect of the taxable year. In addition, as soon as reasonably
practicable after the end of each taxable year of the Company, the secretary
and/or treasurer shall cause to be sent to each Person who was an Interest
Holder at any time during the taxable year then ended, that tax information
concerning the Company which is necessary for preparing the Interest Holder's
income tax returns for that year. At the request of a majority of the Members,
and at the Company's expense, the secretary and/or treasurer shall cause an
audit of the Company's books and records to be prepared by independent
accountants for the period requested by the Members.
SECTION 9.5. Tax Matters Person. The Company's secretary and/or
----------- ------------------
treasurer (if a Member), or such other person who is a Member and is selected by
a majority of the Members, shall be the Company's "tax matters person" and, as
such, shall have all powers and responsibilities provided in Code Section 6221,
et seq. or such other provisions as may become applicable to limited liability
- -- ---
companies.
SECTION 9.6. Tax Elections. The Members shall have the authority to make
----------- -------------
all Company elections permitted under the Code, including, without limitation,
elections of methods of depreciation and elections under Code Section 754. The
decision to make or not make an election shall be at the Members' sole and
absolute discretion.
21
<PAGE>
ARTICLE X
---------
AMENDMENT OF AGREEMENT
----------------------
SECTION 10.1. Amendment. Except as otherwise required by law or as set
------------ ---------
forth herein, all provisions of this Agreement may be amended by the affirmative
vote of two-thirds of the Members; provided that no amendment (i) adversely
affecting the rights of any Interest Holders, or class of Interest Holders, to
distributions under ARTICLE IV (other than as necessary to reflect the economic
interests of any additional or substituted Interest Holders for Interests issued
in accordance with SECTION 3.2) or (ii) expanding or increasing the liability of
any Member or Interest Holder, may be adopted without the approval of each
Member or Interest Holder (or class of Interest Holders) who is adversely
affected thereby; provided further, that no amendment adversely affecting the
voting rights of Arthur Morris under SECTIONS 6.2(C) or 6.2(D) may be adopted
without the approval of Arthur Morris. This Agreement may not be amended to
extend the term hereof past December 31, 2045, without the unanimous consent of
all Members.
SECTION 10.2. Certificate of Formation. In the event this Agreement shall
------------ ------------------------
be amended pursuant to this ARTICLE X, the Members shall amend the Certificate
of Formation to reflect such change and make such other filings that it deems to
be necessary or appropriate.
ARTICLE XI
----------
MISCELLANEOUS
-------------
SECTION 11.1. Assurances. Each Interest Holder shall execute all such
------------ ----------
certificates and other documents and shall do all filing, recording, publishing
and other acts as the Members deem appropriate to comply with the requirements
of law for the formation and operation of the Company and to comply with any
laws, rules and regulations relating to the acquisition, operation, or holding
of the property of the Company.
SECTION 11.2. Notifications. Any notice, demand, consent, election,
------------ -------------
offer, approval, request, or other communication required or permitted under
this Agreement must be in writing and delivered personally, sent by certified or
registered mail, postage prepaid, return receipt requested, sent by recognized
overnight delivery service or by facsimile transmittal. A notice must be
addressed to an Interest Holder at the Interest Holder's last known address on
the records of the Company. A notice to the Company must be addressed to the
Company's principal office. A notice that is sent by mail will be deemed given
three (3) business days after it is mailed. A notice sent by facsimile shall be
deemed given when sent, provided delivery is confirmed. Notice by personal
delivery or overnight delivery service is effective the day of delivery. Any
party may designate, by notice to all of the others, substitute addresses or
addressees for notices; and, thereafter, notices are to be directed to those
substitute address or addressees.
22
<PAGE>
SECTION 11.3. Specific Performance. The parties recognize that
------------ --------------------
irreparable injury will result from a breach of any provision of this Agreement
and that money damages will be inadequate to fully remedy the injury.
Accordingly, in the event of a breach or threatened breach of one or more of the
provisions of this Agreement, any party who may be injured (in addition to any
other remedies which may be available to that party) shall be entitled to one or
more preliminary or permanent orders (i) restraining and enjoining any act which
would constitute a breach or (ii) compelling the performance of any obligation
which, if not performed, would constitute a breach.
SECTION 11.4. Applicable Law. This Agreement and the rights of the
------------ --------------
parties hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware without regard to principles of conflicts of law.
SECTION 11.5. Successors and Assigns. Except as herein otherwise
------------ ----------------------
specifically provided, this Agreement shall be binding upon and inure to the
benefit of the parties and their legal representatives, heirs, administrators,
executors, successors and assigns.
SECTION 11.6. Gender. Wherever from the context it appears appropriate,
------------ ------
each term stated in either the singular or the plural shall include the singular
and the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine, and neuter.
SECTION 11.7. Headings. Captions contained in this Agreement are inserted
------------ --------
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision thereof.
SECTION 11.8. Severability. If any provision of this Agreement, or the
------------ ------------
application of such provision to any person or circumstances, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
SECTION 11.9. Counterparts. This Agreement may be executed in multiple
------------ ------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. All of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.
SECTION 11.10. Entire Agreement. This Agreement, together with all other
------------- ----------------
agreements entered into by the parties hereto on the date hereof, constitutes
the entire agreement among the parties. If supersedes any prior agreement or
understandings among them, and it may not be modified or amended in any manner
other than as set forth herein.
23
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of this 30th day of November, 1997.
/s/ ARTHUR MORRIS
--------------------------------------------
Arthur Morris
/s/ PAUL BALTER
--------------------------------------------
Paul Balter
/s/ MICHAEL CARBON
--------------------------------------------
Michael Carbon
/s/ GEORGE DUNEAU
--------------------------------------------
George Dunea, as Trustee of the
George Dunea Revocable Trust U/A/D 9/18/95
/s/ ASHUTOSH GUPTA
--------------------------------------------
Ashutosh Gupta
/s/ DOUGLAS MUFUKA
--------------------------------------------
Douglas Mufuka
/s/ CRAIG W. MOORE
--------------------------------------------
Craig W. Moore
24
<PAGE>
SCHEDULE A
OPERATING AGREEMENT OF
PEAK LIQUIDATING, L.L.C.
MEMBERS, CAPITAL CONTRIBUTIONS AND INTERESTS
--------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL NUMBER AND TYPE
INITIAL CAPITAL OF
NAME AND ADDRESS CAPITAL CONTRIBUTION CONTRIBUTIONS INTERESTS PERCENTAGE
- ------------------------ ----------------------------- ------------- -------------------- ----------
MEMBERS
- -------
<S> <C> <C> <C> <C>
Arthur Morris 1,936,200 Class A Peak/1/ 1,936,200 Class A 15.136%
906 Franklin Avenue 1,156,333 Class B1 Peak/2/ 1,156,333 Class B1 41.160%
River Forest, IL 60305 787,303 Class B2 Peak/3/ 787,303 Class B2 21.111%
22,661,729 Class C Peak/4/ 22,661,729 Class C 52.527%
5,224,902 Class D Peak/5/ 5,224,902 Class D 24.160%
14,458,446 Class E Peak/6/ 14,458,446 Class E 16.714%
100 Class F Peak/7/ 100 Class F 14.286%
Paul Balter 1,936,200 Class A Peak/1/ 1,936,200 Class A 15.136%
947 Jackson Street 318,833 Class B1 Peak/2/ 318,833 Class B1 11.349%
River Forest, IL 60305 562,903 Class B2 Peak/3/ 562,903 Class B2 15.094%
4,129,071 Class C Peak/4/ 4,129,071 Class C 9.571%
2,733,558 Class D Peak/5/ 2,733,558 Class D 12.640%
12,007,759 Class E Peak/6/ 12,007,759 Class E 13.881%
100 Class F Peak/7/ 100 Class F 14.286%
Michael Carbon 1,936,200 Class A Peak/1/ 1,936,200 Class A 15.136%
2S007 Ironwood Lane 318,833 Class B1 Peak/2/ 318,833 Class B1 11.349%
Wheaton, IL 60187 561,703 Class B2 Peak/3/ 561,703 Class B2 15.062%
3,856,072 Class C Peak/4/ 3,856,072 Class C 8.938%
2,733,558 Class D Peak/5/ 2,733,558 Class D 12.640%
12,007,759 Class E Peak/6/ 12,007,759 Class E 13.881%
100 Class F Peak/7/ 100 Class F 14.286%
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL NUMBER AND TYPE
INITIAL CAPITAL OF
NAME AND ADDRESS CAPITAL CONTRIBUTION CONTRIBUTIONS INTERESTS PERCENTAGE
- ------------------------ ----------------------------- ------------- -------------------- ----------
<S> <C> <C> <C> <C>
George Dunea, as Trustee 1,936,200 Class A Peak/1/ 1,936,200 Class A 15.136%
of the George Dunea 228,833 Class B1 Peak/2/ 228,833 Class B1 8.145%
Revocable Trust U/A/D 561,703 Class B2 Peak/3/ 561,703 Class B2 15.062%
9/18/95
222 E. Chestnut, Apt. 16A 3,946,072 Class C Peak/4/ 3,946,072 Class C 9.146%
Chicago, IL 60611 2,733,558 Class D Peak/5/ 2,733,558 Class D 12.640%
12,007,759 Class E Peak/6/ 12,007,759 Class E 13.881%
100 Class F Peak/7/ 100 Class F 14.286%
Ashutosh Gupta 1,936,200 Class A Peak/1/ 1,936,200 Class A 15.136%
403 St. Marks Court 318,833 Class B1 Peak/2/ 318,833 Class B1 11.349%
Oak Brook, IL 60521 561,703 Class B2 Peak/3/ 561,703 Class B2 15.062%
3,856,072 Class C Peak/4/ 3,856,072 Class C 8.938%
2,733,558 Class D Peak/5/ 2,733,558 Class D 12.640%
12,007,759 Class E Peak/6/ 12,007,759 Class E 13.881%
100 Class F Peak/7/ 100 Class F 14.286%
Douglas Mufuka 1,936,200 Class A Peak/1/ 1,936,200 Class A 15.136%
1037 N. Kenilworth 318,833 Class B1 Peak/2/ 318,833 Class B1 11.349%
Oak Park, IL 60302 561,703 Class B2 Peak/3/ 561,703 Class B2 15.062%
3,856,072 Class C Peak/4/ 3,856,072 Class C 8.938%
2,733,558 Class D Peak/5/ 2,733,558 Class D 12.640%
12,007,759 Class E Peak/6/ 12,007,759 Class E 13.881%
100 Class F Peak/7/ 100 Class F 14.286%
Craig W. Moore 1,174,739 Class A Peak/1/ 1,174,739 Class A 9.183%
717 Kennington Terrace 148,833 Class B1 Peak/2/ 148,833 Class B1 5.298%
Lake Forest, IL 60045 132,273 Class B2 Peak/3/ 132,273 Class B2 3.547%
837,715 Class C Peak/4/ 837,715 Class C 1.942%
2,773,558 Class D Peak/5/ 2,773,558 Class D 12.640%
12,007,759 Class E Peak/6/ 12,007,759 Class E 13.881%
100 Class F Peak/7/ 100 Class F 14.286%
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL NUMBER AND TYPE
INITIAL CAPITAL OF
NAME AND ADDRESS CAPITAL CONTRIBUTION CONTRIBUTIONS INTERESTS PERCENTAGE
- ------------------------ ----------------------------- ------------- -------------------- ----------
<S> <C> <C> <C> <C>
12,791,939 Class A Peak/1// 12,791,939 Class A 100%
2,809,331 Class B1 Peak/2// 2,809,331 Class B1 100%
3,729,291 Class B2 Peak/3// 3,729,291 Class B2 100%
43,142,803 Class C Peak/4// 43,142,803 Class C 100%
21,626,250 Class D Peak/5// 21,626,250 Class D 100%
86,505,000 Class E Peak/6// 86,505,000 Class E 100%
700 Class F Peak/7// 700 Class F 100%
============================= ============= ==================== ==========
</TABLE>
/1// Class A interest in Peak Healthcare, L.L.C.
/2// Class B1 interest in Peak Healthcare, L.L.C.
/3// Class B2 interest in Peak Healthcare, L.L.C.
/4// Class C interest in Peak Healthcare, L.L.C.
/5// Class D interest in Peak Healthcare, L.L.C.
/6// Class E interest in Peak Healthcare, L.L.C.
/7// Class F interest in Peak Healthcare, L.L.C.
A-3
<PAGE>
SCHEDULE B
OPERATING AGREEMENT OF
PEAK LIQUIDATING, L.L.C.
APPRAISAL INSTRUCTIONS
----------------------
In determining the fair market value of the Company's assets which are
equity securities, the appraisers shall apply discounts for lack of
marketability or minority ownership, if appropriate, but shall not apply any
premiums for controlling ownership. The appraisers must employ a valuation
method which considers the worth of the securities of the Operating Company in
comparison to the price of shares being freely traded on a public market. Such
valuation shall consider the extent to which the Operating Company's operations
differ from those public firms, especially as they relate to size, growth, and
profitability. The valuation shall consider factors such as revenues; net
income; income before interest expense but after tax; cash flow; earnings before
interest and taxes (EBIT); and earnings before interest, taxes, depreciation and
amortization (EBITDA). The valuation will also consider working capital
strength, debt, taxes and other relevant factors.
B-1
<PAGE>
EXHIBIT 10.6
MEDICAL DIRECTOR AND ADMINISTRATIVE SERVICES AGREEMENT
------------------------------------------------------
THIS MEDICAL DIRECTOR AND ADMINISTRATIVE SERVICES AGREEMENT is made and
entered into as of October 1, 1997, by and between NEPHROLOGY ASSOCIATES OF
NORTHERN ILLINOIS, LTD., an Illinois medical corporation ("NANI"), and EVEREST
HEALTHCARE SERVICES CORPORATION, a Delaware corporation (the "Company"), both in
its individual capacity and as agent for the Facilities listed on EXHIBIT A
hereto, hereafter collectively referred to as the "Parties."
WHEREAS, NANI is a medical group comprised of nephrologists who are
experienced in the provision of medical direction services for dialysis
treatment facilities;
WHEREAS, NANI employs physicians and personnel with expertise in the
business of providing dialysis and dialysis-related services and equipment; and
WHEREAS, the Company and its subsidiaries operate dialysis treatment
facilities at the locations noted on EXHIBIT A attached hereto (the
"Facilities"), and NANI and the Company desire to memorialize their arrangement
regarding the provision of certain management, administrative and medical
direction services by NANI to the Company in connection with its operation of
the Facilities.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. FACILITY MEDICAL DIRECTION DUTIES.
A. The Company hereby engages the services of NANI to provide the
medical direction services at the Facilities, as provided for in this Agreement,
effective as of January 1, 1997 (the "Effective Date"). Specifically, at all
times while this Agreement is in effect, NANI shall designate one or more of its
employed or contracted nephrologists to serve as a "Medical Director" for each
of the Facilities. The Medical Director designated for each Facility shall be
that physician set forth opposite the name of each Facility on EXHIBIT A. The
designated Medical Director for each Facility shall not change or be re-
designated other than as permitted under this Agreement. NANI shall cause each
such Medical Director to agree to perform services for the Company as medical
director at the designated Facility. In such capacity, the Medical Director
shall:
(i) perform, subject to the supervision of the Managers for
the applicable Facility, the duties relating to the operation of the
Facilities which are set forth on EXHIBIT B attached hereto;
(ii) perform the duties required under the Medicare End-Stage
Renal Disease Program Regulations (42 C.F.R. 405.2161); and
<PAGE>
(iii) assist the Company in the establishment, supervision
and review of all medical policies and procedures to be utilized by
the applicable Facility.
At all times hereunder, each Medical Director shall assist in the operation
of his/her designated Facility in accordance with all applicable laws,
regulations and governmental standards relating to licensing, certification and
operation. Notwithstanding the delegation of certain duties to the Medical
Directors hereunder, the Company and the Facilities shall retain ultimate
authority over the standards of, and procedures and practices for, the services
provided by the Facilities. NANI shall cause the Medical Directors to abide by
the policies, procedures, rules and regulations of the Company and Facilities at
all times.
B. NANI shall cause each of the Medical Directors hereunder to
personally discharge his/her obligations with respect to his/her respective
Facility. NANI shall also cause each of the Medical Directors to devote so much
time, skill and attention to the affairs and activities of his/her designated
Facility as may reasonably be required to serve as Medical Director of the
Facility. NANI shall also cause each of the Medical Directors to cooperate with
and assist the Company and Facilities with identifying and documenting their
efforts in connection with their Medical Director duties.
C. Each individual designated by NANI to serve as a Medical Director
under this Agreement shall at all times during the Term of this Agreement:
(i) remain duly licensed as a physician in the same state that
his/her designated Facility is located;
(ii) remain board certified or board eligible in internal
medicine or pediatrics, and have at least twelve (12) months of
experience or training in the care of patients at ESRD facilities; or
have previously served as a director of a dialysis or transplantation
program for at least twelve (12) months between September 1, 1971 and
September 1, 1979;
(iii) maintain a current participation agreement with the
Secretary of the United States Department of Health and Human Services,
under the Medicare Program;
(iv) maintain a current registration with the Drug Enforcement
Administration; and
(v) remain otherwise qualified to act as a medical director of
a dialysis treatment facility.
In the event one or more of the Medical Directors specified on EXHIBIT A no
longer meets the above noted criteria, or is no longer willing to perform
Medical Director duties at his/her designated Facility, NANI shall promptly
designate another physician who meets the
-2-
<PAGE>
above noted criteria, to serve as the Medical Director for the designated
Facility, and shall provide written notice of said designation to the Company
and applicable Facility. Either the Company or applicable Facility shall have
the right to reject, or request the removal of, any Medical Director designated
by NANI; provided, however, any such rejection or request for removal shall not
be unreasonably made. Notwithstanding the foregoing provisions of this Section
1(C), nothing contained herein shall preclude NANI from assigning, on a
temporary basis, an otherwise qualified physician to serve as a Medical Director
at a Facility during any temporary leave or absence (e.g. vacation, continuing
medical education, illness) on the part of the designated Medical Director.
2. ADMINISTRATIVE AND MANAGEMENT SERVICE DUTIES.
A. NANI hereby agrees that it will provide the following
administrative and management services to the Company and its subsidiaries, as
the Company may from time to time request:
(i) consulting regarding the application or development of
appropriate information systems to track quality of care and associated
costs for all procedures performed at a Facility or any of the
Company's other Affiliates, input of such information into a
centralized information system and generation of appropriate reports to
reflect the necessary information;
(ii) development of protocols, clinical pathways and guidelines
(collectively, "Protocols") for the various procedures performed and
conditions treated in the Facilities or any of the Company's other
Affiliates to ensure the highest quality at the lowest cost, and the
ongoing monitoring, review and updating of such Protocols;
(iii) general consulting regarding hiring and retention of
executive employees and personnel, including, without limitation,
making its key management, employees, and advisors reasonably available
to the Company to consult with the Company's executives, and to review
other executive personnel matters as reasonably requested from time to
time by the Company;
(iv) developing marketing strategies and coordinating the
production of marketing literature and other advertising and
promotional materials, including, but not limited to managed care
relationships;
(v) general executive and administrative services, including,
without limitation, periodic advice and consultation with respect to
the Company's strategic affairs;
(vi) such other corporate, managerial and related strategic
services as the Company may from time to time reasonably request; and
-3-
<PAGE>
(vii) acute dialysis medical director services and overall
corporate medical direction, supervision and oversight of the health
care services provided by the Company and its Affiliates and the
services performed by various local medical directors at the dialysis
facilities owned by the Company or its subsidiaries, or at the
hospitals that have acute dialysis service agreements with the Company
or its Affiliates.
B. NANI hereby agrees during the term of this Agreement to consult
with the management personnel of the Company in such manner and regarding such
business and financial matters as may be reasonably requested from time to time
by such management personnel, including but not limited to:
(i) business strategy and development;
(ii) due diligence procedures and policies; and
(iii) acquisition and divestiture strategies.
C. Notwithstanding anything to the contrary contained herein, NANI
shall only be required to devote such time to the performance of its
administrative and management service duties hereunder as is reasonably
necessary for NANI to perform such duties. The Company acknowledges and agrees
that NANI may engage in other business activities without the consent of the
Company.
3. PROTOCOLS.
It is expressly understood by the parties hereto that the right and title
to any and all Protocols developed by NANI in connection with the performance of
its duties under this Agreement shall be the sole property of NANI; however, the
Company shall be permitted to use the Protocols in connection with its business
during the term of this Agreement and thereafter.
4. TERM.
A. The initial term of this Agreement shall commence on the
Effective Date, and shall continue, unless otherwise terminated pursuant to this
Section 4, for a period of five (5) years (the "Initial Term"). Upon
termination of the Initial Term, this Agreement shall be automatically extended
for consecutive one (1) year renewal terms until terminated pursuant to this
Section 4. The initial term and any extensions thereof may be referred to as
the "Term."
B. This Agreement may be terminated:
(i) either by the Company or NANI for cause (as defined below);
-4-
<PAGE>
(ii) by the Company in the event it no longer operates the
Facilities, or with respect to a particular Facility in the event it
no longer operates such Facility;
(iii) upon the mutual agreement of the Company and NANI; or
(iv) at any time on or after the expiration of the Initial
Term, by either Party, upon at least ninety (90) days prior written
notice of termination to the other Party.
C. With respect to the termination of this Agreement for cause, the
term "cause" shall mean: (i) a material breach by a Party to this Agreement
which shall not have been cured by such breaching Party within ten (10) days of
receipt of notice from the non-breaching Party of the breach; (ii) conviction of
a crime by either of the Parties; (iii) exclusion or suspension of either of the
Parties from the Medicare or Medicaid Programs; or (iv) the inability of the
Parties to satisfactorily renegotiate any terms of this Agreement required to be
amended by a change in the applicable laws or regulations pursuant to the
requirements of Section 9(J) hereof.
5. COMPENSATION.
A. In consideration of the services, covenants, and agreements agreed
to be performed by NANI pursuant to this Agreement, the Company agrees to pay
NANI the sum of One Million Two Hundred Eighty-Four Thousand Nine Hundred Twenty
Dollars ($1,284,920) per year, payable in twelve (12) equal monthly installments
(the "Base Compensation"). In addition to the Base Compensation, NANI shall also
be eligible to receive "Incentive Compensation" in the event the Medical
Directors are able to cause their respective Facilities to meet the quality,
utilization and other performance measurements established by the Company and
the Facilities. Said quality, utilization and other performance measurements
shall include, but not be limited to, the measurement of hematocrit, URR and
albumin levels, as well as Facility morbidity and mortality data. The amount of
Incentive Compensation payable to NANI hereunder shall not exceed Eighty
Thousand Eighty Dollars ($80,080) for any year, and shall be determined in the
sole discretion of the Company.
B. Both the Base Compensation and the Incentive Compensation will be
reviewed annually by NANI and Company, to determine whether such annual payments
reflect the fair market value of the services performed, and adjusted
appropriately following such review. For the purposes of such calculation, fair
market value of the Medical Directors' services shall be determined using
available market indicators such as compensation surveys, wage index factors and
changes to Medicare fee schedules for free-stranding outpatient dialysis
facilities. It is expressly agreed, however, that (i) any increases to such
payments shall be made only to the extent that the duties and responsibilities
of the Medical Directors and NANI hereunder, as appropriate, increase beyond
those duties and responsibilities in the prior year, and such increases shall be
consistent with the fair market value thereof, and (ii) such payments
-5-
<PAGE>
to NANI and any increase thereof shall in no way be determined in a manner that
takes into account the volume or value of referrals or business otherwise
generated between the Company, or any of its Affiliates (including the
Facilities) and the Medical Directors or NANI, for which payment may be made, in
whole or part, under a "federal health care program" (as such term is defined in
Section 1128B(a)(f) of the Social Security Act, as amended).
C. In addition to the amounts payable under Section 5(A) above, the
Company shall reimburse NANI for reasonable out-of-pocket costs and expenses
actually incurred by NANI in connection with the performance of its services and
duties hereunder, including all costs and expenses incurred in any transactions
outside the ordinary course of business on behalf of the Company, regardless of
whether such transactions are finally consummated.
6. NON-COMPETITION COVENANT.
A. Restricted Period. In consideration of the compensation payable
to NANI pursuant to this Agreement, NANI agrees that for the Term of this
Agreement, and for a period of two (2) years after its termination or expiration
for any reason whatsoever, NANI, either individually, or as a member of any
partnership, joint venture, or other entity, shall not:
(i) obtain any Financial Benefit (as hereinafter defined) from,
or any direct or indirect ownership or other interest in, any business,
firm, or entity which (a) provides dialysis services or is engaged in
the sale of durable medical equipment or dialysis supplies to dialysis
patients or in the sale of peritoneal supplies, or (b) competes with
the Company or any of its Affiliates (as hereinafter defined) within a
50 mile radius of any of the locations where the Company, or any of its
Affiliates regularly conduct operations, provided, that the preceding
prohibition shall specifically exclude the business of providing acute
dialysis services. For purposes of this Agreement, "Financial Benefit"
shall include, but shall not be limited to, medical directorship fees,
consultation fees, dividends, lease payments, management fees or any
other payment or financial benefit from professional services rendered
to any dialysis facility or entity or operation related to a dialysis
facility or from the referral of patients to another dialysis facility.
For purposes of this Agreement, "Affiliate" shall mean a person or
entity that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the
Company;
(ii) solicit or attempt to solicit any supplier or patient of any
of the Facilities so as to cause or attempt to cause such supplier or
patient to terminate his/her/its relationship with the Company and/or
Facility; or
(iii) solicit, influence or attempt to influence any employee
or independent contractor of the Company or any of the Facilities to
alter or terminate its relationship with the Company and/or Facility.
-6-
<PAGE>
B. No Limitation to Practice. This covenant shall in no way limit NANI
or any of its employed or contracted physicians in the practice of nephrology,
nor shall it be construed to require that NANI or any of its employed or
contracted physicians admit patients to the Facilities or restrict them from
admitting patients to any other dialysis facility or hospital, nor shall it
prohibit or in any way otherwise limit NANI from charging fees for administering
professional medical services to patients admitted to the Facilities or to any
other dialysis facility or hospital.
C. Enforcement. NANI acknowledges that enforcement of this covenant
will not prevent NANI or any of its employed or contracted physicians from
earning a living by practicing medicine or nephrology in the community where
they currently practice. It is also recognized and agreed by the Parties hereto
that any violation of this Agreement by NANI shall cause irreparable harm to the
Company for which monetary compensation shall not be adequate.
D. Blue Pencil. If any court of competent jurisdiction interprets the
covenants contained in this Section 6 to be too broad as to geographic, time or
scope limitations, the court shall have the power to limit said geographic, time
or scope limitations to those deemed to be reasonable and the Agreement shall be
fully enforceable as so limited by the court.
E. Extension of Restricted Period. In the event of a violation by NANI
of the covenants contained in this Section 6, it is mutually agreed that the
term of any such covenant shall be automatically extended against NANI for a
period of two (2) years from the date on which NANI permanently ceases such
violation, or for a period of two (2) years from the date of the entry by a
court of competent jurisdiction of a final order or a judgment enforcing such
covenant, whichever period is later. The extension of the term of the restricted
period provided in this Section 6 shall be in addition to, and not in lieu of
any other available remedies.
F. Definition of Patient. For purposes of this Agreement, the term
"patient" shall mean and include any person that was a patient of a Facility at
any time during the twelve (12) month period immediately preceding any
termination of this Agreement, or any person who thereafter becomes a patient at
a Facility.
G. Restrictions of Medical Directors. NANI hereby covenants and agrees
that it shall cause each of the Medical Directors or the NANI physicians
performing services hereunder to agree to be bound to a non-competition covenant
similar to that set forth above by causing each individual to execute a
Noncompetition Agreement in the form attached hereto as EXHIBIT C. NANI shall
require that each such individual execute such a Noncompetition Agreement as a
condition to the commencement of his/her tenure as a Medical Director or other
provider of services under this Agreement. The restrictive covenants contained
in this Section 6 and in any Noncompetition Agreement executed in connection
with the services to be provided by NANI to the Company and its Facilities as
described herein shall be in addition to and not in lieu of any other
restrictive covenants or agreements that NANI or any of its contracted or
employed physicians or any NANI Representative (as defined below) may have with
the Company or any of its Affiliates.
-7-
<PAGE>
7. CONFIDENTIAL INFORMATION.
NANI hereby agrees, and shall cause each of the Medical Directors and any
other NANI employees, officers, directors or agents performing services under
this Agreement (the "NANI Representatives") to agree, that during the Term of
this Agreement and for a period of two (2) years thereafter, neither NANI nor
any of the Medical Directors or NANI Representatives will make any use for its
own benefit, or for the benefit of any person, firm, partnership, joint venture,
corporation or other entity, other than the Company or its Affiliates, or
disclose to any person, firm, corporation or other entity other than the Company
or its Affiliates, any secret or confidential information, patient lists or any
other data or proprietary information of, or pertaining to business and
financial affairs or services of the Company and its Affiliates, to the extent
acquired as a result of this Agreement and not generally known within the
industry or as a matter of public knowledge.
8. EXCLUSIVE USE OF FACILITY RESOURCES.
NANI hereby acknowledges and agrees, and shall cause each of the Medical
Directors to acknowledge and agree, that the Facilities and their supplies,
equipment and employees shall be utilized by the Medical Directors exclusively
for the provision of dialysis services to patients of the Facilities and for the
performance by the Medical Directors of their duties hereunder. No portion of
the Facilities or their supplies or equipment, nor the time of any employee,
shall at any time be utilized by any Medical Director for the practice of
medicine or for any other purpose not expressly set forth in this Agreement.
9. MISCELLANEOUS.
A. Governing Law. The validity, construction, interpretation and
enforceability of this Agreement and the capacity of the Parties shall be
determined and governed by the laws of the State of Illinois.
B. Assignment. NANI shall not be permitted to assign or otherwise
transfer this Agreement without first obtaining the prior written consent of the
Company; provided however, the Company shall be permitted to assign this
Agreement without the consent of NANI. This Agreement shall be enforceable by or
against any permitted assigns hereunder.
C. Status of Parties. The Parties acknowledge that they are
independent parties, acting as independent contractors. The Company shall not be
responsible for nor be held liable for any of the acts or omissions of the
Medical Directors in performing such person's duties hereunder, except to the
extent such acts or omissions were directed to be performed by the Company.
D. Insurance. The Company agrees during the Term of this Agreement
that the Company shall purchase and keep in continuous force and effect a policy
of general liability insurance which shall have a single limit of at least One
Million Dollars ($1,000,000) covering
-8-
<PAGE>
the Company and its employees. NANI shall procure and maintain, on behalf of the
NANI Representatives, and on behalf of the Medical Directors, or shall cause
each of the Medical Directors to procure and maintain, professional liability
insurance covering their respective acts and omissions in connection with the
duties and obligations under this Agreement, as well as any professional
services rendered to patients at the Facilities. Such insurance shall have
minimum limits of at least One Million Dollars ($1,000,000) per occurrence and
Three Million Dollars ($3,000,000) in the aggregate per annum and shall name the
Company and Facilities as additional insured parties. Additionally, such NANI
and Medical Director insurance shall be written on an occurrence policy form;
provided, however, NANI and the Medical Directors shall be permitted to procure
said insurance coverage on a claims made policy form, so long as they also
obtain a reporting endorsement to cover any acts or omissions occurring during
the Term of this Agreement, and which reporting endorsement survives the
termination of this Agreement for a period of at least seven (7) years. Upon
request of the Company, NANI shall produce a copy of the certificate of
insurance or other appropriate evidence of such insurance.
E. Access to Books and Records. NANI and Company agree to comply
with Section 1861(v)(1)(I) of the Social Security Act, as amended, and the
regulations promulgated thereunder. Accordingly, during the Term of this
Agreement, and for a period of four (4) years following the termination of this
Agreement, NANI shall make available, upon written request by the Secretary of
the United States Department of Health and Human Services, the Comptroller
General of the United States or any of their duly authorized representatives,
all contracts, books, documents, and other records of NANI which are necessary
to verify the nature and extent of the costs of NANI's services hereunder. NANI
shall notify the Company within ten (10) days from receipt of such a request.
If the statutory provision and regulations noted above shall be deemed
inapplicable hereto, this Section 9(E) shall be deemed inoperative and without
force and effect.
F. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered in person, via
receipted overnight courier, or deposited in the U.S. mail, registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: If to NANI:
Everest Healthcare Services Corporation Nephrology Associates of Northern
101 North Scoville Illinois, Ltd.
Oak Park, Illinois 60302 101 North Scoville
Attention: Chief Executive Officer Oak Park, Illinois 60302
Attention: President
or to such other address as either party may designate in writing to the other
party in accordance with this Section 9(F).
-9-
<PAGE>
G. Waiver of Breach. The waiver by a Party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of the same or any other provision hereof
by that Party.
H. Severability. The provisions of this Agreement shall be
severable, and the invalidity of any provision, or portion thereof, shall not
affect the validity of the other provisions.
I. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
J. Limited Renegotiation. This Agreement shall be construed to be
in accordance with any and all applicable federal and state laws, including,
without limitation, Medicare, Medicaid and other federal and state statutes,
rules, regulations, principles and interpretations. In the event there is a
change in Medicare, Medicaid or other federal or state statutes, rules,
regulations, principles or interpretations that renders any of the material
terms of this Agreement unlawful or unenforceable, including any services
rendered or compensation to be paid hereunder, either party shall have the
immediate right to initiate the good faith negotiation of the affected term or
terms of this Agreement, upon notice to the other party, or remedy such
condition. Should the Parties be unable in good faith to renegotiate the term
or terms so affected so as to bring it/them into compliance with the statute,
rule, regulation, principle or interpretation that rendered it/them unlawful or
unenforceable within thirty (30) days of the date on which notice of a desired
renegotiation is given, then either Party shall be entitled, after the
expiration of said initial thirty (30) day period, to terminate this Agreement
upon an additional thirty (30) days' written notice to the other Party.
K. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties respecting the subject matter hereof and there are
no representations, warranties or commitments, except as set forth herein. This
Agreement may be amended only by an instrument in writing executed by the
Parties hereto.
L. Third Party Beneficiary. Affiliates of the Company, including,
but not limited to, the entities which operate the Facilities, are intended
third party beneficiaries of this Agreement and shall independently have the
right to enforce each of the applicable provisions of this Agreement, including,
but not limited to, the non-compete and non-solicitation provisions contained in
Section 6 of this Agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, the Company and NANI have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
COMPANY:
EVEREST HEALTHCARE SERVICES CORPORATION
By: /s/ CRAIG W. MOORE
----------------------------------------------
Craig W. Moore
Chairman and Chief Executive Officer
EVEREST HEALTHCARE SERVICES CORPORATION,
as agent for the Facilities listed on Exhibit A hereto
By: /s/ CRAIG W. MOORE
----------------------------------------------
Craig W. Moore
Chairman and Chief Executive Officer
NANI:
NEPHROLOGY ASSOCIATES OF NORTHERN ILLINOIS, LTD.
By: /s/ ARTHUR MORRIS
----------------------------------------------
Arthur Morris
President
-11-
<PAGE>
EXHIBIT A
FACILITY LOCATIONS/DESIGNATED MEDICAL DIRECTORS
Facility Name & Location Designated Medical Director
- ------------------------ ---------------------------
1. Aurora Dialysis Center Michael Carbon, M.D.
516 South Lincoln
Aurora, Illinois 60505
2. Chicago Dialysis Center George Dunea, M.D.
640 West Washington
Chicago, Illinois 60606
3. Jackson Park Dialysis Center Douglas Mufuka, M.D.
7531 South Stony Island Avenue
Chicago, Illinois 60649
4. Oak Park Dialysis Center Paul Balter, M.D.
733 Madison Street
Oak Park, Illinois 60302
5. South Side Dialysis Center Ashutosh Gupta, M.D.
7721 South Western Avenue
Chicago, Illinois 60620
6. West Suburban Dialysis Center Arthur Morris, M.D.
Erie at Austin
Oak Park, Illinois 60302
A-1
<PAGE>
EXHIBIT B
MEDICAL DIRECTOR QUALIFICATIONS
QUALIFICATIONS:
Each Medical Director shall be:
(i) a licensed physician in the state in which the facility is
located that he/she will serve as a medical director;
(ii) board certified or board eligible in internal medicine or
pediatrics, with a minimum of one year experience or
training in the care of patients at End Stage Renal Disease
("ESRD") treatment facilities, or have previously served as
a director of a dialysis or transplantation program for at
least twelve (12) months between September 1, 1971 and
September 1, 1976;
(iii) maintain a current participation agreement with the
Secretary of the United States Department of Health and
Human Services, under the Medicare Program;
(iv) maintain a current Drug Enforcement Administration
registration; and
(v) otherwise remain qualified to act as a medical director of a
dialysis treatment facility.
DUTIES AND RESPONSIBILITIES:
Each Medical Director shall have immediate responsibility for the quality
of professional care delivered to the patients at his/her respective facility,
and shall exercise said responsibility through directing the professional
services of the facility, including patient care, education and research. The
Medical Director shall serve as the official channel of communications between
the medical staff and the governing body for the facility. The Medical Director
is also responsible to function as a liaison with "affiliated medical
institutions" (as defined in applicable federal regulations) with respect to
his/her facility.
Specific responsibilities for each Medical Director include:
1. Oversight of the administration and execution of the facility's
patient care policies, with day-to-day implementation of these
policies delegated to the nurse manager.
2. Implementation and ongoing oversight of a patient care policy and
procedures manual, in accordance with federal regulations, which
describes:
B-1
<PAGE>
(a) the types of dialysis used in the facility and the procedures
followed in performance of each type of dialysis;
(b) procedures for the prevention of hepatitis and the care of
patients with hepatitis;
(c) procedures for dealing with infectious agents (e.g. AIDS); and
(d) a disaster readiness plan.
3. Medical consultation with the nurse manager.
4. Oversight of the proper coordination and performance of all patient
care services within the facility.
5. Regular consultation with the facility's nurse manager and members of
the governing body to encourage the proper maintenance of the
facility, including the daily operation and maintenance of dialysis
equipment and the utilization of medical supplies.
6. Participation in the availability and selection of the appropriate
dialysis treatment modality and setting for facility patients, through
participation in monthly patient care plan/quality assurance meetings
and annual long term patient care plan meetings.
7. Monitoring the adequate supervision of the dialysis operation by
medical and patient care staff and assuring periodic assessment of
patient performance of dialysis tasks for self dialysis patients.
8. Participation in the development, needs analysis, implementation and
evaluation of facility training programs, including in-service
training in dialysis methods for nurses and other personnel. Where
the facility provides self-dialysis training to patients, the Medical
Director is responsible, in consultation with nursing and social work
staff, for assuring that each patient has ready access to all training
materials, supplies and equipment during training and at other times
deemed beneficial to the patient.
9. Oversight of the maintenance of all records relating to the care and
treatment of patients in the facility in accordance with facility
policies and applicable regulations of public health and governmental
reimbursement agencies. While the head nurse has day to day
responsibility in this regard, the Medical Director shall be
responsible for overseeing the integrity and completeness of medical
records, including:
B-2
<PAGE>
(a) patient long-term care plans; patient short-term care plans;
medical history;
(b) results of physical examinations and laboratory tests;
(c) the timely completion of all applicable federal, state and local
filings, including but not limited to, Health Care Financing
Administration ("HCFA") certificates and forms;
(d) progress notes by all patient care staff; complete and legibly
signed orders and discharge summary; and
(e) assisting in the implementation and operation of electronic
medical records systems.
10. Review of federal, state and local survey reports and, as needed,
participation in the development and implementation of an appropriate
plan of correction.
11. Review of periodic evaluation reports of all facility incident
reports.
12. Participation in scheduled meetings concerning the facility.
13. Review and approval with appropriate medical staff consultation of
applications for those physicians seeking privileges in the facility.
14. Oversight of all disciplinary action with regard to any matter of the
medical staff or patient care personnel as needed to assure the
quality of services and conformity to facility rules and policies.
15. To the extent that any hospital(s) provide acute hospitalization and
back-up services to patients of the facility, the Medical Director
shall provide coordination and quality assurance functions for the
facility vis-a-vis such hospital(s).
16. Oversight of the facility's overall compliance with:
(i) the Medicare Conditions for Coverage of Suppliers of End-
Stage Rental Disease Services, as set forth in 42 C.F.R. (S)
405.2100 et. seq.; and
(ii) all applicable state laws, regulations or policies
concerning licensure and/or registration of health care
facilities similar to the facilities.
B-3
<PAGE>
EXHIBIT C
FORM OF NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (the "Agreement") is entered into as of
_________________ by and between ____________________________ (the "Company")
and _______________________________ in his/her individual capacity (the
"Physician").
WHEREAS, Physician has been designated to serve as the "Medical Director"
of the Company's facility known as ___________________________ located at
___________________, ___________, ____________ (the "Facility") pursuant to that
certain Medical Director and Administrative Services Agreement (the
"Administrative Services Agreement") dated October 1, 1997 by and between
Nephrology Associates of Northern Illinois, Ltd. and Everest Healthcare Services
Corporation ("Everest");
WHEREAS, as the Medical Director of the Facility, Physician will have
access to, and will gain knowledge of certain proprietary and confidential
information concerning the Company, including, but not limited to, various trade
secrets and competitive information; and
WHEREAS, in order to induce the Company to designate Physician as Medical
Director of the Facility, Physician desires to enter into this Agreement.
NOW, THEREFORE, in consideration of the terms and conditions and the
representations and warranties herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
COVENANT NOT TO COMPETE
1.1 Covenants. Physician agrees that during the time he/she is a Medical
---------
Director at the Facility and for a period equal to two (2) years following the
termination of Physician's Medical Directorship at the Facility, he/she will
not, directly or indirectly, alone or in association with others, in his/her
capacity as partner, shareholder, member, employee, officer or other legal or
beneficial capacity, or through or in connection with any corporation, limited
liability company, partnership or other form of business entity, without the
prior written consent of Company:
(a) Obtain any Financial Benefit (as hereinafter defined) from, or
any direct or indirect ownership or other interest in, any business, firm,
or entity other than the Company or any of its Affiliates which (i)
provides dialysis services or (ii) is engaged in the sale of durable
medical equipment or dialysis supplies to home dialysis patients or in the
sale of peritoneal supplies, or (iii) competes with the Company or any of
its Affiliates (as hereinafter defined), within a fifty (50) mile radius of
the Facility (the
C-1
<PAGE>
"Territory"). For purposes of this Agreement, "Financial Benefit" shall
include, but shall not be limited to, medical directorship fees,
consultation fees, dividends, lease payments, management fees or any other
payment or financial benefit from professional services rendered to any
dialysis facility or entity or operation related to a dialysis facility or
from the referral of patients to another dialysis facility. "Affiliate"
shall mean a person or entity that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common
control with, the Company;
(b) Solicit or attempt to solicit any supplier or patient of the
Facility so as to cause or attempt to cause such supplier or patient to
terminate his/her/its relationship with the Facility; or
(c) Solicit, influence or attempt to influence any employee or
independent contractor of the Company to alter or terminate his/her/its
relationship with the Company.
1.2 No Limitation on Practice. This covenant shall in no way limit the
-------------------------
Physician in the practice of nephrology, nor shall it be construed to require
that the Physician admit patients to the Facility or restrict him/her from
admitting patients to any other dialysis facility or hospital, nor shall it
prohibit or, in any way, otherwise limit the Physician from charging fees for
administering professional medical services to patients admitted to the Facility
or to any other dialysis facility or hospital.
1.3 Enforcement. The Physician acknowledges that enforcement of the
-----------
covenants contained in Article I of this Agreement shall not prevent him/her
from earning a living by practicing medicine or nephrology in the community
where he/she currently practices. It is also recognized and agreed by the
parties hereto that any violation of the covenants contained in Article I of
this Agreement by the Physician shall cause irreparable harm to the Company for
which monetary compensation shall not be adequate. The Physician further
acknowledges that the medical director services provided to the Facility
pursuant to this Agreement are pursuant to the Administrative Services
Agreement, and that in connection therewith Everest is an intended third party
beneficiary of this Agreement and shall independently have the right to enforce
the provisions hereof including without limitation the provisions of this
Article I.
1.4 Blue Pencil. If any court of competent jurisdiction interprets the
-----------
covenants contained in Article I of this Agreement to be too broad in
geographic, time or scope limitations, the court shall have power to limit said
geographic, time or scope limitations to those deemed to be reasonable and the
Agreement shall be fully enforceable as so limited by the court.
1.5 Extension of Restricted Period. In the event of a violation by the
------------------------------
Physician of any of the covenants contained in Article I of this Agreement, it
is mutually agreed that the term of any such covenant shall be automatically
extended against the Physician for a period of two (2) years from the date on
which the Physician permanently ceases such violation or for a period of two (2)
years from the date of the entry by a court of competent jurisdiction of a final
order
C-2
<PAGE>
or a judgment enforcing the covenant, whichever period is later. The extension
of the term of the covenants provided in Article I of this Agreement shall be in
addition to, and not in lieu of, any other available remedies.
1.6 Definition of Patient. For purposes of this Agreement, the term
---------------------
"patient" shall mean and include any person that was a patient of the Facility
at any time during the twelve (12) month period immediately preceding the
termination of Physician's Medical Directorship, or any person who thereafter
becomes a patient at the Facility.
1.7 Other Restrictive Covenants. The Physician acknowledges that the
---------------------------
restrictive covenants contained in Article I of this Agreement are in
consideration of the provision of medical director services at the Facility and
such restrictive covenants shall be in addition to and not in lieu of any other
restrictive covenants or agreements that the Physician may have with the Company
or any of its Affiliates.
1.8 Right to Injunctive Relief. In the event of a breach of any provision
--------------------------
of this Agreement, Company, as it may elect, shall be entitled to an injunction
restraining Physician from such conduct in addition to such other remedies as
may be available to Company for such breach.
ARTICLE II
MISCELLANEOUS
2.1 Assignment. This Agreement shall not be assignable by Physician.
----------
Company, however, may assign this Agreement without Physician's consent.
2.2 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, successors and permitted assigns of each party hereto.
2.3 Entire Agreement. Subject to Section 1.7, this Agreement constitutes
----------------
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior oral or written representations, warranties and
agreements between the parties with respect to the subject matter hereof.
2.4 Notices. All notices and other communications required or permitted
-------
to be given under this Agreement shall be in writing and shall be considered
given and delivered when personally delivered to the party to whom such notice
or communication is addressed or when delivered by courier, when received by
facsimile or when deposited in the United States mail, postage prepaid, return
receipt requested, properly addressed to a party at the address set forth below,
or at such other address as such party shall have specified by notice given in
accordance with this Section.
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<PAGE>
If to Physician: _____________________________________
c/o Nephrology Associates of Northern
Illinois, Ltd.
101 North Scoville
Oak Park, Illinois 60302
If to Company: _____________________________________
_____________________________________
_____________________________________
With a copy to: Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60611
Attention: Alan M. Berry, Esq.
2.5 Waiver. Any term or condition of this Agreement may be waived at any
------
time by the party or parties entitled to the benefit thereof, but only by a
written notice signed by the party or parties waiving such terms or conditions.
The waiver of any term or condition shall not be construed as a waiver of any
other term or condition of this Agreement.
2.6 Amendment. This Agreement may be amended, supplemented or modified at
---------
any time, but only by a written instrument duly executed by Physician and by
Company, which amendment shall be effective as of the date specified herein.
2.7 Governing Law. This Agreement shall be construed, and the rights and
-------------
liabilities of the parties hereto determined, in accordance with the internal
laws of the State of Illinois, provided, however, that the conflicts of law
principles of the State of Illinois shall not apply to the extent that they
would operate to apply the laws of another state.
2.8 Cost of Litigation. In the event any party to this Agreement (or
------------------
Everest as provided in Section 1.3 hereof) takes legal action to enforce any of
the terms of this Agreement, the prevailing party to such action shall be
entitled to reimbursement for such party's reasonable expenses, including but
not limited to reasonable attorneys' fees, incurred in such action.
2.9 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall constitute an original and all of which when
taken together shall constitute one and the same agreement.
2.10 Severability. The provisions of this Agreement shall be severable,
------------
and the invalidity of any provision, or portion thereof, shall not affect the
validity of the other provisions.
C-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
COMPANY:
WSKC DIALYSIS SERVICES, INC.
By:____________________________________
Arthur Morris
President
PHYSICIAN:
_______________________________________
[Name]
C-5
<PAGE>
EXHIBIT 10.7
MANAGEMENT SERVICE AGREEMENT
----------------------------
THIS MANAGEMENT SERVICE AGREEMENT (this "Agreement") is made and entered
into as of the 1st day of October, 1997, by and between NEPHROLOGY ASSOCIATES OF
NORTHERN ILLINOIS, LTD., an Illinois medical corporation (the "Company"), and
EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware corporation (the "Manager").
WHEREAS, the Company employs physicians and personnel with expertise in
providing dialysis treatment and other dialysis-related services to patients;
WHEREAS, the Manager is experienced in the administration of companies that
provide medical services to patients; and
WHEREAS, the Company and the Manager desire to memorialize their
arrangement regarding the provision of management and administrative services by
the Manager to the Company.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DUTIES OF MANAGER.
-----------------
A. The Company hereby engages the services of the Manager and the Manager
agrees to perform services for the Company, subject to the direction, control
and approval of the Board of Directors of the Company, effective as of October
1, 1996 (the "Effective Date"). The management and administrative functions to
be provided by the Manager shall include without limitation, the following:
i. Performance of general executive and administrative services,
including without limitation, periodic advice and consultation
with respect to the Company's strategic affairs;
ii. Performance of all administrative and accounting functions,
including:
(1) hiring and payroll processing,
(2) personnel and benefit administration,
(3) billing and collection of accounts receivable,
(4) contracting and accounts payable,
(5) financial statements and tax return preparation, and
(6) insurance management;
<PAGE>
iii. Maintenance of professional liability, general liability and
property insurance for the actions of its employees, in such
reasonable amounts, with such companies and on such terms and
conditions as the parties may agree; and
iv. Undertaking such other corporate, managerial and related
strategic services as the Company may from time to time
reasonably request.
B. Notwithstanding anything to the contrary contained herein, Manager
shall only be required to devote such time to the performance of its duties
hereunder as is reasonably necessary for Manager to perform its duties
hereunder. The Company acknowledges and agrees that the Manager may engage in
other business activities without the consent of the Company.
C. The officers and employees of the Manager shall be experienced in the
business and administration of physician practice management and they shall have
obtained sufficient knowledge to efficiently and effectively administer the
operations of the Company.
2. TERM.
----
The initial term of this Agreement shall commence on the Effective Date and
shall continue for a period of five (5) years (the "Initial Term"). Thereafter,
this Agreement shall automatically renew for consecutive one (1) year renewal
terms, unless either party provides the other party with written notice of its
intent to terminate this Agreement upon at least ninety (90) days' prior written
notice. In the event this Agreement shall be extended and renewed as herein
provided, except as expressly modified in writing by the parties, all terms,
conditions and provisions of this Agreement shall continue to apply to any
extension hereof. Notwithstanding the termination of this Agreement, any
provisions that are intended to survive termination of this Agreement, including
the obligation to pay any accrued compensation, shall continue with full force
and effect.
3. COMPENSATION.
------------
In consideration of the services, covenants and agreements agreed to be
performed by the Manager pursuant to this Agreement, the Company agrees to pay
the Manager the sum of Eight Hundred Twenty-Five Thousand Dollars ($825,000) per
year, payable in twelve equal annual installments, plus $40.52 per each acute
treatment billed and otherwise administered by the Manager. The amounts payable
under this Section 3 shall be adjusted periodically to provide for changes in
services and inflation, as mutually agreed between the parties.
4. EXPENSES.
--------
In addition to the amounts payable under Section 3 above, the Company shall
reimburse the Manager for reasonable out-of-pocket costs and expenses reasonably
incurred by the Manager in connection with performing its services hereunder.
-2-
<PAGE>
5. INDEMNITY.
---------
The Company agrees to indemnify and hold harmless the Manager, its
controlling persons and each director, officer, shareholder and employee
thereof, from and against any and all losses, claims, liabilities, suits, costs,
damages and expenses (including attorneys' fees) arising as a result of this
Agreement and/or the relationship of the parties hereunder.
6. RESTRICTIVE COVENANTS.
---------------------
A. The Company covenants and agrees that during the term of this Agreement
and for a period of two (2) years from and after the termination of this
Agreement for any reason, the Company shall not directly or indirectly: (i)
take any action to divert or disrupt any of the existing business carried on by
the Manager; or (ii) induce, influence, or attempt to influence any of the
Manager's employees to alter or terminate their employment with the Manager.
B. Neither party shall at any time during the term of this Agreement, or
anytime thereafter, use for its own benefit (except as may be required to carry
out its duties under this Agreement) or divulge, furnish, or cause to be
divulged or furnished, or make accessible to any corporation, partnership, joint
venture, person or entity, any confidential knowledge or information, including
without limitation, patient lists, addresses, telephone numbers and other
patient specific information, books, records, financial statements or other
financial information, supplier information, contracts or information relating
to the business and affairs of the other party, which it may have obtained from
the other party during the term of this Agreement. Upon termination of this
Agreement, each party shall promptly deliver to the other party all files,
patient lists and information, memoranda, plans, records or written materials of
any kind of the other party, which are then in its possession or under its
control.
C. The parties agree that damages will not sufficiently compensate for a
breach of this Section 6, and that in the event of such a breach, the non-
breaching party shall have the right to petition a court of competent
jurisdiction for an injunction or for other equitable relief in addition to all
other remedies allowed by law. In the event the non-breaching party is
successful in a lawsuit enforcing the provisions of this Agreement then, in
addition to all other remedies, the non-breaching party shall be entitled to
recover all costs of litigation, including reasonable attorney's fees, from the
other party.
D. In the event of a violation by a party of the covenants contained in
this Section 6, it is mutually agreed that the term of the covenants shall be
automatically extended against the breaching party for a period of two (2) years
from the date on which the party permanently ceases such violation or for a
period of two (2) years from the date of the entry by a court of competent
jurisdiction of a final order or a judgment enforcing the covenants, whichever
period is earlier. The extension of the term of the covenants provided in this
Section 6 shall be in addition to, and not in lieu of, the remedies provided in
Section 6(C) above.
-3-
<PAGE>
E. If a court of competent jurisdiction should declare the covenants
contained in this Section 6 unenforceable because of any unreasonable
restriction of duration or scope, then the parties hereby acknowledge and agree
that such court shall have the express authority to reform the covenants to
provide for reasonable restrictions and/or grant such other relief at law or in
equity reasonably necessary to protect the interests of the parties.
F. Each of the parties warrants and represents that it: (i) is familiar
with restrictive covenants; (ii) has concluded that such obligations, including,
without limitation, the right to equitable relief contained herein, are
reasonable; and (iii) is fully aware of the duties, responsibilities,
obligations and liabilities imposed upon the parties by this Agreement. Each of
the parties hereto acknowledges, each to the other, that the restrictive
covenants contained in this Agreement are fair, reasonable and just, under the
circumstances, and not a penalty.
7. MISCELLANEOUS.
-------------
A. Governing Law. The validity, construction, interpretation and
enforceability of this Agreement and the capacity of the parties shall be
determined and governed by the laws of the State of Illinois.
B. Assignment. The Company may not assign this Agreement without the
express written consent of the Manager which shall not be unreasonably withheld;
provided, however the Manager may assign this Agreement without the consent of
the Company.
C. Status of Parties. The parties acknowledge that the Manager is acting
as an independent contractor, retaining control over and responsibility for its
own operations and personnel. Neither the Manager nor its employees shall be
considered employees or agents of the Company as a result of this Agreement or
the services provided hereunder.
D. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered in person or deposited
in the U.S. mail, registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company:
Nephrology Associates of Northern Illinois, Ltd.
101 North Scoville
Oak Park, Illinois 60302
Attention: Arthur Morris, M.D.
-4-
<PAGE>
If to the Manager:
Everest Healthcare Services Corporation
101 North Scoville
Oak Park, Illinois 60302
Attention: Craig W. Moore
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Alan M. Berry, Esq.
Matthew S. Brown, Esq.
or to such other address as either party may designate in writing to the other
party in accordance with this Section 7(D).
E. Waiver of Breach. The waiver by a party of a breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach of the same or any other provision hereof by
that party.
F. Severability. The provisions of this Agreement shall be severable and
the invalidity of any provision or portion thereof shall not affect the validity
of the other provisions.
G. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same agreement.
H. Limited Renegotiation. This Agreement shall be construed to be in
accordance with any and all applicable federal and state laws, including,
without limitation, Medicare, Medicaid and other federal and state statutes,
rules, regulations, principles and interpretations. In the event there is a
change in Medicare, Medicaid or other federal or state statutes, rules,
regulations, principles or interpretations that renders any of the material
terms of this Agreement unlawful or unenforceable, including any services
rendered or compensation to be paid hereunder, either party shall have the
immediate right to initiate the good faith renegotiation of the affected term or
terms of this Agreement, upon notice to the other party, or remedy such
condition. Should the parties be unable in good faith to renegotiate the term
or terms so affected so as to bring it/them into compliance with the statute,
rule, regulation, principle or interpretation that rendered it/them unlawful or
unenforceable within thirty (30) days of the date on which notice of a desired
renegotiation is given, then either party shall be entitled, after the
expiration of said initial thirty (30) day period, to terminate this Agreement
upon thirty (30) days
-5-
<PAGE>
written notice to the other party; provided, that if the Agreement is terminated
by the Manager, the terms of Section 6 hereof shall survive such termination as
provided therein.
I. Force Majeure. If either party is delayed or prevented from fulfilling
any of its obligations under this Agreement by Force Majeure, such party shall
not be liable under this Agreement for the delay or failure. "Force Majeure"
means any cause beyond the reasonable control of a party, including but not
limited to an act of God, act or omission of civil or military authorities of a
state or nation, fire, strike, flood, riot, war, delay of transportation, or
inability due to any of these causes to obtain necessary labor, materials or
facilities.
J. Collateral Agreements. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and there are no
representations, warranties or commitments with respect to the subject matter
hereof, other than as set forth herein. This Agreement may be amended only by
an instrument in writing executed by the parties hereto.
K. No Referrals. Notwithstanding anything contained in this Agreement to
the contrary, in no event shall any provision contained in this Agreement be
construed as requiring or otherwise obligating the Manager or any of its
Affiliates to refer patients to, or otherwise generate business for, the
Company. As used in this Agreement, the term "Affiliate" shall mean a person or
entity that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, such party.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company and the Manager have caused this Agreement
to be duly executed and delivered as of the Effective Date.
COMPANY:
NEPHROLOGY ASSOCIATES OF NORTHERN
ILLINOIS, LTD.
By: /s/ ARTHUR MORRIS
---------------------------------
Arthur Morris
President
MANAGER:
EVEREST HEALTHCARE SERVICES
CORPORATION
By: /s/ JOHN B. BOURKE
---------------------------------
John B. Bourke
Chief Financial Officer
-7-
<PAGE>
EXHIBIT 10.8
SHAREHOLDERS AGREEMENT
BY AND AMONG
ARTHUR MORRIS, M.D.
PAUL BALTER, M.D.
MICHAEL CARBON, M.D.
DOUGLAS MUFUKA, M.D.
ASHUTOSH GUPTA, M.D.
GEORGE DUNEA, M.D.
CRAIG W. MOORE
PEAK LIQUIDATING, L.L.C.
MARTIN FOX
THOMAS CREEL
PAUL ZABETAKIS
ANTHONY UNRUH
THE SHAREHOLDERS' AGENT
AND
EVEREST HEALTHCARE II, INC.
<PAGE>
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT (the "Agreement") is made and entered into as
of November 30, 1997 by and among PEAK LIQUIDATING, L.L.C. (a Delaware limited
liability company) ("Peak Liquidating"), ARTHUR MORRIS, M.D., PAUL BALTER, M.D.,
MICHAEL CARBON, M.D., DOUGLAS MUFUKA, M.D., ASHUTOSH GUPTA, M.D., GEORGE DUNEA,
M.D. and CRAIG W. MOORE (collectively, with Peak Liquidating, the "Peak
Shareholders"), MARTIN FOX, THOMAS CREEL, PAUL ZABETAKIS and ANTHONY UNRUH
(collectively, the "HDA Shareholders"), EVEREST HEALTHCARE II, INC., a Delaware
corporation (the "Company"), MARTIN FOX, as agent of the HDA shareholders (the
"Shareholder Agent"), and each other party executing or otherwise becoming a
party hereto. The Peak Shareholders and the HDA Shareholders, and each other
party executing or otherwise becoming a party hereto as a shareholder of the
Company, are hereinafter collectively referred to as the "Shareholders" and
individually referred to as a "Shareholder."
RECITALS
--------
A. In 1995, Everest Healthcare Services Corporation, a Delaware
corporation ("Everest"), was formed as a holding company for various affiliated
dialysis and perfusion facilities. A majority of the issued and outstanding
shares of common stock of Everest was owned by Peak Healthcare, L.L.C., a
Delaware limited liability company ("Peak"), the members of which were the Peak
Shareholders.
B. In 1996, Home Dialysis of America, Inc., an Arizona corporation
("HDA"), and certain other entities merged into Everest pursuant to the Merger
Agreement (as defined herein). As a result of this merger, the HDA Shareholders
became shareholders of Everest. Voting of the HDA Shareholders' shares of the
common stock of Everest was controlled by a Shareholders Agreement, dated as of
June 20, 1996 (the "Everest Shareholders Agreement"), among the HDA
Shareholders, Peak, Everest and the HDA Shareholders' Agent.
C. Peak has been incorporated as the Company and the Peak Shareholders
have become majority shareholders of the Company. Pursuant to an exchange
offer, the HDA Shareholders have exchanged their shares of common stock of
Everest for common stock, par value $.001, of the Company (the "Common Stock").
D. The Company and the Shareholders deem it desirable to enter into this
Agreement to establish certain rights and restrictions with respect to the
management of the Company and the voting, transfer and sale of shares of the
Common Stock held by the Shareholders.
E. The parties hereto are entering into this Agreement in substitution of
the Everest Shareholders Agreement.
<PAGE>
PROVISIONS
NOW, THEREFORE, in consideration of the premises, the mutual covenants of
the parties hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS. The following terms will have the meaning for purposes of this
-----------
AGREEMENT set forth below for such term.
"AFFILIATE" means (i) any shareholder, partner, member or other type of
equity owner of the Company, (ii) any Person or group of Persons who, directly
or indirectly, controls, is controlled by, or is under common control with the
Company, and (iii) any entity which, directly or indirectly, is controlled by
one or more of the Persons referred to in clause (i) or (ii) above .
"BOARD" means the board of directors of the Company.
"EFFECTIVE TIME" means the date and time at which the Certificate of Merger
as defined in the Merger Agreement was accepted for filing.
"FAMILY" means, with respect to any Shareholder who is a natural person,
such shareholder's spouse, child (natural, adopted or step), grandchild, parent,
siblings or a trust or partnership solely for the benefit of such shareholder
and/or any of the foregoing.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its subsidiaries.
"INDEPENDENT THIRD PARTY" means any Person who is not (i) directly or
indirectly a shareholder of the Company or (ii) an affiliate, spouse or
descendant by (birth or adoption) of a shareholder of the Company or owned or
controlled by any such Person.
"MANAGEMENT AGREEMENT" means that certain Management Services Agreement, by
and between Peak and Everest, dated as of October 1, 1995, as amended, restated
or otherwise modified and in effect.
"MERGER AGREEMENT" means that certain Agreement and Plan of Reorganization,
by and among Everest, Home Dialysis of America, Inc., an Arizona corporation,
HDA Acquisition, Inc., an Arizona corporation, the HDA Shareholders, and the HDA
Shareholders' Agent.
"NANI-IL" means Nephrology Associates of Northern Illinois, Ltd., a medical
corporation formed under the laws of Illinois.
-2-
<PAGE>
"NANI-IN" means Nephrology Associates of Northern Indiana, P.C., a
professional corporation formed under the laws of Indiana.
"ORIGINAL SHAREHOLDERS" shall mean the following persons who were the HDA
Shareholders and the Peak Shareholders of the Company: Arthur Morris, Paul
Balter, George Dunea, M.D. Revocable Trust U/A/D _______, Michael Carbon,
Ashutosh Gupta, Douglas Mufuka, Craig W. Moore, Martin Fox, Thomas Creel, Paul
Zabetakis and Anthony Unruh.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or other entity.
"PERMITTED TRANSFEREE" means (i) a Shareholder's spouse, parent,
descendant, or (ii) a trust or family partnership solely for the benefit of such
Shareholder, the Shareholder's spouse, parent and/or descendants at any time
that it holds Common Stock, (iii) a Revocable Trust of an Original Shareholder,
or (iv) such Shareholder's personal representative for purposes of
administration of such Shareholder's estate or upon such Shareholder's
incompetency for the purpose of the protection or management of such Person's
assets; provided, however, that if any proposed transferee is less than 21 years
of age at the time of a proposed Transfer to such Person, then such transfer may
only be made to a trustee of a valid trust for the benefit of such Person, which
trust shall not terminate prior to the beneficiary (or beneficiaries) thereof
attaining the age of 21.
"QUALIFIED PUBLIC OFFERING" means the sale, in an underwritten public
offering registered under the Securities Act, of shares of Common Stock, which
may include securities held by Shareholders, either alone or in conjunction with
each other, in which the price per share paid by the public for such securities
will be at least $10, reflecting a post-offering market capitalization for the
Company of at least $150 million.
"REVOCABLE TRUST" means with respect to an Original Shareholder a trust
created during his lifetime which (i) is amendable and revocable solely by such
Original Shareholder, and (ii) in which the Original Shareholder is the sole
trustee and sole beneficiary.
"SALE OF THE COMPANY" means any transaction between the Company and one or
more Independent Third Parties, including by consolidation, merger or
liquidation, pursuant to which such party or parties acquire (i) a majority of
the issued and outstanding shares of capital stock of the Company, or (ii) all
or substantially all of the Company's assets.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"TRANSFER" means any sale, disposition, assignment, pledge, hypothecation,
encumbrance or other transfer.
Each initial capitalized term not otherwise defined in this Agreement shall
have the definition set forth in the Merger Agreement.
2. CERTAIN AGREEMENTS.
------------------
2.1 VOTING COMMITTEE.
----------------
(a) A voting committee (the "Voting Committee") consisting of four
individuals designated by Peak and one individual designated by the
Shareholders' Agent shall be formed on the date hereof. The initial designees of
Peak to such committee shall be Craig W. Moore, Arthur Morris, M.D., Michael
Carbon, M.D., and Paul Balter, M.D. (the "Peak Designees"). The initial designee
of the Shareholders' Agent shall be Martin Fox (the "HDA Designee").
Notwithstanding any provision contained herein, in the event of Martin Fox's
unavailability for any meeting of the Voting Committee, the HDA Directors shall
have full power to act as the HDA Designee. If any Peak Designee resigns from
such committee, the Peak Shareholders shall have the right to designate such
person's replacement on such committee. If the HDA Designee resigns from such
committee, the Shareholders' Agent shall have the right to designate such
person's replacement on such committee. The members of the Voting Committee
shall designate a secretary of such committee (the "Secretary").
(b) In the event the Shareholders of the Company are voting or consenting
to any matter, at the written request of the HDA Designee to the Company, the
Voting Committee shall be convened for a meeting in person or via telephone to
consider each issue on which the Shareholders of the Company are entitled to
vote. The Secretary shall give each member of the Voting Committee five days'
notice of any meeting of the Voting Committee unless an emergency exists which
requires shorter notice. Such notice shall state all of the matters on which the
Voting Committee shall act at such meeting, and no matters shall be acted on at
such meeting which are not stated in such notice unless each of the members of
the Voting Committee consents to or ratifies such action being taken at such
meeting. At all meetings of the Voting Committee, three or more members of the
Voting Committee, present in person or represented by proxy, shall constitute a
quorum. If a meeting of the Voting Committee cannot be organized because of the
absence of a quorum, the members present may adjourn the meeting to such time
and place as it may determine. The acts of a majority of the members of the
Voting Committee, present in person or by proxy and voting at a meeting having a
quorum, shall be the acts of the Voting Committee. The Peak Designees shall vote
as they are required to vote in accordance with any agreements regarding such
votes among the Peak Shareholders.
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(c) At each meeting of the Voting Committee, the members of the Voting
Committee shall discuss the issues, if any, on which the Shareholders of the
Company are entitled to vote, and shall take a vote on any such issues, and the
outcome of such vote shall be certified by the Secretary.
(d) Each of the HDA Shareholders hereby appoints Martin Fox as his agent
(together with any such replacement or substitute acting in such capacity, the
"Shareholders' Agent") to act on his behalf as set forth herein and in the other
Transaction Documents to which such HDA Shareholder or the Shareholders' Agent
is a party. The Shareholders' Agent is hereby authorized by each of the HDA
Shareholders to act hereunder and under such Transaction Documents on his behalf
with the powers and authority provided for herein and therein as the
representative of such HDA Shareholder and his successors. Each of the
Shareholders hereby (i) ratifies the selection of Martin Fox to act as the
initial Shareholders' Agent and his authority to act hereunder and under such
Transaction Documents on behalf of such HDA Shareholder and his successors, and
(ii) agrees that any action taken by the Shareholders' Agent pursuant to the
terms of this Agreement or such Transaction Document on his behalf shall be the
act of such HDA Shareholder as fully as if such Shareholder had taken such
action himself. The HDA Shareholders may designate a substitute or replacement
Shareholders' Agent by delivery of a written notice pursuant to Section 9.2
hereof of such designation executed by each HDA Shareholder, who is not then the
Shareholders' Agent.
2.2 VOTING AGREEMENT. Each of the Shareholders shall, and shall
----------------
cause its officers, directors, shareholders, agents, trustees or employees to,
execute all documents and take all actions necessary or desirable, including the
voting of shares beneficially owned by it or with respect to which it has the
right to vote:
(a) to, during such time as the HDA Shareholders collectively hold at
least one-fourth of the Common Stock held (the "Material Holding Period") by
them, after giving effect to the Contemplated Transactions provide for the
election to the Board of two (2) nominees (the "HDA Directors") designated by
the Shareholders' Agent which nominees initially shall be Martin Fox and Tom
Creel, and in the event of any resignation, removal of, or inability to serve as
a director by, any such nominee, or other vacancy in the position of a director
so designated to provide for such vacancy to be filled by a successor nominee
designated by the Shareholders' Agent;
(b) to, if the Voting Committee shall decide that it is in the best
interests of the Company to increase the size of the Board other than in
connection with an acquisition, merger or other strategic transaction in
connection with which one or more persons will be added to the Board, and the
Material Holding Period is continuing, vote the Common Stock owned by it to
provide for the election to the Board of an additional number of nominees
designated by the Shareholders' Agent equal to, when added to the number of
nominees already elected to the
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Board in accordance with Section 2.2(a), 22 percent of the members of the Board
who are representatives of the Shareholders, each of which members of the Board
shall be replaced as set forth above in Section 2.2(a);
(c) to, so long as the Peak Shareholders and the HDA Shareholders own or
control in the aggregate no less than 40 percent of the outstanding and issued
Common Stock, support, ratify, endorse, or oppose all matters relating to the
Company and which are submitted to the Shareholders for a vote as supported,
ratified, endorsed or opposed by the Voting Committee by a vote of its members
in accordance with Section 2.1.
2.3 PROXY. Each Shareholder hereby grants to the Voting Committee a
-----
proxy to vote the shares of Common Stock held by such Shareholder in any matter
submitted to the Shareholders for a vote to the extent necessary to give effect
to Section 2.2 hereof. Each such proxy is coupled with an interest and shall be
irrevocable except in accordance with the terms hereof.
2.4 AFFILIATE TRANSACTIONS. The Company will not enter into any
----------------------
arrangement or contract with any Affiliate unless such arrangement is on terms
that are no less favorable to the Company than could be obtained from third
parties who are not Affiliates.
2.5 TERMINATION OF CERTAIN AGREEMENTS. The Everest Shareholders
---------------------------------
Agreement is hereby terminated and superseded in its entirety by this Agreement
and the parties acknowledge that the Management Agreement has previously been
terminated.
3. RESTRICTIONS ON TRANSFER.
------------------------
3.1 RESTRICTIVE LEGEND. Any certificate representing shares of Common
------------------
Stock will bear the following legend:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT AS TO SAID SHARES
OF COMMON STOCK OR AN OPINION, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY AND GIVEN BY COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED. THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, VOTING AND CERTAIN
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<PAGE>
OTHER AGREEMENTS SET FORTH IN A SHAREHOLDERS AGREEMENT AMONG THE
COMPANY, VARIOUS OTHER PARTIES AND THE ORIGINAL HOLDER HEREOF
DATED AS OF NOVEMBER 30, 1997. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
3.2 OPINION OF COUNSEL. No Shareholder may Transfer any shares of Common
------------------
Stock (except Transfers pursuant to an effective registration statement under
the Securities Act, pursuant to the laws of descent and distribution or pursuant
to Section 4 or Section 5) without first delivering to the Company an opinion of
counsel (reasonably acceptable in form and substance to the Company) that
neither registration nor qualification under the Securities Act and applicable
state securities laws is required in connection with such Transfer.
3.3 SHAREHOLDER TRANSFER RESTRICTIONS.
---------------------------------
(a) No Shareholder shall Transfer any interest in any shares of Common
Stock, either voluntarily or involuntarily, by operation of law or otherwise,
except Transfers occurring after the fifth anniversary of the date hereof and
the following transfers occurring prior thereto: (i) to any Permitted
Transferee; (ii) Transfers pursuant to an Approved Sale in accordance with
Section 4 below; (iii) Transfers by any HDA Shareholder to any other HDA
Shareholder, Peak Liquidating, Peak Shareholder or the Company in accordance
with Section 5 hereof; (iv) Transfers by Peak Liquidating to any Peak
Shareholder, or any Peak Shareholder to any other Peak Shareholder; (v) any
Transfers by Peak Liquidating or any Peak Shareholder to any Person if each HDA
Shareholder is given the opportunity to participate in such Transfer, pro rata,
based on his and the Peak Shareholder's (or Peak Liquidating's) percentages of
ownership of the issued and outstanding shares of Common Stock (without giving
effect to such Transfer), on the same terms as such Peak Shareholder (or Peak
Liquidating); and (vi) after June 20, 1998, a Transfer by any HDA Shareholder of
Common Stock held by it to any other HDA Shareholder, the Company or any Peak
Shareholder if, after giving effect to such proposed Transfer, such HDA
Shareholder would continue to hold at least seventy-five percent (75%) of the
Common Stock held by him as of the Closing after giving effect to any dilution
thereof as a result of the issuance of shares of Common Stock as consideration
in connection with an Approved Sale (as defined in Section 4.1 hereof);
provided, however, that (x) the restrictions contained in this Agreement will
continue to be applicable to the shares of Common Stock so Transferred (other
than in accordance with clause (ii)), and the Person to whom such shares are
Transferred, by accepting the Transfer of such shares, thereby agrees to be
bound by the terms of this Agreement as fully as if such Person were an original
signatory hereof, and (y) notwithstanding any provision hereof, no Shareholder
shall Transfer any interest in shares of the Common Stock, either voluntarily or
involuntarily, by operation of law or otherwise, to any Person which the Board
reasonably determines, within 10 days after receiving the applicable Transfer
Notice (as
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<PAGE>
defined below), is a competitor of the Company or is otherwise a person or
entity whose interests are adverse to the Company.
(b) Each Shareholder (the "Transferring Shareholder") intending to
Transfer any interest in any shares of Common Stock, either voluntarily or
involuntarily, by operation of law or otherwise, shall provide written notice
(the "Transfer Notice") to the Company and to each of the other Shareholders of
the Company no later than 15 days, and no earlier than 30 days, prior to the
consummation of such Transfer, setting forth the following:
(i) the intention of the Transferring Holder to Transfer such
shares and the number of such shares proposed to be
Transferred;
(ii) the name and address of the potential transferee (the
"Potential Transferee") in connection with such Transfer;
and
(iii) in the event of any proposed Transfer in accordance with
Section 3.3(a)(v), the amount of the purchase price to be
paid by the Potential Transferee, the payment terms and
the other terms and conditions of such Transfer, and a
copy of any written offer and all correspondence and other
documents relating to the proposed Transfer.
3.4 TRANSFERS IN VIOLATION OF AGREEMENT. Any transfer or attempted
-----------------------------------
transfer of any shares of Common Stock in violation of any provisions of this
Agreement shall be void, and the Company shall not record such transfer on its
books or treat any purported transferee of such shares of Common Stock as the
owner of such shares of Common Stock for any purpose.
4. SALE OF THE COMPANY.
-------------------
4.1 APPROVED SALE. If the Voting Committee approves a Sale of the Company
-------------
(the "Approved Sale"), then each Shareholder will consent to and raise no
objection to the Approved Sale, and if the Approved Sale is structured as a sale
of shares of Common Stock, then each Shareholder will agree to sell all of its
shares of Common Stock on the same terms and conditions as provided for pursuant
to the Approved Sale. Each Shareholder agrees to take all actions which are
necessary in connection with the consummation of any Approved Sale and which are
not otherwise inconsistent with the terms hereof and which do not create
additional liability on the part of the HDA Shareholders.
4.2 CONDITION AND COVENANT AS TO CONSIDERATION. The obligations of each
------------------------------------------
Shareholder set forth in Section 4.1 above with respect to an Approved Sale are
subject to the satisfaction of the following conditions: (i) upon the
consummation of the Approved Sale, each
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<PAGE>
Shareholder will receive the same amount of consideration for its shares of
Common Stock in connection with such Approved Sale, pro rata, based on its
percentage of ownership of the issued and outstanding shares of Common Stock
being sold, and (ii) each Shareholder shall receive the same form of
consideration in connection with the Approved Sale. If any Shareholder is given
an option as to the form of consideration to be received in connection with any
transaction, other than for services to be performed after the consummation of
such transaction on terms that are no less favorable to those that could be
obtained by others in the market generally, each other Shareholder shall be
given the same option.
4.3 EXPENSES. The Company will pay the costs of any sale of shares of
--------
Common Stock pursuant to an Approved Sale to the extent such costs are incurred
for the benefit of all holders of shares of Common Stock and are not otherwise
paid by the Company or the acquiror. Any other costs incurred by any of the
Shareholders on their own behalf will not be considered costs of a transaction
hereunder.
5. REPURCHASE OPTION. Upon the termination of an HDA Shareholder's (each such
-----------------
shareholder is sometimes hereinafter referred to as the "Terminated
Shareholder") employment with Everest for any reason, each share of Common Stock
held by such Terminated Shareholder will be subject to repurchase by the other
HDA Shareholders, Peak Liquidating, the Peak Shareholders and the Company
pursuant to the terms and conditions set forth in this Section 5 (the
"Repurchase Option").
5.1 PURCHASE PRICE. If the Repurchase Option is exercised or if the
--------------
Terminated Shareholder elects for his shares of Common Stock to be purchased
under Section 5.2, the purchase price for each share of such Common Stock will
be the fair market value of such shares, after giving effect to appropriate
minority and lack of liquidity discounts as discussed below (the "Fair Market
Value"), as determined by an independent AIA appraiser who is chosen by the
Person exercising the Repurchase Option, reasonably experienced and reasonably
acceptable to the Terminated Shareholder whose shares are being purchased. If
the parties cannot agree on an appraiser in accordance with the terms hereof,
each party will select a reasonably experienced and recognized appraiser and
those appraisers will in turn select a third. Each of the appraisers
determining the Fair Market Value of the Company shall determine the Fair Market
Value of the Company based on criteria deemed by such appraiser to be relevant
to such determination, including, without limitation, the fair market value of
the Company's assets, including the intangible value of the Company's property,
and the going concern value of the Company's properties, in such appraiser's
professional opinion and shall apply minority and lack of liquidity discounts
(and no others) to such valuation in the aggregate of not less than 20 percent
and not more than 30 percent based on such appraiser's professional opinion of
the appropriate minority and lack of liquidity discounts for such shares. The
average of the two closest appraisals (if more than one), after giving effect to
such minority and lack of liquidity discounts, shall be the amount paid for such
Common Stock. Each of the parties hereto shall
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<PAGE>
use its Best Efforts to cause the Fair Market Value to be established in
accordance with this Section 5.1 within thirty (30) days after the appraiser is,
or appraisers are, as the case may be, chosen in accordance with this Section
5.1. The Person exercising the Repurchase Option shall pay the costs of the
appraisal performed by the appraiser chosen by him and reasonably acceptable to
the Terminated Shareholder. The Terminated Shareholder shall pay the costs of
any appraisal performed by an appraiser chosen by him if he unreasonably rejects
the appraiser chosen by the Person exercising the Repurchase Option in
accordance with this Section 5.1. In the event such Person and the Terminated
Shareholder each choose an appraiser in accordance herewith and they choose a
third appraiser, such Person and the Terminated Shareholder shall share the
costs of such appraiser and the appraisal performed thereby.
5.2 REPURCHASE NOTICE. At the election of the Terminated Shareholder as
-----------------
set forth below, or if any shares of Common Stock pledged pursuant to the
Repurchase Pledge Agreement (as defined below) are successfully appropriated and
realized upon, the non-selling HDA Shareholders shall be obligated to purchase
at least twenty five percent (25%) of such Terminated Shareholder's shares of
Common Stock then owned by such Shareholder or appropriated and realized upon.
If the Terminated Shareholder desires to sell his common stock, he shall give
written notice of the number of shares he desires to sell to the non-selling HDA
Shareholders within 30 days of the date of termination of his employment. The
non-selling HDA Shareholders may elect to purchase all or a greater portion of
such shares. Such HDA Shareholders shall deliver written notice (the
"Repurchase Notice") to such Terminated Shareholder within 30 days after the
purchase price for the shares has been determined in accordance with Section
5.1. The Repurchase Notice shall set forth the number of shares of Common Stock
of such Terminated Shareholder to be acquired from such Person, the aggregate
consideration to be paid for such securities and the time and place for the
closing of the transaction.
5.3 PEAK LIQUIDATING AND SHAREHOLDER OPTION. If for any reason, such non-
---------------------------------------
selling HDA Shareholders do not elect to purchase all of the shares of Common
Stock that are subject to such Repurchase Option pursuant to the Repurchase
Option, Peak Liquidating and the Peak Shareholders shall be entitled to exercise
the Repurchase Option for the shares of Common Stock such HDA Shareholders have
not elected to purchase (the "Available Securities"). As soon as practicable
after such HDA Shareholders have determined that there will be Available
Securities, such HDA Shareholders shall give written notice (the "Option
Notice") to Peak Liquidating and the Peak Shareholders setting forth the number
of Available Securities and the purchase price for each of such Available
Securities. Peak Liquidating and any or all of the Peak Shareholders may elect
to purchase all or a portion of such Available Securities by giving written
notice of such election to such HDA Shareholders within 30 days after the Option
Notice has been given by such HDA Shareholders to Peak Liquidating and the Peak
Shareholders. If Peak Liquidating and the Peak Shareholders elect to purchase
in the aggregate more than the Available Securities, then, unless they agree
otherwise among the electing parties, the Available Shares shall be
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<PAGE>
allocated first to Peak Liquidating and then to the electing Peak Shareholders
pro rata according to the amounts they elected to purchase. As soon as
practicable, and in any event within 10 days after the expiration of such 30-day
period, such HDA Shareholders shall notify such Terminated Shareholder of the
number of shares of Common Stock being purchased from such person by Peak
Liquidating and the Peak Shareholders (the "Supplemental Repurchase Notice").
At the time such HDA Shareholders deliver the Supplemental Repurchase Notice to
the Terminated Shareholder, such HDA Shareholders shall also deliver written
notice to Peak Liquidating and the Peak Shareholders setting forth the number of
shares of Common Stock which Peak Liquidating and the Peak Shareholders are
entitled to purchase, the aggregate purchase price and the time and place of the
closing of the transaction.
5.4 COMPANY'S OPTION. If for any reason Peak Liquidating and the Peak
----------------
Shareholders do not elect to purchase all of the Available Securities pursuant
to the Repurchase Option, the Company shall be entitled to exercise the
Repurchase Option for the shares of Available Securities which the parties have
not elected to purchase (the "Remaining Available Securities"). As soon as
practicable after the HDA Shareholders have determined that there will be
Remaining Available Securities, the HDA Shareholders shall give written notice
(the "Company Option Notice") to the Company setting forth the number of
Remaining Available Securities and the purchase price for each of such Remaining
Available Securities. The Company may elect to purchase all or a portion of
such Remaining Available Securities by giving written notice of such election to
the HDA Shareholders within 30 days after the Company Option Notice has been
given by the HDA Shareholders to the Company. As soon as practicable, and in
any event within 10 days after the expiration of such 30-day period, such HDA
Shareholders shall notify the Terminated Shareholder of the number of shares of
Common Stock being purchased from such person by the Company (the "Company
Repurchase Notice"). At the time such HDA Shareholders deliver the Company
Repurchase Notice to the Terminated Shareholder, such HDA Shareholders shall
also deliver written notice to the Company setting forth the number of shares of
Common Stock which the Company is entitled to purchase, the aggregate purchase
price and the time and place of the closing of the transaction. If, after the
exercise by the HDA Shareholders, Peak Liquidating, the Peak Shareholders and
the Company of the Repurchase Option, all of the Terminated Shareholder's shares
of Common Stock would not be purchased in connection with the exercise of the
Repurchase Option, such Terminated Shareholder shall have no obligation to sell
any of its shares of Common Stock pursuant thereto.
5.5 CLOSING. The closing of the purchase of the shares of Common Stock
-------
pursuant to the Repurchase Option (the "Closing") shall take place on the date
designated by such Shareholders in the Repurchase Notice, the Supplemental
Repurchase Notice or the Company Repurchase Notice, which date shall not be
later than the 30th day after delivery of the latest of such notices to be
delivered. The HDA Shareholders (other than the Terminated Shareholder), Peak
Liquidating and the Peak Shareholders or the Company will pay for the shares at
a Fair Market Value multiplied by the number of shares of Common Stock to be
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<PAGE>
purchased pursuant to the Repurchase Option by delivery at the Closing of (i)
cash in an amount equal to twenty percent (20%) of the aggregate purchase price
for such shares as determined in accordance with Section 5.1 and Section 5.6
subject to, in the case of any purchase by the Company, Section 9.16 hereof,
(ii) a promissory note substantially in the form of Exhibit B hereto which shall
be due and payable, subject to, in the case of any purchase by the Company,
Section 9.16 hereof, no later than the second anniversary of the execution and
delivery thereof, and (iii) a pledge agreement substantially in the form of
Exhibit C hereto (the "Repurchase Pledge Agreement"); provided, however, that in
the event the purchase price for such shares does not exceed, in the aggregate,
$250,000, the purchaser shall pay such amount in full as the purchase price and
shall not deliver the documents described in clauses (ii) and (iii) above. The
purchaser of the shares of Common Stock will be entitled to receive customary
representations and warranties from the seller of such shares as to title,
authority and capacity to sell.
5.6 PURCHASE PRICE ADJUSTMENT. In the event (i) a Terminated
-------------------------
Shareholder's employment with the Company is terminated by the Company without
Cause (as defined in such Terminated Shareholder's employment agreement with
Everest) or by the resignation of the Terminated Shareholder for Good Reason (as
defined in such employment agreement), (ii) the Repurchase Option for any of the
Terminated Shareholder's Common Stock is exercised by any Person, and (iii)
within six months of the termination of such employment agreement, an Approved
Sale or a Transfer in accordance with Section 3.3(a)(v) hereof is consummated,
or a Qualified Public Offering occurs, at a price per share (the "Transaction
Price") of Common Stock payable to such Person which is higher than the purchase
price at which the Repurchase Option was exercised by such Person (the
"Repurchase Price"), such Person shall pay to such Terminated Shareholder,
within 30 days after the consummation of such transaction or of such an
occurrence, an amount equal to (1)(a) the Transaction Price, minus (b) the Fair
Market Value of the shares, multiplied by (2) the number of shares purchased by
such Person pursuant to the exercise of the Repurchase Option.
6. TERMINATION. The provisions of this Agreement, other than Section 8, shall
-----------
terminate on the earlier to occur of:
(a) an Approved Sale;
(b) a dissolution of the Company; or
(c) notwithstanding any provision of Sections 2.1 and 2.2, the approval of
the Board and the affirmative vote of the Shareholders holding 90% of the
outstanding shares of Common Stock subject to this Agreement.
Upon the occurrence of a Qualified Public Offering, the provisions of this
Agreement, other than the provisions of Sections 2 and 8, shall cease to be
effective. At such time as the
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aggregate percentage of the shares of Common Stock held by the HDA Shareholders,
Peak Liquidating and the Peak Shareholders does not exceed forty-one percent
(41%) of the issued and outstanding shares of Common Stock at such time, Section
2 of this Agreement shall cease to be effective.
7. NON-DILUTION RIGHTS. Except for the issuance or sale, with the approval of
-------------------
the Board and subject to Section 2.5 hereof, of any shares of Common Stock (or
any other capital stock of the Company) or any securities containing options or
other rights, as incentive-based compensation, to acquire up to, in the
aggregate, ten percent (10%) of the shares of Common Stock issued and
outstanding from time to time prior to the tenth anniversary of the date hereof
to Peak Shareholders who are also acting in a management or officer role with
the Company, the Company shall not issue or sell to Peak Liquidating, or any
Peak Shareholders any shares of Common Stock (or any other capital stock of the
Company) or any securities containing options or other rights to acquire Common
Stock, unless each of the HDA Shareholders shall be offered the opportunity pro
rata, based on his and Peak Liquidating or the Peak Shareholder's percentage of
ownership of the issued and outstanding shares of the Common Stock without
giving effect to such issuance or sale, to be issued or sold such securities or
options on the same terms and conditions offered to the Peak Shareholders.
8. HOLDBACK AND REGISTRATION RIGHTS.
--------------------------------
(a) Each Shareholder agrees not to effect any public sale or distribution
of Common Stock during the seven (7) days prior to, and during the ninety (90)
days (or in the case of the Company's initial public offering, 180 days)
following, the effective date of any underwritten offering of Common Stock
registered with the Securities and Exchange Commission, except as part of such
underwritten registration, unless the underwriter managing the registered public
offering otherwise agrees. This Section 8 shall continue in force until the
second anniversary of the Company's initial public offering which is a Qualified
Public Offering.
(b) In the event the Company determines to engage in a Qualified Public
Offering, the HDA Shareholders shall have the right to request the Company to
register their shares of Common Stock on the appropriate forms under the
Securities Act, at the Company's sole expense on the same basis that Peak
Liquidating and the Peak Shareholders or their successors or assigns are
entitled to register their shares and pro rata with Peak Liquidating and such
Peak Shareholders and their successors or assigns.
9. MISCELLANEOUS.
-------------
9.1 NO INCONSISTENT AGREEMENTS. None of the parties hereto will hereafter
--------------------------
enter into any agreement which is inconsistent with the rights granted to the
parties in this Agreement.
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<PAGE>
9.2 NOTICES, CONSENTS, ETC. Any notices, consents or other communication
-----------------------
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a recognized
overnight courier service, or (d) sent by facsimile transmission to the parties
at the addresses as set forth below or at such other addresses as may be
furnished in writing.
(a) If to the Company:
Everest Healthcare II, Inc.
101 N. Scoville
Oak Park, Illinois 60302
Attention: Craig W. Moore
Fax No.: 708/386-1711
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3694
Attention: Matthew S. Brown, Esq.
Tara Goff, Esq.
Fax No.: 312/902-1061
(b) If to Peak Liquidating or any Peak Shareholder:
c/o Craig W. Moore
101 N. Scoville
Oak Park, Illinois 60302
Fax No.: 708/386-1711
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
Tara Goff, Esq.
Fax No.: 312/902-1061
-14-
<PAGE>
(c) If to any HDA Shareholder:
c/o Martin Fox
Home Dialysis of America, Inc.
6300 East El Dorado Plaza
Suite 100
Tucson, AZ 85715
Fax No.: 520/751-1211
with a copy to:
Ross & Hardies
150 N. Michigan Avenue
Chicago, Illinois 60601
Attention: James B. Riley
Fax No.: 312/750-8600
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three days after the date of mailing if sent by certified or
registered mail, (y) one day after date of delivery to the overnight courier if
sent by overnight courier or (z) the next succeeding business day after
transmission by facsimile.
9.4 SEVERABILITY. The unenforceability or invalidity of any provision of
------------
this Agreement shall not affect the enforceability or validity of any other
provision.
9.5 AMENDMENT AND WAIVER. This Agreement may not be amended except by a
--------------------
written Agreement executed by each of the parties hereto. Neither the failure
nor any delay by any party hereto in exercising any right, power or privilege
under the Agreement or the documents referred to in this Agreement will operate
as a waiver of such right, power or privilege, and no single or partial exercise
of any such right, power or privilege will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege.
9.6 DOCUMENTS. Each party will execute all documents and take such other
---------
actions as any other party may reasonably request in order to consummate the
transactions provided for herein and to accomplish the purposes of this
Agreement.
9.7 COUNTERPARTS. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties hereto and
delivered to the other.
-15-
<PAGE>
9.8 CONSTRUCTION. This Agreement shall be construed and enforced in
------------
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Illinois, without giving effect to provisions thereof regarding
conflict of laws.
9.9 HEADINGS. The subject headings of Articles and Sections of this
--------
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
9.10 ASSIGNMENT. This Agreement will be binding upon and inure to the
----------
benefit of the parties hereto and their respective successors and transferees of
shares of Common Stock (who will succeed only to the rights and obligations of
the transferor and only with respect to shares of Common Stock transferred in
accordance with the terms hereof) but will not be assignable or delegable by any
party without the prior written consent of the other parties.
9.11 ENTIRE AGREEMENT. This Agreement, the recitals and all the exhibits
----------------
attached to this Agreement (all of which shall be deemed incorporated in the
Agreement and made a part hereof) set forth the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms hereof,
and may be modified only by instruments signed by all of the parties hereto.
9.12 THIRD PARTIES. Nothing herein expressed or implied is intended or
-------------
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason of this Agreement.
9.13 NO STRICT CONSTRUCTION. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF THE PARTIES
----------------------------------------------
HERETO HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH
-16-
<PAGE>
THIS AGREEMENT. SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH
COURT SHALL BE MAILED BY REGISTERED MAIL TO EACH PARTY HERETO A PARTY TO SUCH
PROCEEDING EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE
TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. EACH
SHAREHOLDER HEREBY AGREES THAT SERVICE UPON HIM BY CERTIFIED MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
OTHER PARTY HERETO TO SERVE PROCESS ON ANY PARTY HERETO IN ANY OTHER MANNER
PERMITTED BY LAW.
9.15 REMEDIES. Each of the parties to this Agreement will be entitled to
--------
enforce its rights under this Agreement specifically, to recover damage by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages will not be an adequate remedy for any breach of the
provisions of this Agreement and that any party in its sole discretion apply to
any court of law or equity of competent jurisdiction for specific performance or
injunctive relief (without the necessity of posting a bond) in order to enforce
or prevent any violation of the provisions of this Agreement.
9.16 RESTRICTIONS AND EXCEPTIONS TO CERTAIN OBLIGATIONS. Except as
--------------------------------------------------
otherwise set forth herein, the Company shall not have any obligation to
purchase any Common Stock or make any installment payment when due pursuant to
this Agreement if:
(a) such purchase or payment would constitute a violation of applicable
law or any covenant in any loan document or similar agreement with banks or
insurance companies by which it is bound; or
(b) such purchase or installment payment would require it to pay an
aggregate amount hereunder in any given fiscal year equal to or greater than
thirty-three percent (33%) of its income after income taxes.
In the event either of such restrictions exists, the Company shall purchase the
amount of Common Stock or make the applicable installment payment as it is then
able to purchase or make pursuant to the terms hereof that would not be so
restricted. The remainder of such amounts shall be purchased or paid, as
applicable, at such time as such conditions no longer exist. Notwithstanding
any provision hereof, all such payments shall be made no later than the tenth
anniversary of any purchase of such Common Stock.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Shareholders
Agreement to be signed as of the date first written above.
THE COMPANY:
EVEREST HEALTHCARE II, INC.
By: /s/ CRAIG W. MOORE
-----------------------------------------
Craig W. Moore, Chief Executive Officer
PEAK SHAREHOLDERS:
/s/ ARTHUR MORRIS, M.D.
---------------------------------------------
Arthur Morris, M.D.
/s/ PAUL BALTER, M.D.
---------------------------------------------
Paul Balter, M.D.
/s/ MICHAEL CARBON, M.D.
---------------------------------------------
Michael Carbon, M.D.
/s/ DOUGLAS MUFUKA, M.D.
---------------------------------------------
Douglas Mufuka, M.D.
/s/ ASHUTOSH GUPTA, M.D.
---------------------------------------------
Ashutosh Gupta, M.D.
/s/ GEORGE DUNEA, M.D.
---------------------------------------------
George Dunea, M.D.
/s/ CRAIG W. MOORE
---------------------------------------------
Craig W. Moore
-18-
<PAGE>
HDA SHAREHOLDERS:
/s/ MARTIN FOX
---------------------------------------------
Martin Fox
/s/ THOMAS CREEL
---------------------------------------------
Thomas Creel
/s/ PAUL ZABETAKIS
---------------------------------------------
Paul Zabetakis
/s/ ANTHONY UNRUH
---------------------------------------------
Anthony Unruh
HDA SHAREHOLDERS' AGENT:
/s/ MARTIN FOX
---------------------------------------------
Martin Fox
-19-
<PAGE>
EXHIBIT 10.9
FIRST AMENDMENT TO RESTRICTED STOCK AGREEMENT
---------------------------------------------
THIS FIRST AMENDMENT TO RESTRICTED STOCK AGREEMENT (this "Amendment") is
made and entered into as of November 30, 1997 by and among EVEREST HEALTHCARE
SERVICES CORPORATION, a Delaware corporation (the "Company"), EVEREST HEALTHCARE
II, INC., a Delaware corporation ("Holding"), and the persons or entities listed
on the attached Schedule A (each, a "Stockholder" and collectively, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders and the Company are parties to that certain
Restricted Stock Agreement (the "Agreement") dated as of October 1, 1995,
entered into in connection with the establishment of the Company in 1995;
WHEREAS, Holding is being organized as a successor to Peak Healthcare,
L.L.C. and the Company, in connection with the formation of Holding, will become
a wholly-owned subsidiary of Holding; and
WHEREAS, the Company and the Stockholders desire to amend the Agreement to
substitute Holding for the Company and facilitate transfers of shares for estate
planning purposes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Formation and Substitution of Holding. The restrictions of the
-------------------------------------
Agreement shall apply to the securities of Holding issued to the Stockholders to
the same extent as they applied to the Company's securities. In connection with
the organization of Holding, such transaction shall constitute an "Approved
Sale" with respect to the Company. Upon completion of the organization of
Holding all references herein to the Company shall be deemed to be references to
Holding. Notwithstanding anything in the Agreement to the contrary, the
Agreement shall not terminate as the result of Holding acquiring the stock of or
becoming the sole stockholder of the Company.
2. Permitted Transferees. The definition of "Permitted Transferee"
---------------------
contained in Section 1(F) of the Agreement shall be deleted and replaced with
the following:
"(F) "Permitted Transferee" means, with respect to a
Stockholder who is a natural person and an original
signatory to this Agreement, (i) such Stockholder's
spouse, descendant or parent, or (ii) a trust or
family partnership solely for the benefit of such
Stockholder or such person(s) in item (i), or (iii) a
Revocable Trust, or (iv) such Stockholder's personal
representative for purposes of
<PAGE>
administration of such Stockholder's estate or upon
such Stockholder's incompetency for the purpose of the
protection or management of such Stockholder's assets;
provided, however, that if any proposed Permitted
Transferee is less than 21 years of age at the time of
a proposed Transfer to such person, then such Transfer
may only be made to a trustee of a valid trust for the
benefit of such person, which trust shall not
terminate prior to the beneficiary (or beneficiaries)
thereof attaining the age of 21.
For purposes of this Agreement, the term "Revocable
Trust" means a trust created by the Stockholder during
his lifetime, (i) which is amendable and revocable
solely by such Stockholder, and (ii) in which such
Stockholder is the sole trustee and sole beneficiary."
3. No Board Approval. Section 2(B) of the Agreement shall be amended to
-----------------
provide that no approval of the Board of Directors of the Company is necessary
for Transfers to any Permitted Transferee, and as such shall be deleted and
replaced with the following:
"(B) A Transfer will be permitted under this Agreement (a
"Permitted Transfer") if (i) made to a Permitted
Transferee and the Company is provided written notice
of such Transfer or (ii) subject to Section 2(E), made
to an Outsider and the Board gives its prior written
consent to such Transfer and waiver to the provisions
of Section 3 to such Transfer (which consent may be
granted or withheld in the Board's discretion);
provided, however, in the event of such Transfer, the
Transferee takes such shares subject to the terms and
provisions of this Agreement, as amended from time to
time, whether or not such Transferee executes a
counterpart hereof."
4. Approved Sale. The definition of "Approved Sale" contained in Section
-------------
1(A) of the Agreement shall be amended to provide for reorganization of the
Company, and the restriction on sale of the Company to an affiliate shall be
deleted, and as such, the definition of "Approved Sale" shall be deleted and
replaced with the following:
"(A) "Approved Sale" means the sale of the Company, in a
single transaction or a series of related
transactions, to a third party pursuant to which (a)
such third party proposes to acquire (i) a majority of
the outstanding Shares (whether by merger,
consolidation, recapitalization, reorganization,
purchase of the outstanding Shares or otherwise) or
(ii) all or substantially all of the Company's assets,
(b) holders of a majority of the Shares then
outstanding have approved the sale, (c) all holders of
Shares receive the same form and amount of
consideration per Share or, if any holders are given
an option as to the form and amount of consideration
to be received, all holders are given the same option,
2
<PAGE>
and (d) the sale is designated an Approved Sale by the
Board of Directors of the Company."
5. Terms; Effect of Amendment. All capitalized terms used in this
--------------------------
Amendment but not otherwise defined herein shall have the meanings given to them
in the Agreement. All other terms and provisions of the Agreement not modified
by this Amendment shall remain in full force and effect.
6. Strict Construction. The language used in this Amendment will be
-------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
7. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
EVEREST HEALTHCARE SERVICES CORPORATION
By:/s/ CRAIG W. MOORE
------------------------------------------------------
Craig W. Moore
Chairman and Chief Executive Officer
/s/ THOMAS GOLUBSKI, M.D.
---------------------------------------------------------
Thomas Golubski, M.D.
/s/ EDWARD LELONEK, M.D.
---------------------------------------------------------
Edward Lelonek, M.D.
/s/ SANDRA L. GADSON, M.D.
---------------------------------------------------------
Sandra L. Gadson, M.D.
/s/ CLAUDIA CABALUNA, M.D.
---------------------------------------------------------
Claudia Cabaluna, M.D.
3
<PAGE>
/s/ MARTIN FINN, M.D.
---------------------------------------------------------
Martin Finn, M.D.
/s/ OLIVE OH, M.D.
---------------------------------------------------------
Olive Oh, M.D.
/s/ NARESH JULKA, M.D.
---------------------------------------------------------
Naresh Julka, M.D.
/s/ DARRYL SUGAR, M.D.
---------------------------------------------------------
Darryl Sugar, M.D.
/s/ RAM RAO, M.D.
---------------------------------------------------------
Ram Rao, M.D.
/s/ LOUIS CESPEDES, M.D.
---------------------------------------------------------
Louis Cespedes, M.D.
/s/ JOHN SIMONAITIS, M.D.
---------------------------------------------------------
John Simonaitis, M.D.
/s/ ROBERT C. MUEHRCEK
---------------------------------------------------------
Robert C. Muehrcke, as Trustee of the Robert C. Muehrcke
Revocable Trust U/A/D 12/8/81
/s/ GENE LAWRENCE M.D.
---------------------------------------------------------
Gene Lawrence, M.D.
/s/ ROBERT M. DODGE
---------------------------------------------------------
Robert M. Dodge
4
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12. Computation of Earnings to Fixed Charges
Predecessor The Company
------------------------------- -----------------------------------------------------
Year ended September 30, Year ended September 30, Six Months ended March 31,
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense 81 380 723 1,013 2,962 1,411 2,201
Portion of rental expense
representative of interest 137 167 465 883 1,267 569 761
-------- -------- --------- --------- -------- -------- ---------
Total fixed charges 218 547 1,188 1,896 4,229 1,980 2,962
======== ======== ========= ========= ======== ======== =========
Earnings:
Income (loss) before income taxes $ (2,984) $ 1,212 $ 852 $ 7,112 $ 8,250 $ 3,439 $ 5,115
Fixed charges 218 547 1,188 1,896 4,229 1,980 2,962
-------- -------- --------- --------- -------- -------- ---------
Total earnings (2,766) 1,759 2,040 9,008 12,479 5,419 8,077
======== ======== ========= ========= ======== ======== =========
Ration of earnings to fixed charges (1) 3.2 to 1 1.7 to 1 4.8 to 1 3.0 to 1 2.7 to 1 2.7 to 1
Excess of fixed charges over earnings $ 2,984 N/A N/A N/A N/A N/A N/A
(1) Earnings are inadequate to cover fixed charges
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF EVEREST HEALTHCARE SERVICES CORPORATION
NAME OF SUBSIDIARY JURISDICTION
- ------------------ ------------
Amarillo Acute Dialysis Specialists, L.L.C. Texas
Con-Med Supply Company, Inc. Illinois
Continental Health Care, Ltd. Illinois
Dialysis Services of Cincinnati, Inc. Ohio
Dialysis Specialists of Corpus Christi, L.L.C. Texas
Dialysis Specialists of Marietta, Ltd. Ohio
Dialysis Specialists of Northeast Ohio, Ltd. Ohio
Dialysis Specialists of South Texas, L.L.C. Texas
DuPage Dialysis Ltd. Illinois
Everest Management, Inc. Delaware
Extracorporeal Alliance, L.L.C. Delaware
Hemo Dialysis of Amarillo L.L.C. Texas
Home Dialysis of America, Inc. Arizona
Home Dialysis of Dayton, Inc. Ohio
Home Dialysis of Eastgate, Inc. Ohio
Home Dialysis of Mt. Auburn, Inc. Ohio
Lake Avenue Dialysis Center, Inc. Indiana
Mercy Dialysis Center, Inc. Wisconsin
New York Dialysis Management, Inc. New York
North Buckner Dialysis Center, Inc. Delaware
Northwest Indiana Dialysis, Inc. Indiana
Ohio Valley Dialysis Center, Inc. Indiana
Perfusion Resource Association, L.L.C. Delaware
Saint Margaret Mercy Dialysis Centers, L.L.C. Illinois
Tri-State Perfusion, L.L.C. Delaware
WSKC Dialysis Services, Inc. Illinois
Everest New York Holdings, Inc. New York
Everest One IPA, Inc. New York
<PAGE>
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports on Peak Healthcare, L.L.C. and West Suburban Kidney Center,
S.C. dated March 13, 1998, in the Registration Statement (Form S-4 No.
333-XXXXX) of Everest Healthcare Services Corporation for the registration of
$100,000,000 of 9 3/4% Senior Subordinated Notes due 2008.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
June 18, 1998
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
FOR STATEMENTS OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF CORPORATIONS DESIGNATED TO ACT AS TRUSTEES
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
(Name of Trustee)
36-0727623
(I.R.S. employer identification No.)
120 SOUTH LASALLE STREET, CHICAGO, IL
(Address of principal executive offices)
60603
(zip code)
EVEREST
HEALTHCARE SERVICES CORPORATION
(Name of obligor)
DELAWARE 36-4045521
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
101 North Scoville
Oak Park, Illinois 60302
(Address of principal executive offices) (zip code)
9.75% Senior Subordinated Notes
DUE 2008
(Title of Indenture Securities)
<PAGE>
GENERAL
1. General information. Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
Director of Financial Institutions, State of Illinois, Springfield,
Illinois (as to Trust Department only).
Chicago Clearing House Association, 164 West Jackson Boulevard,
Chicago, Illinois.
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to execute corporate trust powers.
The trustee is authorized to execute corporate trust powers.
2. Affiliations with obligor and underwriters. If the obligor or any
underwriter for the obligor is an affiliate of the trustee, describe each
affiliation.
No such affiliation exists. See Note, page 4 hereof.
12. Indebtedness of the Obligor to the Trustee.
As of May 31, 1998:
Nature of Indebtedness Amount Outstanding Date Due
---------------------- ------------------ --------
None
13. Defaults by the Obligor.
None.
15. Foreign Trustee.
Not applicable.
2
<PAGE>
16. List of Exhibits.
Exhibit 1 A copy of the existing Articles of Association of the trustee.
(Filed herewith).
Exhibit 1(a) A copy of Certificate of Change of Name.*
Exhibit 2 A copy of the Certificate of Authority to commence business.*
Exhibit 3 A copy of the authorization to exercise corporate trust powers.*
Exhibit 4 A copy of existing by-laws of the trustee. (Filed herewith).
Exhibit 5 None.
Exhibit 6 The Consent of the trustee required by Section 321(b) of the Act.
(Filed herewith).
Exhibit 7 A copy of the latest report of condition of the trustee published
pursuant to law or requirements of its supervising authority.
(Filed herewith).
* These Exhibits are hereby incorporated by reference to Exhibits bearing
identical Exhibit numbers submitted by this trustee in its statement of
eligibility and qualification filed with Securities and Exchange Commission
with respect to the Indianapolis Power & Light Company First Mortgage
Bonds, 5/1/8/% Series due July 1996, Securities and Exchange Commission
Registration No. 2-24581.
3
<PAGE>
NOTE
The answer to item 2 is based on incomplete information. To the best of our
knowledge and belief, however, there is no person, firm or corporation
ordinarily engaged in underwriting securities of the obligor:
(1) which is an affiliate of the trustee;
(2) of which any director or executive officer of the trustee is a
director, officer, partner, employee, appointee or representative;
(3) which individually owns, beneficially, more that 1% of the outstanding
Common Stock of the trustee or First Chicago NBD Corporation;
(4) whose securities are owned beneficially by the trustee as collateral
security for obligations in default.
This statement may therefore be considered as correct unless amended
contemporaneously with the filing by the obligor of the Amendment or Supplement
to its Registration Statement disclosing underwriters for the Indenture
securities.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a corporation
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility and Qualification to be signed on its
behalf by the undersigned thereunto duly authorized, all in the City of Chicago,
State of Illinois, on the 2/nd/ day of June, 1998.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /s/ Anjali Gottreich
------------------------------------
Its: Assistant Vice President
------------------------------------
5
<PAGE>
State of Illinois )
County of Cook )
The Undersigned, Anjali Gottreich, hereby certifies that she is a duly
----------------
appointed and qualified Assistant Vice President of American National Bank and
------------------------
Trust Company of Chicago, a corporation duly organized and existing as a
national banking association under the laws of the United States of America, and
has authority to execute this Certificate.
She further certifies that attached to this certificate are true and
correct copies of Amended Articles of Association and the By-Laws of said
Association, that said Articles and By-Laws were duly adopted by the Board of
Directors of said Association, and that said Amended Articles and By-Laws have
never been repealed and are still in full force and effect.
She further certifies that the Seal affixed to this certificate is the
corporate seal of said Association.
In witness whereof, the undersigned has set her hand and has affixed the
corporate seal of said association, this 2/nd/ day of June, 1998.
------------------------
By: /s/ Anjali Gottreich
--------------------------------------
Its: Assistant Vice President
(Seal)
6
<PAGE>
EXHIBIT 1
_____________________________________________________________________________
_____________________________________________________________________________
Amended Articles of Association
of
American National Bank
and Trust Company of Chicago
(AS AMENDED AND RESTATED FEBRUARY 2, 1996)
CHARTER NO. 13216
7
<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
Amended Articles of Association
of
American National Bank and Trust Company
of Chicago
Charter No. 13216
First. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "American National Bank
and Trust Company of Chicago."
Second. The place where the main banking house or office of this Association
shall be located, its operations of discount and deposit carried on, and its
general business conducted, shall be Chicago, County of Cook, State of Illinois.
Third. The Board of Directors of this Association shall consist of such number
of its shareholders, not less than five nor more than twenty-five, as from time
to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled. By vote of a majority of the full Board
of Directors, the Board may increase such number, within such maximum limit, by
not more than two and appoint a person or persons to fill the resulting vacancy
or vacancies between meetings of the shareholders. A majority of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business.
Fourth. The regular annual meeting of the shareholders of this Association
shall be held at its main banking hours, or such other convenient place as shall
be duly authorized by the Board of Directors, on such day of each year as is
specified therefor in the By-Laws of the Association, at which meeting a Board
of Directors shall be elected; but, if no such election shall be held on that
day, it may be held on any subsequent day, in accordance with the provisions of
the banking laws of the United States.
Fifth. The amount of capital stock of this Association shall be divided into
2,000,000 shares of common stock of the par value of Ten Dollars ($10) each; but
said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares thereof, each
shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a resolution
adopted by the shareholders at the time the increase is authorized. The Board
of Directors shall have the power to prescribe a reasonable period of time
within which the pre-emptive rights to subscribe to the new shares of capital
stock must be exercised.
8
<PAGE>
If the capital stock is increased by a stock dividend, each shareholder shall be
entitled to his proportionate amount of such increase in accordance with the
number of shares of capital stock owned by him at the time the increase is
authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized.
Sixth. The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board; but the Board of Directors
may appoint a Director, in lieu of the President, to be Chairman of the Board,
who shall perform such duties as may be designated by the Board of Directors.
The Board of Directors shall have the power to appoint one or more Vice-
Presidents, at least one of whom shall also be a member of the Board of
Directors, and who shall be authorized, in the absence of the President, to
perform all acts and duties pertinent to the office of President, except such as
the President only is authorized by law to perform; to appoint a Cashier and
such other officers as may be required to transact the business of this
Association; to fix the salaries to be paid to all officers of this Association;
and to dismiss such officers, or any of them.
The Board of Directors shall have the power to define the duties of officers and
employees of this Association, to require bonds from them, and to fix the
penalty thereof; to regulate the manner in which Directors shall be elected or
appointed, and to appoint judges of the election; to make all by-laws that it
may be lawful for them to make for the general regulation of the business of
this Association and the management of its affairs; and generally to do and
perform all acts that it may be lawful for a Board of Directors to do and
perform.
Any person made a party to any action, suit or other proceeding, civil or
criminal, by reason of the fact that he is or was a director, officer, or
employee of the Association shall be indemnified by the Association against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorney's fees, actually and necessarily incurred by him in connection with the
defense of such proceeding, or in connection with any appeal therein, except in
relation to (i) any matter as to which it shall be adjudged in such proceeding
that he is liable for negligence or misconduct in the performance of his duties
to the Association, provided that in the case of a criminal action, suit, or
proceeding, a conviction or judgment shall not be deemed in adjudication that
the director, officer, or employee is liable for negligence or misconduct in the
performance of his duties to the Association if it shall be determined that he
was acting in good faith in what he considered to be the best interests of the
Association and without reasonable cause to know that his acts were illegal; or
(ii) any matter settled or compromised unless it shall be determined that there
is not reasonable ground for such person being adjudged liable for negligence or
misconduct in the performance of his duties to the Association. All such
determinations hereunder shall be made by a majority of those members of the
Board of Directors who were not parties to such proceeding, or by one or more
disinterested persons to whom the question shall be referred by the Board of
Directors. Such right of indemnification shall not be deemed exclusive of any
other rights to which such director, officer, or employee may be entitled apart
from this provision.
Seventh. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of
9
<PAGE>
law, or until terminated by either a general or a special act of Congress, or
until its affairs be placed in the hands of a receiver and finally wound up by
him.
Eighth. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the stock
of this Association, may call a special meeting of shareholders at any time:
Provided, however, that, unless otherwise provided by law, not less than ten
days prior to the date fixed for any such meeting, a notice of the time, place,
and purpose of the meeting shall be given by first-class mail, postage prepaid,
to all shareholders of record of this Association at their respective addresses
as shown upon the books of the Association. These Articles of Association may be
amended at any regular or special meeting of the shareholders by the affirmative
vote of the shareholders owning at least a majority of the stock of this
Association, subject to the provisions of the banking laws of the United States.
The notice of any shareholders' meeting, at which an amendment to the Articles
of Association of this Association is to be considered, shall be given as
hereinabove set forth.
* * *
Certified to be a true copy of the Articles of Association of American National
Bank and Trust Company of Chicago, as amended, now in force and effect.
Date: June 2, 1998
(Seal)
10
<PAGE>
EXHIBIT 4
_______________________________________________________________________________
_______________________________________________________________________________
By-Laws
of
[LOGO]
American National Bank
and Trust Company of Chicago
(AS AMENDED AND RESTATED FEBRUARY 2, 1996)
CHARTER NO. 13216
_______________________________________________________________________________
_______________________________________________________________________________
February, 1996
11
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I Meetings of Shareholders............................ 1
Article II Directors........................................... 2
Article III Officers............................................ 4
Article IV Transfers of Real Estate............................ 5
Article V Contracts and Voting................................ 5
Article VI Authority to Sell Stocks, Bonds, etc................ 6
Article VII Stock Certificates & the Transfer Thereof........... 6
Article VIII Increase of Stock................................... 7
Article IX Banking Hours....................................... 7
Article X Seal................................................ 8
Article XI Trust Department.................................... 8
Article XII Amendments of By-Laws............................... 9
</TABLE>
12
<PAGE>
BY-LAWS
OF
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
(AS AMENDED AND RESTATED FEBRUARY 2, 1996)
CHARTER NO. 13216
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of shareholders shall be held
on the first Friday of February each year or at such other date as is from time
to time designated by the Board of Directors (the "Board"), for the purpose of
electing directors and the transaction of such other business as may come before
the meeting. If the election of directors shall not be held on the day
designated for the annual meeting, or at any adjournment thereof, the Board
shall cause the election to be held at a meeting of the shareholders as soon
thereafter as possible.
SECTION 2. SPECIAL MEETINGS. The Board, or shareholders owning in the
aggregate not less than 10 percent of the stock of the Bank, may call a special
meeting of shareholders at any time for the purpose or purposes stated in the
call of the meeting.
SECTION 3. PLACE OF MEETINGS. Shareholder meetings shall be held at the main
banking office of the Bank or at such other convenient place established by the
Board.
SECTION 4. NOTICE OF MEETINGS. The Chairman of the Board or the Secretary
shall give written notice stating the place, day and hour of each meeting of
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called. Such notice shall be delivered not less than ten,
nor more than forty days before the date of the meeting, either personally or by
mail to each shareholder of record entitled to vote at such meeting. If mailed,
such notices shall be deemed to be delivered when deposited in the United States
mail, addressed to the shareholder at his address as it appears on the records
of the Bank with postage thereon prepaid. Such notice may be waived in writing.
SECTION 5. PRESIDING OFFICER. The Chairman of the Board, if present, shall
preside at all shareholder meetings. In the Chairman's absence, the President,
if present, shall preside. In the absence of the Chairman and President, the
shareholders may elect a Chairman pro tem to preside at the meeting.
13
<PAGE>
SECTION 6. QUORUM; MAJORITY VOTE. A majority of the outstanding shares of
stock, represented in person or by proxy, shall constitute a quorum at any
meeting of the shareholders, provided that if less than a majority of the
outstanding shares of stock are represented at said meeting, a majority of the
shares of stock so represented may adjourn the meeting from time to time without
further notice. If a quorum is present, the affirmative vote of the majority of
shares represented at the meeting shall be the act of the shareholders.
SECTION 7. PROXIES. Proxies may be secured for annual and special meetings,
shall be dated, and shall be filed with the Secretary of the Bank before or at
the time of the meeting. At all meetings of the shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his attorney-in-fact.
No proxy shall be valid eleven months from the date of its execution, unless
otherwise provided in the proxy. No officer or employee of the Bank may act as
proxy.
SECTION 8. VOTING RIGHTS. Each outstanding share shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders.
SECTION 9. CONSENT OF SHAREHOLDERS IN LIEU OF ANNUAL OR SPECIAL MEETING.
Unless otherwise restricted by the Articles of Association or by law, any action
which may be taken at any annual or special shareholder meeting may be taken
without a meeting, without prior notice and without a vote, if written consent
setting forth the action so taken shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those shareholders who did not give written consent.
ARTICLE II
DIRECTORS
SECTION 1. AUTHORITY. The property and business of the Bank shall be managed
by the Board, which shall have all of the powers conferred by law, the Articles
of Association and these by-laws.
SECTION 2. NUMBER. The Board shall at all times consist of not less than five
nor more than twenty-five individuals. The exact number within such minimum and
maximum limits shall be fixed and determined from time to time by resolution of
a majority of the full Board or by resolution of the shareholders at any meeting
thereof; provided, however, that the Board may not increase the number of
directors to a number which: (i) exceeds by more than two the number of
directors last elected by shareholders where such number was fifteen or less; or
(ii) exceeds by more than four the number of directors last elected by
shareholders where such number was sixteen or more, but in no event shall the
number of directors exceed twenty-five.
14
<PAGE>
SECTION 3. TERM OF OFFICE. Each director shall hold office from the date of
his election or appointment until the next annual shareholder meeting. Any
director ceasing to be the owner of the amount of stock required by law or in
any other manner becoming disqualified, shall thereby vacate his office as
director. A director who is an officer of the Bank or one of its affiliates
shall not stand for re-election to the Board at the annual meeting coincident
with or next following the date of his retirement or other termination of
employment from the Bank or such affiliate. A director who is not an officer of
the Bank or any such affiliate shall not stand for re-election to the Board at
the annual meeting of the Bank held in the third year following the year in
which he retired from his principal occupation; provided, however, that no
director shall be eligible for re-election at the annual meeting of the Bank
next following his 73rd birthday. The Board may fill any vacancy which occurs in
the Board at any regular meeting of the Board or at a special meeting called for
that purpose.
SECTION 4. COMPENSATION. By resolution, the Board may provide that a
reasonable fee be paid to any of its members or to the members of any duly
authorized committee for services rendered. No such payment shall preclude any
director from serving the Bank in any other capacity and receiving compensation
therefor.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board shall be held on
such dates, times and locations as determined by the Chairman of the Board and
communicated to the directors in writing by the beginning of each calendar year
for that calendar year.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board may be held at any
time and at any place upon the call of the Chairman of the Board or upon the
call of at least three directors. Notice of special meetings shall state the
meeting's purpose, and shall be given to each director in person, by facsimile
transmission, by telephone, by overnight delivery service, or by U.S. first
class mail addressed to his usual place of business or to his residence.
Personal notice or notice by facsimile transmission or telephone shall be given
not later than the second day before the meeting. A director's attendance at a
special meeting shall constitute a waiver of notice of such meeting, except when
the director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
SECTION 7. QUORUM; MAJORITY VOTE. A quorum of directors shall be required to
transact business at any regular or special meeting of the Board. A majority of
the directors shall constitute a quorum. Each director shall be entitled to one
vote. A vote by a majority of the directors present at any regular or special
meeting of the Board at which a quorum is present shall be required to approve
any matter or proposal at any such meeting.
SECTION 8. PRESIDING OFFICER. The Chairman of the Board, if present, shall
preside at all meetings of the Board. The President, if present, shall preside
at meetings of the Board in the Chairman's absence. In the absence of both the
Chairman and the President, the Board shall designate another one of their
members to so preside.
SECTION 9. MINUTES OF MEETING. The Board shall appoint a Secretary, who need
not be a member of the Board, to take minutes at any regular or special meeting
of the Board. If the
15
<PAGE>
Secretary is not present at any such meeting, the Chairman of the Board may
designate a secretary pro tem to take minutes at the meeting. The Secretary or
secretary pro tem shall record the actions and proceedings at each regular or
special meeting of the Board as minutes of the meeting and shall maintain such
minutes in a minute book of proceedings of such meetings of the Board. Minutes
of each such meeting shall be signed by the presiding officer and secretary of
each meeting.
SECTION 10. PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise
restricted by the Articles of Association or by law, members of the Board or any
committee designated by the Board may participate in a meeting of the Board or
committee by means of conference telephone or similar communications equipment
which allows each person participating in the meeting to hear each other.
Participation in such a meeting shall constitute presence in person at such
meeting.
SECTION 11. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise provided
in the Articles of Association or by law, any action required to be taken at a
meeting of the Board or any action which may be taken at a regular or special
meeting of the Board or a committee thereof, may be taken without a meeting,
without prior notice and without a vote, if written consent setting forth the
action so taken is signed by all of the directors that would be necessary to
authorize or take such action at a regular or special meeting of the board.
SECTION 12. COMMITTEES. The Board may, from time to time, establish such
committees as it deems appropriate and as required by law. Any such committee
shall be comprised of such members, shall have such authority and shall conduct
its activities in such manner as is provided in the resolution establishing the
committee. The members of any such committee who are not officers of the Bank
shall receive such compensation as the Board determines from time to time. The
Chairman of the Board shall be an ex-officio member of all committees of the
Board.
ARTICLE III
OFFICERS
SECTION 1. OFFICER TITLES. The titles of the officers of the Bank may include
the Chairman of the Board, one or more Vice Chairmen of the Board, a President,
one or more Executive Vice Presidents, one or more Senior Vice Presidents, a
Chief Credit Officer, a Chief Trust Officer, a Chief Financial Officer, a
General Auditor, a General Counsel, one or more Vice Presidents, a Cashier, a
Secretary, one or more Assistant Secretaries, one or more Trust Officers, and
such other officers as may be appropriate for the prompt and orderly transaction
of the business of the Bank. Individuals appointed as Chairman and Vice
Chairman of the Board and President must be members of the Board. The same
person may hold any two or more offices. The Chairman of the Board and the
President shall have the authority to establish all officer titles below the
level of Senior Vice President.
SECTION 2. ELECTION OF OFFICERS. The Chairman of the Board and the President
shall be elected by the Board for the current year for which such Board was
elected and each shall hold his office for such year unless he shall resign,
become disqualified or be removed. Officers at the
16
<PAGE>
level of Senior Vice President and above shall be elected by the Board. The
Chairman of the Board and the President shall have the authority to appoint all
other officers, and to further delegate such authority to other officers of the
Bank.
SECTION 3. AUTHORITY AND RESPONSIBILITY. The authorities and responsibilities
of all officers, in addition to those specifically prescribed herein, shall be
those usually pertaining to their respective offices, or as may be designated by
the Board or by the Chairman of the Board or by the President, or by any officer
of the Bank designated by one of the foregoing.
SECTION 4. MISCELLANEOUS. All officers and employees of the Bank who shall be
responsible for any moneys, funds or valuables of the Bank shall give bond, or
be covered by a blanket bond, in such penal sum and with such security as shall
be approved by the Board, conditioned for the faithful and honest discharge of
their duties as such officers or employees and that they will faithfully apply
and account for all such moneys, funds and valuables and deliver the same on
proper demand to the order of the Board of this Bank, or to the person or
persons authorized to receive the same.
SECTION 5. TERM OF OFFICE. Officers shall be appointed for an indefinite
term, and their employment may be terminated and/or they may be removed from
office at any time. The Bank's holding company, First Chicago NBD Corporation,
may terminate and/or remove the Chairman of the Board, the President and the
Chief Executive Officer. The Chairman of the Board, the President, and their
designates have the authority to terminate and/or remove all other officers.
The salary of any officer whose employment terminates shall cease as of the date
of his termination, and he shall cease to be an officer as of the date of
termination.
ARTICLE IV
TRANSFERS OF REAL ESTATE
The Chairman of the Board, the President and any Vice President or above of the
Bank shall have authority (without an order of the Board) to execute and deliver
on behalf of and in the name of the Bank, deeds or contracts for deeds conveying
any real estate owned by the Bank in its own right or in which the Bank has an
interest either with or without covenants of warranty, and the same shall be
attested to by any of such officers of the Bank other than the officers so
executing said instruments; provided, however, that deeds, contracts or leases
with respect to any real estate used by the Bank as its banking quarters, must
be executed by an executive vice president or above, or an officer designated by
an executive vice president or above. All releases of mortgages or trust deeds
shall be executed in the same manner as provided in the preceding sentence in
respect of transfers and conveyances of real estate in which this Bank has an
interest.
ARTICLE V
CONTRACTS AND VOTING
17
<PAGE>
SECTION 1. EXECUTION OF INSTRUMENTS ON BEHALF OF BANK. Any officer of the Bank
and such other persons as may be authorized by the Chairman of the Board or the
President from time to time are severally and respectively authorized to execute
documents and take action(s) in the Bank's name in connection with transactions
conducted in the ordinary course of business including, without limitation, to
guarantee signatures, certify resolutions and/or agreements, endorse checks,
drafts and notes, sign orders for the deposit of securities and for the
withdrawal of securities deposited with the bank correspondents of this Bank.
Notwithstanding the foregoing, (i) all notes evidencing obligations of the Bank
must be executed and delivered by a Vice President of the Bank or above, or the
Cashier, (ii) letters of credit must be signed and issued by two designated
officers or by a designated officer and any employee who shall be authorized to
do so by the Chairman of the Board or the President.
SECTION 2. VOTING. The vote of this Bank as stockholder in any corporation in
which it may hold stock or upon any securities carrying voting rights which it
shall have the right to vote in its individual capacity as a Bank, shall be cast
at any stockholders' meeting by any Vice President or above, or the Cashier, in
person, or by some person or persons authorized by written proxy signed by one
of said officers. In all cases where shares of stock or other securities
carrying voting rights and owned by this Bank shall be held in the name of a
nominee of the Bank, any Vice President or above, or the Cashier may authorize
such nominee to vote such stock or other securities in person, either
unconditionally or upon such terms, limitations, or conditions as such officer
may direct, or any such officer may authorize such nominee to execute a proxy to
vote such shares of stock or other securities carrying voting rights, either
unconditionally or upon such terms, limitations or conditions as such officer
shall approve.
ARTICLE VI
AUTHORITY TO SELL STOCKS, BONDS, ETC.
Any two officers from the group consisting of Vice Presidents and above and the
Cashier or such officers as authorized from time to time by the Board, may at
any time jointly:
(1) Sell, assign, and transfer any and all United States registered bonds now
standing, or which may hereafter stand in the name of the Bank;
(2) Sell, assign, and transfer any and all notes, bonds, certificates of
indebtedness or obligations of any corporation, firm or individual, which notes,
bonds, certificates of indebtedness or obligations are now registered or may
hereafter be registered in the name of this Bank, or are payable or endorsed to
this Bank; or
(3) Sell, assign, and transfer to any assignee or transferee, for and on behalf
of this Bank and in its name, any and all shares of capital stock of any
corporation or corporations held by this Bank.
ARTICLE VII
18
<PAGE>
STOCK CERTIFICATES AND THE TRANSFER THEREOF
SECTION 1. TRANSFERABILITY OF SHARES. Shares of stock of this Bank shall be
transferable only upon the books of the Bank, subject to the provisions of the
National Bank Act. The Bank shall maintain a transfer book in which all
transfers of such stock shall be recorded. Transfers of stock may be suspended
preparatory to any election or payment of any dividends.
SECTION 2. RECORD DATE. The Board shall have power to fix a date of record of
stock holdings for purposes of notices of shareholders' meetings, voting rights
at such meetings, the payment of dividends, or any other proper purpose.
SECTION 3. MISCELLANEOUS. All stock certificates shall be signed with a manual
or facsimile signature by any Vice President or above, and by another of such
officers or the Secretary or Cashier, and the seal of the Bank shall be
impressed thereon or a facsimile thereof printed thereon. Each certificate
shall also be signed manually by the Chief Financial Officer or General Auditor,
on behalf of the Bank as registrar, and by a duly authorized officer or employee
of the trust department as transfer agent. Each certificate shall recite on its
face that the stock represented thereby is transferable only upon the books of
the Bank by the holder thereof, or the holder's attorney, upon surrender of the
certificate, and when stock is transferred, the certificates thereof shall be
returned to the Bank, canceled, preserved, and new certificates issued. In case
of loss of any certificates a new one executed in the manner above provided,
shall be issued in lieu thereof upon proof satisfactory to the Chairman of the
Board, the President, any Executive Vice President, or the Chief Trust Officer
of such loss and upon appropriate indemnity if required by such officer.
ARTICLE VIII
INCREASE OF STOCK
In the event of any increase in the capital stock of this Bank, the preemptive
rights of the shareholders, if any, in respect of any such increased stock shall
be set forth in the Articles of Association. Any warrants or certificates
issuable to shareholders in connection with any increase of the capital stock of
this Bank shall be delivered to the respective shareholders entitled thereto,
either by hand or by mail, first-class postage prepaid, addressed to their
respective addresses as shown on the books of the Bank. If, in the event of sale
of additional shares, any subscription rights shall not have been exercised at
the expiration of the specified subscription period, such unsubscribed new
shares may be issued and sold at such price, not less than the par value
thereof, to such persons and on such terms as the Directors may determine.
ARTICLE IX
BANKING HOURS
The Bank shall be open for business during such days of the year and during such
hours of the day as the Chairman of the Board or the President or their
designate shall determine.
19
<PAGE>
ARTICLE X
SEAL
The seal of the Bank shall be circular in form and the words AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO-CORPORATE SEAL thereon. Such seal or a
facsimile thereof may be affixed to or printed on any instrument requiring the
same and attested by the Chief Financial Officer, the Cashier, the Secretary,
any Assistant Secretary, any Trust Officer, or any other officer thereunto
designated by the Board.
ARTICLE XI
TRUST DEPARTMENT
SECTION 1. EXERCISE OF FIDUCIARY POWERS. All fiduciary powers of the Bank
shall be exercised through the trust department, subject to all applicable laws
and governmental regulations. The Bank shall maintain separate books and records
for the trust department that are distinct from the other books and records of
the Bank.
SECTION 2. CHIEF TRUST OFFICER. All operations and fiduciary activities of the
trust department shall be the responsibility of the Chief Trust Officer, subject
to the powers and duties of the Board, the Committees appointed by the Board,
the Chairman of the Board, the President, and any Executive Vice President. The
Board may appoint one or more Vice Presidents and/or Trust Officers in addition
to the Chief Trust Officer to administer said trust department, who shall have
such powers and perform such duties as may be prescribed by these By-laws or as
may be delegated to them by the Chief Trust Officer, the Board, the Chairman of
the Board, the President, or any Executive Vice President.
SECTION 3. EXECUTION OF INSTRUMENTS. Any Trust Officer or above, the
Secretary, any Assistant Secretary, the Cashier, the Chief Financial Officer, or
any other officer or person appointed by the Chairman of the Board or the
President or their designate, for that purpose, or for the purpose of appointing
vault custodians may sign, execute, acknowledge, deliver and accept on behalf of
the Bank all checks against any trust department account or accounts and all
agreements, indentures, mortgages, deeds, conveyances, releases, transfers,
assignments, certificates, declarations, receipts, discharges, satisfactions,
settlements, petitions, schedules, accounts, affidavits, bonds, undertakings and
other instruments or documents in connection with the exercise of any of the
fiduciary powers of the Bank in the ordinary course of business of the trust
department.
SECTION 4. AUTHENTICATION OF INSTRUMENTS. All authentication or certificates
by the Bank as trustee under any mortgage, deed of trust or other instrument
securing bonds, notes, debentures or other obligations of any person or
corporation, and all certificates as registrar or
20
<PAGE>
transfer agent, and all certificates of deposit for stocks, bonds, or other
securities, and interim and trust certificates may be signed or countersigned on
behalf of the Bank by any of the officers designated in the preceding Section
hereof or by any other person appointed by the Chairman of the Board or the
President or their designate and when so signed shall be binding on the Bank as
the valid act of the Bank.
SECTION 5. VOTING. The vote of this Bank as stockholder in any corporation in
which it may hold capital stocks trustee or other fiduciary capacity may be cast
at the stockholders' meetings of such corporation by any Trust Officer or above,
the Secretary, any Assistant Secretary, in person or by some person authorized
by written proxy signed by one of said officers; provided, however, that such
proxy if given to any person not an officer or director of this Bank shall be
limited to a single meeting and shall either be limited to voting for trustees
or directors or shall direct how such proxy holder shall vote. The above
provision, however, shall not apply to stock held by this Bank under a written
agreement which expressly provides for the giving of proxies. Whenever this Bank
has been or may be appointed attorney in fact with power of substitution in and
about the transfer of shares of capital stock of any corporation, any Second
Vice President or above may substitute by proper written instrument an attorney
in fact to act in the place and stead of this Bank in and about such transfer.
ARTICLE XII
AMENDMENTS OF BY-LAWS
The Board may amend these By-laws in any respect to the extent permitted at law
at any regular or special meeting of the Board or shareholders duly called for
that purpose, by a vote of a majority of the Board or a majority of the
shareholders.
21
<PAGE>
EXHIBIT 6
CONSENT OF TRUST UNDER SECTION 321(b) OF THE
TRUST INDENTURE ACT OF 1939
The American National Bank and Trust Company of Chicago hereby
consents that reports of examination of said bank by Federal, State, Territorial
or District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon its request therefor.
Such reports shall be used for the purposes and subject to the
limitations and conditions set forth in Section 321(b) of the Trust Indenture
Act of 1939.
Dated: June 2, 1998
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Anjali Gottreich
--------------------------
Its: Assistant Vice President
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001058560
<NAME> EVEREST HEALTHCARE SERVICES CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 2,456,669
<SECURITIES> 0
<RECEIVABLES> 32,387,323
<ALLOWANCES> 2,791,000
<INVENTORY> 2,640,442
<CURRENT-ASSETS> 38,272,103
<PP&E> 29,542,083
<DEPRECIATION> 14,567,911
<TOTAL-ASSETS> 102,757,347
<CURRENT-LIABILITIES> 17,576,835
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 42,439,405
<TOTAL-LIABILITY-AND-EQUITY> 102,757,347
<SALES> 113,808,296
<TOTAL-REVENUES> 113,808,296
<CGS> 72,057,929
<TOTAL-COSTS> 102,087,674
<OTHER-EXPENSES> 1,600,784
<LOSS-PROVISION> 714,166
<INTEREST-EXPENSE> 2,961,528
<INCOME-PRETAX> 8,250,165
<INCOME-TAX> 3,689,000
<INCOME-CONTINUING> 4,561,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,561,165
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR TENDER OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
OF
EVEREST HEALTHCARE SERVICES CORPORATION
Pursuant to the Prospectus dated , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1998 UNLESS EXTENDED (THE "EXPIRATION
DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
By Registered or By Facsimile Transmission By Overnight Courier
Certified Mail American National Bank American National Bank
American National Bank and and
and Trust Trust Company of Chicago Trust Company of Chicago
Company of Chicago (312) 407-1067
ATTN: Barbara Arndt Corporate Trust
Corporate Trust Securities
Redemption Confirm by Telephone: 1 N. State Street Teller
Unit Barbara Arndt 9th Floor
1 First National Plaza (312) 336-9123 Chicago, IL 60670
9th Floor, ATTN: Barbara Arndt
Suite 0124
Chicago, IL 60670-0124
For Information Call:
Anjali J. Gottreich
(312) 661-6042
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL
INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (as it may be supplemented and amended from time to time,
the "Prospectus") of Everest Healthcare Services Corporation, a Delaware
corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its 9 3/4% Senior
Subordinated Notes due 2008, Series B (the "Exchange Notes"), which have been
registered under
<PAGE>
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement, for each $1,000 in principal amount of its outstanding
9 3/4% Senior Subordinated Notes due 2008, Series A (the "Private Notes"), of
which $100,000,000 aggregate principal amount is outstanding. Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
The undersigned hereby tenders the Private Notes described in Box 1 below
(the "Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes (the "Beneficial
Owners") a duly completed and executed form of "Instructions to Registered
Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take
the action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns and transfers to, or upon the
order of, the Company all right, title, and interest in, to and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for the Tendered Notes in the
name(s) of the undersigned. Similarly, unless otherwise indicated under
"SPECIAL DELIVERY INSTRUCTIONS" below (see Box 3), please send or cause to be
sent the certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned
with respect to the Tendered Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Company or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Company,
on the books of the registrar for the Private Notes and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Notes to which the undersigned is entitled upon acceptance by the
Company of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of the Private Notes pursuant to
the procedures described under the caption "The Exchange Offer" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer, subject only to withdrawal of such tenders
on the terms set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders." All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owner(s) hereunder shall be binding upon the heirs, representatives,
successors, and assigns of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances and adverse
claims when the Tendered Notes are acquired by the Company as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Company or
the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are
2
<PAGE>
being acquired by the undersigned and any Beneficial Owner(s) in the ordinary
course of business of the undersigned and any Beneficial Owner(s), (ii) the
undersigned and each Beneficial Owner are not participating, do not intend to
participate, and have no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, (iii) except as
otherwise disclosed in writing herewith, neither the undersigned nor any
Beneficial Owner is an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company or any Subsidiary Guarantor, and (iv) the
undersigned and each Beneficial Owner acknowledge and agree that any person
participating in the Exchange Offer with the intention or for the purpose of
distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the Exchange Notes acquired by such person and cannot rely
on the position of the staff of the Securities and Exchange Commission (the
"Commission") set forth in the no-action letters that are discussed in the
section of the Prospectus entitled "The Exchange Offer." In addition, by
accepting the Exchange Offer, the undersigned hereby (i) represents and
warrants that, if the undersigned or any Beneficial Owner of the Private Notes
is a Participating Broker-Dealer, such Participating Broker-Dealer acquired
the Private Notes for its own account as a result of market-making activities
or other trading activities and has not entered into any arrangement or
understanding with the Company or any "affiliate" of the Company or any
Subsidiary Guarantor (within the meaning of Rule 405 under the Securities Act)
to distribute the Exchange Notes to be received in the Exchange Offer, and
(ii) acknowledges that, by receiving the Exchange Notes for its own account in
exchange for the Private Notes, where the Private Notes were acquired as a
result of market-making activities or other trading activities, the
Participating Broker-Dealer will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of the Exchange Notes;
provided, however, that by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
Holders of the Private Notes that are tendering by book-entry transfer to
the Exchange Agent's account at DTC can execute the tender through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible. DTC participants that are accepting the Exchange Offer must transmit
their acceptance to DTC, which will verify the acceptance and execute a book-
entry delivery to the Exchange Agent's DTC account. DTC will then send an
Agent's Message to the Exchange Agent for its acceptance. DTC participants may
also accept the Exchange Offer prior to the Expiration Date by submitting a
Notice of Guaranteed Delivery or Agent's Message relating thereto as described
herein under Instruction 2, "Guaranteed Delivery Procedures."
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (Box 4).
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (Box 5).
3
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
BOX 1
DESCRIPTION OF THE PRIVATE NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED NOTE HOLDER(S), EXACTLY
AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE NUMBER(S) AGGREGATE AGGREGATE PRINCIPAL
CERTIFICATE(S) (PLEASE FILL IN, IF OF PRIVATE PRINCIPAL BY THE PRIVATE AMOUNT
BLANK) NOTES* AMOUNT REPRESENTED NOTES TENDERED**
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Need not be completed by persons tendering by book-entry transfer.
**The minimum permitted tender is $1,000 in principal amount of the
Private Notes. All other tenders must be in integral multiples of
$1,000 of principal amount. Unless otherwise indicated in this column,
the principal amount of all Note Certificates identified in this Box 1
or delivered to the Exchange Agent herewith shall be deemed tendered.
See Instruction 4.
<TABLE>
<CAPTION>
BOX 2
BENEFICIAL OWNER(S)
- ----------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF THE TENDERED NOTES
BENEFICIAL OWNER OF THE TENDERED NOTES HELD FOR ACCOUNT OF THE BENEFICIAL OWNER
- ----------------------------------------------------------------------------------------------
<S> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF THE EXCHANGE NOTES EXCHANGED FOR THE PRIVATE NOTES
AND THE UNTENDERED NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE
UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN
ABOVE.
Mail the Exchange Note(s) and any untendered Private Notes to:
Name(s):
---------------------------------------------------------------------------
(please print)
Address:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.: ________________________________________________________
5
<PAGE>
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF THE Private Notes ARE BEING TENDERED BY MEANS OF A
NOTICE OF GUARANTEED DELIVERY.
Name(s) of the Registered Holder(s): ______________________________________
Window Ticket No. (if any): _______________________________________________
Date of Execution of the Notice of Guaranteed Delivery: ___________________
Name of Institution that Guaranteed Delivery: _____________________________
If Delivered by Book-Entry Transfer:
Account Number with DTC: _______________________________________________
Transaction Code Number: _______________________________________________
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF THE TENDERED NOTES IS TO BE MADE BY
BOOK-ENTRY TRANSFER.
Name of Tendering Institution: ____________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
6
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
X _________________________________ Signature Guarantee
(If required by Instruction 5)
X _________________________________
(Signature of Registered Holder(s) Authorized Signature
or Authorized Signatory)
Note: The above lines must be X _________________________________
signed by the registered holder(s)
of the Private Notes as their
name(s) appear(s) on the Private
Notes or by persons(s) authorized
to become registered holder(s)
(evidence of such authorization
must be transmitted with this
Letter of Transmittal). If
signature is by a trustee,
executor, administrator, guardian,
attorney-in-fact, officer or other
person acting in a fiduciary or
representative capacity, such
person must set forth his or her
full title below. See Instruction
5.
Name: _____________________________
(please print)
Title: ____________________________
Name of
Firm: _____________________________
(Must be an Eligible Institution
as
defined in Instruction 5)
Address: __________________________
-----------------------------
-----------------------------
Name(s): __________________________ (Zip Code)
Capacity: _________________________ Area Code and
Telephone Number: _________________
Street Address: __________________
Dated: ____________________________
------------------------
(Zip Code)
Area Code and
Telephone Number: _________________
Tax Identification or
Social Security Number: ___________
BOX 7
BROKER-DEALER STATUS
- --------------------------------------------------------------------------------
[_]Check this box if the Beneficial Owner of the Private Notes is a
Participating Broker-Dealer and the Participating Broker-Dealer
acquired the Private Notes for its own account as a result of market-
making activities or other trading activities. IF THIS BOX IS CHECKED,
REGARDLESS OF WHETHER YOU ARE TENDERING BY BOOK-ENTRY TRANSFER THROUGH
ATOP, AN EXECUTED COPY OF THIS LETTER OF TRANSMITTAL MUST BE RECEIVED
WITHIN THREE NYSE TRADING DAYS AFTER THE EXPIRATION DATE BY EVEREST
HEALTHCARE SERVICES CORPORATION, ATTENTION CHIEF FINANCIAL OFFICER,
FACSIMILE (708) 386-1711.
[_]Check this box if such Participating Broker-Dealer wishes to receive 10
additional copies of the Prospectus and 10 copies of any amendments or
supplements thereto.
7
<PAGE>
PAYORS' NAME: AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
- --------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part 1
below. See instructions if your name has changed.)
SUBSTITUTE ------------------------------------------------------------
FORM W-9 Address
DEPARTMENT OF THE ------------------------------------------------------------
TREASURY
INTERNAL REVENUE City, State and ZIP Code
SERVICE
------------------------------------------------------------
------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup
withholding under the provisions of section
3406(a)(1)(C) of the Internal Revenue Code because (1)
you have not been notified that you are subject to
backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue
Service has notified you that you are no longer subject
to backup withholding. [_]
List account number(s) here (optional)
------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TAXPAYER Social Security
IDENTIFICATION NUMBER ("TIN") IN THE Number or TIN
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
- --------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PART 3--
PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE.
Awaiting TIN [_]
SIGNATURE ___________ DATE __________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
8
<PAGE>
EVEREST HEALTHCARE SERVICES CORPORATION
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND THE PRIVATE NOTES. This Letter
of Transmittal is to be completed by registered holders of the Private Notes
if certificates representing the Private Notes are to be forwarded herewith
pursuant to the procedures set forth in the Prospectus under "The Exchange
Offer--Procedures for Tendering," unless delivery of such certificates is to
be made by book-entry transfer to the Exchange Agent's account maintained by
DTC through ATOP. For a holder to properly tender the Private Notes pursuant
to the Exchange Offer, a properly completed and duly executed copy of this
Letter of Transmittal, including Substitute Form W-9, and any other documents
required by this Letter of Transmittal must be received by the Exchange Agent
at one of its addresses set forth herein, and either (i) certificates for the
Tendered Notes must be received by the Exchange Agent at one of its addresses
set forth herein, or (ii) the Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "The Exchange Offer--Procedures for Tendering" (and a confirmation of
such transfer received by the Exchange Agent), in each case prior to 5:00
p.m., New York City time, on the Expiration Date. The method of delivery of
certificates for the Tendered Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the Holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Tendered Notes should be sent to
the Company. Neither the Company nor the Exchange Agent is under any
obligation to notify any tendering holder of the Company's acceptance of
Tendered Notes prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. If a registered holder desires to tender
the Private Notes pursuant to the Exchange Offer and (a) certificates
representing the Tendered Notes are not immediately available, (b) time will
not permit the holder's Letter of Transmittal, certificates representing the
Tendered Notes and all other required documents to reach the Exchange Agent on
or prior to the Expiration Date, or (c) the procedures for book-entry transfer
cannot be completed on or prior to the Expiration Date, the holder may
nevertheless tender the Tendered Notes with the effect that the tender will be
deemed to have been received on or prior to the Expiration Date if the
procedures set forth below and in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures" (including the completion of
Box 4 above) are followed. Pursuant to these procedures, (i) the tender must
be made by or through an Eligible Institution (as defined herein), (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Company herewith, or an Agent's
Message with respect to a guaranteed delivery that is accepted by the Company,
must be received by the Exchange Agent on or prior to the Expiration Date, and
(iii) the certificates for the Tendered Notes, in proper form for transfer (or
a Book-Entry Confirmation of the transfer of the Tendered Notes to the
Exchange Agent's account at DTC as described in the Prospectus), together with
a Letter of Transmittal (or manually signed facsimile thereof) properly
completed and duly executed, with any required signature guarantees and any
other documents required by the Letter of Transmittal or a properly
transmitted Agent's Message, must be received by the Exchange Agent within
three New York Stock Exchange trading days after the date of execution of the
Notice of Guaranteed Delivery. Any holder who wishes to tender the Private
Notes pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to the Tendered Notes prior to 5:00 p.m., New York City time, on the
Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by an
Eligible Holder who attempted to use the guaranteed delivery process.
9
<PAGE>
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name the Tendered Notes are registered on the books of the registrar (or
the legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of the
Tendered Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" form accompanying this Letter of
Transmittal.
4. PARTIAL TENDERS. Tenders of the Private Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of the Private Notes held by the holder is tendered, the
tendering holder should fill in the principal amount tendered in the column
labeled "Aggregate Principal Amount Tendered" of the box entitled "Description
of the Private Notes Tendered" (see Box 1) above. The entire principal amount
of the Private Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated. If the entire principal amount of
all Private Notes held by the holder is not tendered, then the Private Notes
for the principal amount of the Private Notes not tendered and the Exchange
Notes issued in exchange for any Private Notes tendered and accepted will be
sent to the holder at his or her registered address, unless a different
address is provided in the appropriate box on this Letter of Transmittal, as
soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which the Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of the
Tendered Notes, and the Exchange Notes issued in exchange therefor are to be
issued (and any untendered principal amount of the Private Notes is to be
reissued) in the name of the registered holder(s), then the registered
holder(s) need not and should not endorse any Tendered Notes, nor provide a
separate bond power. In any other case, the registered holder(s) must either
properly endorse the Tendered Notes or transmit a properly completed separate
bond power with this Letter of Transmittal, with the signature(s) on the
endorsement or bond power guaranteed by a Medallion Signature Guarantor (as
defined below).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, the Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as
the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with
the signature(s) on the endorsement or bond power guaranteed by a Medallion
Signature Guarantor.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with this Letter of Transmittal.
Signatures on this Letter of Transmittal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program (each a "Medallion Signature Guarantor"), unless the Tendered Notes
are tendered (i) by a registered holder of the Tendered Notes (or by a
participant in DTC whose name appears on a security position listing as the
owner of the Tendered Notes) who has not completed Box 3 on this Letter of
10
<PAGE>
Transmittal, or (ii) for the account of a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being referred to as
an "Eligible Institution"). If the Tendered Notes are registered in the name
of a person other than the signor of the Letter of Transmittal or if the
Private Notes not tendered are to be returned to a person other than the
registered holder, then the signature on this Letter of Transmittal
accompanying the Tendered Notes must be guaranteed by a Medallion Signature
Guarantor as described above. Beneficial owners whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if they desire to tender their Private Notes.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate in Box 3
the name and address to which the Exchange Notes and/or substitute Private
Notes for principal amounts not tendered or not accepted for exchange are to
be sent, if different from the name and address of the person signing this
Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must
also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of the Tendered Notes pursuant to the Exchange
Offer. If, however, a transfer tax is imposed for any reason other than the
transfer and exchange of the Tendered Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or on any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to the tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide
the Exchange Agent (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be subject to backup withholding and a $50 penalty imposed
by the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding and reporting requirements. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional instructions.
To prevent backup withholding, each holder of the Tendered Notes must
provide the holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that the holder
is awaiting a TIN) and that (i) the holder has not been notified by the
Internal Revenue Service that the holder is subject to backup withholding as a
result of failure to report all interest or dividends, or (ii) if previously
so notified, the Internal Revenue Service has notified the holder that the
holder is no longer subject to backup withholding. If the Tendered Notes are
registered in more than one name or are not in the name of the actual owner,
consult the "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of the Tendered Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the right to reject any and
all Private Notes not validly tendered or any Private Notes the Company's
acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the right to waive any conditions of the
11
<PAGE>
Exchange Offer or defects or irregularities in tenders of the Private Notes as
to any ineligibility of any holder who seeks to tender the Private Notes in
the Exchange Offer. The interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of the
Private Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of the Private Notes, nor shall any of them incur any liability for
failure to give notification. Tenders of the Private Notes will not be deemed
to have been made until any defects or irregularities have been cured or
waived. Any Private Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of the Private Notes or transmittal of this Letter of
Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering holder
whose Private Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address indicated
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF THE TENDERED NOTES AND ISSUANCE OF THE EXCHANGE NOTES;
RETURN OF THE PRIVATE NOTES. Subject to the terms and conditions of the
Exchange Offer, the Company will accept for exchange all validly Tendered
Notes as soon as practicable after the Expiration Date and will issue the
Exchange Notes therefor as soon as practicable thereafter. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted the Tendered
Notes when, as and if the Company has given written or oral notice
(immediately followed in writing) thereof to the Exchange Agent. If any
Tendered Notes are not exchanged pursuant to the Exchange Offer for any
reason, such unexchanged Private Notes will be returned, without expense, to
the undersigned at the address shown in Box 1 or at a different address as may
be indicated herein under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of
Tenders."
12
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
OF
EVEREST HEALTHCARE SERVICES CORPORATION
PURSUANT TO THE PROSPECTUS DATED , 1998
The Exchange Agent for the Exchange Offer is:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
American National Bank
By Registered or By Facsimile and Trust Company of
Certified Mail Transmission Chicago
By Overnight Courier
American National Bank
American National Bank and Trust Company of
and Trust Company of Chicago (312) 407-1067
Chicago ATTN: Barbara Arndt
Corporate Trust
Securities 1 N. State
Street Teller 9th Floor
Chicago, IL 60670 ATTN:
Barbara Arndt
Corporate Trust Confirm by Telephone:
Redemption Unit 1 First Barbara Arndt (312) 336-
National Plaza9th Floor, 9123
Suite 0124 Chicago, IL
60670-0124
For Information Call:
Anjali J. Gottreich
(312) 661-6042
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
As set forth in the Prospectus dated , 1998 (as it may be
supplemented and amended from time to time, the "Prospectus") of Everest
Healthcare Services Corporation (the "Company") under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures," and in the Instructions to
the related Letter of Transmittal (the "Letter of Transmittal"), this form, or
one substantially equivalent hereto, or an Agent's Message relating to the
guaranteed delivery procedures, must be used to accept the Company's offer
(the "Exchange Offer") to exchange any and all of its outstanding 9 3/4%
Senior Subordinated Notes due 2008, Series A (the "Private Notes"), for new 9
3/4% Senior Subordinated Notes due 2008, Series B (the "Exchange Notes"), if
time will not permit the Letter of Transmittal, certificates representing such
Private Notes and other required documents to reach the Exchange Agent, or the
procedures for book-entry transfer cannot be completed, on or prior to the
Expiration Date (as defined herein).
This form must be delivered by an Eligible Institution (as defined herein)
by mail or hand delivery or transmitted via facsimile to the Exchange Agent as
set forth above. If a signature on the Letter of Transmittal is required to be
guaranteed by a Medallion Signature Guarantor (as defined in the Letter of
Transmittal) under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the Letter of Transmittal. This
form is not to be used to guarantee signatures.
Questions and requests for assistance and requests for additional copies of
the Prospectus may be directed to the Exchange Agent. Holders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Exchange Offer.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1998, UNLESS EXTENDED (THE "EXPIRATION
DATE").
1
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal (receipt of which is hereby acknowledged), the principal amount of
the Private Notes specified below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures" and in Instruction 2 to the Letter of Transmittal. The
undersigned hereby authorizes the Exchange Agent to deliver this Notice of
Guaranteed Delivery to the Company with respect to the Notes tendered pursuant
to the Exchange Offer.
The undersigned understands that the Private Notes will be exchanged only
after timely receipt by the Exchange Agent of (i) the Private Notes or a Book-
Entry Confirmation, and (ii) a Letter of Transmittal (or a manually signed
facsimile thereof), including by means of an Agent's Message, of the transfer
of the Private Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility, with respect to the Private Notes, properly completed and
duly executed, with any signature guarantees and any other documents required
by the Letter of Transmittal within three New York Stock Exchange trading days
after the execution hereof. The undersigned also understands that the method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the
holder, and the delivery will be deemed made only when actually received by
the Exchange Agent.
The undersigned understands that tenders of the Private Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned also understands that tenders of the Private Notes
may be withdrawn at any time prior to the Expiration Date.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
All capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Prospectus.
2
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Date: _____________________________
Holder(s) or
Address: __________________________
Authorized Signatory: _____________
-----------------------------------
-----------------------------------
Area Code and Telephone No. _______
-----------------------------------
If the Private Notes will be
Name(s) of Registered Holder(s): __ delivered by book-entry transfer,
check book-entry transfer facility
below:
-----------------------------------
-----------------------------------
Principal Amount of the Private
Notes [_]The Depository Trust Company
Tendered: _________________________
Depository
----------------------------------- Account No. _______________________
Certificate No.(s) of the Private
Notes
(if available) ____________________
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear(s) on the certificate(s) for the Private Notes or
on a security position listing as the owner of the Private Notes, or by
person(s) authorized to become holder(s) by endorsements and documents
transmitted with this Notice of Guaranteed Delivery without alteration,
enlargement or any change whatsoever. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s): __________________________________________________________________
---------------------------------------------------------------------------
Capacity: _________________________________________________________________
Address(es): ______________________________________________________________
---------------------------------------------------------------------------
---------------------------------------------------------------------------
DO NOT SEND THE PRIVATE NOTES WITH THIS FORM. THE PRIVATE NOTES SHOULD BE
SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL.
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of the Securities Transfer Agents Medallion
Program, the Stock Exchange Medallion Program or the New York Stock
Exchange, Inc. Medallion Signature Program (each, an "Eligible
Institution"), hereby (i) represents that the above-named persons are
deemed to own the Private Notes tendered hereby within the meaning of Rule
14e-4 promulgated under the Securities Exchange Act of 1934, as amended
("Rule 14e-4"), (ii) represents that such tender of the Private Notes
complies with Rule 14e-4, and (iii) guarantees that the Private Notes
tendered are in proper form for transfer (pursuant to the procedures set
forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures"), and that the Exchange Agent will receive (a) the Private
Notes, or a Book-Entry Confirmation of the transfer of the Private Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility, and
(b) a properly completed and duly executed Letter of Transmittal or
facsimile thereof (or Agent's message) with any required signature
guarantees and any other documents required by the Letter of Transmittal
within three New York Stock Exchange trading days after the date of
execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal
and the Private Notes to the Exchange Agent within the time period shown
herein. Failure to do so could result in a financial loss to the Eligible
Institution.
Name of Firm: _____________________________________________________________
Authorized Signature: _____________________________________________________
Title: ____________________________________________________________________
Address: __________________________________________________________________
---------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number: ___________________________________________
Dated: __________________, 1998
4
<PAGE>
EXHIBIT 99.3
FOR TENDER OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
OF
EVEREST HEALTHCARE SERVICES CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1998 UNLESS EXTENDED (THE "EXPIRATION
DATE").
To Registered Holders and Depository
Trust Company Participants:
We are enclosing the material listed below relating to the offer by Everest
Healthcare Services Corporation, a Delaware corporation (the "Company"), to
exchange its 9 3/4% Senior Subordinated Notes Due 2008, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of its
issued and outstanding 9 3/4% Senior Subordinated Notes Due 2008, Series A
(the "Private Notes"), upon the terms and subject to the conditions set forth
in the Company's Prospectus dated , 1998 (the "Prospectus")
and the related Letter of Transmittal (which together constitute the "Exchange
Offer").
Enclosed are copies of the following documents:
1. Prospectus dated , 1998;
2. Letter of Transmittal (together with accompanying Substitute Form W-9
Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter to Clients which may be sent to your clients for whose account
you hold the Private Notes in your name or in the name of your nominee; and
5. Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner.
We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of the Private
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of the Private Notes
being tendered will represent to the Company that of the tendered Private
Notes (i) the Exchange Notes to be acquired by the holder and any beneficial
owner(s) of the tendered Private Notes in connection with the Exchange Offer
are being acquired by the holder and any beneficial owner(s) in the ordinary
course of business of the holder and any beneficial owner(s), (ii) the holder
and each beneficial owner are not participating, do not intend to participate,
and have no arrangement or understanding with any person to participate, in
the distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the holder nor any beneficial owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company
or any Subsidiary Guarantor, and (iv) the holder and each beneficial owner
acknowledge and agree that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale of the Exchange Notes
acquired
<PAGE>
by such person and cannot rely on the position of the staff of the Securities
and Exchange Commission set forth in the no-action letters that are discussed
in the section of the Prospectus entitled "The Exchange Offer." In addition,
by accepting the Exchange Offer, the holder will (i) represent and warrant
that, if the holder or any beneficial owner of the tendered Private Notes is a
Participating Broker-Dealer (as defined in the Prospectus), such Participating
Broker-Dealer acquired the Private Notes for its own account as a result of
market-making activities or other trading activities and has not entered into
any arrangement or understanding with the Company or any "affiliate" of the
Company or any Subsidiary Guarantor (within the meaning of Rule 405 under the
Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer, and (ii) acknowledges that, by receiving the Exchange Notes
for its own account in exchange for the Private Notes, where the Private Notes
were acquired as a result of market-making activities or other trading
activities, the Participating Broker-Dealer will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of the
Exchange Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Notes, the holder is not deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The enclosed Instructions to Registered Holder and/or Book-Entry Transfer
Facility Participant from beneficial owner(s) contain an authorization by the
beneficial owner(s) for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of the Private Notes pursuant to the Exchange Offer.
The Company will pay or cause to be paid any transfer taxes payable on the
transfer of the Private Notes to it, except as otherwise provided in
Instruction 7 of the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
Everest Healthcare Services
Corporation
2
<PAGE>
EXHIBIT 99.4
FOR TENDER OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
OF
EVEREST HEALTHCARE SERVICES CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1998 UNLESS EXTENDED (THE "EXPIRATION
DATE").
To Our Clients:
We are enclosing a Prospectus dated , 1998 (the "Prospectus")
of Everest Healthcare Services Corporation, a Delaware corporation (the
"Company"), and a related Letter of Transmittal (which together constitute the
"Exchange Offer") relating to the offer by the Company to exchange its 9 3/4%
Senior Subordinated Notes Due 2008, Series B (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding 9
3/4% Senior Subordinated Notes Due 2008, Series A (the "Private Notes"), upon
the terms and subject to the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of the Private
Notes being tendered.
We are the holder of record of the Private Notes held by us for your
account. A tender of the Private Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
the Private Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Private Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of the Private Notes will
represent to the Company that (i) the Exchange Notes to be acquired by the
undersigned and any beneficial owner(s) of the tendered Private Notes in
connection with the Exchange Offer are being acquired by the undersigned and
any beneficial owner(s) in the ordinary course of business of the undersigned
and any beneficial owner(s), (ii) the undersigned and each beneficial owner
are not participating, do not intend to participate, and have no arrangement
or understanding with any person to participate, in the distribution of the
Exchange Notes, (iii) except as otherwise disclosed in writing herewith,
neither the undersigned nor any beneficial owner is an "affiliate," as defined
in Rule 405 under the Securities Act, of the Company or any Subsidiary
Guarantor, and (iv) the undersigned and each beneficial owner acknowledge and
agree that any person participating in the Exchange Offer with the intention
or for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes acquired by such
person and cannot rely on the position of the staff of the Securities and
Exchange Commission set forth in the no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer." In addition, by
accepting the Exchange Offer, the undersigned will (i) represent and warrant
that, if the undersigned or any beneficial owner of the tendered Private Notes
is a Participating Broker-Dealer (as defined in the Prospectus), such
Participating Broker-Dealer acquired the Private Notes for its own account as
a result of market-making activities or other trading activities and has not
entered into any arrangement or understanding
<PAGE>
with the Company or any "affiliate" of the Company or any Subsidiary Guarantor
(within the meaning of Rule 405 under the Securities Act) to distribute the
Exchange Notes to be received in the Exchange Offer, and (ii) acknowledges
that, by receiving the Exchange Notes for its own account in exchange for the
Private Notes, where the Private Notes were acquired as a result of market-
making activities or other trading activities, the Participating Broker-Dealer
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the Exchange Notes. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
Very truly yours,
2
<PAGE>
EXHIBIT 99.5
INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY
TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
FOR TENDER OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
OF
EVEREST HEALTHCARE SERVICES CORPORATION
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (as the same may be amended or supplemented from time to
time, the "Prospectus") of Everest Healthcare Services Corporation, a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange any and all of its outstanding 9 3/4% Senior
Subordinated Notes due 2008, Series A (the "Private Notes"), for new 9 3/4%
Senior Subordinated Notes due 2008, Series B (the "Exchange Notes").
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the Private Notes held by you for the account of the
undersigned.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$ of the 9 3/4% Senior Subordinated Notes due
2008, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]TO TENDER the following Private Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF THE PRIVATE NOTES TO BE
TENDERED, IF ANY): $
[_]NOT TO TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you for
the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including, but not limited to, the representations that
(i) the undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (iii) the undersigned is
not participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in no-action letters
that are discussed in the section of the Prospectus entitled "The Exchange
Offer--Resale of the Exchange Notes," and (v) the undersigned is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company
or any Subsidiary Guarantor; (b) to agree, on behalf of the undersigned, as
set forth in the Letter of Transmittal; and (c) to take such other action as
necessary under the Prospectus or the Letter of Transmittal to effect the
valid tender of the Private Notes.
<PAGE>
Check this box if the Beneficial Owner of the Private Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Private Notes for its own account as a result of market-
making activities or other trading activities. IF THIS BOX IS CHECKED,
A COPY OF THESE INSTRUCTIONS MUST BE RECEIVED WITHIN THREE NEW YORK
STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION DATE BY EVEREST
HEALTHCARE SERVICES CORPORATION, ATTENTION CHIEF FINANCIAL OFFICER,
FACSIMILE (708) 386-1711.
[_]
- --------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s): ______________________________________________
Signature(s): _____________________________________________________________
Name (please print): ______________________________________________________
Address: __________________________________________________________________
--------------------------------------------------------------------
--------------------------------------------------------------------
Telephone number: __________________________________________________
Taxpayer Identification or Social Security Number: ________________________
Date: _____________________________________________________________________
<PAGE>
EXHIBIT 99.6
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- -----------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one of
the
individuals(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if
joint funds,
either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor,
guardian or committee for a or incompetent
designated ward, minor, or person(3)
incompetent person
7. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
--------
<S> <C>
8. Sole proprietorship The owner(4)
account
9. A valid trust, estate, or The legal entity
pension trust (do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account title)(5)
10. Corporate account The corporation
11. Partnership account held The partnership
in the name of the business
12. Association, club, The organization
religious, charitable,
educational or other tax-
exempt organization
13. A broker or registered The broker or
nominee nominee
14. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
---------------------------------------
- ---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your social security
number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Internal Revenue Service Form SS-5 (Application for Social
Security Number Card) or Form SS-4 (Application for Employer Identification
Number) from your local office of the Social Security Administration or the
Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan or a custodial account under Section 403(b)(7) of the Code.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a) of the Code.
. An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1) of the Code.
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441 of
the Code.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt interest dividends under
Section 852 of the Code).
. Payments described in Section 6049(b)(5) of the Code to nonresident aliens.
. Payments on tax-free covenant bonds under Section 1451 of the Code.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FURNISH YOUR TAXPAYER IDENTIFICATION
NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND
RETURN IT TO THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT
SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE
FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6045, and 6050A of the
Code.
PRIVACY ACT NOTICE--Section 6109 of the Code requires most recipients of
dividend, interest or other payments to give taxpayer identification numbers
to payers who must report the payments to the Internal Revenue Service. The
Internal Revenue Service uses the numbers for identification purposes and to
help verify the accuracy of your tax return. Payers must be given the numbers
whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividends and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to
a penalty of $50 for each such failure, unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Wilfully falsifying
certifications or affirmations may subject you to criminal penalties,
including fines and/or imprisonment.
(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be subject to a penalty
of 5% on any portion of an under-payment attributable to that failure unless
there is clear and convincing evidence to the contrary.
FOR ADDITIONAL INFORMATION CONTACT YOUR OWN TAX ADVISOR OR THE INTERNAL
REVENUE SERVICE
