THIS DOCUMENT IS A COPY OF THE FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1996, FILED ON AUGUST 15, 1996 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP
EXEMPTION.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 1-11144
Regency Health Services, Inc.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Delaware 33-0210226
Regency Health Services, Inc.
2742 Dow Avenue
Tustin, California 92780
714-544-4443
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Stock 16,173,695
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements.
REGENCY HEALTH SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
ASSETS
June 30, December 31,
1996 1996
<S> <C> <C> <C> <C> <C> <C>
-------------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 66,900 $ 104,238
Restricted cash 4,400 -
Accounts receivable, net of allowances of $4,150 at
June 30, 1996 and $3,757 at December 31, 1995 79,737 54,050
Notes and other receivables 1,369 2,182
Deferred income taxes 5,447 5,447
Assets held for sale 7,640 8,970
Other current assets 8,046 6,396
-------------- --------------
Total current assets 173,539 181,283
-------------- --------------
PROPERTY AND EQUIPMENT:
Land 21,281 21,249
Buildings and improvements 101,432 96,396
Leasehold interest - other 17,554 17,556
Leasehold interest - related party 2,075 2,075
Equipment 29,384 24,610
-------------- --------------
171,726 161,886
Less - accumulated depreciation and amortization (39,131) (34,679)
-------------- --------------
Total property and equipment 132,595 127,207
-------------- --------------
OTHER ASSETS:
Mortgage notes receivable, net of allowances of $949 at
June 30, 1996 and $951 at December 31, 1995 4,651 5,163
Goodwill, net of accumulated amortization of $2,023 at
June 30, 1996 and $563 at December 31, 1995 57,951 13,621
Other assets, net of accumulated amortization of $3,323 at
June 30, 1996 and $2,206 at December 31, 1995 31,201 15,697
-------------- --------------
Total other assets 93,803 34,481
-------------- --------------
$399,937 $ 342,971
============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
REGENCY HEALTH SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1996 1995
-------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 51,438 $ 4,371
Accounts payable 24,748 22,285
Accrued expenses 4,828 5,946
Accrued compensation 21,023 18,051
Accrued workers' compensation 4,892 5,377
Deferred revenue 1,428 1,743
Accrued interest 4,197 4,231
-------------- --------------
Total current liabilities 112,554 62,004
LONG-TERM DEBT, NET OF CURRENT PORTION 183,607 179,615
OTHER LIABILITIES AND NONCURRENT RESERVES 11,878 13,017
DEFERRED INCOME TAXES 10,414 7,946
-------------- --------------
Total liabilities 318,453 262,582
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized - 35,000 shares; 16,174 and
16,670 shares issued and outstanding
at June 30, 1996 and December 31, 1995, respectively 167 167
Additional paid-in capital 51,972 56,679
Retained earnings 29,345 23,543
-------------- --------------
Total stockholders' equity 81,484 80,389
-------------- --------------
$ 399,937 $ 342,971
============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
REGENCY HEALTH SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
------------------------- --------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C> <C>
(Unaudited) (Unaudited)
NET OPERATING REVENUE $137,632 $99,766 $267,595 $197,314
------------ ----------- ------------ ------------
COSTS AND EXPENSES:
Operating expenses 112,567 80,881 218,693 159,853
Corporate general and administrative
5,617 4,450 11,680 9,698
Rent expense
6,178 4,205 11,690 8,358
Depreciation and amortization
3,836 2,336 7,186 4,622
Interest expense
4,194 1,925 8,346 3,835
Class action suit settlement
- 3,098 - 3,098
------------ ----------- ------------ ------------
Total costs and expenses 132,392 96,895 257,595 189,464
------------ ----------- ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES
5,240 2,871 10,000 7,850
PROVISION FOR INCOME TAXES
2,175 1,091 4,198 2,983
------------ ----------- ------------ ------------
NET INCOME $ 3,065 $ 1,780 $ $
5,802 4,867
============ =========== ============ ============
INCOME PER COMMON SHARE:
Primary $ $ $ $
0.19 0.11 0.35 0.29
============ =========== ============ ============
Fully diluted $ $ $ $
0.18 0.11 0.33 0.29
============ =========== ============ ============
WEIGHTED AVERAGE SHARES OF COMMON STOCK
AND EQUIVALENTS:
Primary 16,382 16,600
16,617 16,594
============ =========== ============ ============
Fully diluted 20,341 20,567
20,573 20,548
============ =========== ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
REGENCY HEALTH SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six months ended
June 30,
-----------------------------------
1996 1995
(Unaudited)
<S> <C> <C> <C> <C>
Net income $ 5,802 $ 4,867
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 7,186 4,622
Deferred income taxes and charge in lieu of taxes 2,468 1,252
Other, net 296 2
Change in cash from changes in assets and liabilities, excluding effects
of acquisitions and dispositions:
Accounts receivable (24,158) (1,359)
Other current assets 335 234
Current and other liabilities 2,033 3,418
----------------- ---------------
Net cash provided by (used in) operating activities (6,038) 13,036
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from mortgage notes receivable 109 87
Acquisitions (48,183)
-
Purchases of property and equipment (5,600) (7,829)
Changes in other assets, net (5,823) 1,242
----------------- ---------------
Net cash used in investing activities (59,497) (6,500)
----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (4,898) (2,727)
Proceeds from exercise of warrants and options 232 99
Proceeds from exercise of stock appreciation rights 615
-
Purchase of treasury stock
(5,082) -
Workers' compensation trust funding (10,637)
-
Proceeds from issuance of long-term debt 48,582 1,066
----------------- ---------------
Net cash provided by (used in) financing activities 28,197 (947)
----------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (37,338) 5,589
CASH AND CASH EQUIVALENTS, beginning of period 104,238 25,677
----------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 66,900 $ 31,266
================= ===============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the six months ended June 30, 1995, $20,000 of the Company's
Convertible Subordinated Debentures were converted into 1,616 shares of
common stock.
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
REGENCY HEALTH SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The unaudited consolidated financial statements and related notes have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have not been presented. The accompanying
unaudited financial statements and related notes should be read in conjunction
with the consolidated financial statements and related notes included in Regency
Health Services, Inc.'s ("Regency" or the "Company") 1995 Annual Report on Form
10-K.
In the opinion of the management of Regency, all material adjustments
necessary to present fairly the Company's financial condition, results of
operations, and changes in financial position have been made. All material
intercompany balances, profits, and transactions have been eliminated. The
consolidated results of operations presented are not necessarily indicative of
the consolidated results for a full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain amounts in the 1995 financial statements have been
reclassified to conform to the 1996 presentation.
2. Acquisitions
Effective January 2, 1996, the Company completed the acquisition of the
assets of Assist-A-Care, a pharmacy located in San Diego, California. The
purchase price was $5.8 million, comprised of $3.2 million cash and a $2.6
million note payable.
Effective February 1, 1996, the Company acquired leasehold interests in
18 health care facilities in Tennessee and North Carolina with 2,375 beds from
Liberty Healthcare Limited Partnership ("Liberty") through an asset purchase for
$39.3 million cash and a note payable for $2.2 million. The Company also
acquired Executive Pharmacy with a $763,000 note payable and an enteral feeding
business for $1.5 million cash from businesses affiliated with Liberty. In
addition, the Company paid $400,000 cash for the inventory of Liberty. A portion
of the purchase was funded with notes payable, which may be reduced as a result
of certain seller liabilities and audit adjustments. Escrow accounts established
at the time of purchase were funded with $2.96 million for payment on the notes
payable and are included in other assets on the accompanying consolidated
balance sheet as of June 30, 1996.
On April 1, 1996, the Company completed the acquisition of the assets
of Buena Vista Nursing Center ("Buena Vista"), a health care facility with 64
skilled nursing beds and 22 assisted living beds, located in Lexington, North
Carolina. The purchase price was $2.875 million, consisting of $2.675 million in
cash and a $200,000 note payable. Payment of the note is dependent upon Buena
Vista attaining certain financial performance targets.
These transactions were accounted for using the purchase method of
accounting under generally accepted accounting principles. Revenues and expenses
are included in the accompanying financial statements subsequent to the purchase
date. The purchase price allocation related to these transactions has not yet
been finalized.
<PAGE>
The following unaudited pro forma condensed consolidated statements of
earnings present the summarized consolidated results of operations of the
Company after giving effect to the acquisitions of Liberty and
Liberty-affiliated businesses for the six months ended June 30, 1996 and 1995,
as if such acquisitions had been consummated on January 1, 1995 (in thousands,
except per share data):
<TABLE>
Six months ended
June 30,
--------------------------------
1996 1995
-------------- ---------------
(Unaudited)
<S> <C> <C>
Net operating revenue $ 274,401 $ 237,113
Total costs and expenses 263,820 228,813
-------------- ---------------
Income before provision for income taxes 10,581 8,300
Provision for income taxes 4,442 3,163
-------------- ---------------
Net income $ 6,139 $ 5,137
============== ===============
Income per common share -
Primary $ 0.37 $ 0.31
============== ===============
Fully diluted $ 0.35 $ 0.30
============== ===============
</TABLE>
The pro forma results are presented for informational purposes only and
are not necessarily indicative of what results of operations actually would have
been had such acquisitions been consummated at the beginning of such period or
of future operations or results. The effect of the other acquisitions is
immaterial.
3. Dispositions
On March 1, 1996, the Company disposed of a 98-bed facility in Lynwood,
California resulting in a $182,000 charge against the reserve established in the
fourth quarter 1995.
4. Workers' Compensation Claims Trust
In 1995, the Company established a revocable workers' compensation
claims trust ("Trust") to pre-fund its workers' compensation obligations. The
Trust was funded in March 1996 with approximately $10.6 million from available
cash. Of the remaining $9.2 million in the Trust at June 30, 1996, $4.4 million
was classified as current restricted cash and $4.8 million was classified as
other long-term assets.
5. Issuance of Subordinated Notes
On June 28, 1996, the Company issued 12 1/4% Subordinated Notes (the
"Subordinated Notes") in an aggregate amount of $50 million. Interest on the
Notes will be payable semi-annually on January 15 and July 15 of each year,
commencing January 15, 1997. The Subordinated Notes will mature on July 15,
2003, unless previously redeemed. Net proceeds received by the Company totaled
approximately $48.4 million and funded the redemption of the Company's
outstanding 6 1/2% Convertible Subordinated Debentures due 2003 (the
"Convertible Subordinated Debentures") on July 29, 1996 (see Note 7 - Subsequent
Event). The Subordinated Notes contain certain covenants similar to the 9-7/8%
Senior Subordinated Notes, including limitations on the ability of the Company
to, among other things, (a) incur additional indebtedness and issue redeemable
preferred stock, (b) sell equity interests in subsidiaries, (c) make certain
restricted payments (as defined), (d) create liens, and (e) engage in mergers,
consolidations or transfers of substantially all of the assets of the Company to
another party.
6. Net Income per Share
For the three and six months ended June 30, 1996 and 1995, primary
income per share was calculated based on the weighted average number of common
and common equivalent shares outstanding during the periods. For the three and
six months ended June 30, 1996 and 1995, fully diluted income per share was
computed as described above and includes the issuance of common shares upon the
assumed conversion of the Convertible Subordinated Debentures. Additionally,
interest and amortization of underwriting costs related to such debentures were
added, net of tax, to income for the purpose of calculating fully diluted income
per share. Such amounts aggregated $496,000 and $509,000 for the three months
ended June 30, 1996 and 1995, respectively, and $984,000 and $1,019,000 for the
six months ended June 30, 1996 and 1995, respectively.
7. Subsequent Event
On July 29, 1996, the Company completed the redemption of all $48.9
million of its outstanding Convertible Subordinated Debentures for cash at such
amount. The redemption was financed through the issuance of the Subordinated
Notes and available cash. The redemption reduces fully diluted shares by 3.9
million shares. The full amount of outstanding Convertible Subordinated
Debentures is recorded in the current portion of long-term debt at June 30,
1996.
<PAGE>
Item 2: Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
General
The following table sets forth certain operating data for the Company
on the dates indicated:
<TABLE>
June 30,
1996 1995
In-patient operations
<S> <C> <C>
Facilities............................................. 112 93
Licensed beds.......................................... 11,541 9,134
Subacute beds.......................................... 1,108 1,028
Subacute units......................................... 46 43
Contract rehabilitation therapy operations(1)
Non-affiliated facilities served....................... 86 --
Regency operated facilities served..................... 49 --
Total........................................ 135 --
Pharmacy operations
Non-affiliated facilities served....................... 76 5
Regency operated facilities served..................... 60 34
Total........................................ 136 39
- - ------------------
(1) The Company did not provide contract rehabilitation therapy services until the acquisition of SCRS &
Communicology, Inc. ("SCRS") in July 1995.
</TABLE>
In-Patient Operations
The Company's in-patient operations derive its net operating revenue
from the performance of routine and ancillary services at the Company's
facilities. Revenue from routine services is comprised of charges for room and
board and basic nursing services for the care of patients, including those in
the Company's subacute specialty units. Revenue from ancillary services is
comprised of charges for rehabilitative services, subacute specialty services,
and pharmaceutical products and services provided to patients at the Company's
facilities. In-patient operations derive most of its ancillary services revenue
from Medicare- and HMO-eligible patients. The Company has classified revenue
from in-patient operations as either basic nursing care revenue or subacute
revenue. Basic nursing care revenue includes charges for room and board for
non-Medicare and non-HMO patients. Subacute revenue includes room and board and
basic nursing services for Medicare and HMO patients and revenues from all
ancillary services provided to patients at the Company's facilities.
The Company's growth strategy includes the selective acquisition of
both new facilities as well as other service providers. The Company incurs
certain costs and experiences operating inefficiencies in connection with the
acquisition of a new facility following such acquisition, relating to the
integration of such facility's financial and administrative systems, physical
plant and other aspects of its operations into those of the Company. In
addition, the introduction of a substantial portion of the Company's contract
rehabilitation therapy, pharmacy and other ancillary services to a new facility
may take as long as 12 months to fully implement. There can be no assurance that
each of the service providers the Company may acquire will be profitable, or
that the acquisition of new facilities that result in significant integration
costs and inefficiencies will not adversely affect the Company's profitability.
During the fourth quarter of 1995 the Company exchanged leasehold
interests in three healthcare facilities with 360 beds in New Mexico for
leasehold interests in four healthcare facilities with 461 beds in Ohio
previously operated by another company. In October 1995, the Company also opened
a newly constructed facility and disposed of one additional facility.
In December 31, 1995, the Company determined to dispose of 13
facilities located in California as part of its strategic plan of diversifying
from the California Medicaid system ("Medi-Cal"). The results of operations of
these facilities will continue to be reflected in the Company's financial
statements until the disposition is completed. In March 1996, the Company
disposed of one of the thirteen facilities with 98 beds.
Effective February 1, 1996, the Company acquired 18 healthcare
facilities with 2,375 beds in Tennessee and North Carolina (see Note 2 to the
Consolidated Financial Statements).
In addition, effective April 1, 1996, the Company acquired 1
healthcare facility in North Carolina with 86 beds.
Ancillary Businesses Operations
In July 1995, the Company acquired SCRS which provides rehabilitation
services to Company-operated and non-affiliated healthcare facilities in 14
states in the West, Midwest, and Southeast. In the second quarter 1996, 65% of
SCRS revenues were derived from providing services to non-affiliated healthcare
providers.
The Company's pharmacy operations provide prescription services and
basic pharmaceutical dispensing programs to Company and third party healthcare
facilities. During the first six months of 1996 and 1995, 65% and 55%,
respectively, of revenues from pharmacy operations were derived from providing
services to non-affiliated healthcare providers and patients at Regency
facilities billed directly to third-party payors. In January and February of
1996, the Company acquired three additional pharmacy operations (see Note 2 to
the Consolidated Financial Statements).
The Company's 29 home healthcare locations provide skilled nursing,
rehabilitation and other services in selected areas in California and Ohio.
The acquisitions occurring in the first and second quarters 1996
are collectively referred to as the "1996 Acquisitions."
<PAGE>
Results of Operations
The following table sets forth the amounts of certain elements of net
operating revenue and the percentage of total net operating revenue for the
periods presented:
<TABLE>
Three months ended June 30,
1996 1995
(dollars in thousands)
<S> <C> <C> <C> <C>
Basic nursing care......................................... $70,660 51% $58,443 59%
Subacute................................................... 42,915 32 31,425 31
Total in-patient operations........................... 113,575 83 89,868 90
Home healthcare operations................................. 8,856 6 7,529 7
Contract rehabilitation therapy operations to
non-affiliates (1).................................... 9,292 7 -- --
Pharmacy operations to non-affiliates (2).................. 5,379 4 1,755 2
Interest................................................... 530 -- 614 1
Total................................................. $137,632 100% $ 99,766 100%
(1) Net of intercompany billings of $4,962,000 for the three months ended June 30, 1996.
(2) Net of intercompany billings of $2,880,000 and $1,426,000 for the three months ended June 30, 1996 and
1995, respectively.
</TABLE>
<TABLE>
Six months ended June 30,
1996 1995
(dollars in thousands)
<S> <C> <C> <C> <C>
Basic nursing care......................................... $137,257 51% $115,719 58%
Subacute................................................... 84,410 32 62,751 32
Total in-patient operations........................... 221,667 83 178,470 90
Home healthcare operations................................. 17,548 6 14,443 7
Contract rehabilitation therapy operations to
non-affiliates (1).................................... 16,755 6 -- --
Pharmacy operations to non-affiliates (2).................. 10,105 4 3,287 2
Interest................................................... 1,520 1 1,114 1
Total................................................. $267,595 100% $197,314 100%
(1) Net of intercompany billings of $7,890,000 for the six months ended June 30, 1996.
(2) Net of intercompany billings of $5,352,000 and $2,678,000 for the six months ended June 30, 1996 and
1995, respectively.
</TABLE>
<PAGE>
The following table sets forth certain operating data for the Company
for the periods presented:
<TABLE>
Three months ended Six months ended
June 30, June 30,
-------------------------------- ---------------------------------
1996 1995 1996 1995
Patient Days by Payor:
<S> <C> <C> <C> <C>
Medicare 79,733 62,382 156,060 125,051
Private/Other 191,264 171,686 373,923 342,926
Managed Care 27,593 23,221 59,643 47,657
Medicaid 635,352 474,161 1,202,522 940,689
------------- -------------- ------------ -------------
Total 933,942 731,450 1,792,148 1,456,323
============= ============== ============ =============
Home Health Visits 70,307 66,017 145,284 128,031
Home Health Hours 109,171 101,336 215,049 168,741
Revenue Mix:
Medicare 29.9 % 33.4 % 30.4 % 32.9 %
Private/Other 23.9 % 20.3 % 23.9 % 20.4 %
Managed Care 4.9 % 5.2 % 5.5 % 5.6 %
Medicaid 41.3 % 41.1 % 40.2 % 41.1 %
</TABLE>
The following table presents the percentage of net operating revenue
represented by certain items reflected in the Company's Consolidated Statements
of Operations for the periods presented:
<TABLE>
Three months ended Six months ended
June 30, June 30,
---------------------------- -----------------------------
1996 1995 1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET OPERATING REVENUE 100.0 % 100.0 % 100.0 % 100.0 %
------------ ------------- ------------- -------------
COSTS AND EXPENSES:
Operating expenses 81.8 81.1 81.7 81.0
Corporate general and administrative 4.1 4.5 4.4 4.9
Rent expense 4.5 4.2 4.4 4.2
Depreciation and amortization 2.8 2.3 2.7 2.3
Interest expense 3.0 1.9 3.1 2.0
Class action lawsuit settlement 0.0 3.1 0.0 1.6
------------ ------------- ------------- -------------
Total costs and expenses 96.2 97.1 96.3 96.0
------------ ------------- ------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 3.8 % 2.9 % 3.7 % 4.0 %
============ ============= ============= =============
</TABLE>
Quarter Comparison 1996 to 1995
Net Operating Revenue
The Company's net operating revenue for the three months ended June 30,
1996 ("Second Quarter 1996") was $137.6 million compared to $99.8 million for
the three months ended June 30, 1995 ("Second Quarter 1995"), an increase of
$37.8 million or 38.0%.
Net operating revenue from in-patient operations increased $23.7 million,
or 26.4%, to $113.6 million from $89.9 million primarily due to the 1996
acquisition of 18 in-patient facilities and, on a same store basis, a shift in
payor mix from Medicaid (42.8% to 41.2%) and private (14.7% to 12.9%) to
Medicare (30.3% to 31.4%) and managed care (5.9% to 6.9%), partially offset by a
slight decrease in total patient days. The 18 in-patient facilities acquired by
the Company in February 1996 contributed $20.9 million of net operating revenue
during Second Quarter 1996. On a same store basis, the average increase in
reimbursement rates per patient day was 5.7% from Second Quarter 1995 and was
primarily due to providing services to higher acuity patients. The Company
experienced a 0.4% net decrease in total patient days in Second Quarter 1996
from Second Quarter 1995 on a same store basis, consisting of a decrease of
3,402 and 7,960 from Medicaid and private and other sources, respectively, and
an increase of 3,830 and 4,447 from Medicare and managed care, respectively.
Net operating revenue from home healthcare operations grew $1.3 million to
$8.9 million, or 17.6% in Second Quarter 1996 over Second Quarter 1995,
primarily reflecting an increase in patient visits to 70,307 in Second Quarter
1996 from 66,017 in Second Quarter 1995 and an increase in treatment hours to
109,171 in Second Quarter 1996 from 101,336 in Second Quarter 1995. Net
operating revenue from pharmacy operations to non-affiliates increased $3.6
million or 206.5% in Second Quarter 1996 over Second Quarter 1995, primarily due
to the acquisition of Assist-A-Care in January 1996 and Executive Pharmacy in
February 1996 (collectively, the "Pharmacy Acquisitions"). Net operating revenue
from the Pharmacy Acquisitions for Second Quarter 1996 was $2.9 million. Net
operating revenue from contract rehabilitation therapy operations to
non-affiliates was $9.3 million in Second Quarter 1996 and was a result of the
purchase of SCRS in July 1995. The Company had no net operating revenue from
contract rehabilitation therapy operations in the Second Quarter 1995.
Costs and Expenses
Total costs and expenses for Second Quarter 1996 increased $35.5 million,
or 37%, to $132.4 million (96.2% of net operating revenue) from $96.9 million
(97.1% of net operating revenue) for Second Quarter 1995.
Operating expenses as a percentage of net operating revenue increased to
81.8% for Second Quarter 1996, from 81.1% for Second Quarter 1995. The increase
resulted from the incurrence of increased labor costs in the in-patient
operations while reimbursement rates per patient day for room and board charges
remained relatively flat for the Medi-Cal and Medicare systems.
Corporate general and administrative expense is the corporate overhead and
regional costs related to the supervision of operations. This expense decreased
as a percentage of net operating revenue to 4.1% for Second Quarter 1996 from
4.5% in Second Quarter 1995. The decrease as a percentage of revenues is
attributed to achieving economies of scale through acquisition and same store
growth.
Rent expense as a percentage of net operating revenue increased to 4.5%
in Second Quarter 1996 from 4.2% in Second Quarter 1995 primarily due to the
1996 Acquisitions.
Depreciation and amortization expense as a percentage of net operating
revenue increased to 2.8% in Second Quarter 1996 from 2.3% in Second Quarter
1995 primarily due to goodwill amortization related to the purchase of SCRS in
July 1995 and the 1996 Acquisitions.
<PAGE>
Interest expense as a percentage of net operating revenue increased to 3.0%
in Second Quarter 1996 from 1.9% in Second Quarter 1995 primarily due to the
Company issuing the 9-7/8% Senior Subordinated Notes (the "Senior Subordinated
Notes") in October 1995 partially offset by the repayment of the 8.1% Senior
Secured Notes in that month.
Pursuant to the settlement of a class action lawsuit, the Company recorded
a charge of $3.1 million in Second Quarter 1995. The amount represents the
Company's portion of the settlement, together with related legal fees and other
costs.
Six Months Comparison 1996 to 1995
Net Operating Revenue
The Company's net operating revenue for the six months ended June 30, 1996
("Six Months 1996") was $267.6 million compared to $197.3 million for the six
months ended June 30, 1995 ("Six Months 1995"), an increase of $70.3 million or
35.6%.
Net operating revenue from in-patient operations increased $43.2 million,
or 24.2%, to $221.7 million from $178.5 million due to the 1996 acquisition of
18 in-patient facilities and, on a same store basis, a shift in payor mix from
Medicaid (42.8% to 40.4%) and private (14.9% to 13.0%) to Medicare (29.6% to
31.6%) and managed care (6.2% to 7.5%). The 18 in-patient facilities acquired by
the Company in February 1996 contributed $33.5 million of net operating revenue
during Six Months 1996. On a same store basis, the average increase in
reimbursement rates per patient day was 7.2% and was primarily due to providing
services to higher acuity patients.
Net operating revenue from home healthcare operations grew $3.1 million to
$17.5 million, or 21.5%, in Six Months 1996 over Six Months 1995, primarily
reflecting an increase in patient visits to 145,284 in Six Months 1996 from
128,031 in Six Months 1995 and an increase in treatment hours to 215,049 in Six
Months 1996 from 168,741 in Six Months 1995. Net operating revenue from pharmacy
operations to non-affiliates increased $6.8 million or 207.4% in Six Months 1996
over Six Months 1995, primarily due to the acquisition of Assist-A-Care in
January 1996 and Executive Pharmacy in February 1996 (collectively, the
"Pharmacy Acquisitions"). Net operating revenue from the Pharmacy Acquisitions
for Six Months 1996 was $5.6 million. Net operating revenue from contract
rehabilitation therapy operations to non-affiliates was $16.8 million in Six
Months 1996 and was a result of the purchase of SCRS in July 1995. The Company
had no net operating revenue from contract rehabilitation therapy operations in
Six Months 1995.
Costs and Expenses
Total costs and expenses for Six Months 1996 increased $68.1 million, or
36%, to $257.6 million (96.3% of net operating revenue) from $189.5 million
(96.0% of net operating revenue) for Six Months 1995.
Operating expenses as a percentage of net operating revenue increased to
81.7% for Six Months 1996, from 81.0% for Six Months 1995. The increase resulted
from the incurrence of increased labor costs in the in-patient operations while
reimbursement rates per patient day for room and board charges remained
relatively flat for the Medi-Cal and Medicare systems. In addition, the home
health agency participating in the Medicare Prospective Pay System pilot project
beginning in 1996 did not adequately reduce costs at the outset of this program.
Corporate general and administrative expense is the corporate overhead and
regional costs related to the supervision of operations. This expense decreased
as a percentage of net operating revenue to 4.4% for Six Months 1996 from 4.9%
in Six Months 1995. The decrease as a percentage of revenues is attributed to
achieving economies of scale through acquisition and same store growth.
Rent expense as a percentage of net operating revenue increased to 4.4%
in Six Months 1996 from 4.2% in Six Months 1995 primarily due to the 1996
Acquisitions.
<PAGE>
Depreciation and amortization expense as a percentage of net operating
revenue increased to 2.7% in Six Months 1996 from 2.3% in Six Months 1995
primarily due to goodwill amortization related to the purchase of SCRS in July
1995 and the 1996 Acquisitions.
Interest expense as a percentage of net operating revenue increased to 3.1%
in Six Months 1996 from 2.0% in Six Months 1995 primarily due to the Company
issuing the Senior Subordinated Notes in October 1995 partially offset by the
repayment of the Senior Secured Notes in that month.
Pursuant to the settlement of a class action lawsuit, the Company recorded
a charge of $3.1 million in Six Months 1995. The amount represents the Company's
portion of the settlement, together with related legal fees and other costs.
Liquidity and Capital Resources
Working capital at June 30, 1996 decreased $58.3 million to $61.0 million
(including cash and cash equivalents of $66.9 million) from $119.3 million
(including cash and cash equivalents of $104.2 million) at December 31, 1995.
The decrease was primarily attributable to funding the purchase of the 1996
Acquisitions. During the Six Months 1996, the Company's receivables increased
approximately $24 million primarily related to the 1996 Acquisitions. A portion
of the increase in receivables is due to delays in securing state and federal
provider numbers for certain of the 18 healthcare facilities acquired in the
1996 Acquisitions. Management anticipates the collections related to the delay
will occur in the third and fourth quarter 1996. In addition, the Company
established a revocable workers' compensation claims payment trust to pre-fund
its workers' compensation obligations which was funded in March 1996 with
approximately $10.6 million from available cash.
(See Note 4 to the Consolidated Financial Statements).
The Company's major requirements for liquidity relate to funding working
capital, capital improvements and debt service obligations. The Company must
also provide funding to cover potential delays, temporary cessations or
interruptions in payments by third-party payors due to political or budgetary
constraints. Management believes that these liquidity needs can be met from
available cash, internally generated funds and existing borrowing capacity under
a revolving credit loan agreement ("Credit Agreement") with NationsBank of
Texas, N.A.
as agent for a group of banks (discussed below).
The Company's healthcare facilities require capital improvements for
renovations and improvements in physical appearance. Future capital improvements
may be required as a result of routine regulatory inspections. In addition, the
Company is and will continue to invest in improving its information systems. The
Company's capital expenditures for the six months ended June 30, 1996 and 1995
were approximately $5.6 million and $7.8 million, respectively. These capital
expenditures have been financed through a combination of internally generated
funds and debt. The Company expects to spend approximately an aggregate of $13.0
million for capital expenditures during 1996 to be financed through leases,
borrowings under the Credit Agreement and funds generated from operations.
The Company has financed its acquisitions from a combination of borrowings
and funds generated by operations. The Company expects to finance future
acquisitions from a combination of existing cash, the Credit Agreement, and
alternative sources such as real estate investment trusts. Depending on the
numbers, size and timing of any such transactions, the Company may in the future
require additional financing in order to continue to make acquisitions.
Periodically, the Company has funded temporary delays in reimbursement from
third-party payors. For example, in July 1995, the State of California, due to
budgetary constraints, delayed payment of significant amounts owed to healthcare
providers under the Medi-Cal program. In 1992, the State of California
reimbursed providers with registered warrants, which some banks temporarily
refused to redeem at face value. The Company has been able to mitigate the
effects of such payment delays by monitoring the related activities of the
California legislature, expediting billings through its direct access electronic
billing arrangement, and obtaining the agreement of creditors to extend the due
date for payables. The Company has not recently experienced any material adverse
effects on its liquidity as a result of such delays. There can be no assurance,
however, that the Company will be able to mitigate the effects of any future
funding delays by the State of California or other third-party payors.
In April and May 1996, the Company purchased 555,000 shares of Company
common stock at an average price of $9.16 per share. The transaction, accounted
for using the cost method, reduced stockholders' equity by $5.1 million.
On June 28, 1996 the Company issued 12 1/4% Subordinated Notes (the
"Subordinated Notes") in an aggregate amount of $50 million. Interest on the
Notes will be payable semi-annually on January 15 and July 15 of each year,
commencing January 15, 1997. The Notes will mature on July 15, 2003, unless
previously redeemed. Net proceeds received by the Company totaled approximately
$48.4 million and funded the redemption of the Company's outstanding 6 1/2%
Convertible Subordinated Debentures due 2003 on July 29, 1996.
On December 28, 1995 the Company entered into the Credit Agreement, which
provides up to $50,000,000 in a revolving line of credit and letters of credit.
As of July 31, 1996, no borrowings have been drawn on the Credit Agreement and
approximately $9,000,000 of standby letters of credit have been issued in
connection with the Company's self-insured workers' compensation programs.
Seasonality
The Company's income from operations before fixed charges generally
fluctuates from quarter to quarter. The fluctuation is related to several
factors: the timing of Medicaid rate increases, seasonal census cycles, and the
number of calendar days in a given quarter. As a result, the Company's income
from operations before fixed charges tends to be higher in its third and fourth
quarters when compared to the first and second quarters.
Impact of Inflation
The healthcare industry is labor intensive. Wages and other labor costs are
especially sensitive to inflation. Increases in wages and other labor costs as a
result of inflation, or increases in federal or state minimum wages without a
corresponding increase in Medicare and Medicaid reimbursement rates, could
adversely impact the Company.
Reimbursement
The majority of the Company's net operating revenue is derived from
services provided under the Medicare and Medicaid programs. Numerous proposals
relating to healthcare reform have been or may be introduced in the United
States Congress, state legislatures or by governmental agencies who regulate the
Medicare and Medicaid programs. It is uncertain what reform will ultimately be
enacted by the federal government, any state government or governmental agencies
and therefore, the Company cannot predict at this time the impact on the Company
of any proposed reforms.
As discussed above, the Company provides contract rehabilitation and
pharmacy services to both Regency operated and non-affiliated facilities. Under
current Medicare regulations, reimbursement for these services provided to
Medicare eligible patients in Regency facilities is based upon the related
entity's cost to provide the services unless a significant portion of the
related entity's revenues is derived from non-affiliated facilities. If a
significant portion of the related entity's revenues is derived from
non-affiliated facilities, Medicare will reimburse the facility's cost, which
includes a profit paid to the related entity. During 1995 and prior years, the
Company was reimbursed by Medicare based on its pharmacy operation costs on
billings to Regency facilities, as it did not meet the significant portion
criteria. After the acquisition of Assist-A-Care Pharmacy and Executive Pharmacy
in 1996, the Company believes it meets the "significant portion" criteria and
began recording a profit on billings for pharmacy services provided to Medicare
eligible patients in Regency facilities. The Company believes it meets the
"significant portion" criteria for its contract rehabilitation therapy
operations provided by SCRS, and therefore has recorded a profit on billings to
Regency facilities since the acquisition of SCRS. Medicare regulations do not
define a "significant portion," therefore, the Company's and Medicare's
interpretations could differ, which could result in retroactive adjustments
related to the profit on billings to Regency facilities for pharmacy and
contract rehabilitation services.
In the recently enacted federal budget deficit reduction bill, various
reimbursement rules and regulations were adopted by the federal government that
pertain to the Company. The recently effective changes to regulations
promulgated under OBRA, some of which expand the remedies available to enforce
regulations mandating minimum healthcare standards, may have an adverse effect
on the Company's operations. The Company is unable to predict the particular
effect on the Company until the manner in which these regulations is implemented
becomes known.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4.11 Indenture, dated as of June 28, 1996, between Regency Health
Services, Inc. as Issuer, the Guarantors named therein and U.S. Trust Company
of California, N.A., as Trustee.
4.12 Form 12-1/4% Subordinated Note due 2003 of Regency Health
Services, Inc. (included in Exhibit 4.11).
4.13 Registration Rights Agreement, dated as of June 28, 1996, by
and among Regency Health Services, Inc., as Issuer, the Guarantors named
therein and Bear, Stearns & Co., Inc. and NationsBanc Capital Markets,
Inc., as Initial Purchasers.
(b) Reports on Form 8-k
Current Report on Form 8-K/A, dated April 12, 1996, reporting an event
dated February 1, 1996 under Items 2 and 7 of Form 8-K, and filing the following
audited financial statements of Liberty Healthcare Limited Partnership: (i)
balance sheets as of September 30, 1994 and 1995, (ii) statements of partners'
capital for the years ended September 30, 1994 and 1995, (iii) statements of
income for the years ended September 30, 1994 and 1995, and (iv) statements of
cash flows for the years ended September 30, 1994 and 1995.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REGENCY HEALTH SERVICES, INC.
By:_____________________________________________________
Bruce D. Broussard
Executive Vice President and Chief Financial Officer
Date: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 66,900
<SECURITIES> 0
<RECEIVABLES> 83,887
<ALLOWANCES> 4,150
<INVENTORY> 0
<CURRENT-ASSETS> 173,539
<PP&E> 171,726
<DEPRECIATION> 39,131
<TOTAL-ASSETS> 399,937
<CURRENT-LIABILITIES> 112,554
<BONDS> 183,607
0
0
<COMMON> 167
<OTHER-SE> 81,317
<TOTAL-LIABILITY-AND-EQUITY> 399,937
<SALES> 0
<TOTAL-REVENUES> 267,595
<CGS> 0
<TOTAL-COSTS> 218,693
<OTHER-EXPENSES> 18,876
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,346
<INCOME-PRETAX> 10,000
<INCOME-TAX> 4,198
<INCOME-CONTINUING> 5,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,802
<EPS-PRIMARY> .35
<EPS-DILUTED> .33
</TABLE>
=========================================================
REGENCY HEALTH SERVICES, INC.,
Issuer,
and
THE GUARANTORS NAMED HEREIN
and
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
------------------------
INDENTURE
Dated as of June 28, 1996
-------------------
$50,000,000
12-1/4% Subordinated Securities due 2003
=========================================================
<PAGE>
<TABLE>
TABLE OF CONTENTS
Page
ARTICLE I
<S> <C>
DEFINITIONS AND INCORPORATION BY REFERENCE.................................................... 1
SECTION 1.1. Definitions..................................................................... 1
SECTION 1.2. Incorporation by Reference of TIA............................................... 25
SECTION 1.3. Rules of Construction........................................................... 25
ARTICLE II
THE SECURITIES................................................................................ 26
SECTION 2.1. Form and Dating.................................................... 26
SECTION 2.2. Execution and Authentication....................................... 26
SECTION 2.3. Registrar and Paying Agent......................................... 27
SECTION 2.4. Paying Agent to Hold Assets in
Trust.............................................................. 28
SECTION 2.5. Securityholder Lists............................................... 29
SECTION 2.6. Transfer and Exchange.............................................. 29
SECTION 2.7. Replacement Securities............................................. 37
SECTION 2.8. Outstanding Securities............................................. 38
SECTION 2.9. Treasury Securities................................................ 38
SECTION 2.10. Temporary Securities............................................... 38
SECTION 2.11. Cancellation....................................................... 39
SECTION 2.12. Defaulted Interest................................................. 39
ARTICLE III
REDEMPTION.................................................................................... 41
SECTION 3.1. Right of Redemption................................................ 41
SECTION 3.2. Notices to Trustee................................................. 41
SECTION 3.3. Selection of Securities to Be
Redeemed........................................................... 42
SECTION 3.4. Notice of Redemption............................................... 42
SECTION 3.5. Effect of Notice of Redemption..................................... 44
SECTION 3.6. Deposit of Redemption Price........................................ 44
SECTION 3.7. Securities Redeemed in Part........................................ 45
i
<PAGE>
Page
ARTICLE IV
COVENANTS..................................................................................... 45
SECTION 4.1. Payment of Securities.............................................. 45
SECTION 4.2. Maintenance of Office or Agency.................................... 45
SECTION 4.3. Limitation on Restricted Payments.................................. 46
SECTION 4.4. Corporate Existence................................................ 47
SECTION 4.5. Payment of Taxes and Other Claims.................................. 48
SECTION 4.6. Maintenance of Properties and
Insurance.......................................................... 48
SECTION 4.7. Compliance Certificate; Notice of
Default............................................................ 49
SECTION 4.8. Reports............................................................ 49
SECTION 4.9. Limitation on Status as Investment
Company............................................................ 50
SECTION 4.10. Limitation on Transactions with
Affiliates......................................................... 50
SECTION 4.11. Limitation on Incurrence of
Additional Indebtedness and
Disqualified Capital Stock......................................... 51
SECTION 4.12. Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries....................................................... 53
SECTION 4.13. Limitation on Liens................................................ 54
SECTION 4.14. Limitation on Sale of Assets and
Subsidiary Stock................................................... 54
SECTION 4.15. Limitation on Lines of Business.................................... 59
SECTION 4.16. Restriction on Sale and Issuance of
Subsidiary Stock................................................... 59
SECTION 4.17. Waiver of Stay, Extension or Usury
Laws............................................................... 59
SECTION 4.18. Rule 144A Information Requirement...................................59
ARTICLE V
SUCCESSOR CORPORATION......................................................................... 60
SECTION 5.1. Limitation on Merger, Sale or Con-
solidation......................................................... 60
SECTION 5.2. Successor Corporation Substituted.................................. 60
ii
<PAGE>
Page
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES................................................................ 61
SECTION 6.1. Events of Default.................................................. 61
SECTION 6.2. Acceleration of Maturity Date;
Rescission and Annulment........................................... 63
SECTION 6.3. Collection of Indebtedness and
Suits for Enforcement by Trustee................................... 65
SECTION 6.4. Trustee May File Proofs of Claim................................... 66
SECTION 6.5. Trustee May Enforce Claims Without
Possession of Securities........................................... 67
SECTION 6.6. Priorities......................................................... 67
SECTION 6.7. Limitation on Suits................................................ 68
SECTION 6.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest............................................................69
SECTION 6.9. Rights and Remedies Cumulative..................................... 69
SECTION 6.10. Delay or Omission Not Waiver....................................... 69
SECTION 6.11. Control by Holders................................................. 69
SECTION 6.12. Waiver of Past Default............................................. 70
SECTION 6.13. Undertaking for Costs.............................................. 71
SECTION 6.14. Restoration of Rights and Remedies................................. 71
ARTICLE VII
TRUSTEE....................................................................................... 71
SECTION 7.1. Duties of Trustee.................................................. 72
SECTION 7.2. Rights of Trustee.................................................. 73
SECTION 7.3. Individual Rights of Trustee....................................... 74
SECTION 7.4. Trustee's Disclaimer............................................... 74
SECTION 7.5. Notice of Default.................................................. 75
SECTION 7.6. Reports by Trustee to Holders...................................... 75
SECTION 7.7. Compensation and Indemnity......................................... 75
SECTION 7.8. Replacement of Trustee............................................. 76
SECTION 7.9. Successor Trustee by Merger, Etc................................... 78
SECTION 7.10. Eligibility; Disqualification...................................... 78
SECTION 7.11. Preferential Collection of Claims
Against Company.................................................... 78
iii
<PAGE>
Page
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE...................................................... 78
SECTION 8.1. Option to Effect Legal Defeasance
or Covenant Defeasance............................................. 78
SECTION 8.2. Legal Defeasance and Discharge..................................... 78
SECTION 8.3. Covenant Defeasance................................................ 79
SECTION 8.4. Conditions to Legal or Covenant
Defeasance......................................................... 80
SECTION 8.5. Deposited Cash and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions..................................... 82
SECTION 8.6. Repayment to the Company........................................... 82
SECTION 8.7. Reinstatement...................................................... 83
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS........................................................... 83
SECTION 9.1. Supplemental Indentures Without
Consent of Holders................................................. 83
SECTION 9.2. Amendments, Supplemental Indentures
and Waivers with Consent of
Holders............................................................ 84
SECTION 9.3. Compliance with TIA................................................ 86
SECTION 9.4. Revocation and Effect of Consents.................................. 86
SECTION 9.5. Notation on or Exchange of
Securities......................................................... 87
SECTION 9.6. Trustee to Sign Amendments, Etc.................................... 87
ARTICLE X
RIGHT TO REQUIRE REPURCHASE................................................................... 88
SECTION 10.1. Repurchase of Securities at Option
of the Holder Upon a Change of
Control............................................................ 88
iv
<PAGE>
Page
ARTICLE XI
GUARANTEE..................................................................................... 91
SECTION 11.1. Guarantee.......................................................... 91
SECTION 11.2. Execution and Delivery of
Guarantee.......................................................... 94
SECTION 11.3. Future Subsidiary Guarantors....................................... 94
SECTION 11.4. Guarantor May Consolidate, Etc., on
Certain Terms...................................................... 95
SECTION 11.5. Release of Guarantors.............................................. 96
SECTION 11.6. Certain Bankruptcy Events.......................................... 97
ARTICLE XII
SUBORDINATION................................................................................. 97
SECTION 12.1. Securities Subordinated to
Senior Debt.........................................................97
SECTION 12.2. No Payment on Securities in Certain
Circumstances.......................................................98
SECTION 12.3. Securities Subordinated to Prior
Payment of All Senior Debt on
Dissolution, Liquidation or
Reorganization.....................................................100
SECTION 12.4. Securityholders to Be Subrogated to
Rights of Holders of Senior Debt.................................. 101
SECTION 12.5. Obligations of the Company and the
Guarantors Unconditional.......................................... 102
SECTION 12.6. Trustee Entitled to Assume Payments
Not Prohibited in Absence of Notice............................... 103
SECTION 12.7. Application by Trustee of Assets
Deposited with It................................................. 103
SECTION 12.8. Subordination Rights Not Impaired
by Acts or Omissions of the Company,
the Guarantors or Holders of
Senior Debt....................................................... 104
SECTION 12.9. Securityholders Authorize Trustee
to Effectuate Subordination of
Securities........................................................ 104
SECTION 12.10. Right of Trustee to Hold Senior
Debt.............................................................. 105
SECTION 12.11. Article XII Not to Prevent Events
of Default........................................................ 105
v
<PAGE>
Page
SECTION 12.12. No Fiduciary Duty of Trustee to
Holders of Senior Debt............................................ 105
ARTICLE XIII
MISCELLANEOUS............................................................................... 105
SECTION 13.1. TIA Controls..................................................... 105
SECTION 13.2. Notices.......................................................... 106
SECTION 13.3. Communications by Holders with
Other Holders.................................................... 107
SECTION 13.4. Certificate and Opinion as to
Conditions Precedent............................................. 107
SECTION 13.5. Statements Required in Certificate
or Opinion....................................................... 107
SECTION 13.6. Rules by Trustee, Paying Agent,
Registrar........................................................ 108
SECTION 13.7. Non-Business Days................................................ 108
SECTION 13.8. Governing Law.................................................... 108
SECTION 13.9. No Adverse Interpretation of Other
Agreements....................................................... 109
SECTION 13.10. No Recourse against Others....................................... 109
SECTION 13.11. Successors....................................................... 109
SECTION 13.12. Duplicate Originals.............................................. 110
SECTION 13.13. Severability..................................................... 110
SECTION 13.14. Table of Contents, Headings, Etc................................. 110
SECTION 13.15. Qualification of Indenture.........................................110
SECTION 13.16. Registration Rights................................................110
SIGNATURES.................................................................................. 111
Exhibit A - FORM OF SECURITY................................................................. A-1
</TABLE>
vi
<PAGE>
INDENTURE, dated as of June 28, 1996, by and among
Regency Health Services, Inc., a Delaware corporation (the
"Company"), the Guarantors referred to below and U.S. Trust
Company of California, N.A., as Trustee.
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Company's 12-1/4% Series A Subordinated Securities due 2003 and the Holders of
12-1/4% Series B Subordinated Securities due 2003 to be exchanged for the
12-1/4% Series A Subordinated Securities due 2003:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acceleration Notice" shall have the meaning
specified in Section 6.2.
"Acceptance Amount" shall have the meaning speci-
fied in Section 4.14.
"Acquired Indebtedness" means Indebtedness or Disqualified
Capital Stock of any person existing at the time such person becomes a
Subsidiary of the Company or is merged or consolidated into or with the Company
or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any
person or substantially all the assets of any person by any other person,
whether by purchase, merger, consolidation, or other transfer, and whether or
not for consideration.
"Affiliate" means any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company. For purposes of this definition, the term "control" means the power to
direct the management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided that a beneficial owner of 10% or more of the total
voting power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
<PAGE>
"Affiliate Transaction" shall have the meaning
specified in Section 4.10.
"Agent" means any authenticating agent, Registrar,
Paying Agent or transfer agent.
"Asset Sale" shall have the meaning specified in
Section 4.14.
"Asset Sale Offer" shall have the meaning specified in Section
4.14.
"Asset Sale Offer Amount" shall have the meaning specified in
Section 4.14.
"Asset Sale Offer Price" shall have the meaning specified in
Section 4.14.
"Average Life" means, as of the date of determination, with
respect to any security or instrument, the quotient obtained by dividing (i) the
sum of the products of (a) the number of years from the date of determination to
the date or dates of each successive scheduled principal (or redemption) payment
of such security or instrument, multiplied by (b) the amount of each such
respective principal (or redemption) payment, by (ii) the sum of all such
principal (or redemption) payments.
"Bankruptcy Law" means Title 11, U.S. Code, or any
similar Federal, state or foreign law for the relief of
debtors.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of Change of Control has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" or "Board" means, with respect to any
Person, the Board of Directors of such Person or any committee of the Board of
Directors of such Person authorized, with respect to any particular matter, to
exercise the power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
2
<PAGE>
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York, New
York are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any
and all shares, interests, rights to purchase (other than convertible or
exchangeable Indebtedness), warrants, options, participations or other
equivalents of or interests (however designated) in stock issued by that
corporation.
"Capitalized Lease Obligation" means rental obligations under
a lease that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
"Cash" or "cash" 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.
"Cash Equivalent" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) or (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500.0 million and commercial paper issued by any other issuer
which is rated at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's and in each case maturing within one year
after the date of acquisition.
"Change of Control" means (i) any sale, merger or
consolidation with or into any person or any transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable) other than an Excluded
Person is or becomes the "beneficial owner," directly or indirectly, of more
than 50% of the total voting power in the aggregate normally entitled to vote in
the election of directors, managers, or trustees, as applicable, of the
3
<PAGE>
transferee or surviving entity, (ii) any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) other than an Excluded Person is or becomes the "beneficial
owner," directly or indirectly, of more than 50% of the total voting power in
the aggregate of all classes of Capital Stock of the Company then outstanding
normally entitled to vote in elections of directors, or (iii) during any period
of 12 consecutive months after the Issue Date, individuals who at the beginning
of any such 12-month period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
"Change of Control Offer" shall have the meaning
specified in Section 10.1.
"Change of Control Offer Period" shall have the meaning
specified in Section 10.1.
"Change of Control Purchase Date" shall have the meaning
specified in Section 10.1.
"Change of Control Purchase Price" shall have the meaning
specified in Section 10.1.
"Change of Control Put Date" shall have the meaning specified
in Section 10.1.
"Claim" means any claim for damages arising from the purchase
of the Notes or for reimbursement or contribution on the account of such claim,
in each case to the extent relating to the purchase price of the Notes.
"Commission" means the SEC.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture, and thereafter means
such successor.
"Consolidated EBITDA" means, with respect to any person, for
any period, the Consolidated Net Income of such person for such period adjusted
to add thereto (to the extent deducted from net revenues in determining
Consolidat-
4
<PAGE>
ed Net Income), without duplication, the sum of (i) consolidated provision for
income tax, (ii) consolidated depreciation and amortization expense, provided
that consolidated depreciation and amortization of a Subsidiary that is less
than wholly owned shall only be added to the extent of the equity interest of
the Company in such Subsidiary, and (iii) Consolidated Interest Expense.
"Consolidated Interest Coverage Ratio" of any person on any
date of determination (the "Transaction Date") means the ratio, on a pro forma
basis, of (a) the aggregate amount of Consolidated EBITDA of such person
attributable to continuing operations and businesses (exclusive of amounts,
whether positive or negative, attributable to operations and businesses
permanently discontinued or disposed of) for the Reference Period to (b) the
aggregate Consolidated Interest Expense of such person (exclusive of amounts
attributable to operations and businesses permanently discontinued or disposed
of, but only to the extent that the obligations giving rise to such Consolidated
Interest Expense would no longer be obligations contributing to such person's
Consolidated Interest Expense subsequent to the Transaction Date) during the
Reference Period; provided, that for purposes of such calculation, (i)
Acquisitions which occurred during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date shall be assumed to
have occurred on the first day of the Reference Period, (ii) transactions giving
rise to the need to calculate the Consolidated Interest Coverage Ratio shall be
assumed to have occurred on the first day of the Reference Period, (iii) the
incurrence of any Indebtedness or issuance of any Disqualified Capital Stock
during the Reference Period or subsequent to the Reference Period and on or
prior to the Transaction Date (and the application of the proceeds therefrom to
the extent used to refinance or retire other Indebtedness) shall be assumed to
have occurred on the first day of such Reference Period, and (iv) the
Consolidated Interest Expense of such person attributable to interest on any
Indebtedness or dividends on any Disqualified Capital Stock bearing a floating
interest (or dividend) rate shall be computed on a pro forma basis as if the
average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless such
Person or any of its Subsidiaries is a party to an Interest Swap and Hedging
Obligation (which shall remain in effect for the 12-month period immediately
following the Transaction Date) that has the effect of fixing the interest rate
on the date of computation, in which case such rate (whether higher or lower)
shall be used.
5
<PAGE>
"Consolidated Interest Expense" of any person means, for any
period, the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations) of such person
and its Consolidated Subsidiaries during such period, including (i) original
issue discount and noncash interest payments or accruals on any Indebtedness,
(ii) the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financing and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period, and
(b) the amount of dividends accrued or payable by such person or any of its
Consolidated Subsidiaries in respect of Preferred Stock (other than by
Subsidiaries of such person to such person or such person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP, (y) interest expense
attributable to any Indebtedness represented by the guaranty by such person or a
Subsidiary of such person of an obligation of another person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed, and (z)
dividends in respect of Preferred Stock shall be deemed to be an amount equal to
the actual dividends paid divided by one minus the applicable actual combined
Federal, state, local and foreign income tax rate of the Company and its
Consolidated Subsidiaries (expressed as a decimal).
"Consolidated Net Income" means, with respect to any person
for any period, the net income (or loss) of such person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication): (a) all gains, losses or other
items which are either extraordinary (as determined in accordance with GAAP) or
are either unusual or nonrecurring (including any gain or loss from the sale or
other disposition of assets outside the ordinary course of business or from the
issuance or sale of any capital stock), (b) the net income, if positive, of any
person, other than a wholly owned Consolidated Subsidiary, in which such person
or any of its Consolidated Subsidiaries has an interest, except to the extent of
the amount of any dividends or distributions actually paid in cash to such
6
<PAGE>
person or a wholly owned Consolidated Subsidiary of such person during such
period, but in any case not in excess of such person's pro rata share of such
person's net income for such period, (c) the net income or loss of any person
acquired in a pooling-of-interests transaction for any period prior to the date
of such acquisition, (d) the net income, if positive, of any of such person's
Consolidated Subsidiaries in the event and solely to the extent that the
declaration or payment of dividends or similar distributions is not at the time
permitted by operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Consolidated Subsidiary.
"Consolidated Net Worth" of any person at any date means the
aggregate consolidated stockholders' equity of such person (plus amounts of
equity attributable to preferred stock) and its Consolidated Subsidiaries, as
would be shown on the consolidated balance sheet of such person prepared in
accordance with GAAP, adjusted to exclude (to the extent included in calculating
such equity), (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such person and its Consolidated
Subsidiaries, (b) all upward revaluations and other write-ups in the book value
of any asset of such person or a Consolidated Subsidiary of such person
subsequent to the Issue Date, and (c) all investments in Subsidiaries that are
not Consolidated Subsidiaries and in persons that are not Subsidiaries.
"Consolidated Subsidiary" means, for any person, each
Subsidiary of such person (whether now existing or hereafter created or
acquired) the financial statements of which are consolidated for financial
statement reporting purposes with the financial statements of such person in
accordance with GAAP.
"Convertible Subordinated Debentures" means the 6 1/2%
Convertible Subordinated Debentures due 2003 issued by the Company pursuant to
an indenture dated as of March 23, 1993 between the Company and Chemical Trust
Company of California, as trustee.
"Covenant Defeasance" shall have the meaning
specified in Section 8.3.
"Credit Agreement" means the one or more credit agreements
entered into by and among the Company, certain of its Subsidiaries, and certain
financial institutions, which provide for a term loan, revolving credit facility
and/or
7
<PAGE>
letter of credit facility, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, as such
credit agreement and/or related documents may be amended, restated,
supplemented, renewed, replaced or otherwise modified from time to time whether
or not with the same agent, Trustee, representative lenders or holders, and,
subject to the proviso to the next succeeding sentence, irrespective of any
changes in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "Credit Agreement" shall include the Credit Facility and
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to the Credit Facility or any other credit agreement
and all refundings, refinancings and replacements of any such credit agreement,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as borrowers and issuers include one or more of
the Company and its Subsidiaries and their respective successors and assigns,
(iii) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder, provided that on the date such Indebtedness is incurred
it would not be prohibited by paragraph (c) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock," or (iv)
otherwise altering the terms and conditions thereof in a manner not prohibited
by the terms hereof.
"Credit Facility" means the Credit Agreement dated as of
December 28, 1995 among the Company, NationsBanc as Arranger and NationsBanc of
Texas, N.A., as Agent and the other Lenders listed therein as the same may from
time to time be extended, amended, modified or supplemented from time to time,
and all documents, agreements and instruments in connection therewith or
evidencing or securing Indebtedness created thereunder or pursuant thereto.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt Incurrence Ratio" shall have the meaning
specified in Section 4.11.
"Default" means any event or condition that is, or after
notice or passage of time or both would be, an Event of Default.
8
<PAGE>
"Defaulted Interest" shall have the meaning speci-
fied in Section 2.12.
"Definitive Securities" means Securities that are in the form
of Security attached hereto as Exhibit A that do not include the information
called for by footnotes 3 and 6 thereof.
"Depositary" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.3
as the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Director Stock Plan" means the Regency Health Services, Inc.
Directors Stock Plan effective as of July 1, 1993, as the same may be amended,
or modified, and any successor, replacement or supplementary stock plan for the
benefit of directors of the Company.
"Disqualified Capital Stock" means (a) except as set forth in
(b), with respect to any person, Capital Stock of such person that, by its terms
or by the terms of any security into which it is then convertible, exercisable
or exchangeable, is, or upon the happening of an event or the passage of time
would be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such person or any of its Subsidiaries, in whole or in part,
on or prior to the Stated Maturity of the Securities and (b) with respect to any
Subsidiary of such person (including with respect to any Subsidiary of the
Company), any Capital Stock other than any common stock with no preference,
privileges, or redemption or repayment provisions.
"DTC" shall have the meaning specified in Section
2.3.
"Event of Default" shall have the meaning speci-
fied in Section 6.1.
"Excess Proceeds" shall have the meaning specified
in Section 4.14.
"Excess Proceeds Date" shall have the meaning
specified in Section 4.14.
9
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 12-1/4% Series B Subordinated
Securities due 2003, as supplemented from time to time in accordance with the
terms hereof, to be issued pursuant to this Indenture in connection with the
offer to exchange Securities for the Initial Securities that may be made by the
Company and the Guarantors pursuant to the Registration Rights Agreement that
contains the changes referred to in footnotes 1 and 2 to the form of Security
attached hereto as Exhibit A.
"Excluded Guarantee Subsidiary" shall have the
meaning specified in Section 11.3.
"Excluded Person" means, in the case of the Compa-
ny, the Smith Management Group, comprised of Energy Manage-
ment Corporation, Woodstead Associates, L.P., The Durian
Trust, SEGA Associates, Smith Management Company, Randall D.
Smith, John W. Adams, Jeffrey A. Smith and Gary M. Smith.
"Exempted Affiliate Transaction" means (a) customary employee
compensation arrangements approved by a majority of independent (as to such
transactions) members of the Board of Directors of the Company, (b) dividends
permitted under the terms of the covenant discussed under "Limitation on
Restricted Payments" and payable, in form and amount, on a pro rata basis to all
holders of Common Stock of the Company, and (c) transactions solely between the
Company and any of its wholly owned Subsidiaries or solely among wholly owned
Subsidiaries of the Company.
"Existing Assets" means assets of the Company and its
Subsidiaries existing at the Issue Date (other than cash, Cash Equivalents or
inventory held for resale in the ordinary course of business) and including
proceeds of any sale of such assets and assets acquired in whole or in part with
proceeds from the sale from any such assets.
"Fair Market Value" or "fair market value" means, with respect
to any assets or properties, the amount at which such assets or properties would
change hands between a willing buyer and a willing seller, within a commercially
reasonable time, each having reasonable knowledge of the relevant facts, neither
being under a compulsion to sell or buy, as such amount is determined by (i) the
Board of Directors of the Company acting in good faith or (ii) an appraisal or
valuation firm of national or regional standing se-
10
<PAGE>
lected by the Company, with experience in the appraisal or valuation of
properties or assets of the type for which Fair Market Value is being
determined.
"Final Put Date" shall have the meaning specified
in Section 4.14.
"Future Subsidiary Guarantor" shall have the
meaning specified in Section 11.3.
"GAAP" means United States 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 approved by a significant segment
of the accounting profession as in effect on the Issue Date.
"Global Security" means a Security that contains the paragraph
referred to in footnote 3 and the additional schedule referred to in footnote 6
to the form of Security attached hereto as Exhibit A.
"Guarantee" shall have the meaning provided in
Section 11.1.
"Guarantors" means (i) the Initial Guarantors identified in
the following sentence and (ii) any Future Subsidiary Guarantors that become
Guarantors pursuant to the terms of this Indenture, but excluding any Persons
whose guarantees have been released pursuant to the terms of this Indenture and
any Unrestricted Subsidiaries. The Initial Guarantors consist of: (i) Americare
HomeCare, Inc., Americare Midwest, Inc., Americare of West Virginia, Inc.,
Beckley Health Care Corp., Braswell Enterprises, Inc., Brel, Inc., Brittany
Rehabilitation Center, Inc., Care Finance, Inc., Care Enterprises, Inc., Care
Enterprises West, Care Home Health Services, Carmichael Rehabilitation Center,
Casa de Vida Rehabilitation Center, Circleville Health Care Corp., Coalinga
Rehabilitation Center, Covina Rehabilitation Center, Dunbar Health Care Corp.,
Evergreen Rehabilitation Center, Fairfield Rehabilitation Center, First Class
Pharmacy, Inc., Fullerton Rehabilitation Center, Glendora Rehabilitation Center,
Glenville Health Care, Inc., Grand Terrace Rehabilitation Center, Hallmark
Health Services, Inc., Harbor View Rehabilitation Center, Hawthorne
Rehabilitation Center, HealthCare Network, Heritage Rehabilitation Center,
Huntington Beach Convalescent Hospital, Jackson Rehabilitation Center, Inc.,
Linda-Mar Rehabilitation Center, Marion
11
<PAGE>
Health Care Corp., Meadowbrook Rehabilitation Center, Meadowview Rehabilitation
Center, New Lexington Health Care Corp., Newport Beach Rehabilitation Center,
North State Home Health Care, Inc., Paradise Rehabilitation Center, Inc., Paso
Robles Rehabilitation Center, Putnam Health Care Corp., RHS Management
Corporation, Rose Rehabilitation Center, Rosewood Rehabilitation Center, Inc.
Salem Health Care Corp., SCRC & Communicology, Inc. of Ohio, Shandin Hills
Rehabilitation Center, Stockton Rehabilitation Center, Inc., Vista Knoll
Rehabilitation Center, Inc., Willowview Rehabilitation Center, Oasis Mental
Health Treatment Center, Inc., Regency - North Carolina, Inc. and Regency -
Tennessee, Inc.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" or "Incurrence" shall have the meaning
specified in Section 4.11.
"Incurrence Date" shall have the meaning specified
in Section 4.11.
"Indebtedness" of any person means, without duplication, (a)
all liabilities and obligations, contingent or otherwise, of any such person,
(i) in respect of borrowed money (whether or not the recourse of the lender is
to the whole of the assets of such person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, (iii) representing
the balance deferred and unpaid of the purchase price of any property or
services, except (other than accounts payable or other obligations to trade
creditors which have remained unpaid for greater than 90 days past their
original due date) those incurred in the ordinary course of its business that
would constitute ordinarily a trade payable to trade creditors, (iv) evidenced
by bankers' acceptances or similar instruments issued or accepted by banks, (v)
for the payment of money relating to a Capitalized Lease Obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such person
with respect to any letter of credit; (b) all net obligations of such person
under Interest Swap and Hedging Obligations; and (c) all liabilities and
obligations of others of the kind described in the preceding clauses (a) or (b)
that such person has guaranteed or that is otherwise its legal liability or
which are secured by any assets or property of such person and all immediately
enforceable obligations to purchase, redeem or acquire any Capital Stock.
12
<PAGE>
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Initial Purchasers" means Bear, Stearns & Co.,
Inc. and NationsBanc Capital Markets, Inc.
"Initial Securities" means the 12 1/4% Series A Subordinated
Securities due 2003, as supplemented from time to time in accordance with the
terms hereof, issued under this Indenture that contains the changes referred to
in footnotes 4, 5 and 7 to the form of Security attached hereto as Exhibit A.
"Interest Payment Date" means the stated due date
of an installment of interest on the Securities.
"Interest Swap and Hedging Obligation" means any obligation of
any Person pursuant to any interest rate swaps, caps, collars and similar
arrangements providing protection against fluctuations in interest rates. For
purposes of this Indenture, the amount of such obligations shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement, or related group of agreements pertaining to such obligation
provides for the netting of amounts payable by and to such Person thereunder or
if any such agreement provides for the simultaneous payment of amounts by and to
such Person, then in each such case, the amount of such obligations shall be the
net amount so determined, plus, in case of default by such Person, any premium
due as a result of such default by such Person.
"Investment" by any person in any other person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other person or any agreement to make any such acquisition; (b) the making
by such person of any deposit with, or advance, loan or other extension of
credit to, such other person (including the purchase of property from another
person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such other person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary
13
<PAGE>
course of business); (c) other than guarantees of Indebtedness of the Company or
any Guarantor to the extent permitted by the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock," the entering into by
such person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
person; (d) the making of any capital contribution by such person to such other
person; and (e) the designation by the Board of Directors of the Company of any
person to be an Unrestricted Subsidiary. The Company shall be deemed to make an
Investment in an amount equal to the fair market value of the net assets of any
subsidiary (or, if neither the Company nor any of its Subsidiaries has
theretofore made an Investment in such subsidiary, in an amount equal to the
Investments being made), at the time that such subsidiary is designated an
Unrestricted Subsidiary, and any property transferred to an Unrestricted
Subsidiary from the Company or a Subsidiary shall be deemed an Investment valued
at its fair market value at the time of such transfer.
"Issue Date" means the date of first issuance of the
Securities under this Indenture.
"Junior Security" means any Qualified Capital Stock and any
Indebtedness of the Company or a Guarantor, as applicable, that is a general,
unsecured obligation subordinated in right of payment to Senior Debt at least to
the same extent as the Securities or the Guarantee, as applicable, and has no
scheduled installment of principal due, by redemption, sinking fund payment or
otherwise, on or prior to the Stated Maturity of the Securities.
"Legal Defeasance" shall have the meaning speci-
fied in Section 8.2.
"Lien" means any mortgage, lien, pledge, charge, security
interest, or other encumbrance of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Long Term Incentive Plan" means the Regency Health Services,
Inc. Long Term Incentive Plan effective as of July 1, 1993, as the same may be
amended, or modified, and any successor, replacement or supplementary stock plan
for the benefit of employees of the Company or any Subsidiary.
14
<PAGE>
"Maturity Date" means, when used with respect to any Security,
the date specified on such Security as the fixed date on which the final
installment of principal of such Security is due and payable (in the absence of
any acceleration thereof pursuant to the provisions of the Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Asset Sale
Offer).
"Moody's" means Moody's Investors Service, Inc.
and its successors.
"Net Cash Proceeds" means the aggregate amount of Cash or Cash
Equivalents received by the Company in the case of a sale of Qualified Capital
Stock and by the Company and its Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Company that were issued for cash on or
after the Issue Date, the amount of cash originally received by the Company upon
the issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all payments,
fees, commissions and (in the case of Asset Sales, reasonable and customary)
expenses (including, without limitation, the fees and expenses of legal counsel
and investment banking fees and expenses) incurred in connection with such Asset
Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only,
less the amount (estimated reasonably and in good faith by the Company) of
income, franchise, sales and other applicable taxes required to be paid by the
Company or any of its respective Subsidiaries in connection with such Asset
Sale.
"Notice of Default" shall have the meaning speci-
fied in Section 6.1(3).
"Obligation" means any principal, premium, interest,
penalties, fees, reimbursements, damages, indemnification and other liabilities
relating to obligations of the Company or any Guarantor under the Notes, the
Registration Rights Agreement or the Indenture.
"Officer" means, with respect to the Company or a Guarantor,
the Chief Executive Officer, the President, any Executive or Senior Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of
the Company or such Guarantor.
15
<PAGE>
"Officers' Certificate" means, with respect to the Company or
a Guarantor, a certificate signed by two Officers or by an Officer and an
Assistant Secretary of the Company or such Guarantor (as applicable) and
otherwise complying with the requirements of Sections 13.4 and 13.5, and
delivered to the Trustee or an Agent, as applicable.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee (which may include counsel
to the Trustee or the Company including an employee of the Company) or an Agent,
as applicable, complying with the requirements of Sections 13.4 and 13.5, and
delivered to the Trustee or an Agent, as applicable.
"Outstanding" as used with reference to the Securities shall
have the meaning specified in Section 2.8 hereof.
"Parent" of any person means a corporation which at the date
of determination owns, directly or indirectly, a majority of the Voting Stock of
such person or of a Parent of such person.
"Paying Agent" has the meaning specified in Sec-
tion 2.3.
"Payment Blockage Period" has the meaning speci-
fied in Section 12.2(b).
"Payment Default" has the meaning specified in
Section 12.2(a).
"Payment Notice" has the meaning specified in
Section 12.2(b).
"Permitted Lien" means any of the following:
(a) Liens existing on the Issue Date;
(b) Liens imposed by governmental authori-
ties for taxes, assessments or other charges not yet subject to penalty or which
are being contested in good faith and by appropriate proceedings, if adequate
reserves with respect thereto are maintained on the books of the Company in
accordance with GAAP;
(c) statutory liens of carriers, warehouse-
men, mechanics, materialmen, landlords, repairmen or other
like Liens arising by operation of law in the ordinary
16
<PAGE>
course of business provided that (i) the underlying obligations are not overdue
for a period of more than 30 days, or (ii) such Liens are being contested in
good faith and by appropriate proceedings and adequate reserves with respect
thereto are maintained on the books of the Company in accordance with GAAP;
(d) Liens securing the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, simi-
lar restrictions and other similar encumbrances or title defects which, singly
or in the aggregate, do not in any case materially detract from the value of the
property, subject thereto (as such property is used by the Company or any of its
Subsidiaries) or interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries;
(f) Liens arising by operation of law in
connection with judgments, only to the extent, for an amount
and for a period not resulting in an Event of Default with
respect thereto;
(g) pledges or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security
legislation;
(h) Liens securing Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or is merged with or into
the Company or a Subsidiary or Liens securing Indebtedness incurred in
connection with an Acquisition, provided in each case that such Liens were in
existence prior to the date of such acquisition, merger or consolidation, were
not incurred in anticipation thereof, and do not extend to any other assets;
(i) Liens securing Refinancing Indebtedness
incurred to refinance any Indebtedness that was previously so secured in a
manner no more adverse to the Holders of the Securities than the terms of the
Liens securing such refinanced Indebtedness;
(j) Liens arising from Purchase Money In-
debtedness permitted to be incurred under this Indenture
17
<PAGE>
provided such Liens relate only to the property which is
subject to such Purchase Money Indebtedness; and
(k) Liens securing Indebtedness permitted to
be incurred under Sections 4.11(c), (h) and (i).
"Person" or "person" means any corporation, individual,
limited liability company, joint stock company, joint venture, partnership,
unincorporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust, municipality or other entity.
"Pro Rata Portion" shall have the meaning specified in Section
11.1.
"property" means any right or interest in or to property or
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
"Purchase Agreement" means that certain Purchase Agreement
dated June 24, 1996 by and among the Company, the Guarantors and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time in accordance with the terms thereof.
"Purchase Date" shall have the meaning specified
in Section 4.14.
"Purchase Money Indebtedness" means Indebtedness of the
Company or the Guarantors to the extent that (i) such Indebtedness is incurred
in connection with the acquisition of specified assets and property (the
"Subject Assets") for the business of the Company or the Guarantors, including
Indebtedness which existed at the time of the acquisition of such Subject Asset
and was assumed in connection therewith; and (ii) liens securing such
Indebtedness are limited to the Subject Asset.
"Qualified Capital Stock" means any Capital Stock
of the Company that is not Disqualified Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption,
retirement, repurchase or other acquisition of Capital Stock or Indebtedness of
the Company issued on or after the Issue Date with the Net Cash Proceeds
received by the Company from the substantially concurrent (i.e., within 60 days)
sale of Qualified Capital Stock or any exchange of Qualified Capital Stock for
any Capital Stock or Indebtedness issued on or after the Issue Date.
18
<PAGE>
"Record Date" means a Record Date specified in the Securities
whether or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security.
"Redemption Price," when used with respect to any Security to
be redeemed, means the redemption price for such redemption pursuant to
Paragraph 5 in the form of Security, which shall include, without duplication,
in each case, accrued and unpaid interest to the Redemption Date (subject to the
provisions of Section 3.5).
"Reference Period" with regard to any person means the four
full fiscal quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination is
to be made pursuant to the terms of the Securities or this Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified
Capital Stock (a) issued in exchange for, or the proceeds from the issuance and
sale of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in part,
or (b) constituting an amendment, modification or supplement to, or a deferral
or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so refinanced and (ii) if such Indebtedness being
refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such Refinancing;
provided, that (A) such Refinancing Indebtedness of any Subsidiary of the
Company shall only be used to refinance outstanding Indebtedness or Disqualified
Capital Stock of any Subsidiary, (B) Refinancing Indebtedness shall (x) not have
an Average Life shorter than the Indebtedness to be so refinanced at the time of
such Refinancing and (y) in all respects, be no less subordinated or junior, if
applicable, to the rights of Holders of the Securities than was the Indebtedness
or
19
<PAGE>
Disqualified Capital Stock to be refinanced, in the event such Indebtedness or
Disqualified Capital Stock is subordinated, and (C) such Refinancing
Indebtedness shall have no installment of principal (or redemption payment)
scheduled to come due earlier than the scheduled maturity of any installment of
principal of the Indebtedness or Disqualified Capital Stock to be so refinanced
which was scheduled to come due prior to the Stated Maturity.
"Registrar" shall have the meaning specified in
Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Related Business" means the business conducted (or proposed
to be conducted) by the Company and its Subsidiaries as of the Issue Date and
any and all businesses that in the good faith judgment of the Board of Directors
of the Company are materially related businesses. Without limiting the
generality of the foregoing, Related Business shall include the operation of
in-patient and specialty healthcare services, skilled nursing care, subacute
care, rehabilitation programs, pharmaceutical services, retirement care and
assisted living, home healthcare and other ancillary services.
"Resale Restriction Termination Date" shall have the meaning
specified in Section 2.6(h).
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than Investments in (i) Cash Equivalents,
(ii) a Subsidiary (other than an Unrestricted Subsidiary), or (iii) any Person
that as a consequence of such Investment becomes a Subsidiary; provided,
however, that a merger of another person with or into the Company or a Guarantor
shall not be deemed to be a Restricted Investment so long as the surviving
entity is the Company or a direct wholly owned Guarantor.
"Restricted Payment" means, with respect to any person, (a)
the declaration or payment of any dividend or other distribution in respect of
Capital Stock of such person or any parent or Subsidiary of such person, (b) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Capital Stock of such person or any parent or Subsidiary
of such person, (c) other
20
<PAGE>
than with the proceeds from the substantially concurrent (i.e., within 60 days)
sale of, or in exchange for, Refinancing Indebtedness, any purchase, redemption,
or other acquisition or retirement for value of, any payment in respect of any
amendment of the terms of or any defeasance of, any Subordinated Indebtedness
other than any of the Securities, directly or indirectly, by such person or a
parent or Subsidiary of such person prior to the scheduled maturity, any
scheduled repayment of principal, or scheduled sinking fund payment, as the case
may be, of such Indebtedness and (d) any Restricted Investment by such person;
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on or with respect to, or on account of
the purchase, redemption or other acquisition or retirement for value of,
Capital Stock of an issuer to the extent payable solely in shares of Qualified
Capital Stock of such issuer; or (ii) any dividend, distribution or other
payment to the Company, or to any of its wholly owned Guarantors, by the Company
or any of its Subsidiaries.
"Restricted Security" means a Security, unless or until it has
been (i) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering it or (ii) distributed to
the public pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act; provided, that in no case shall an Exchange Security issued
in accordance with this Indenture and the terms and provisions of the
Registration Rights Agreement be a Restricted Security.
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill, Incorporated and its successors.
"SEC" means the Securities and Exchange Commis-
sion.
"Securities" means, collectively, the Initial Securities and,
when and if issued as provided in the Registration Rights Agreement, the
Exchange Securities.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Securities Custodian" means the Registrar, as custodian with
respect to the Securities in global form, or any successor entity thereto.
21
<PAGE>
"Securityholder" or "Holder" means any Person in whose name a
Security is registered on the Registrar's books.
"Senior Debt" of the Company or any Guarantor means (i)
Indebtedness of the Company and the Guarantors under the Senior Subordinated
Notes, (ii) Indebtedness of the Company or such Guarantor arising under the
Credit Agreement, and (iii) any other Indebtedness that, by the terms of the
instrument creating or evidencing such Indebtedness, is expressly designated
Senior Debt and made senior in right of payment to the Securities or the
applicable Guarantee; with respect to any Indebtedness arising under the Credit
Agreement, all such Indebtedness includes any and all interest (including
interest accruing or payable after the filing of any petition under the
Bankruptcy Code (11 U.S.C. Section 101 et seq.)), fees, costs (including
attorneys' fees and costs), expenses, indemnities, and any and all other amounts
payable under or in relation to such Indebtedness, however or whenever arising.
To the extent any payment of Senior Debt (whether by or on behalf of the Company
or as proceeds of security or enforcement of any right of set-off or otherwise)
is declared to be fraudulent, preferential, or is otherwise required to be paid
to a trustee, receiver or other similar party under any bankruptcy, insolvency,
receivership, or similar law, then if such payment is recovered by, or paid over
to, such party, the Senior Debt or part thereof originally satisfied thereby
shall be deemed to be reinstated and outstanding as if such payment had not
occurred. All Senior Debt shall be and remain Senior Debt for all purposes of
this Indenture, whether or not subordinated in a bankruptcy or similar
proceeding. Notwithstanding the foregoing, however, in no event shall Senior
Debt include (a) Indebtedness to any Subsidiary of the Company or any officer,
director or employee of the Company or any Subsidiary of the Company, (b)
Indebtedness incurred in violation of the terms of the Indenture, (c)
Indebtedness to trade creditors, (d) Disqualified Capital Stock, (e) Capitalized
Lease Obligations, and (f) any liability for taxes owed or owing by the Company
or such Guarantor.
"Senior Debt Representative" means the indenture trustee or
other trustee, agent or representative for any Senior Debt.
"Senior Subordinated Notes" means the 97/8% Senior
Subordinated Notes due 2002 issued by the Company pursuant to an indenture dated
as of October 12, 1995 by and among
22
<PAGE>
the Company, the guarantors named therein and U.S. Trust
Company of California, N.A., as trustee.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article I, Rule 1-02-w of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date of
the Indenture.
"Special Record Date" for payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Security,
means July 15, 2003.
"Subordinated Indebtedness" means Indebtedness of the Company
or a Guarantor that is subordinated in right of payment to the Securities or the
Guarantee of such Guarantor, as applicable, in any respect.
"Subsidiary" with respect to any person, means (i) a
corporation a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such person, by such person and one or more Subsidiaries of such person or by
one or more Subsidiaries of such person, (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest,
or (iii) a partnership in which such person or a Subsidiary of such person is,
at the time, a general partner and in which such person, directly or indirectly,
at the date of determination thereof has at least a majority ownership interest.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be a
Subsidiary of the Company or of any Subsidiary of the Company.
"TIA" means the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb), as in effect on the date of the execution of
this Indenture; except as otherwise provided in Section 9.3.
"Transfer Restricted Securities" means Securities that bear or
are required to bear the legend set forth in Section 2.6 hereof.
"Trust Officer" means any officer within the
corporate trust division (or any successor group) of the
23
<PAGE>
Trustee or any other officer of the Trustee customarily performing functions
similar to those performed by the Persons who at that time shall be such
officers, and also means, with respect to a particular corporate trust matter,
any other officer of the Trustee to whom such trust matter is referred because
of his knowledge of and familiarity with the particular subject.
"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.
"Unrestricted Subsidiary" means any subsidiary of the Company
that does not own any Capital Stock of, or own or hold any Lien on any property
of, the Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that (i) such subsidiary shall not
engage, to any substantial extent, in any line or lines of business activity
other than a Related Business, (ii) neither immediately prior thereto nor after
giving pro forma effect to such designation would there exist a Default or Event
of Default and (iii) immediately after giving pro forma effect thereto, the
Company could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio in Section 4.11(a). The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, provided, that (i) no
Default or Event of Default is existing or will occur as a consequence thereof
and (ii) immediately after giving effect to such designation, on a pro forma
basis, the Company could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio in Section 4.11(a). Each such designation shall be
evidenced by filing with the Trustee a certified copy of the resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct non-callable
obligations of, or noncallable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged.
"Voting Stock" means, with respect to any specified person,
capital stock with voting power, under ordinary circumstances, to elect
directors of such Person.
24
<PAGE>
"Wholly Owned" or "wholly owned" with respect to a Subsidiary
of any person means (i) with respect to a Subsidiary that is a partnership or a
limited liability company or similar entity, a Subsidiary whose equity interest
is 99% or greater beneficially owned by such person and (ii) with respect to a
Subsidiary that is other than a partnership or a limited liability company or
similar entity, a Subsidiary whose capital stock or other equity interest is
100% beneficially owned by such person.
SECTION 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a
Securityholder.
"indenture to be qualified" means this Indenture.
"indenture Trustee" or "institutional Trustee"
means the Trustee.
"obligor" on the indenture securities means the Company, each
Guarantor and any other obligor on the Securities.
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 thereby.
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;
25
<PAGE>
(4) words in the singular include the plu-
ral, and words in the plural include the singular;
(5) provisions apply to successive events
and transactions;
(6) "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; and
(7) references to Sections or Articles means
reference to such Section or Article in this Indenture,
unless stated otherwise.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
The Securities and the Trustee's certificate of
authentication, in respect thereof, shall be substantially in the form of
Exhibit A hereto, which Exhibit is part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement on them. Any such notations, legends or endorsements not
contained in the form of Security attached as Exhibit A hereto shall be
delivered in writing to the Trustee. Each Security shall be dated the date of
its authentication.
The terms and provisions contained in the form of Securities
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.2. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one
Officer shall attest to, the Security for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security was
an Officer at the time of such execution but no longer holds
26
<PAGE>
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless and the Company shall nevertheless be bound by the
terms of the Securities and this Indenture.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate or cause to be authenticated
Securities for original issue in the aggregate principal amount of up to
$50,000,000 and shall authenticate Exchange Securities for original issue in the
aggregate principal amount of up to $50,000,000, in each case upon a written
order of the Company in the form of an Officers' Certificate; provided that such
Exchange Securities shall be issuable only upon the valid surrender for
cancellation of Initial Securities of a like aggregate principal amount in
accordance with the Registration Rights Agreement. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $50,000,000, except as
provided in Section 2.7. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in substitution
of Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in fully registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where Securities may be presented for
registration of transfer or ex-
27
<PAGE>
change ("Registrar") and an office or agency of the Company where Securities may
be presented for payment ("Paying Agent") and where notices and demands to or
upon the Company in respect of the Securities may be served. The Company may act
as Registrar or Paying Agent, except that for the purposes of Articles III,
VIII, X and Section 4.14 and as otherwise specified in this Indenture, neither
the Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-Registrars and one or more
additional Paying Agents. The term "Registrar" includes any co-registrar and the
term "Paying Agent" includes any additional Paying Agent. The Company hereby
initially appoints U.S. Trust Company of California, N.A. as Registrar and
Paying Agent, and by its signature hereto, U.S. Trust Company of California,
N.A. hereby agrees so to act. The Company may at any time change any Paying
Agent or Registrar without notice to any Holder.
The Company shall enter into an appropriate written agency
agreement with any Agent (including the Paying Agent) not a party to this
Indenture, which agreement shall implement the provisions of this Indenture that
relate to such Agent, and shall furnish a copy of each such agreement to the
Trustee. The Company shall promptly notify the Trustee in writing of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Securities.
The Company initially appoints the Registrar to act as
Securities Custodian with respect to the Global Securities.
Upon the occurrence of an Event of Default described in
Section 6.1(4) or (6), the Trustee shall, or upon the occurrence of any other
Event of Default by notice to the Company, the Registrar and the Paying Agent,
the Trustee may, assume the duties and obligations of the Registrar and the
Paying Agent hereunder.
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 such Paying Agent shall hold in trust for the
benefit of Holders or the Trust-
28
<PAGE>
ee all assets held by the Paying Agent for the payment of principal of, premium,
if any, or interest on, the Securities (whether such assets have been
distributed to it by the Company or any other obligor on the Securities), and
shall notify the Trustee in writing of any Default in making any such payment.
If either of the Company or a Subsidiary of the Company acts as Paying Agent, it
shall segregate such assets and hold them as a separate trust fund for the
benefit of the Holders or the Trustee. 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 or any Event of 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 (if other than the Company) shall have no further
liability for such assets.
SECTION 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee on or
before the third Business Day preceding each Interest Payment Date and at such
other times as the Trustee or any such Paying Agent may request in writing a
list in such form and as of such date as the Trustee reasonably may require of
the names and addresses of Holders and the Company shall otherwise comply with
TIA ss. 312(a).
SECTION 2.6. Transfer and Exchange.
(a) Transfer and Exchange of
Definitive Securities. When Definitive Securities are presented to the
Registrar with a request:
(x) to register the transfer
of such Definitive Securities; or
(y) to exchange such Defini-
tive Securities for an equal principal amount of Definitive
Securities of other authorized denominations,
the Registrar shall register the transfer or make the ex-
change as requested if its reasonable requirements for such
29
<PAGE>
transaction are met; provided, however, that the Definitive Securities
surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompa-
nied by a written instrument of transfer in form reasonably
satisfactory to the Company and the Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(ii) in the case of Definitive Securi-
ties that are Transfer Restricted Securities, such request shall be
accompanied by the following additional information and documents, as
applicable:
(A) if such Transfer Restricted Securities
are being delivered to the Trustee by a Holder for
registration in the name of such Holder, without transfer, a
certification from such Holder to that effect (in
substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Security is
being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act, a certification to
that effect (in substantially the form set forth on the
reverse of the Security); or
(C) if such Transfer Restricted Security is
being transferred (i) pursuant to an exemption from
registration in accordance with Rule 144 under the Securities
Act or (ii) pursuant to an effective registration statement
under the Securities Act, or (iii) to an institutional
"accredited investor" within the meaning of Rule 501(A)(1),
(2), (3) or (7) under the Securities Act that is acquiring the
security for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum
principal amount of the Securities of $100,000, not with a
view to or for offer or sale in connection with any
distribution in violation of the Securities Act, or (iv) in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (in substantially the form set forth on the reverse of
the Security) and in the case of (i), (iii) and (iv) above, if
the Company or the Trustee so request, a
30
<PAGE>
customary opinion of counsel reasonably acceptable to the
Company and to the Trustee to the effect that such transfer is
in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive
Security for a Beneficial Interest in a Global Security. A Definitive Security
may not be exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a
Transfer Restricted Security, certification, substantially in the form
set forth on the reverse of the Security, that such Definitive Security
is being transferred to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Definitive
Security is a Transfer Restricted Security, written instructions of the
Holder directing the Trustee to make, or to direct the Securities
Custodian to make, an endorsement on the Global Security to reflect an
increase in the aggregate principal amount of the Securities
represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securi-
ties. The transfer and exchange of Global Securities or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Indenture (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor which shall include
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act.
31
<PAGE>
(d) Transfer of a Beneficial Interest in a
Global Security for a Definitive Security.
(i) Any Person having a beneficial
interest in a Global Security may upon request exchange such beneficial
interest for a Definitive Security. Upon receipt by the Trustee of
written instructions or such other form of instructions as is customary
for the Depositary from the Depositary or its nominee on behalf of any
Person having a beneficial interest in a Global Security, and upon
receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depositary or the Person
designated by the Depositary as having such a beneficial interest in a
Transfer Restricted Security only, the following additional information
and documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary as
being the beneficial owner, a certification from such person
to that effect (in substantially the form set forth on the
reverse of the Security); or
(B) if such beneficial interest is being
transferred to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act a certification to that effect
from the transferor (in substantially the form set forth on
the reverse of the Security); or
(C) if such beneficial interest is being
transferred (i) pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or (ii)
pursuant to an effective registration statement under the
Securities Act, or (iii) to an institutional "accredited
investor" within the meaning of Rule 501(A)(1), (2), (3) or
(7) under the Securities Act that is acquiring the security
for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum
principal amount of the Securities of $100,000, not with any
distribution in violation of the Securities Act, or (iv) in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect from the transferee or transferor (in substantially the
form set forth on
32
<PAGE>
the reverse of the Security) and in the case of (i), (iii) and
(iv) above, if the Company or the Trustee so requests, a
customary opinion of counsel from the transferee or transferor
reasonably acceptable to the Company and to the Trustee to the
effect that such transfer is in compliance with the Securities
Act;
then the Trustee or the Securities Custodian at the direction of the Trustee
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Securities Custodian, the aggregate principal
amount of the Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the form of
an Officers' Certificate, the Trustee or the Trustee's authenticating agent will
authenticate and deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in
exchange for a beneficial interest in a Global Security pursuant to
this Section 2.6(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct
the Trustee. The Trustee shall deliver such Definitive Securities to
the persons in whose names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of
Global Securities. Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in subsection (f) of this Section 2.6), a Global
Security may not be transferred as a whole except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Securities
in Absence of Depositary. If at any time:
(i) the Depositary for the Securities
notifies the Company that the Depositary is unwilling or unable to
continue as Depositary for the Global Securities and a successor
Depositary for the Global Securities is not appointed by the Company
within 90 days after delivery of such notice; or
33
<PAGE>
(ii) the Company, in its sole discre-
tion, notifies the Trustee and the Registrar in writing that it elects
to cause the issuance of Definitive Securities under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will, or its authenticating agent will, authenticate and deliver Definitive
Securities, in an aggregate principal amount equal to the principal amount of
the Global Securities, in exchange for such Global Securities.
(g) Cancellation and/or Adjustment of Global
Security. At such time as all beneficial interests in a Global Security have
either been exchanged for Definitive Securities, redeemed, repurchased or
cancelled, such Global Security shall be returned to or retained and cancelled
by the Trustee. At any time prior to such cancellation, if any beneficial
interest in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or cancelled, the principal amount of Securities represented by such
Global Security shall be reduced and an endorsement shall be made on such Global
Security, by the Trustee or the Securities Custodian, at the direction of the
Trustee, to reflect such reduction.
(h) Legends.
(i) Except as permitted by the follow-
ing paragraph (ii), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OR THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
34
<PAGE>
THE HOLDER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER AND
BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") THAT IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) PURSUANT TO RULE 144A, FOR SO LONG AS
IT IS AVAILABLE, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF RULE 501(A)(1),(2),(3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENT OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D),(E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGO-
35
<PAGE>
ING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a
Transfer Restricted Security (including any Transfer Restricted
Security represented by a Global Security) pursuant to Rule 144 under
the Securities Act or an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Security, the Trustee shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Definitive Security that does not bear the
legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security in the case of a
sale or transfer pursuant to Rule 144 under the Securities
Act, after the Resale Restriction Termination Date or delivery
of a customary opinion of counsel; and
(B) any such Transfer Restricted Security
represented by a Global Security shall not be subject to the
provisions set forth in (i) above (such sales or transfers
being subject only to the provisions of Section 2.6(c)
hereof); provided, however, that with respect to any request
for an exchange of a Transfer Restricted Security that is
represented by a Global Security for a Definitive Security
that does not bear a legend, which request is made in reliance
upon Rule 144 under the Securities Act, the Holder thereof
shall certify in writing (to be accompanied by a customary
opinion of counsel) to the Registrar that such request is
being made pursuant to Rule 144 under the Securities Act (such
certification to be substantially in the form set forth on the
reverse of the Security).
(i) Obligations with respect to Transfers
and Exchanges of Definitive Securities.
(i) To permit registrations of trans-
fers and exchanges, the Company shall execute and the
36
<PAGE>
Trustee or any authenticating agent of the Trustee shall authenticate
Definitive Securities and Global Securities at the Registrar's request.
(ii) No service charge shall be made to
a Holder for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in connection
therewith (other than any such transfer taxes, assessments, or similar
governmental charge payable upon exchanges or transfers pursuant to
Section 2.2 (fourth paragraph), 2.10, 3.7, 4.14(8), 9.5, or 10.1 (final
paragraph).
(iii) The Registrar shall not be re-
quired to register the transfer of or exchange (a) any Definitive
Security selected for redemption in whole or in part pursuant to
Article III, except the unredeemed portion of any Definitive Security
being redeemed in part, or (b) any Security for a period beginning 15
Business Days before the mailing of a notice of an offer to repurchase
pursuant to Article X or Section 4.14 hereof or redeem Securities
pursuant to Article III hereof and ending at the close of business on
the day of such mailing.
(iv) Prior to due presentment for
registration or transfer of any Security, the Trustee, any Agent and
the Company may deem and treat the Person in whose name the Security is
registered as the absolute owner of such Security, and none of the
Trustee, Agent or the Company shall be affected by notice to the
contrary.
SECTION 2.7. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims and submits an affidavit or other evidence,
satisfactory to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee or any
authenticating agent of the Trustee shall authenticate a replacement Security if
the Trustee's requirements are met. If required by the Trustee or the Company,
such Holder must provide 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 Security is
replaced. The
37
<PAGE>
Company may charge such Holder for its reasonable, out-of-pocket expenses in
replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9.
If a Security is replaced pursuant to Section 2.7 (other than
a mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent
(other than the Company or an Affiliate of the Company) holds Cash or U.S.
Government Obligations sufficient to pay all of the principal and interest and
premium, if any, due on the Securities payable on that date and payment of the
Securities called for redemption is not otherwise prohibited, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.9. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, amendment, supplement,
waiver or consent, Securities owned by the Company or Affiliates of the Company
shall be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, amendment,
supplement, waiver or consent, only Securities that a Trust Officer of the
Trustee knows are so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
38
<PAGE>
Until Definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of Definitive Securities
but may have variations that the Company reasonably and in good faith considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities in
exchange for temporary Securities. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
permanent Securities authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to it or them (as applicable) for
registration of transfer, exchange or payment. The Trustee or, at the direction
of the Trustee, the Registrar or the Paying Agent (other than the Company or an
Affiliate of the Company), and no one else shall cancel and, at the written
direction of the Company, shall dispose of all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.7, the Company
may not issue new Securities to replace Securities that have been paid or
delivered to the Trustee for cancellation. No Securities shall be authenticated
in lieu of or in exchange for any Securities cancelled as provided in this
Section 2.11, except as expressly permitted in the form of Securities and as
permitted by this Indenture.
SECTION 2.12. Defaulted Interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful, any interest payable on the defaulted interest (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Record Date, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make pay-
ment of any Defaulted Interest to the persons in whose names the
Securities (or their respective predecessor Securities) are registered
at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
39
<PAGE>
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of
the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of Cash equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such Cash when deposited to be held in
trust for the benefit of the persons entitled to such Defaulted
Interest as provided in this clause (1). Thereupon the Trustee shall
fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Security register not less
than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid
to the persons in whose names the Securities (or their respective
predecessor Securities) are registered on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any
Defaulted Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
40
<PAGE>
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption.
(a) Redemption of Securities, as permitted
by any provision of this Indenture, shall be made in accordance with such
provision and this Article III. The Company will not have the right to redeem
any Securities prior to July 15, 2000; except as provided in Section 3.1(b)
hereof. On or after July 15, 2000, the Company will have the right to redeem all
or any part of the Securities at the Redemption Prices specified in the form of
Security attached as Exhibit A set forth therein under the caption "Redemption,"
in each case (subject to the right of Holders of record on a Record Date to
receive interest due on an Interest Payment Date that is on or prior to such
Redemption Date, and subject to the provisions set forth in Section 3.5),
including accrued and unpaid interest to the Redemption Date.
(b) Notwithstanding the foregoing, in the
event that the Company redeems for cash less than $40.0 million of the Company's
outstanding Convertible Subordinated Debentures pursuant to the redemption
thereof by the Company (as a result of the holders thereof exercising their
conversion rights), the Company may redeem the Securities, in whole but not in
part, at a redemption price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of redemption. In the event the Company
elects to effect such redemption, notice of such redemption must be given not
more than 30 days after the date of the consummation of the redemption of the
Convertible Subordinated Debentures and such redemption must occur not more than
30 days after the date of such notice of redemption. Until the earlier of (i) 90
days after the Issue Date, or (ii) such time as the Company provides the Trustee
irrevocable notice in writing that it does not intend to exercise such optional
redemption of the Securities, the net proceeds to the Company from the sale of
the Securities will be held in escrow by the Trustee, and during such time may
be used by the Company only to redeem or purchase Convertible Subordinated
Debentures or to effect the redemption of the Securities.
SECTION 3.2. Notices to Trustee.
41
<PAGE>
If the Company elects to redeem Securities pursuant to
Paragraph 5 of the Securities, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Securities to be redeemed and
whether it wants the Trustee to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of
Securities to be redeemed pursuant to Paragraph 5 of the Securities by crediting
against any such redemption Securities it has not previously delivered to the
Trustee for cancellation, it shall so notify the Trustee of the amount of the
reduction and deliver such Securities with such notice.
The Company shall give each notice to the Trustee provided for
in this Section 3.2 at least 45 days before the Redemption Date (unless a
shorter notice shall be satisfactory to the Trustee); provided, however, the
Company shall only be required to give 30 days' notice before the Redemption
Date for purposes of a redemption effected pursuant to Section 3.1(b) hereof.
Any such notice may be cancelled at any time prior to notice of such redemption
being mailed to any Holder and shall thereby be void and of no effect.
SECTION 3.3. Selection of Securities to Be Re-
deemed.
If less than all of the Securities are to be redeemed pursuant
to Paragraph 5 thereof, the Trustee shall select the Securities or portions
thereof for redemption on a pro rata basis, by lot or by such other method as
the Trustee shall determine to be fair and appropriate.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount
thereof to be redeemed. Securities 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 Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.4. Notice of Redemption.
42
<PAGE>
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee and each Holder whose Securities are to be redeemed to
such Holder's last address as then shown on the registry books of the Registrar.
At the Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the
amount of accrued and unpaid interest to be paid upon
such redemption;
(3) the name, address and telephone
number of the Paying Agent;
(4) that Securities called for redemp-
tion must be surrendered to the Paying Agent at the
address specified in such notice to collect the Redemp-
tion Price;
(5) that, unless the Company defaults
in its obligation to deposit Cash or U.S. Government Obligations which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, Cash in an amount to fund the
Redemption Price with the Paying Agent in accordance with Section 3.6
hereof or such redemption payment is otherwise prohibited, interest on
Securities called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price, including
accrued and unpaid interest to the Redemption Date, upon surrender to
the Paying Agent of the Securities called for redemption and to be
redeemed;
(6) if any Security is being redeemed
in part, the portion of the principal amount equal to $1,000 or any
integral multiple thereof, of such Security to be redeemed and that,
after the Redemption Date, and upon surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued;
43
<PAGE>
(7) if less than all the Securities are
to be redeemed, the identification of the particular Securities (or
portion thereof) to be redeemed, as well as the aggregate principal
amount of such Securities to be redeemed and the aggregate principal
amount of Securities to be outstanding after such partial redemption;
(8) the CUSIP number of the Securities
to be redeemed; and
(9) that the notice is being sent pur-
suant to this Section 3.4 and pursuant to the optional redemption
provisions of Paragraph 5 of the Securities.
SECTION 3.5. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.4, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or Paying Agent, such Securities
called for redemption shall be paid at the Redemption Price, including interest,
if any, accrued and unpaid to the Redemption Date; provided that if the
Redemption Date is after a regular Record Date and on or prior to the Interest
Payment Date to which such Record Date relates, the accrued interest shall be
payable to the Holder of the redeemed Securities registered on the relevant
Record Date; and provided, further, that if a Redemption Date is a nonBusiness
Day, payment shall be made on the next succeeding Business Day and no interest
shall accrue for the period from such Redemption Date to such succeeding
Business Day.
SECTION 3.6. Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit
with the Paying Agent (other than the Company or an Affiliate of the Company)
Cash or U.S. Government Obligations sufficient to pay the Redemption Price of,
including accrued and unpaid interest on, all Securities to be redeemed on such
Redemption Date (other than Securities or portions thereof called for redemption
on that date that have been delivered by the Company to the Trustee for
cancellation). The Paying Agent shall promptly return to the Company any Cash or
U.S. Government Obligations so deposited which is not required for that purpose
upon the written request of the Company.
If the Company complies with the preceding paragraph and the
other provisions of this Article III and
44
<PAGE>
payment of the Securities called for redemption is not otherwise prohibited,
interest on the Securities to be redeemed will cease to accrue on the applicable
Redemption Date, whether or not such Securities are presented for payment.
Notwithstanding anything herein to the contrary, if any Security surrendered for
redemption in the manner provided in the Securities shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall continue to accrue and be paid from the
Redemption Date until such payment is made on the unpaid principal, and, to the
extent lawful, on any interest not paid on such unpaid principal, in each case
at the rate and in the manner provided in Section 4.1 hereof and the Security.
SECTION 3.7. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part,
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.
The Company shall pay the principal of and interest and
premium, if applicable, on the Securities on the dates and in the manner
provided herein and in the Securities. An installment of principal of or
interest and premium, if applicable, on the Securities shall be considered paid
on the date it is due if the Trustee or Paying Agent (other than the Company, a
Subsidiary of the Company or an Affiliate of the Company) holds for the benefit
of the Holders, on or before 10:00 a.m. New York City time on that date, Cash
deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on
overdue installments of interest at the rate specified in the Securities
compounded semi-annually, to the extent lawful.
45
<PAGE>
SECTION 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The
City of New York, an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 13.2.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency. The Company hereby initially designates the corporate trust office of
the Trustee as such office.
SECTION 4.3. Limitation on Restricted Payments.
On and after the Issue Date the Company and the Guarantors
shall not, and shall not permit any of their Subsidiaries to, directly or
indirectly, make any Restricted Payment if, after giving effect to such
Restricted Payment on a pro forma basis, (1) a Default or an Event of Default
shall have occurred and be continuing, (2) the Company is not permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Consolidated Interest
Coverage Ratio in paragraph (a) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," or (3) the aggregate
amount of all Restricted Payments made by the Company and its Subsidiaries,
including after giving effect to such proposed Restricted Payment, from and
after the Issue Date and on or prior to the date of such Restricted Payment,
shall exceed the sum of (a) 50% of the aggregate Consolidated Net Income of the
Company and its Consolidated Subsidiaries for the period (taken as one
accounting period), commencing on January 1, 1996, to and
46
<PAGE>
including the last day of the fiscal quarter ended immediately prior to the date
of each such calculation (or, in the event Consolidated Net Income for such
period is a deficit, then minus 100% of such deficit), plus (b) the aggregate
Net Cash Proceeds received by the Company from the sale of its Qualified Capital
Stock (other than (i) to a Subsidiary of the Company, (ii) to the extent applied
in connection with a Qualified Exchange and (iii) to the extent applied in
connection with a transaction described in clause (y) of the next paragraph),
after the Issue Date, plus (c) $5.0 million.
The foregoing clauses (2) and (3) of the immediately preceding
paragraph, however, will not prohibit (v) any payment by the Company to its
employees or directors pursuant to the Company's Long Term Incentive Plan,
Director Stock Plan or any other stock plan for the benefit of the Company's
employees and approved by the Company's Board of Directors and by its
stockholders in an aggregate amount to all employees not to exceed $1.0 million
per fiscal year, (w) a Qualified Exchange, (x) the payment of any dividend on
Qualified Capital Stock within 60 days after the date of its declaration if such
dividend could have been made on the date of such declaration in compliance with
the foregoing provisions, or (y) any redemption, repurchase, retirement or other
acquisition of any Capital Stock or Subordinated Indebtedness of the Company not
covered by clause (w) of this paragraph in exchange for, or out of the Net Cash
Proceeds of, the substantially concurrent (i.e., within 60 days) sale (other
than to a Subsidiary of the Company) of Qualified Capital Stock of the Company;
provided that the amount of any such Net Cash Proceeds that is utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
from clause (3)(b) of the preceding paragraph. The full amount of any Restricted
Payment made pursuant to the foregoing clauses (v) and (x) (but not pursuant to
clauses (w) and (y)) of the immediately preceding sentence, however, will be
deducted in the calculation of the aggregate amount of Restricted Payments
available to be made referred to in clause (3) of the immediately preceding
paragraph.
SECTION 4.4. Corporate Existence.
Subject to Article V, the Company and the Guarantors shall do
or cause to be done all things necessary to preserve and keep in full force and
effect their respective corporate existence in accordance with the respective
organizational documents of each of them (as the same may be amended from time
to time) and the rights (charter and
47
<PAGE>
statutory) and corporate franchises of the Company and the Guarantors; provided,
however, nothing in this Section will prohibit the Company or any Guarantor from
engaging in any transaction permitted under Section 11.4 or Section 11.5 hereof
and provided further that neither the Company nor any Guarantor shall be
required to preserve any right or franchise if (a) the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of such entity and (b) the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 4.5. Payment of Taxes and Other Claims.
Except with respect to immaterial items, the Company and the
Guarantors shall, and shall cause each of their Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to taxes) levied or
imposed upon the Company, any Guarantor or any of their Subsidiaries or any of
their respective properties and assets; and (ii) all lawful claims, whether for
labor, materials, supplies, services or anything else, which have become due and
payable and which by law have or may become a Lien upon the property and assets
of the Company, any Guarantor or any of their Subsidiaries; provided, however,
that neither the Company nor any Guarantor shall be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which disputed amounts adequate reserves have
been established in accordance with GAAP.
SECTION 4.6. Maintenance of Properties and Insur-
ance.
The Company and the Guarantors shall cause all material
properties used or useful to the conduct of their business and the business of
each of their Subsidiaries to be maintained and kept in good condition, repair
and working order (reasonable wear and tear excepted) and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in their reasonable
judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.6 shall prevent the Company or any Guarantor from
discontinuing any
48
<PAGE>
operation or maintenance of any of such properties, or disposing of any of them,
if such discontinuance or disposal is (a), in the judgment of the Board of
Directors of the Company or Guarantor, as applicable, desirable in the conduct
of the business of such entity and (b) not disadvantageous in any material
respect to the Holders.
The Company and the Guarantors shall provide, or cause to be
provided, for themselves and each of their Subsidiaries, insurance (including
appropriate self-insur- ance) against loss or damage of the kinds that, in the
reasonable, good faith opinion of the Company is adequate and appropriate for
the conduct of the business of the Company, the Guarantors and such
Subsidiaries.
SECTION 4.7. Compliance Certificate; Notice of
Default.
(a) The Company shall deliver to the Trustee
within 120 days after the end of its fiscal year an Officers' Certificate
complying with Section 314(a)(4) of the TIA and stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, whether or not the signer knows of any failure by the
Company or any Guarantor to comply with any conditions or covenants in this
Indenture and, if such signer does know of such a failure to comply, the
certificate shall describe such failure with particularity. The Officers'
Certificate shall also notify the Trustee should the relevant fiscal year end on
any date other than the current fiscal year end date.
(b) The Company shall, so long as any of the
Securities are outstanding, deliver to the Trustee, promptly upon becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto. The Trustee shall not be deemed to have knowledge of
any Default or any Event of Default unless one of its Trust Officers receives
written notice thereof from the Company or any of the Holders.
SECTION 4.8. Reports.
Whether or not the Company is subject to the report-
ing requirements of Section 13 or 15(d) of the Exchange Act,
49
<PAGE>
the Company shall deliver to the Trustee, within 15 days after it files or would
have been required to file such with the Commission, annual and quarterly
financial statements substantially equivalent to financial statements that would
have been included in reports filed with the Commission, if the Company were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the Commission, and, in each case, together with management's
discussion and analysis of financial condition and results of operations which
would be so required. Whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and will make such information available to securities
analysts and prospective investors upon request.
SECTION 4.9. Limitation on Status as Investment
Company.
Neither the Company nor any Subsidiary shall become an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or otherwise become subject to regulation as an investment
company.
SECTION 4.10. Limitation on Transactions with
Affiliates.
After the Issue Date, the Company and the Guarantors shall
not, and shall not permit any of their Subsidiaries to, enter into any contract,
agreement, arrangement or transaction with any Affiliate (an "Affiliate
Transaction"), or any series of related Affiliate Transactions (other than
Exempted Affiliate Transactions), unless such Affiliate Transaction is made in
good faith, the terms of such Affiliate Transaction are fair and reasonable to
the Company or such Subsidiary, as the case may be, and are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an
arm'slength basis with persons who are not Affiliates.
Without limiting the foregoing, any Affiliate Transaction or
series of related Affiliate Transactions (other than Exempted Affiliate
Transactions) (1) involving consideration to either party in excess of $5.0
million, shall be evidenced by an Officers' Certificate addressed and delivered
to the Trustee stating that the terms of such Affiliate Transaction are fair and
reasonable to the Company and no less favorable
50
<PAGE>
to the Company than could have been obtained in an arm'slength transaction with
a non-Affiliate, and (2) involving consideration to either party in excess of
$10.0 million, shall be evidenced by an Officers' Certificate in accordance with
the foregoing clause (1) and, prior to the consummation thereof, a written
favorable opinion as to the fairness of such transaction to the Company from a
financial point of view from an independent investment banking firm of national
reputation.
SECTION 4.11. Limitation on Incurrence of Addition-
al Indebtedness and Disqualified Capital Stock.
Except as set forth below in this Section 4.11, the Company
and the Guarantors shall not, and shall not permit any of their Subsidiaries to,
directly or indirectly, issue, assume, guaranty, incur, become directly or
indirectly liable with respect to (including as a result of an Acquisition), or
otherwise become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness
or any Disqualified Capital Stock (including Acquired Indebtedness).
Notwithstanding the foregoing:
(a) if (i) no Default or Event of Default shall have occurred
and be continuing at the time of, or would occur after giving effect on
a pro forma basis to, such incurrence of Indebtedness or Disqualified
Capital Stock and (ii) on the date of such incurrence (the "Incurrence
Date"), the Consolidated Interest Coverage Ratio of the Company for the
Reference Period immediately preceding the Incurrence Date, after
giving effect on a pro forma basis to such incurrence of such
Indebtedness or Disqualified Capital Stock and, to the extent set forth
in the definition of Consolidated Interest Coverage Ratio, the use of
proceeds thereof, would be at least (x) 2.0 to 1 (the "Debt Incurrence
Ratio") if such incurrence or issuance occurs on or before September
30, 1997, or (y) 2.25 to 1 (the "Debt Incurrence Ratio") if such
incurrence or issuance occurs at any time thereafter, then the Company
and the Guarantors may incur such Indebtedness or Disqualified Capital
Stock;
(b) the Company and the Guarantors may incur In-
debtedness evidenced by the Securities and represented by
this Indenture up to the amounts specified herein as of
the date hereof;
(c) the Company and the Guarantors may incur In-
debtedness pursuant to the Credit Agreement up to an
51
<PAGE>
aggregate amount outstanding (including any Indebtedness issued to
refinance, refund or replace such Indebtedness in whole or in part) at
any time of $50.0 million, minus the amount of any such Indebtedness
retired with Net Cash Proceeds from any Asset Sale or assumed by a
transferee in an Asset Sale;
(d) the Company and the Guarantors, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or
Disqualified Capital Stock, as applicable, (i) described in clauses
(a), (b), (c) and (e) of this covenant, or (ii) which is outstanding on
the Issue Date;
(e) the Company and the Guarantors may incur Pur-
chase Money Indebtedness in an aggregate amount at any
time outstanding not to exceed $10.0 million;
(f) the Company and the Guarantors may incur Indebtedness (in
addition to Indebtedness permitted by any other clause of this Section
4.11) in an aggregate amount outstanding at any time (including any
Indebtedness issued to refinance, replace, or refund such Indebtedness
in whole or in part) of up to $5.0 million, minus the amount of any
such Indebtedness retired with Net Cash Proceeds from any Asset Sale or
assumed by a transferee in an Asset Sale;
(g) the Company may incur Indebtedness to any Guarantor, and
any Guarantor may incur Indebtedness to any other Guarantor or to the
Company; provided, that, in the case of Indebtedness of the Company,
such obligations shall be unsecured and subordinated in case of an
Event of Default in all respects to the Company's obligations pursuant
to the Securities;
(h) the Company and its Guarantors may incur (in addition to
indebtedness permitted by any other clause of this Section 4.11) (i)
Indebtedness solely in respect of letters of credit issued in the
ordinary course of business consistent with past practice to support
the Company's or any Guarantor's insurance or self-insurance
obligations (including letters of credit to secure workers'
compensation and other similar insurance coverages) or (ii) to secure
Indebtedness otherwise permitted as set forth above in this Section
4.11; provided, however, that the incurrence of any obligation pursuant
to clause (ii) above does not result in the incurrence of any
obligation to pay any additional obligations; and
52
<PAGE>
(i) the Company and the Guarantors may incur Indebtedness
solely in respect of Capitalized Lease Obligations in an aggregate
amount (including Capitalized Lease Obligations issued to refund,
replace or refinance other Capitalized Lease Obligations) not to exceed
$7.0 million at any one time outstanding.
Indebtedness of any Person which is outstanding at the time
such Person becomes a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company shall be deemed to
have been incurred at the time such Person becomes such a Subsidiary of the
Company or is merged with or into or consolidated with the Company or a
Subsidiary of the Company, as applicable.
SECTION 4.12. Limitation on Dividends and Other
Payment Restrictions Affecting Subsidiaries.
The Company and the Guarantors shall not, and shall not permit
any of their Subsidiaries to, directly or indirectly, create, assume or suffer
to exist any consensual restriction on the ability of any Subsidiary of the
Company to pay dividends or make other distributions to or on behalf of, or to
pay any obligation to or on behalf of, or otherwise to transfer assets or
property to, or make or pay loans or advances to or on behalf of, the Company or
any Subsidiary of the Company, except (a) restrictions imposed by the Securities
or this Indenture, (b) restrictions imposed by applicable law, (c) existing
restrictions under or in respect of Indebtedness outstanding on the Issue Date
or under or in respect of any Acquired Indebtedness not incurred in violation of
this Indenture or any agreement relating to any property, asset, or business
acquired by the Company or any of its Subsidiaries, which restrictions, in each
case, existed at the time of acquisition, were not put in place in connection
with or in anticipation of such acquisition and are not applicable to any
person, other than the person acquired, or to any property, asset or business,
other than the property, assets and business so acquired, (d) any such
restriction or requirement imposed by or in respect of Indebtedness incurred
under paragraph (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," provided such restriction or
requirement is no more restrictive than that imposed by the Credit Agreement in
effect as of the Issue Date, (e) restrictions with respect solely to a
Subsidiary of the Company imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary, provided such restrictions apply
solely to the Capital Stock or assets of such Subsidiary which are being sold,
and
53
<PAGE>
(f) in connection with and pursuant to permitted Refinancings, replacements of
restrictions imposed pursuant to clauses (c) of this paragraph that are not more
restrictive than those being replaced and do not apply to any other person or
assets than those that would have been covered by the restrictions in the
Indebtedness so refinanced. Notwithstanding the foregoing, neither (a) customary
provisions restricting subletting or assignment of any lease entered into in the
ordinary course of business, consistent with industry practice, nor (b) Liens
permitted under the terms of this Indenture on assets securing Senior Debt
incurred in accordance with the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" shall in and of themselves be
considered a restriction on the ability of the applicable Subsidiary to transfer
such agreement or assets, as the case may be.
SECTION 4.13. Limitation on Liens.
The Company and the Guarantors shall not, and shall not permit
any of their Subsidiaries to, directly or indirectly, incur, or suffer to exist
any Lien on any of their respective assets, now owned or hereinafter acquired,
securing any Indebtedness that is pari passu with or subordinated in right of
payment to the Securities, except Permitted Liens, unless the Securities are
secured with such other Indebtedness; provided that, if such Indebtedness is by
its terms expressly subordinated to the Securities, the Lien securing such
subordinated or junior Indebtedness shall be subordinate and junior to the Lien
securing the Securities with the same relative priority as such subordinated or
junior Indebtedness shall have with respect to the Securities.
SECTION 4.14. Limitation on Sale of Assets and
Subsidiary Stock.
The Company and the Guarantors shall not, and shall not permit
any of their Subsidiaries to, in one or a series of related transactions,
convey, sell, transfer, assign or otherwise dispose of, directly or indirectly,
any of their property, business or assets, including by merger or consolidation
(in the case of a Guarantor or a Subsidiary of the Company), and including any
sale or other transfer or issuance of any Capital Stock of any Subsidiary of the
Company, whether by the Company or a Subsidiary of either or through the
issuance, sale or transfer of Capital Stock by a Subsidiary of the Company (an
"Asset Sale"), unless (1)(a) within 395 days after the date of such Asset Sale,
an amount equal to the Net Cash Proceeds therefrom (the "Asset Sale Offer
Amount") are applied to the optional redemption of the Securities in accordance
with the terms of this Indenture or to the repurchase of the
54
<PAGE>
Securities pursuant to an irrevocable, unconditional cash offer (the "Asset Sale
Offer") to repurchase Securities at a purchase price of 100% of principal amount
(the "Asset Sale Offer Price"), plus accrued interest to the date of payment
(the "Purchase Date"), and which Asset Sale Offer shall commence within 365 days
of such Asset Sale or (b) within 360 days following such Asset Sale, the Asset
Sale Offer Amount is (i) invested in assets and property (other than notes,
bonds, obligations and securities) which in the good faith and reasonable
judgment of the Board will immediately constitute or be a part of a Related
Business of the Company or such Subsidiary (if it continues to be a Subsidiary)
immediately following such transaction, (ii) used to retire Senior Debt and to
permanently reduce the amount of such Indebtedness outstanding on the Issue Date
or permitted pursuant to paragraph (c) or (f) (and, in each case, the
corresponding reference thereto in paragraph (d)) of Section 4.11 (including
that in the case of a revolver or similar arrangement that makes credit
available, such commitment is so permanently reduced by such amount), or (iii)
used to repurchase Senior Subordinated Notes, (2) at least 75% of the
consideration for such Asset Sale consists of Cash or Cash Equivalents;
provided, that any Asset Sale or related series of Asset Sales involving
securities, property or assets with an aggregate fair market value of less than
$3.0 million per Asset Sale or series of related Asset Sales, but in any case
not to exceed $10.0 million in the aggregate for all transactions in any
consecutive 12-month period, shall be exempt from the provisions of this clause
(2) (but any consideration received from any such Asset Sales shall be deemed to
be Net Cash Proceeds for purposes of this paragraph when reduced to Cash or Cash
Equivalents), (3) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro forma
basis, to, such Asset Sale, and (4) the Board of Directors of the Company
determines in good faith that the Company or such Subsidiary, as applicable,
receives fair market value as a result of such Asset Sale.
Notwithstanding the foregoing provisions of the prior
paragraph:
(i) the Company, the Guarantors and
their Subsidiaries may, in the ordinary course of business, convey,
sell,
lease, transfer, assign or otherwise dispose of inventory acquired and
held for resale in the ordinary course of business;
(ii) the Company, the Guarantors and
their Subsidiaries may convey, sell, lease, transfer, assign or
55
<PAGE>
otherwise dispose of assets pursuant to and in accordance
with the provisions of Article V;
(iii) the Company and the Guarantors may
convey, sell, lease, transfer, assign or otherwise dis-
pose of assets to the Company or any of the Guarantors;
and
(iv) the provisions of the first paragraph
of this Section 4.14 shall not apply to any sale or series of related
sales of assets or properties of the Company and the Guarantors having
an aggregate Fair Market Value of less than $1.0 million in any fiscal
year.
An Asset Sale Offer may be deferred until the accumulated Net
Cash Proceeds from Asset Sales not applied to the uses set forth in (1)(b) above
exceeds $5.0 million (the "Excess Proceeds").
For purposes of this Section 4.14, "Excess Proceeds Date"
means each date on which the Excess Proceeds exceed $5.0 million. Not later than
the first date such Asset Sale Offer is required to be made, the Company will
commence an Asset Sale Offer to the Holders to purchase, on a pro rata basis,
the Asset Sale Offer Amount at the Asset Sale Offer Price in accordance with the
provisions set forth in this Section 4.14. Notice of an Asset Sale Offer will be
sent 20 Business Days prior to the close of business on the earlier of (a) the
third Business Day prior to the Purchase Date (which shall no later than 60
Business Days after the date such Asset Sale Offer commences) and (b) the third
Business Day following the expiration of the Asset Sale Offer (such earlier date
being the "Final Put Date") by first-class mail, by the Company to each Holder
at its registered address, with a copy to the Trustee. The notice to the Holders
will contain all information, instructions and materials required by applicable
law or otherwise material to such Holders' decision to tender Securities
pursuant to the Asset Sale Offer. The notice, which (to the extent consistent
with the Indenture) shall govern the terms of the Asset Sale Offer, shall state:
(1) that the Asset Sale Offer is
being made pursuant to such notice and this Section
4.14;
(2) the Asset Sale Offer, the Asset
Sale Offer Price (including the amount of accrued and unpaid interest),
the Final Put Date, and the Purchase Date, which Purchase Date shall be
on or
56
<PAGE>
prior to 60 Business Days following the Excess Pro-
ceeds Date;
(3) that any Security or portion
thereof not tendered or accepted for payment will
continue to accrue interest;
(4) that, unless the Company de-
faults in depositing Cash with the Paying Agent in accordance with the
provisions of this Section 4.14 or such payment is otherwise prevented,
any Security, or portion thereof, accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest after the Purchase
Date;
(5) that Holders electing to have a
Security, or portion thereof, purchased pursuant to an Asset Sale Offer
will be required to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Security
completed, to the Paying Agent (which may not for purposes of this
Section 4.14, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) at the
address specified in the notice prior to the close of business on the
Final Put Date;
(6) that Holders will be entitled to
withdraw their elections, in whole or in part, if the Paying Agent
(which may not for purposes of this Section 4.14, notwithstanding any
other provision of this Indenture, be the Company or any Affiliate of
the Company) receives, up to the close of business on the Final Put
Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Securities the
Holder is withholding and a statement that such Holder is withdrawing
his election to have such principal amount of Securities purchased;
(7) that if Securities in a prin-
cipal amount in excess of the principal amount of Securities to be
acquired pursuant to the Asset Sale Offer are tendered and not
withdrawn, the Company shall purchase Securities on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so
that only Securities in denominations of $1,000 or integral multiples
of $1,000 shall be acquired);
57
<PAGE>
(8) that Holders whose Securities
were purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities
surrendered; and
(9) a brief description of the cir-
cumstances and relevant facts regarding such Asset
Sales.
On or before a Purchase Date, the Company shall (i) accept for
payment Securities or portions thereof properly tendered pursuant to the Asset
Sale Offer on or before the Final Put Date (on a pro rata basis if required
pursuant to paragraph (7) hereof), (ii) deposit with the Paying Agent Cash
sufficient to pay the Asset Sale Offer Price for all Securities or portions
thereof so tendered and accepted plus an amount equal to accrued interest (on a
pro rata basis if the Asset Sale Offer Amount is insufficient to purchase all
Securities so tendered) at the Asset Sale Offer Price (together with accrued
interest) and (iii) promptly following the Purchase Date the Company shall
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall on each Purchase Date mail or deliver to Holders
of Securities so accepted payment in an amount equal to the Asset Sale Offer
Price for such Securities (together with accrued interest), and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered. Any Security not so accepted shall be promptly mailed or delivered
by the Company to the Holder thereof.
If the amount required to acquire all Securities tendered by
Holders pursuant to the Asset Sale Offer (the "Acceptance Amount") made pursuant
to the third paragraph of this Section 4.14 is less than the Asset Sale Offer
Amount, the excess of the Asset Sale Offer Amount over the Acceptance Amount may
be used by the Company for general corporate purposes without restriction,
unless otherwise restricted by the other provisions of the Indenture. Upon
consummation of any Asset Sale Offer made in accordance with the terms of the
Indenture, the Excess Proceeds will be reduced to zero irrespective of the
amount of Securities tendered pursuant to the Asset Sale Offer.
Any Asset Sale Offer shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of
58
<PAGE>
this Indenture that conflict with such laws shall be deemed to be superseded by
the provisions of such laws.
SECTION 4.15. Limitation on Lines of Business.
Neither the Company nor any of its Subsidiaries shall directly
or indirectly engage to any substantial extent in any line or lines of business
activity other than that which, in the reasonable good faith judgment of the
Board of Directors of the Company is a Related Business.
SECTION 4.16. Restriction on Sale and Issuance of
Subsidiary Stock.
The Company and the Guarantors will not issue or sell, and
will not permit any of their Subsidiaries to issue or sell, any shares of
Capital Stock of any Subsidiary of the Company to any Person other than the
Company or a wholly owned Subsidiary of the Company, except for shares of common
stock with no preferences or special rights or privileges and with no redemption
or prepayment provisions.
SECTION 4.17. Waiver of Stay, Extension or Usury
Laws.
Each of the Company and the Guarantors covenants (to the
extent that it may lawfully do so) that it will 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 which would prohibit or
forgive the Company or any Guarantor from paying all or any portion of the
principal of, premium of, or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) each of the Company and the Guarantors hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.18. Rule 144A Information Requirement.
59
<PAGE>
The Company shall furnish to the Holders of the Initial
Securities, securities analysts, and prospective purchasers of Securities
designated by the Holders of Transfer Restricted Securities, upon their request,
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act until such time as either the Company has concluded an offer to
exchange the Exchange Securities for the Initial Securities or a registration
statement relating to resales of the Securities has become effective under the
Securities Act. The Company shall also furnish such information during the
pendency of any suspension of effectiveness of such resale registration
statement.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Con-
solidation.
The Company shall not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons, unless (i) either (a) the Company
is the continuing entity or (b) the resulting, surviving or transferee entity is
a corporation organized under the laws of the United States, any state thereof
or the District of Columbia and expressly assumes by supplemental indenture all
of the obligations of the Company in connection with the Securities and this
Indenture; (ii) no Default or Event of Default shall exist or occur immediately
after giving effect on a pro forma basis to such transaction; (iii) immediately
after giving effect to such transaction on a pro forma basis, the Consolidated
Net Worth of the consolidated, surviving or transferee entity is at least equal
to the Consolidated Net Worth of the Company immediately prior to such
transaction; and (iv) immediately after giving effect to such transaction on a
pro forma basis, the consolidated resulting, surviving or transferee entity
would immediately thereafter be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio set forth in Section 4.11(a).
SECTION 5.2. Successor Corporation Substituted.
Upon any consolidation or merger or any transfer of
all or substantially all of the assets of the Company in
60
<PAGE>
accordance with Section 5.1 hereof, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named herein as the Company, and when a successor
corporation duly assumes all of the obligations of the Company pursuant hereto
and pursuant to the Securities, the Company shall be released from such
obligations except with respect to any obligations that arise from, or are
related to, such transaction.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure to pay any installment of interest upon
the Securities as and when the same becomes due and payable, and the
continuance of such default for a period of 30 days;
(2) failure to pay all or any part of the principal
of or premium, if any, on the Securities when and as the same becomes
due and payable at maturity, upon redemption, by acceleration, or
otherwise, including, without limitation, default in the payment of the
Change of Control Payment in accordance with Article X or the Asset
Sale Offer Price in accordance with Section 4.14;
(3) failure by the Company or any Guarantor to
observe or perform any covenant or agreement contained in the
Securities or this Indenture (other than a default in the performance
of any covenant or agreement which is specifically dealt with elsewhere
in this Section 6.1), and continuance of such failure for a period of
30 days after there has been given, by registered or certified mail, to
the Company by the Trustee, or to the Company and the Trustee by
Holders of at least 25% in aggregate principal amount of the
outstanding Securities, a written
61
<PAGE>
notice specifying such default or breach, requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder;
(4) a decree, judgment, or order by a court of
competent jurisdiction shall have been entered adjudicating the Company
or any of its Significant Subsidiaries as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the
Company or any of its Significant Subsidiaries under any bankruptcy or
similar law, and such decree or order shall have continued undischarged
and unstayed for a period of 60 consecutive days; or a decree or order
of a court of competent jurisdiction, judgment appointing a receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency for the
Company, any of its Significant Subsidiaries, or any substantial part
of the property of any such Person, or for the winding up or
liquidation of the affairs of any such Person, shall have been entered,
and such decree, judgment, or order shall have remained in force
undischarged and unstayed for a period of 60 days;
(5) a default in any Indebtedness of the Company or
any of its Subsidiaries with an aggregate principal amount in excess of
$5.0 million (a) resulting from the failure to pay principal at
maturity or (b) as a result of which the maturity of such Indebtedness
has been accelerated prior to its stated maturity;
(6) the Company or any of its Significant
Subsidiaries shall institute proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking
reorganization under any bankruptcy or similar law or similar statute,
or shall consent to the filing of any such petition, or shall consent
to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any substantial part of
its assets or property, or shall make a general assignment for the
benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due, or shall, within the meaning of
any Bankruptcy Law, become insolvent, fail generally to pay its debts
as they become due, or take any corporate action in furtherance of or
to facilitate, conditionally or otherwise, any of the foregoing; or
(7) final unsatisfied judgments not covered by
insurance for the payment of money, or the issuance of
62
<PAGE>
any warrant of attachment against any portion of the property or assets
of the Company or any of its Subsidiaries, aggregating in excess of
$5.0 million at any one time shall be rendered against the Company or
any of its Subsidiaries and not be stayed, bonded or discharged for a
period (during which execution shall not be effectively stayed) of 60
days (or, in the case of any such final judgment which provides for
payment over time, which shall so remain unstayed, unbonded or
undischarged beyond any applicable payment date provided therein).
Notwithstanding the 30-day period and notice requirement
contained in Section 6.1(3) above,(i) with respect to a default under Article X,
the 30-day period referred to in Section 6.1(3) shall be deemed to have begun as
of the date notice of a Change of Control Offer is required to be sent to the
Holders in the event that the Company has not complied with the provisions of
Section 10.1, and the Trustee or Holders of at least 25% in principal amount of
the outstanding Securities thereafter give the Notice of Default referred to in
Section 6.1(3) to the Company and, if applicable, the Trustee; provided,
however, that if the breach or default is a result of a default in the payment
when due of the Change of Control Payment on the Change of Control Payment Date,
such default shall be deemed, for purposes of this Section 6.1, to arise no
later than on the Change of Control Payment Date; and (ii) with respect to a
default under Section 4.14 requiring the giving of such notice, the 30-day
period referred to in Section 6.1(3) shall be deemed to have begun as of the
date the notice of an Asset Sale Offer is required to be sent in the event that
the Company has not complied with the provisions of Section 4.14, and the
Trustee or Holders of at least 25% in principal amount of the outstanding
Securities thereafter give the Notice of Default referred to in Section 6.1(3)
to the Company and, if applicable, the Trustee; provided, however, that if the
breach or default is a result of a default in the payment when due of the Asset
Sale Offer Price on the Purchase Date, such default shall be deemed, for
purposes of this Section 6.1, to arise no later than on the Purchase Date.
SECTION 6.2. Acceleration of Maturity Date; Re-
scission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 6.1(4) or (6) relating to the Company or any of its
Significant Subsidiaries) occurs and is continuing, then, in every such case,
unless the principal of all of the Securities shall have already become due and
payable, either the Trustee or the Holders of not less than 25%
63
<PAGE>
in aggregate principal amount of then outstanding Securities, by a notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all of the principal of the Securities (or
the Change of Control Payment if the Event of Default includes failure to pay
the Change of Control Payment), including in each case accrued interest thereon,
to be due and payable immediately. If an Event of Default specified in Section
6.1(4) or (6) relating to the Company or any Significant Subsidiary occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Securities without any declaration or other act on the part of
Trustee or the Holders.
At any time after such a declaration of acceleration being
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter provided in this Article VI, the Holders
of not less than a majority in aggregate principal amount of then outstanding
Securities, by written notice to the Company and the Trustee, may rescind, on
behalf of all Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the
Trustee Cash sufficient to pay
(A) all overdue in-
terest on all Securities,
(B) the principal of
(and premium, if any, applicable to) any Securities which
would become due other than by reason of such declaration of
acceleration, and interest thereon at the rate borne by the
Securities,
(C) to the extent
that payment of such interest is lawful,
interest upon overdue interest at the rate
borne by the Securities,
(D) all sums paid or
advanced by the Trustee hereunder and the compensation,
expenses, disbursements and advances of the Trustee and its
agents and counsel, and any other amounts due the Trustee
under Section 7.7, and
(2) all Events of Default, other than the non-payment
of the principal of, premium, if any, and interest on Securities which
have become due solely by such
64
<PAGE>
declaration of acceleration, have been cured or waived as provided in
Section 6.12, including, if applicable, any Event of Default relating
to the covenants contained in Section 10.1.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to (i) any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event and (ii) any provision requiring supermajority approval to amend, unless
such default has been waived by such a supermajority. No such waiver shall cure
or waive any subsequent default or impair any right consequent thereon.
The Trustee shall provide to each Senior Debt Representative a
copy of each Acceleration Notice that it sends, and of each Acceleration Notice
and notice of rescission of a declaration of acceleration that it receives,
under this Section 6.2, on the date that the Trustee sends any such notice, and
as promptly as possible following the date that the Trustee receives any such
notice.
SECTION 6.3. Collection of Indebtedness and Suits
for Enforcement by Trustee.
The Company covenants that if an Event of Default in payment
of principal, premium, or interest specified in clause (1) or (2) of Section 6.1
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal, premium (if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including compensation to, and expenses, disbursements and advances
of the Trustee and its agents and counsel and all other amounts due the Trustee
under Section 7.7.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust in favor
of the Holders, may institute a judicial proceeding for the collection of the
sums so due and unpaid, may prosecute such proceeding to judgment or final
65
<PAGE>
decree and may enforce the same against the Company or any other obligor upon
the Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal and premium, if any, or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise to take any and all actions under the TIA, including
(1) to file and prove a claim for
the whole amount of principal (and premium, if any) and interest owing
and unpaid in respect of the Securities and to file such other papers
or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee and
its agent and counsel and all other amounts due the Trustee under
Section 7.7) and of the Holders allowed in such judicial proceeding,
and
(2) to collect and receive any mon-
eys or other property payable or deliverable on any
such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such
66
<PAGE>
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel, and any other amounts due
the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment, or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.5. Trustee May Enforce Claims Without
Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and counsel
and all other amounts due the Trustee under Section 7.7, be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
SECTION 6.6. Priorities.
Any money collected by the Trustee pursuant to this Article VI
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium (if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due
pursuant to Section 7.7;
SECOND: To the Holders in payment of the amounts then due and
unpaid for principal of, premium (if any) and interest on, the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
67
<PAGE>
amounts due and payable on such Securities for principal,
premium (if any) and interest, respectively; and
THIRD: To the Company or such other Person as may
be lawfully entitled thereto, the remainder, if any.
The Trustee may, but shall not be obligated to, fix a record
date and payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. Limitation on Suits.
No Holder of any Security shall have any right to order or
direct the Trustee to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless
(A) such Holder has previously given
written notice to the Trustee of a continuing Event of
Default;
(B) the Holders of not less than 25% in
aggregate principal amount of then outstanding Securities shall have
made written request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee hereunder;
(C) such Holder or Holders have offered
to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities to be incurred or reasonably probable to be
incurred in compliance with such request;
(D) the Trustee for 60 days after its re-
ceipt of such notice, request and offer of indemnity has
failed to institute any such proceeding; and
(E) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period
by the Holders of a majority in aggregate principal amount of the
outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture,
68
<PAGE>
except in the manner herein provided and for the equal and
ratable benefit of all the Holders.
SECTION 6.8. Unconditional Right of Holders to
Receive Principal, Premium and Interest.
Notwithstanding any other provision of this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of, and premium (if any) and
interest on, such Security on the Maturity Dates of such payments as expressed
in such Security (in the case of redemption, the Redemption Price on the
applicable Redemption Date, and in the case of an Asset Sale Offer the Asset
Sale Price, on the date of payment thereof) and to institute suit for the
enforcement of any such payment after such respective dates, and such rights
shall not be impaired without the consent of such Holder.
SECTION 6.9. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.10. Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of any
Security to exercise any right or remedy arising upon any Event of Default shall
impair the exercise of any such right or remedy or constitute a waiver of any
such Event of Default. Every right and remedy given by this Article VI or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 6.11. Control by Holders.
The Holder or Holders of a majority in aggregate principal
amount of then outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exer-
69
<PAGE>
cising any trust or power conferred upon the Trustee, pro-
vided, that
(1) such direction shall not be in conflict with any
rule of law or with this Indenture or involve the Trustee in personal
liability,
(2) the Trustee shall not determine that the action
so directed would be unjustly prejudicial to the Holders not taking
part in such direction, and
(3) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction.
SECTION 6.12. Waiver of Past Default.
Subject to Section 6.8, prior to the declaration of
acceleration of the maturity of the Securities, the Holder or Holders of not
less than a majority in aggregate principal amount of the outstanding Securities
may, on behalf of all Holders, waive any past default hereunder and its
consequences, except a default
(A) in the payment of the principal of,
premium, if any, or interest on, any Security as speci-
fied in clauses (1) and (2) of Section 6.1 and not yet
cured;
(B) in respect of a covenant or provision
hereof which, under Article IX, cannot be modified or amended without
the consent of the Holder of each outstanding Security affected; or
(C) in respect of any provision hereof
which, under Article IX, cannot be modified, amended or waived without
the consent of the Holders of 662/3% of the aggregate principal amount
of the Securities at the time outstanding; provided, that any such
waiver may be effected with the consent of the Holders of 662/3% of the
aggregate principal amount of the Securities then outstanding.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair the exercise of any right arising
therefrom.
70
<PAGE>
SECTION 6.13. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken, suffered or omitted to be taken
by it as Trustee, any court may in its discretion require the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 6.13 shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in aggregate principal amount of the outstanding Securities, or to any
suit instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the respective
Maturity Date expressed in such Security (including, in the case of redemption,
on or after the Redemption Date).
SECTION 6.14. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed,
subject to the terms hereof.
71
<PAGE>
SECTION 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent 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:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no
covenants or obligations shall be implied in or read into this
Indenture which are adverse to the Trustee, and
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are 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) The Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(1) This paragraph does not limit the effect
of paragraph (b) of this Section 7.1,
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts, and
(3) 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 6.11.
(d) No provision of this Indenture shall
require the Trustee to expend or risk its own funds or other-
wise incur any financial liability in the performance of any
72
<PAGE>
of its duties hereunder or to take or omit to take any action under this
Indenture or at the request, order or direction of the Holders 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), (d) and
(f) of this Section 7.1.
(f) The Trustee shall not be liable for inter-
est on any 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 on any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from
acting, it may consult with counsel and may require an Officers' Certificate or
an Opinion of Counsel, 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 certificate or advice of counsel.
(c) The Trustee may act through its attorneys
and agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers conferred upon it by this Indenture,
nor for any action permitted to be taken or omitted hereunder by any Agent.
(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.
73
<PAGE>
(f) The Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders, pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
(g) Unless otherwise specifically provided for
in this Indenture, any demand, request, direction or notice from the Company or
any Guarantor shall be sufficient if signed by an Officer of the Company or such
Guarantor, as applicable.
(h) The Trustee shall have no duty to inquire
as to the performance of the Company's or any Guarantor's covenants in Article
IV hereof or as to the performance by any Agent of its duties hereunder. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except any Default or Event of Default of which the Trustee
shall have received written notification or with respect to which a Trust
Officer shall have actual knowledge.
(i) Whenever in the administration of this
Indenture the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate.
SECTION 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, any
Guarantor, any of their Subsidiaries, 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 Securities and it shall not be accountable for
the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities, other than the Trustee's
certificate of authentication (if executed by the Trustee), or the use or
application of any funds received by a Paying Agent other than the Trustee.
74
<PAGE>
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 Securityholder
and each Senior Debt Representative notice of the uncured Default or Event of
Default within 90 days after such Default or Event of Default occurs. Except in
the case of a Default or an Event of Default in payment of principal (or
premium, if any) of, or interest on, any Security (including the payment of the
Change of Control Purchase Price on the Change of Control Payment Date, the
payment of the Redemption Price on the Redemption Date and the payment of the
Asset Sale Price on the date of payment thereof), the Trustee may withhold the
notice if and so long as a Trust Officer in good faith determines that
withholding the notice is in the interest of the Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
Within 60 days after each July 15 beginning with July 15,
1997, the Trustee shall, if required by law, mail to each Securityholder a brief
report dated as of such July 15 that complies with TIA ss. 313(a). The Trustee
also shall comply with TIA ss.ss. 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if
the Securities become listed on any stock exchange or automatic quotation
system.
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Securities are listed.
SECTION 7.7. Compensation and Indemnity.
The Company and the Guarantors jointly and severally agree to
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 and the Guarantors shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it in accordance with this Indenture. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel.
The Company and the Guarantors jointly and severally agree to
indemnify the Trustee (in its capacity as Trustee) and each of its officers and
each of them, directors, attor-
75
<PAGE>
neys-in-fact and agents for, and hold it harmless against, any claim, demand,
expense (including but not limited to reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel), loss or liability incurred by it
without negligence or bad faith on the part of the Trustee, arising out of or in
connection with the administration of this trust and its rights or duties
hereunder including the reasonable costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. The Company and the Guarantors shall defend the claim and the Trustee
shall provide reasonable cooperation at the Company's and the Guarantors'
expense in the defense. The Trustee may have separate counsel and the Company
and the Guarantors shall pay the reasonable fees and expenses of such counsel.
The Company and the Guarantors need not pay for any settlement made without
their written consent. The Company and the Guarantors 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 and the Guarantors' payment
obligations in this Section 7.7, the Trustee shall have a lien prior to the
Securities on all assets held or collected by the Trustee, in its capacity as
Trustee, except assets held in trust to pay principal and premium, if any, of or
interest on particular Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(4) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's and the Guarantors' obligations 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 and the Guarantors'
obligations pursuant to Article VIII of this Indenture and any rejection or
termination of this Indenture under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing,
to become effective upon the appointment of a successor trustee. The Holder or
Holders of a majority in aggregate principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee
76
<PAGE>
in writing and may appoint a successor trustee with the
Company's consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section
7.10;
(b) the Trustee is adjudged bankrupt or insol-
vent;
(c) a receiver, Custodian, or other public
officer takes charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holder or Holders of a majority in aggregate principal amount of the Securities
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 have been paid, 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 Holder or Holders of at least 10% in aggregate principal amount
of the outstanding Securities 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
Securityholder 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 and the Guarantors' obligations under Section 7.7 shall
continue for the benefit of the retiring Trustee.
77
<PAGE>
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, 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.
SECTION 7.10. Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA
ss. 310(a)(1), (2) and (5). The Trustee shall have a combined capital and
surplus of at least $25,000,000 as set forth in its most recent published annual
report of condition.
The Trustee shall comply with TIA ss. 310(b).
SECTION 7.11. Preferential Collection of Claims
Against Company.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or
Covenant Defeasance.
The Company may, at its option and at any time within one year
of the Stated Maturity of the Securities, elect to have Section 8.2 or may, at
any time, elect to have Section 8.3 applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.2. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.2, the Company and the Guarantors shall be deemed
to have been discharged from their respective obligations with respect to all
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Securities, which shall thereafter
be
78
<PAGE>
deemed to be "outstanding" only for the purposes of Section 8.5 and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Securities and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in Section 8.4, and as more fully set forth in such section, payments
in respect of the principal of, premium, if any, and interest on such Securities
when such payments are due, (b) the Company's obligations with respect to such
Securities under Sections 2.4, 2.6, 2.7, 2.10 and 4.2, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's and the
Guarantors' obligation in connection therewith and (d) this Article VIII. Upon
Legal Defeasance as provided herein, the Guarantee of each Guarantor shall be
fully released and discharged and the Trustee shall promptly execute and deliver
to the Company any documents reasonably requested by the Company to evidence or
effect the foregoing. Subject to compliance with this Article VIII, the Company
may exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 with respect to the Securities.
SECTION 8.3. Covenant Defeasance.
Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.3, the Company and the Guarantors shall be released
from their respective obligations under the covenants contained in Sections 4.3,
4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and
Article V with respect to the outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Securities 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. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Securities, the Company need not comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document (and Section 6.1(3) shall not
apply to any such covenant), but, except as specified above, the remainder of
this Indenture and such
79
<PAGE>
Securities shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.1 of the option applicable to this Section 8.3, Sections 6.1(3)
through 6.1(7) shall not constitute Events of Default.
SECTION 8.4. Conditions to Legal or Covenant Defea-
sance.
The following shall be the conditions to the application of
either Section 8.2 or Section 8.3 to the outstanding Securities:
(a) The Company shall irrevocably have depos-
ited or caused to be deposited with the Trustee (or another trustee satisfactory
to the Trustee satisfying the requirements of Section 7.10 who shall agree to
comply with the provisions of this Article VIII applicable to it) as trust funds
in trust for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of such
Securities, (a) Cash in an amount, or (b) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the due
date of any payment, Cash in an amount, or (c) a combination thereof, in such
amounts, as in each case will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge and which
shall be applied by the Paying Agent (or other qualifying trustee) to pay and
discharge the principal of, premium, if any, and interest on the outstanding
Securities on the stated maturity or on the applicable redemption date, as the
case may be, of such principal or installment of principal, premium, if any, or
interest on the Securities, and the holders of the Securities must have a valid,
perfected, exclusive security interest in such trust; provided that the Paying
Agent shall have been irrevocably instructed to apply such Cash and the proceeds
of such U.S. Government Obligations to said payments with respect to the
Securities. The Paying Agent shall promptly advise the Trustee in writing of any
Cash or Securities deposited pursuant to this Section 8.4;
(b) In the case of an election under Section
8.2, the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that (i) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date hereof, there has been a change in the
applicable Federal income tax law, in either case to
80
<PAGE>
the effect that, and based thereon such opinion shall confirm that, the Holders
of the outstanding Securities 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
8.3, the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States to the effect that the Holders of the outstanding Securities
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 in
the same amount, 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 with re-
spect to the Securities shall have occurred and be continuing on the date of
such deposit or, insofar as Section 6.1(4) or Section 6.1(6) is concerned, at
any time in the period ending on the 91st day after the date of such deposit (it
being understood that this condition is a condition subsequent which shall not
be deemed satisfied until the expiration of such period, but in the case of
Covenant Defeasance, the covenants which are defeased under Section 8.3 will
cease to be in effect unless an Event of Default under Section 6.1(4) or Section
6.1(6) occurs during such period);
(e) Such Legal Defeasance or Covenant Defea-
sance 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) In the case of an election under either
Section 8.2 or 8.3, the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit made by the Company pursuant to its
election under Section 8.2 or 8.3 was not made by the Company with the intent of
preferring the Holders over other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the Company
or others; and
(g) The Company shall have delivered to the
Trustee an Officers' Certificate stating that the conditions precedent provided
for have been complied with and an Opinion of Counsel stating that clauses (a)
(with respect to the
81
<PAGE>
validity and perfection of the security interest), (b) (if applicable), (c) and
(e) of this Section 8.4 have been complied with.
SECTION 8.5. Deposited Cash and U.S. Government
Obligations to be Held in Trust; Other Miscellaneous Provi-
sions.
Subject to Section 8.6, all Cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the Paying Agent (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"Paying Agent") pursuant to Section 8.4 in respect of the outstanding Securities
shall be held in trust and applied by the Paying Agent, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any other Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.6. Repayment to the Company.
Anything in this Article VIII to the contrary notwithstanding,
the Trustee or the Paying Agent, as applicable, shall deliver or pay to the
Company from time to time upon the request of the Company any Cash or U.S.
Government Obligations held by it as provided in Section 8.4 hereof which in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which may
be the opinion delivered under Section 8.4(a) hereof), are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
Any Cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request; and the Holder of such Security shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (na-
82
<PAGE>
tional edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any Cash or
U.S. Government Obligations in accordance with Section 8.2 or 8.3, as the case
may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's and the Guarantors' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.2 or 8.3 until such time as the Trustee or Paying Agent is
permitted to apply such money in accordance with Section 8.2 and 8.3, as the
case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the Cash and U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Con-
sent of Holders.
Without the consent of any Holder, the Company or any
Guarantor, when authorized by Board Resolutions, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or incon-
sistency, or make any other provisions with respect to matters or questions
arising under this Indenture which shall not be inconsistent with the provisions
of this Indenture, provided such action pursuant to this clause shall not
adversely affect the interests of any Holder in any respect;
(2) to provide for uncertificated Securities
in addition to or in place of certificated Securities;
83
<PAGE>
(3) to add to the covenants of the Company or
the Guarantors for the benefit of the Holders, or to surrender
any right or power herein conferred upon the Company or the
Guarantors;
(4) to provide for additional Guarantors of
the Securities;
(5) to evidence the succession of another
Person to the Company, and the assumption by any such successor of the
obligations of the Company, herein and in the Securities in accordance with
Article V;
(6) to comply with the TIA;
(7) to evidence the succession of another
corporation to any Guarantor and assumption by any such successor of the
Guarantee of such Guarantor (as set forth in Section 11.4) in accordance with
Article XI;
(8) to provide for the issuance and authoriza-
tion of the Exchange Securities;
(9) to evidence the release of any Guarantor
in accordance with Article XI;
(10) in any other case where a supplemental
indenture is required or permitted to be entered into pursuant
to the provisions of Article XI without the consent of any
Holder; or
(11) to evidence and provide for the acceptance
of appointment hereunder by a successor Trustee with respect
to the Securities.
SECTION 9.2. Amendments, Supplemental Indentures
and Waivers with Consent of Holders.
Subject to Section 6.8, with the consent of the Holders of not
less than a majority in aggregate principal amount of then outstanding
Securities, by written act of said Holders delivered to the Company and the
Trustee, the Company or any Guarantor, when authorized by Board Resolutions, and
the Trustee may amend or supplement this Indenture or the Securities or enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or the Securities or of modifying in any manner the rights of
the Holders under this Indenture or the Securities. Subject to Section 6.8, the
Holder or Holders of not
84
<PAGE>
less than a majority in aggregate principal amount of then outstanding
Securities may waive compliance by the Company or any Guarantor with any
provision of this Indenture or the Securities. Notwithstanding any of the above,
however, no such amendment, supplemental indenture or waiver shall without the
consent of the Holders of not less than 662/3% of the aggregate principal
amounts of Securities at the time outstanding alter the terms or provisions of
Section 10.1; no such amendment, supplemental indenture or waiver shall, without
the written consent of all holders of Senior Debt alter the terms or provisions
of Article XII; and no such amendment, supplemental indenture or waiver shall,
without the consent of the Holder of each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of Securities
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment
of interest on any Security;
(3) reduce the principal or premium amount of any
Security, or reduce the Asset Sale Offer Price or the Redemp-
tion Price;
(4) change the Stated Maturity;
(5) alter the redemption provisions of Article III
or the Asset Sale Offer Price in either case, in a manner ad-
verse to any Holder;
(6) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Securities or the rights of
Holders to recover the principal or premium of, interest on, or redemption
payment with respect to, any Security, including without limitation any changes
in Section 6.8, 6.12 or this third sentence of this Section 9.2, except to
increase any required percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the Holder of
each outstanding Security affected thereby;
(7) make the principal of, or the interest or premium on, any
Security payable with anything or in any manner other than as provided for in
this Indenture (including changing the place of payment where, or the coin or
currency in which, any Security or any premium or the interest thereon is
payable) and the Securities as in effect on the date hereof; or
85
<PAGE>
(8) make the Securities further subordinated in
right of payment to any extent or under any circumstances to
any other Indebtedness.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
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 or
waiver.
After an amendment, supplement or waiver under this Section
9.2 or Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under
this Article IX, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by written notice to
the Company or the Person designated by the Company as the Person to whom
consents should be sent if such revocation is received by the Company or such
Person before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented
86
<PAGE>
(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 the date so fixed by
the Company notwithstanding the provisions of the TIA. 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, and only those
Persons (or their duly designated proxies), 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 Securityholder, 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 Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; provided, that any such
waiver shall not impair or affect the right of any other Holder to receive
payment of principal and premium of and interest on a Security, on or after the
respective dates set for such amounts to become due and payable expressed in
such Security, or to bring suit for the enforcement of any such payment on or
after such respective dates.
SECTION 9.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee or require the Holder to put an appropriate notation on the
Security. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Any failure to make the appropriate notation or to issue a new Security
shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided,
87
<PAGE>
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, and
shall be fully protected in relying upon, an Opinion of Counsel 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
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. Repurchase of Securities at Option of
the Holder Upon a Change of Control.
(a) In the event that a Change of Control
occurs, each Holder shall have the right, at such Holder's option, pursuant to
an irrevocable and unconditional offer by the Company (the "Change of Control
Offer") subject to the terms and conditions of this Indenture, to require the
Company to repurchase all or any part of such Holder's Securities (provided,
that the principal amount of such Securities at maturity must be $1,000 or an
integral multiple thereof) on a date selected by the Company that is no later
than 45 Business Days after the occurrence of such Change of Control (the
"Change of Control Purchase Date"), at a cash price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof, plus (subject to
the right of Holders of record on a Record Date to receive interest due on an
Interest Payment Date that is on or prior to such repurchase date and subject to
clause (b)(4) below) accrued and unpaid interest, if any, to and including the
Change of Control Purchase Date.
(b) In the event of a Change of Control, the
Company shall be required to commence an offer to purchase Securities (a "Change
of Control Offer") as follows:
(1) the Change of Control Offer shall commence within
15 Business Days following the occurrence of the Change of Control
Triggering Event;
(2) the Change of Control Offer shall remain open for
20 Business Days, except to the extent that a longer period is required
by applicable law, but in any case not more than 35 Business Days
following commencement (the "Change of Control Offer Period");
88
<PAGE>
(3) upon the expiration of a Change of Control Offer,
the Company shall purchase all of the properly tendered Securities at
the Change of Control Purchase Price, plus accrued and unpaid interest
thereon;
(4) if the Change of Control Purchase Date is on or
after a Record Date and on or before the related interest payment date,
any accrued interest will be paid to the Person in whose name a
Security is registered at the close of business on such Record Date,
and no additional interest will be payable to Securityholders who
tender Securities pursuant to the Change of Control Offer;
(5) the Company shall provide the Trustee and the
Paying Agent with notice of the Change of Control Offer at least three
Business Days before the commencement of any Change of Control Offer;
and
(6) on or before the commencement of any Change of
Control Offer, the Company or the Registrar (upon the request and at
the expense of the Company) shall send, by first-class mail, a notice
to each of the Securityholders, which (to the extent consistent with
this Indenture) shall govern the terms of the Change of Control Offer
and shall state:
(i) that the Change of Control Offer is
being made pursuant to such notice and this Section 10.1 and that all
Securities, or portions thereof, tendered will be accepted for payment;
(ii) the Change of Control Purchase Price
(including the amount of accrued and unpaid interest, subject to clause
(b)(4) above), the Change of Control Purchase Date and the Change of
Control Put Date (as defined below);
(iii) that any Security, or portion
thereof, not tendered or accepted for payment will con-
tinue to accrue interest;
(iv) that, unless the Company defaults in
depositing Cash with the Paying Agent in accordance with the last
paragraph of this Article X or such payment is prevented, any Security,
or portion thereof, accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Purchase Date;
89
<PAGE>
(v) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a Change of Control
Offer will be required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent (which may not for purposes of
this Section 10.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) at the
address specified in the notice prior to the close of business on the
earlier of (a) the third Business Day prior to the Change of Control
Purchase Date and (b) the third Business Day following the expiration
of the Change of Control Offer (such earlier date being the "Change of
Control Put Date");
(vi) that Holders will be entitled to
withdraw their election, in whole or in part, if the Paying Agent
(which may not for purposes of this Section 10.1, notwithstanding
anything in this Indenture to the contrary, be the Company or any
Affiliate of the Company) receives, up to the close of business on the
Change of Control Put Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Securities the Holder is withdrawing and a statement that such
Holder is withdrawing his election to have such principal amount of
Securities purchased; and
(vii) a brief description of the events
resulting in such Change of Control.
Any such Change of Control Offer shall comply with all
applicable provisions of Federal and state laws, including those regulating
tender offers, if applicable, and any provisions of this Indenture which
conflict with such laws shall be deemed to be superseded by the provisions of
such laws.
On or before the Change of Control Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof properly tendered
pursuant to the Change of Control Offer on or before the Change of Control Put
Date, and (ii) deposit with the Paying Agent Cash sufficient to pay the Change
of Control Purchase Price (including accrued and unpaid interest, if any,
subject to clause (b)(4) above) for all Securities or portions thereof so
tendered. Promptly following the Change of Control Purchase Date the Company
shall deliver to the Trustee Securities so accepted together with an Officers'
Certificate listing the aggregate principal amount of the Securities or portions
thereof being purchased by the Company. The Paying Agent shall on the Change of
Control
90
<PAGE>
Purchase Date or promptly thereafter mail to Holders of Securities so accepted
payment in an amount equal to the Change of Control Purchase Price (together
with accrued and unpaid interest, if any, subject to clause (b)(4) above), for
such Securities (subject to clause (b)(4) above), and the Trustee or its
authenticating agent shall promptly authenticate and mail or deliver (or cause
to be transferred by book entry) to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered;
provided, however, that each such new Security will be in a principal amount of
$1,000 or an integral multiple thereof. Any Securities not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Purchase Date.
ARTICLE XI
GUARANTEE
SECTION 11.1. Guarantee.
(a) In consideration of good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, each
of the Guarantors hereby irrevocably and unconditionally guarantees (the
"Guarantee"), jointly and severally, on a subordinated basis, to each Holder of
a Security authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Securities or the obligations of the Company under this Indenture
or the Securities, that: (v) the principal and premium (if any) of and interest
on the Securities will be paid in full when due, whether at the Maturity Date or
Interest Payment Date, by acceleration or call for redemption, (w) the purchase
price for all Securities properly and timely tendered for a acceptance in
response to a Change of Control Offer or Asset Sale Offer will be timely, or
otherwise in accordance with the provisions of this Indenture, paid in full; (x)
all other obligations of the Company to the Holders or the Trustee under this
Indenture or the Securities will be promptly paid in full or performed, all in
accordance with the terms of this Indenture and the Securities; and (y) in case
of any extension of time of payment or renewal of any Securities or any of such
other obligations, they will be paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at maturity, by
acceleration, call for redemption, upon a Change of Control Offer, upon an Asset
Sale
91
<PAGE>
Offer or otherwise. Failing payment when due of any amount so guaranteed for
whatever reason, each Guarantor shall be jointly and severally obligated to pay
the same before failure so to pay becomes an Event of Default. If the Company or
a Guarantor defaults in the payment of the principal of, premium, if any, or
interest on, the Securities when and as the same shall become due, whether upon
maturity, acceleration, call for redemption, upon a Change of Control Offer,
Asset Sale Offer or otherwise, without the necessity of action by the Trustee or
any Holder, each Guarantor shall be required, jointly and severally, to promptly
make such payment in full.
(b) Each Guarantor hereby agrees that its
obligations with regard to this Guarantee shall be unconditional, irrespective
of the validity, regularity or enforceability of the Securities or this
Indenture, the absence of any action to enforce the same, any delays in
obtaining or realizing upon or failures to obtain or realize upon collateral,
the recovery of any judgment against the Company, any action to enforce the same
or any other circumstances that might otherwise constitute a legal or equitable
discharge or defense of a guarantor (except as provided in Sections 11.4 and
11.5). Each 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 or right to
require the prior disposition of the assets of the Company to meet its
obligations, protest, notice and all demands whatsoever and covenants that this
Guarantee will not be discharged (except to the extent released pursuant to
Section 11.4 or 11.5) except by complete performance of the obligations
contained in the Securities and this Indenture.
(c) If any Holder or the Trustee is required
by any court or otherwise to return to either the Company or any Guarantor, or
any Custodian, trustee, or similar official acting in relation to either the
Company or such Guarantor, any amount paid by either the Company or such
Guarantor to the Trustee or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect (except to
the extent released pursuant to Section 11.4 or 11.5). Each Guarantor agrees
that it will not be entitled to any right of subrogation in relation to the
Holders in respect of any obligations guaranteed hereby until payment in full of
all obligations guaranteed hereby. Each Guarantor further agrees that, as
between such Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (i) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Section 6.2 for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition
92
<PAGE>
preventing such acceleration as to the Company of the obligations guaranteed
hereby, and (ii) in the event of any declaration of acceleration of those
obligations as provided in Section 6.2, those obligations (whether or not due
and payable) will forthwith become due and payable by each of the Guarantors for
the purpose of this Guarantee.
(d) Each Guarantor and by its acceptance of a
Security issued hereunder each Holder hereby confirms that it is the intention
of all such parties that the guarantee by such Guarantor set forth in Section
11.1(a) not constitute a fraudulent transfer or conveyance for purpose of any
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law. To effectuate the foregoing
intention, the Holders and such Guarantor hereby irrevocably agree that the
obligations of such Guarantor under its guarantee set forth in Section 11.1(a)
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its guarantee or
pursuant to the following paragraph of this Section 11.1(d), result in the
obligations of such Guarantor under such guarantee not constituting such a
fraudulent transfer or conveyance.
Each Guarantor that makes any payment or distribution under
Section 11.1(a) shall be entitled to a contribution from each other Guarantor
equal to its Pro Rata Portion of such payment or distribution. For purposes of
the foregoing, the "Pro Rata Portion" of any Guarantor means the percentage of
the net assets of all Guarantors held by such Guarantor, determined in
accordance with GAAP.
(e) It is the intention of each Guarantor and
the Company that the obligations of each Guarantor hereunder shall be joint and
several and in, but not in excess of, the maximum amount permitted by applicable
law. Accordingly, if the obligations in respect of the Guarantee would be
annulled, avoided or subordinated to the creditors of any Guarantor by a court
of competent jurisdiction in a proceeding actually pending before such court as
a result of a determination both that such Guarantee was made without fair
consideration and, immediately after giving effect thereto, such Guarantor was
insolvent or unable to pay its debts as they mature or left with an unreasonably
small capital, then the obligations of such Guarantor under such Guarantee shall
be reduced by such court if and to the extent such reduction would result in the
avoidance of such annulment, avoidance or subordination;
93
<PAGE>
provided, however, that any reduction pursuant to this paragraph shall be made
in the smallest amount as is strictly necessary to reach such result. For
purposes of this paragraph, "fair consideration", "insolvency", "unable to pay
its debts as they mature", "unreasonably small capital" and the effective times
of reductions, if any, required by this paragraph shall be determined in
accordance with applicable law.
SECTION 11.2. Execution and Delivery of Guarantee.
Each Guarantor shall, by virtue of such Guarantor's execution
and delivery of this Indenture or such Guarantor's execution and delivery of an
indenture supplement pursuant to Section 11.3 hereof, be deemed to have signed
on each Security issued hereunder the notation of guarantee set forth on the
form of the Securities attached hereto as Exhibit A to the same extent as if the
signature of such Guarantor appeared on such Security.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the guarantee
set forth in Section 11.1 on behalf of each Guarantor. The notation of a
guaranty set forth on any Security shall be null and void and of no further
effect with respect to the guaranty of any Guarantor which, pursuant to Section
11.4 or Section 11.5, is released from such guarantee.
SECTION 11.3. Future Subsidiary Guarantors.
Upon (i) the acquisition by the Company or Guarantor of the
Capital Stock of any Person, if, as a result of such acquisition, such Person
becomes a Subsidiary or (ii) the last day of any fiscal quarter during which any
Subsidiary of the Company that is not a Guarantor as of such date and has not
previously been released as a Guarantor pursuant to Section 11.4 or Section 11.5
of this Indenture becomes a Subsidiary, such Subsidiary (hereinafter any such
Subsidiary, except any Excluded Guarantee Subsidiary (as defined below), being
called a "Future Subsidiary Guarantor") shall unconditionally guarantee the
obligations of the Company with respect to payment and performance of the
Securities and the other obligations of the Company under this Indenture to the
same extent that such obligations are guaranteed by the other Guarantors
pursuant to Section 11.1; and, within 60 days of the date of such occurrence,
such Future Subsidiary Guarantor shall execute and deliver to the Trustee a
supplemental indenture making such Future Subsidiary Guarantor a party to this
Indenture; provided, however, that the foregoing provisions shall not apply to
(A) any Subsidiary referenced in clause (i) or clause (ii)
94
<PAGE>
above that is prohibited by law or by the terms of any agreement from making the
guarantee set forth in Section 11.1 (an "Excluded Guarantee Subsidiary")
(provided that such Subsidiary will become a Future Subsidiary Guarantor as of
the date such prohibition is removed or lapses), or (B) a Subsidiary which would
have been released from its guarantee, by virtue of events set forth in Section
11.5, had such Subsidiary been a Guarantor at the time such events occurred, or
(C) a Subsidiary of any Person which has been released as a Guarantor pursuant
to Section 11.5.
SECTION 11.4. Guarantor May Consolidate, Etc., on
Certain Terms.
(a) Nothing contained in this Indenture or in
any of the Securities shall prevent any consolidation or merger of a Guarantor
with or into the Company or any other Guarantor. Upon any such consolidation or
merger, the guarantees (as set forth in Section 11.1) of the Guarantor which is
not the survivor of the merger or consolidation, and of any Subsidiary of such
Guarantor that is also a Guarantor, shall be released and shall no longer have
any force or effect.
(b) Nothing contained in this Indenture shall
prevent any sale or conveyance of assets of any Guarantor (whether or not
constituting all or substantially all of the assets of such Guarantor) to any
Person, provided that the Company shall comply with the provisions of Section
4.14, and provided further that, in the event that all or substantially all of
the assets of a Guarantor are sold or conveyed, the guarantees of such Guarantor
(as set forth in Section 11.1) shall be released and shall no longer have any
force or effect.
(c) Except as provided in Section 11.4(a) or
Section 11.5, each Guarantor shall not, directly or indirectly, consolidate with
or merge with or into another Person, unless (i) either (a) the Guarantor is the
continuing entity or (b) the resulting or surviving entity is corporation
organized under the laws of the United States, any state thereof or the District
of Columbia and expressly assumes by supplemental indenture all of the
obligations of the Guarantor in connection with the Securities and this
Indenture; (ii) no Default or Event of Default would occur as a consequence of
(after giving effect, on a pro forma basis, to) such transaction; and (iii) the
Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation or merger and if a supplemental
indenture is required, such supplemental indenture comply with this
95
<PAGE>
Indenture and that all conditions precedent herein relating to such transaction
have been satisfied.
(d) Upon any consolidation or merger of the
Guarantor in accordance with Section 11.4 hereof, the successor corporation
formed by such consolidation or into which the Guarantor is merged shall succeed
to, and be substituted for, and may exercise every right and power of, the
Guarantor under this Indenture with the same effect as if such successor
corporation had been named herein as the Guarantor, and when a successor
corporation duly assumes all of the obligations of the Guarantor pursuant hereto
and pursuant to the Securities, the Guarantor shall be released from such
obligations.
SECTION 11.5. Release of Guarantors.
(a) Without any further notice or action being
required by any Person, any Guarantor, and each Subsidiary of such Guarantor
that is also a Guarantor, shall be fully and conditionally released and
discharged from all obligations under its guarantee and this Indenture upon (i)
the sale or other disposition of all or substantially all of the assets or
properties of such Guarantor, or 50% or more of the Capital Stock of any such
Guarantor to Persons other than the Company and its Subsidiaries; or (ii) the
consolidation or merger of any such Guarantor with any Person other than the
Company or a Subsidiary of the Company, if, as a result of such consolidation or
merger, Persons other than the Company and its Subsidiaries beneficially own
more than 50% of the capital stock of such Guarantor, provided that, in either
such case, the Net Cash Proceeds of such sale, disposition, merger or
consolidation are applied in accordance with Section 4.14 of this Indenture; or
(iii) a Legal Defeasance as set forth in Article VIII.
(b) The releases and discharges set forth in
Section 11.5(a) shall be effective (i) in the case of releases and discharges
effected pursuant to clause (i) or (ii) of Section 11.5(a) by virtue of a sale,
disposition, consolidation or merger, on the date of consummation thereof and
(ii) in the case of releases and discharges effected pursuant to clause (iii) of
Section 11.5(a), upon the date of Covenant Defeasance or Legal Defeasance, as
applicable. At the written request of the Company, the Trustee shall promptly
execute and deliver appropriate instruments in forms reasonably acceptable to
the Company evidencing and further implementing any releases and discharges
pursuant to the foregoing provisions. If the Company desires the instruments
evidencing or implementing any releases or discharges to be executed prior to
the effectiveness of such releases and discharges as set forth above,
96
<PAGE>
such instruments may be made conditional upon the occurrence of the events
necessary to cause the effectiveness of such releases and discharges, as
specified in the first sentence of this Section 11.5.
(c) Notwithstanding the foregoing provisions
of this Article XI, (i) any Guarantor whose guarantee would otherwise be
released pursuant to the provisions of this Section 11.5 may elect, by written
notice to the Trustee, to maintain such guarantee in effect notwithstanding the
event or events that otherwise would cause the release of such guarantee (which
election to maintain such guarantee in effect may be conditional or for a
limited period of time), and (ii) any Subsidiary of the Company which is not a
Guarantor may elect, by written notice to the Trustee, to become a Guarantor
(which election may be conditional or for a limited period of time).
SECTION 11.6. Certain Bankruptcy Events.
Each Guarantor hereby covenants and agrees, to the fullest
extent that it may do so under applicable law, that in the event of the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, such Guarantor shall not file (or join in any filing of), or otherwise
seek to participate in the filing of, any motion or request seeking to stay or
to prohibit (even temporarily) execution on the Guarantee and hereby waives and
agrees not to take the benefit of any such stay of execution, whether under the
Bankruptcy Law or otherwise.
ARTICLE XII
SUBORDINATION
SECTION 12.1. Securities Subordinated to Senior
Debt.
The Company and the Guarantors and each Holder, by its
acceptance of Securities, agree that (a) the payment of the principal of and
interest on the Securities and (b) any other payment in respect of the
Securities, including on account of the acquisition or redemption of the
Securities by the Company and the Guarantors (including, without limitation,
pursuant to Section 4.14 or 10.1) is subordinated, to the extent and in the
manner provided in this Article XII, to the prior payment in full in Cash or
Cash Equivalents of all Senior Debt of the Company and the Guarantors and that
these subordination provisions are for the benefit of the holders of Senior
Debt.
97
<PAGE>
This Article XII shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Debt, and such provisions are made for the benefit of the holders
of Senior Debt, and such holders are made obligees hereunder and any one or more
of them may enforce such provisions.
SECTION 12.2. No Payment on Securities in Certain
Circumstances.
(a) No payment (by set-off or otherwise) shall
be made by or on behalf of the Company or a Guarantor, as applicable, on account
of any Obligation in respect of the Securities, including the principal of,
premium, if any, or interest on the Securities (including any repurchases of
Securities) or on account of the redemption provisions of the Securities for
cash or property (other than Junior Securities), (i) upon the maturity of any
Senior Debt of the Company or such Guarantor by lapse of time, acceleration
(unless waived) or otherwise, unless and until all principal of, premium, if
any, and interest on such Senior Debt shall first be paid in full in Cash or
Cash Equivalents (or such payment is duly provided for) or otherwise to the
extent holders accept satisfaction of amounts due by settlement in other than
Cash or Cash Equivalents, or (ii) in the event of default in payment of any
principal of, premium, if any, or interest on Senior Debt of the Company or such
Guarantor when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise (a "Payment Default")
unless and until such Payment Default has been cured or waived or otherwise has
ceased to exist.
(b) Upon (i) the happening of an event of
default (other than a Payment Default) that permits the holders of Senior Debt
to declare such Senior Debt to be due and payable (or, in the case of letters of
credit, require cash collateralization thereof) and (ii) written notice of such
event of default given to the Company by the Senior Debt Representative under a
Credit Agreement, or by the holders of an aggregate of at least $20.0 million
principal amount outstanding of any Other Senior Debt or their representative (a
"Payment Notice"), then, unless and until such event of default has been cured
or waived or otherwise has ceased to exist, no payment (by set-off or otherwise)
may be made by or on behalf of the Company or any Guarantor which is an obligor
under such Senior Debt on account of any Obligation in respect of the
Securities, including the principal of, premium, if any, or interest on the
Securities, or the repurchase any of the Securities, or on account of the
redemption provisions of the Securities, in any such case, including any payment
or distri-
98
<PAGE>
bution which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Company subordinate in right of payment to payments in
respect of the Securities (such payment or distribution hereinafter being
"Junior Subordinated Payments"), but excluding payments made with Junior
Securities. Notwithstanding the foregoing, unless the Senior Debt in respect of
which such event of default exists has been declared due and payable in its
entirety within 179 days after the Payment Notice is delivered as set forth
above (such period of 179 or fewer days being hereinafter referred to as the
"Payment Blockage Period") (and such declaration has not been rescinded or
waived), at the end of the Payment Blockage Period, the Company and the
Guarantor shall be required to pay all sums not paid to the Holders of the Notes
during the Payment Blockage Period due to the foregoing prohibitions and to
resume all other payments as and when due on the Securities. Any number of
Payment Notices may be given; provided, however, that (i) not more than one
Payment Notice shall be given within a period of any 360 consecutive days, and
(ii) no default that existed upon the date of such Payment Notice or the
commencement of such Payment Blockage Period (whether or not such event of
default is on the same issue of Senior Debt) shall be made the basis for the
commencement of any other Payment Blockage Period.
(c) In furtherance of the provisions of Section
12.1, in the event that, notwithstanding the foregoing provisions of this
Section 12.2, any payment or distribution of assets on account of any Obligation
in respect of the Securities, including principal of or interest on the
Securities or to defease or acquire any of the Securities (including repurchases
of Securities pursuant to Section 4.14 or 11.1) for cash, property or securities
(including Junior Subordinated Payments, but excluding payments made with Junior
Securities), or on account of the redemption provisions of the Securities shall
be made by the Company and the Guarantors and received by the Trustee, by any
Holder or by any Paying Agent (or, if the Company is acting as the Paying Agent,
money for any such payment shall be segregated and held in trust), at a time
when such payment or distribution was prohibited by the provisions of this
Section 12.2, then, unless such payment or distribution is no longer prohibited
by this Section 12.2, such payment or distribution (subject to the provisions of
Section 12.7) shall be received and held in trust by the Trustee or such Holder
or Paying Agent for the benefit of the holders of Senior Debt of the Company or
such Guarantor, and shall be paid or delivered by the Trustee or such Holders or
such Paying Agent, as the case may be, to the holders of Senior Debt of the
Company or such Guarantor remaining unpaid or their representative or
representatives, or to the Trustee or Trustees under any inden-
99
<PAGE>
ture pursuant to which any instruments evidencing such Senior Debt of the
Company or such Guarantor may have been issued, ratably according to the
aggregate amounts unpaid on account of such Senior Debt held or represented by
each, for application to the payment of all Senior Debt in full in Cash or Cash
Equivalents (or have such payments duly provided for) after giving effect to all
concurrent payments and distributions to or for the holders of such Senior Debt.
SECTION 12.3. Securities Subordinated to Prior Pay-
ment of All Senior Debt on Dissolution, Liquidation or Reorga-
nization.
Upon any distribution of assets of the Company or any
Guarantor or upon any dissolution, winding up, total or partial liquidation or
reorganization of the Company or any Guarantor, whether voluntary or
involuntary, in bankruptcy, insolvency, receivership or similar proceeding or
upon assignment for the benefit of creditors or any marshalling of assets or
liabilities:
(a) the holders of all Senior Debt of the Comp-
any or such Guarantor, as applicable, shall first be entitled to receive
payments in full in Cash or Cash Equivalents or otherwise to the extent holders
accept satisfaction of amounts due by settlement in other than Cash or Cash
Equivalents (or have such payment duly provided for) before the Holders are
entitled to receive any payment on account of any Obligation in respect of the
Securities, including the principal of, premium, if any, and interest on the
Securities (including Junior Subordinated Payments, but excluding payments made
with Junior Securities);
(b) any payment or distribution of assets of
the Company or such Guarantor of any kind or character from any source, whether
in cash, property or securities (including Junior Subordinated Payments, but
excluding payments made with Junior Securities), to which the Holders or the
Trustee on behalf of the Holders would be entitled (by set-off or otherwise)
except for the provisions of this Article XII, shall be paid by the liquidating
trustee or agent or other Person making such a payment or distribution, directly
to the holders of such Senior Debt or their representative, ratably according to
the respective amounts of Senior Debt held or represented by each, to the extent
necessary to make payment in full in Cash or Cash Equivalents (or have such
payment duly provided for) all such Senior Debt remaining unpaid after giving
effect to all concurrent payments and distributions to the holders of such
Senior Debt; and
100
<PAGE>
(c) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Company or any Guarantor
of any kind or character from any source, whether in Cash, property or
securities (including Junior Subordinated Payments, but excluding payments made
with Junior Securities), shall be received by the Trustee or the Holders or any
Paying Agent (or, if the Company is acting as its own Paying Agent, money for
any such payment or distribution shall be segregated or held in trust) on
account of any Obligation in respect of the Securities, including principal of
or interest on the Securities before all Senior Debt of the Company or any
Guarantor is paid in full in Cash or Cash Equivalents, such payment or
distribution (subject to the provisions of Section 12.7) shall be received and
held in trust by the Trustee or such Holder or Paying Agent for the benefit of
the holders of such Senior Debt, or their respective representative, ratably
according to the respective amounts of such Senior Debt held or represented by
each, to the extent necessary to make payment as provided herein of all such
Senior Debt remaining unpaid after giving effect to all concurrent payments and
distributions and all provisions therefor to or for the holders of such Senior
Debt, but only to the extent that as to any holder of such Senior Debt, as
promptly as practical following notice from the Trustee to the holders of such
Senior Debt that such prohibited payment has been received by the Trustee,
Holder(s) or Paying Agent (or has been segregated as provided above), such
holder (or a representative therefor) notifies the Trustee of the amounts then
due and owing on such Senior Debt, if any, held by such holder and only the
amounts specified in such notices to the Trustee shall be paid to the holders of
such Senior Debt.
SECTION 12.4. Securityholders to Be Subrogated to
Rights of Holders of Senior Debt.
Subject to the payment in full in Cash or Cash Equivalents of
all Senior Debt of the Company or any Guarantor as provided herein, the Holders
of Securities shall be subrogated to the rights of the holders of such Senior
Debt to receive payments or distributions of assets of the Company applicable to
the Senior Debt until all amounts owing on the Securities shall be paid in full,
and for the purpose of such subrogation no such payments or distributions to the
holders of such Senior Debt by or on behalf of the Company or any 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 Company or any
Guarantor and the Holders, be deemed to be payment by the Company or any
Guarantor or on account of such Senior Debt, it being understood that the
provisions of this Article XII are and are intended solely for the purpose of
101
<PAGE>
defining the relative rights of the Holders, on the one hand, and the holders of
such Senior Debt, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article XII shall
have been applied, pursuant to the provisions of this Article XII, to the
payment of amounts payable under Senior Debt of the Company or any Guarantor,
then the Holders shall be entitled to receive from the holders of such Senior
Debt any payments or distributions received by such holders of Senior Debt in
excess of the amount sufficient to pay all amounts payable under or in respect
of such Senior Debt in full in Cash or Cash Equivalents.
SECTION 12.5. Obligations of the Company and the
Guarantors Unconditional.
Nothing contained in this Article XII or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company and any Guarantors and the Holders, the obligation of each such Person,
which is absolute and unconditional, to pay to the Holders the principal of,
premium, if any, and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders and creditors of the Company and
the Guarantors other than the holders of the Senior Debt, nor shall anything
herein or therein prevent the Trustee or any Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article XII, of the holders of Senior Debt in
respect of cash, property or securities of the Company and the Guarantors
received upon the exercise of any such remedy. Notwithstanding anything to the
contrary in this Article XII or elsewhere in this Indenture or in the
Securities, upon any distribution of assets of the Company and the Guarantors
referred to in this Article XII, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating Trustee or agent or other Person making any
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other Indebtedness of the Company or any 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 so long as such
court has been apprised of the provisions of, or the order, decree or
certificate makes reference to, the provisions of
102
<PAGE>
this Article XII. Nothing in this Section 12.5 shall apply to the claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
SECTION 12.6. Trustee Entitled to Assume Payments
Not Prohibited in Absence of Notice.
The Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee unless and until a Trust Officer of the Trustee or any Paying
Agent shall have received, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Debt or from any representative therefor and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of Sections 7.1 and 7.2,
shall be entitled in all respects conclusively to assume that no such fact
exists.
SECTION 12.7. Application by Trustee of Assets
Deposited with It.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of Securityholders
and, to the extent (i) the making of such deposit by the Company shall not be in
contravention of any term or provision of the Credit Agreement and (ii)
allocated for the payment of Securities, shall not be subject to the
subordination provisions of this Article XII. Otherwise, any deposit of assets
with the Trustee or the Agent (whether or not in trust) for the payment of
principal of or interest on any Securities shall be subject to the provisions of
Sections 12.1, 12.2, 12.3 and 12.4; provided, that, if prior to one Business Day
preceding the date on which by the terms of this Indenture any such assets may
become distributable for any purpose (including without limitation, the payment
of either principal of or interest on any Security) the Trustee or such Paying
Agent shall not have received with respect to such assets the written notice
provided for in Section 12.6, then the Trustee or such Paying Agent shall have
full power and authority to receive such assets and to apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such date.
103
<PAGE>
SECTION 12.8. Subordination Rights Not Impaired by
Acts or Omissions of the Company, the Guarantors or Holders of
Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination provisions contained in this Article XII 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 any Guarantor or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company or any
Guarantor with the terms of this Indenture, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with. The holders of
Senior Debt may extend, renew, modify or amend the terms of the Senior Debt or
any security therefor and release, sell or exchange such security and otherwise
deal freely with the Company and the Guarantors, all without affecting the
liabilities and obligations of the parties to this Indenture or the Holders.
SECTION 12.9. Securityholders Authorize Trustee to
Effectuate Subordination of Securities.
Each Holder of the Securities by his acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provisions
contained in this Article XII and to protect the rights of the Holders pursuant
to this Indenture, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company or any Guarantor (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or any other marshalling of assets and liabilities of the Company or
any Guarantor), the immediate filing of a claim for the unpaid balance of his
Securities in the form required in said proceedings and cause said claim to be
approved. If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Debt or their representative to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee or
the holders of Senior Debt or
104
<PAGE>
their representative to vote in respect of the claim of any
Securityholder in any such proceeding.
SECTION 12.10. Right of Trustee to Hold Senior Debt.
The Trustee shall be entitled to all of the rights set forth
in this Article XII in respect of any Senior Debt at any time held by it to the
same extent as any other holder of Senior Debt, and nothing in this Indenture
shall be construed to deprive the Trustee of any of its rights as such holder.
SECTION 12.11. Article XII Not to Prevent Events of
Default.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Securities by reason of any provision of
this Article XII shall not be construed as preventing the occurrence of a
Default or an Event of Default under Section 6.1 or in any way prevent the
Holders or the Trustee from exercising any right hereunder other than the right
to receive payment on the Securities.
SECTION 12.12. No Fiduciary Duty of Trustee to
Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Debt, and shall not be liable to any such holders (other
than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Securities or the Company,
any Guarantor or any other Person, cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article XII or
otherwise. Nothing in this Section 12.12 shall affect the obligation of any
other such Person to hold such payment for the benefit of, and to pay such
payment over to, the holders of Senior Debt or their representative.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of the TIA, the imposed duties,
upon qualification of this Indenture under the TIA, shall control.
105
<PAGE>
SECTION 13.2. Notices.
Any notices or other communications to the Company or any
Guarantor, Paying Agent, Registrar, Securities Custodian, transfer agent or the
Trustee required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Guarantor:
Regency Health Services, Inc.
2742 Dow Avenue
Tustin, California 92680
Attention: Chief Financial Officer
Telephone: (714) 544-4443
Telecopy: (714) 544-2441
if to the Trustee:
U.S. Trust Company of California, N.A.
515 Flower Street, 27th Floor
Los Angeles, California 90071
Attention: Corporate Trust Administration
Telecopy: (213) 489-3371
Any party by notice to each other party may designate
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party shall be deemed to have been
given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and five
Business 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 Securityholder shall
be mailed to him or her by first-class mail or other equivalent means at his or
her address as it appears on the registration books of the Registrar and shall
be sufficiently given to him or her if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
106
<PAGE>
above, it is duly given, whether or not the addressee re-
ceives it.
SECTION 13.3. Communications by Holders with
Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA ss. 312(c).
SECTION 13.4. Certificate and Opinion as to
Conditions Precedent.
Upon any request or application by the Company or any
Guarantor to the Trustee to take any action under this Indenture, such Person
shall furnish to the Trustee:
(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 met; and
(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
have been met;
provided, however, that in the case of any such request or application as to
which the furnishing of particular documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished under this Section 13.4.
SECTION 13.5. Statements Required in Certifi-
cate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person
making such certificate or opinion has read
such covenant or condition;
107
<PAGE>
(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 necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been met; and
(4) a statement as to whether
or not, in the opinion of each such Person, such condition or covenant
has been met; provided, however, that with respect to matters of fact
an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 13.6. Rules by Trustee, Paying Agent,
Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 13.7. Non-Business Days.
If a payment date is not a Business Day at such place, payment
may be made at such place on the next succeeding day that is a Business Day, and
no interest shall accrue for the intervening period.
SECTION 13.8. Governing Law.
THIS INDENTURE, THE GUARANTEES AND THE SECURITIES 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. EACH OF
THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPER-
108
<PAGE>
TY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF
THE COMPANY AND THE GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY AND THE GUARANTORS IN ANY OTHER
JURISDICTION.
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 Guarantor or any of their
respective Subsidiaries. Any such indenture, loan or debt agreement may not be
used to interpret this Indenture.
SECTION 13.10. No Recourse against Others.
No direct or indirect stockholder, employee, officer or
director, as such, past, present or future of the Company, the Guarantors or any
successor entity, shall have any personal liability in respect of the
obligations of the Company or the Guarantors under the Securities or this
Indenture by reason of his, her or its status as such stockholder, employee,
officer or director. Each Securityholder by accepting a Security waives and
releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 13.11. Successors.
All agreements of the Company and the Guarantors in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals.
All parties may sign any number of copies or counterparts of
this Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
109
<PAGE>
SECTION 13.13. Severability.
In case any one or more of the provisions in this Indenture or
in the Securities 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 full
extent permitted by law.
SECTION 13.14. Table of Contents, Headings,
Etc.
The Table of Contents, Cross-Reference Table and headings of
the Articles and the Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms or provisions hereof.
SECTION 13.15. Qualification of Indenture.
The Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the Registration Rights Agreement
and shall pay all costs and expenses (including attorneys' fees for the Company
and the Trustee) incurred in connection therewith, including, but not limited
to, costs and expenses of qualification of the Indenture and the Securities and
printing this Indenture and the Securities. The Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 13.16. Registration Rights.
Certain Holders of the Securities may be entitled to certain
registration rights with respect to such Securities pursuant to, and subject to
the terms of, the Registration Rights Agreement.
110
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
REGENCY HEALTH SERVICES, INC.
[Seal]
By:
Name:
Title:
Attest:
Secretary
U.S. TRUST COMPANY OF CALIFORNIA,
N.A.
-----------------------------------
as Trustee, Registrar, Paying Agent
and Securities Custodian
By: _______________________________
Name:
Title:
Attest:
Secretary
111
<PAGE>
IN WITNESS WHEREOF, I have, in the name and on behalf of the
Guarantors listed below, caused this Indenture to be duly executed as of the
date first written above.
By: _______________________________
Name:
Title:
Attest:
Secretary
GUARANTORS:
BRASWELL ENTERPRISES, INC.
BREL, INC.
BRITTANY REHABILITATION CENTER, INC.
CARE ENTERPRISES, INC.
CARE FINANCE, INC.
CARE HOME HEALTH SERVICES
CARMICHAEL REHABILITATION CENTER
CASA DE VIDA REHABILITATION CENTER
COALINGA REHABILITATION CENTER
COVINA REHABILITATION CENTER
EVERGREEN REHABILITATION CENTER
FAIRFIELD REHABILITATION CENTER
FIRST CLASS PHARMACY, INC.
FULLERTON REHABILITATION CENTER
GLENDORA REHABILITATION CENTER
GRAND TERRACE REHABILITATION CENTER
HALLMARK HEALTH SERVICES, INC.
HARBOR VIEW REHABILITATION CENTER
HAWTHORNE REHABILITATION CENTER
HEALTHCARE NETWORK
HERITAGE REHABILITATION CENTER
HUNTINGTON BEACH CONVALESCENT HOSPITAL
JACKSON REHABILITATION CENTER, INC.
LINDA-MAR REHABILITATION CENTER
MEADOWBROOK REHABILITATION CENTER
MEADOWVIEW REHABILITATION CENTER
NEWPORT BEACH REHABILITATION CENTER
NORTH STATE HOME HEALTH CARE, INC.
PARADISE REHABILITATION CENTER, INC.
PASO ROBLES REHABILITATION CENTER
RHS MANAGEMENT CORPORATION
ROSE REHABILITATION CENTER
ROSEWOOD REHABILITATION CENTER, INC.
SHANDIN HILLS REHABILITATION CENTER
<PAGE>
STOCKTON REHABILITATION CENTER, INC.
VISTA KNOLL REHABILITATION CENTER, INC.
WILLOWVIEW REHABILITATION CENTER
AMERICARE HOMECARE, INC.
AMERICARE MIDWEST, INC.
CIRCLEVILLE HEALTH CARE CORP.
MARION HEALTH CARE CORP.
NEW LEXINGTON HEALTH CARE CORP.
SCRS & COMMUNICOLOGY, INC. OF OHIO
CARE ENTERPRISES WEST
AMERICARE OF WEST VIRGINIA, INC.
BECKLEY HEALTH CARE CORP.
DUNBAR HEALTH CARE CORP.
GLENVILLE HEALTH CARE, INC.
PUTNAM HEALTH CARE CORP.
SALEM HEALTH CARE CORP.
OASIS MENTAL HEALTH TREATMENT
CENTER, INC.
REGENCY - NORTH CAROLINA, INC.
REGENCY - TENNESSEE, INC.
<PAGE>
REGENCY HEALTH SERVICES, INC.
12 1/4% SERIES A1 SUBORDINATED SECURITY
DUE 2003
CUSIP: 758934AC7
758934AD5
No. 1 $50,000,000
Regency Health Services, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of 50,000,000 Dollars,
on July 15, 2003.
Interest Payment Dates: January 15 and July 15 com-
mencing January 15, 1997.
Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security
on the reverse side, which will, for all purposes, have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to
be duly executed under its corporate seal.
Dated:
REGENCY HEALTH SERVICES, INC., a
Delaware corporation
By:
Name: Richard K. Matros
Title: President and Chief Executive
Officer
Attest:
Name: David A. Grant
Title: Secretary
- - --------
1 Series A should be replaced with Series B in the
Exchange Securities.
A-1
<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the
within-mentioned Indenture.
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee and
Authenticating Agent
By:
Authorized Signatory
A-2
<PAGE>
REGENCY HEALTH SERVICES, INC.
12 1/4% Series A2 Subordinated Security
due 2003
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the Company or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or 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.3
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OR THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER AND
BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RE-
- - --------
2 Series A should be replaced with Series B in the
Exchange Security.
3 This paragraph should be added if the Security is
issued in global form.
A-3
<PAGE>
STRICTION TERMINATION DATE") THAT IS
THREE YEARS AFTER THE LATER OF THE ORIG-
INAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATED
PERSON OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) EXCEPT (A) TO THE COMPA-
NY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFEC-
TIVE UNDER THE SECURITIES ACT, (C) PUR-
SUANT TO RULE 144A, FOR SO LONG AS IT IS
AVAILABLE, TO A PERSON IT REASONABLY BE-
LIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECU-
RITIES ACT, (E) TO AN INSTITUTIONAL "AC-
CREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(A)(1),(2),(3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "AC-
CREDITED INVESTOR," FOR INVESTMENT PUR-
POSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURI-
TIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRA-
TION REQUIREMENT OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE
(D),(E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION
AND OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH OF THE FOREGO-
ING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFER-
OR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION
DATE.4
- - --------
4 This paragraph should be included only for the
Initial Securities.
A-4
<PAGE>
1. Interest.
Regency Health Services, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), promises to pay interest on the principal
amount of this Security at the rate of 12 1/4% per annum from the date of
issuance until maturity. To the extent it is lawful, the Company promises to pay
interest on any interest payment due but unpaid on such principal amount at a
rate of 12 1/4% per annum compounded semi-annually.
The Company will pay interest semi-annually on January 15 and
July 15 of each year or, if any such day is not a Business Day, on the next
succeeding Business Day (each, an "Interest Payment Date"), commencing January
15, 1997. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid on the Securities,
from the date of issuance. Interest will be computed on the basis of a 360-day
year consisting of twelve 30-day months.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the January 1 or July 1 immediately preceding the Interest
Payment Date. Holders must surrender Securities to a Paying Agent to collect
principal payments. Except as provided below, the Company shall pay principal
and interest in such coin or currency of the United States of America as at the
time of payment shall be legal tender for payment of public and private debts
("Cash"). The Securities will be payable as to principal, premium, if any, and
interest, and the Securities may be presented for registration of transfer or
exchange, at the office or agency of the Company maintained for such purpose
within or without the Borough of Manhattan, the City and State of New York or,
at the option of the Company, payment of interest may be made by check mailed to
the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest and premium on all Global
Securities and all other Securities the Holders of which shall have provided
wire transfer instructions to the Company or the Paying Agent. Until otherwise
designated by the Company, the Company's office or agency will be the corporate
trust office of the Trustee presently located at 770 Broadway, New York, New
York 10003.
A-5
<PAGE>
3. Paying Agent and Registrar.
Initially, U.S. Trust Company of California, N.A. (the
"Trustee," which term includes any successor Trustee under the Indenture) will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or coRegistrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as
of June 28, 1996 (the "Indenture"), among the Company, the Guarantors named
therein and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act, as in effect on the date of the Indenture. The
Securities are subject to all such terms, and Holders of Securities are referred
to the Indenture and said Act for a statement of them. The Securities are
subordinated, unsecured general obligations of the Company limited in aggregate
principal amount to $50,000,000. The Securities are subordinated in right of
payment to certain other debt obligations of the Company. The Securities are
guaranteed on a subordinated basis by each of the Company's present and future
Subsidiaries (the "Guarantors").
5. Redemption.
The Securities may be redeemed, in whole or in part, at any
time on or after July 15, 2000, at the option of the Company, at the Redemption
Price (expressed as a percentage of principal amount) set forth below with
respect to the indicated Redemption Date, in each case (subject to the right of
Holders of record on a Record Date that is on or prior to such Redemption Date
to receive interest due on the Interest Payment Date to which such Record Date
relates), plus any accrued but unpaid interest to the Redemption Date. The
Securities may not be so redeemed prior to July 15, 2000.
<TABLE>
If redeemed during
the 12-month period
commencing October Redemption Price
<C> <C>
2000 . . . . . . . . 106.125%
2001 . . . . . . . . 103.063%
2002 and thereafter. 100.000%
</TABLE>
A-6
<PAGE>
Notwithstanding the foregoing, in the event that the Company
redeems for cash less than $40.0 million of the Company's outstanding
Convertible Subordinated Debentures pursuant to the redemption thereof by the
Company (as a result of the holders thereof exercising their conversion rights),
the Company may redeem the Securities, in whole but not in part, at a redemption
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of redemption. In the event the Company elects to effect
such redemption, notice of such redemption must be given not more than 30 days
after the date of the consummation of the redemption of the Convertible
Subordinated Debentures and such redemption must occur within 30 days of the
date of such notice of redemption. Until the earlier of (i) 90 days after the
Issue Date, or (ii) such time as the Company provides the Trustee irrevocable
notice in writing that it does not intend to exercise such optional redemption
of the Securities, the net proceeds to the Company from the sale of the
Securities will be held in escrow by the Trustee, and during such time may be
used by the Company only to redeem or purchase such convertible debentures or to
effect the redemption of the Securities.
Any such redemption will comply with Article III of the
Indenture.
6. Notice of Redemption.
Notice of redemption will be sent by first class mail, at
least 30 days and not more than 60 days prior to the Redemption Date to the
Holder of each Security to be redeemed at such Holder's last address as then
shown upon the registry books of the Registrar. Securities may be redeemed in
part in multiples of $1,000 only.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Securities called for
redemption shall have been deposited with the Paying Agent on such Redemption
Date and payment of the Securities called for redemption is not otherwise
prohibited, the Securities called for redemption will cease to bear interest and
the only right of the Holders of such Securities will be to receive payment of
the Redemption Price.
7. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. A Holder may
register the transfer or exchange of Securities in accordance with the
Indenture. No service charge will be made for any registration of transfer or
exchange of the Securities, but the Company may require a
A-7
<PAGE>
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes or other governmental charge payable in
connection therewith. The Registrar need not register the transfer of or
exchange any Securities selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Security may be treated as the
owner of it for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee and the Paying Agent(s) will pay the money
back to the Company at its written request. After that, all liability of the
Trustee and any such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
Except as set forth in the Indenture, if the Company
irrevocably deposits with the Trustee, in trust, for the benefit of the Holders,
Cash, U.S. Government Obligations or a combination thereof, in such amounts as
will be sufficient in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the Securities to redemption or maturity and comply with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including the restrictive
covenants described in paragraph 12 below, but excluding their obligation to pay
the principal of and interest on the Securities). Upon satisfaction of certain
additional conditions set forth in the Indenture, the Company may, within one
year of the Stated Maturity of the Securities, elect to have its obligations
discharged with respect to outstanding Securities.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice to
or consent of any Holder, the parties thereto may under certain circumstances
amend or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or incon-
A-8
<PAGE>
sistency, or make any other change that does not adversely affect the rights of
any Holder of a Security.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and the Guarantors to, among other things, incur additional
Indebtedness and Disqualified Capital Stock, pay dividends or make certain other
restricted payments, enter into certain transactions with Affiliates, incur
Liens, sell assets, merge or consolidate with any other Person or transfer (by
lease, assignment or otherwise) substantially all of the properties and assets
of the Company. The limitations are subject to a number of important
qualifications and exceptions. The Company must periodically report to the
Trustee on compliance with such limitations.
13. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be
required to offer to purchase on the Change of Control Purchase Date all
outstanding Securities at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. Holders of Securities will receive a Change of Control Offer from
the Company prior to any related Change of Control Purchase Date and may elect
to have such Securities purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability
of the Company, the Guarantors or any of their respective Subsidiaries to sell
assets. In the event the proceeds from a permitted Asset Sale exceed certain
amounts, as specified in the Indenture, the Company will be required either to
reinvest the proceeds of such Asset Sale in its business, use such proceeds to
retire debt, or to make an asset sale offer to purchase a certain amount of each
Holder's Securities at 100% of the principal amount thereof, plus accrued
interest, if any, to the purchase date.
14. Notation of Guarantee.
As set forth more fully in the Indenture and the Guarantee,
the Persons constituting Guarantors from time to time, in accordance with the
provisions of the Indenture, unconditionally and jointly and severally
guarantee, in accordance with Section 11.1 of the Indenture, to the Holder and
to the Trustee and its successors and assigns, that (i) the principal of and
premium of, and interest on the Security will be paid, whether at the Maturity
Date or Interest Payment Dates, by acceleration, call for redemption or
A-9
<PAGE>
otherwise, and all other obligations of the Company to the Holders or the
Trustee under the Indenture or the Guarantee or this Security will be promptly
paid in full or performed, all in accordance with the terms of the Indenture and
the Guarantee and this Security, and (ii) in the case of any extension of
payment or renewal of this Security or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of such
extension or renewal, whether at the Maturity Date, as so extended, by
acceleration or otherwise. Such guarantees shall cease to apply, and shall be
null and void, with respect to any Guarantor who, pursuant to Article Eleven of
the Indenture, is released from its guarantees, or whose guarantees otherwise
cease to be applicable pursuant to the terms of the Indenture.
15. Successors.
When a successor assumes all the obligations of its
predecessor under the Securities, the Guarantee and the Indenture, the
predecessor will be released from those obligations.
16. Ranking.
Payment of principal, premium, if any, and interest on the
Securities is subordinated, in the manner and to the extent set forth in the
Indenture, to the prior payment in full of all Senior Debt.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
securities shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities 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.
A-10
<PAGE>
18. Trustee or Agent Dealings with Company.
The Trustee and each Agent under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates as if it were not the Trustee and such Agent.
19. No Recourse Against Others.
No direct or indirect stockholder, partner, employee, officer
or director, as such, past, present or future, of the Company, the Guarantors or
any successor entity shall have any personal liability in respect of the
obligations of the Company or the Guarantors under the Securities or the
Indenture by reason of his or its status as such stockholder, partner, employee,
officer or director. Each Holder of a Security by accepting a Security waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
20. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Security.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security 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 will cause CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
23. Additional Rights of Holders of Securities.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture.
Requests may be made to:
A-11
<PAGE>
Regency Health Services, Inc.
2742 Dow Avenue
Tustin, California 92780
Attn: Corporate Secretary
In addition to the rights provided to Holders of Secu-
rities under the Indenture, Holders of Securities shall have
all the rights set forth in the Registration Rights Agree-
ment.5
- - --------
5 This paragraph should be included only for the Initial
Securities.
A-12
<PAGE>
ASSIGNMENT
`
I or we assign this Security to
- - ----------------------------------------------------------
- - ----------------------------------------------------------
- - ----------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying
number of assignee
- - -------------------------
and irrevocably appoint __________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: ______________________________
- - ----------------------------------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee**
- - --------
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs:
(i) The Securities Transfer Agent Medallion Program (Stamp); (ii) The
New York Stock Exchange Medallion Program (MSP); (iii) The Stock
Exchange Medallion Program (SEMP); or (iv) in such other guarantee
program acceptable to the Trustee.
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.14 or Article X of the Indenture, check the
appropriate box: |_| Section 4.14 |_| Article X
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.14 or Article X of the Indenture,
as the case may be, state the amount you want to be purchased: $________
Date: ________________ Signature: ________________________
(Sign exactly as your
name appears on the
other side of this Se-
curity)
Signature Guarantee**
- - --------
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs:
(i) The Securities Transfer Agent Medallion Program (Stamp); (ii) The
New York Stock Exchange Medallion Program (MSP); (iii) The Stock
Exchange Medallion Program (SEMP); or (iv) in such other guarantee
program acceptable to the Trustee.
A-14
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES6
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<S> <C> <C> <C>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer
Principal Amount Principal Amount Security following of Trustee or
Date of of this Global of this Global such decrease (or Securities
Exchange Security Security increase) Custodian
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - --------
6 This schedule should only be added if the Security is
issued in global form.
A-15
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER OF TRANSFER RESTRICTED SECURITIES
Re: 12 1/4% SERIES A SUBORDINATED SECURITIES DUE 2002 OF RE-
GENCY HEALTH SERVICES, INC.
This Certificate relates to $______ principal amount of Securities held
in (check applicable space) _____ book-entry or ______ definitive form by (the
"Transferor").
The Transferor (check applicable box):
|_| has requested the Trustee by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
|_| has requested the Trustee by written order to ex-
change or register the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Securities7 and as provided in
Section 2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act (as defined below) because:
|_| Such Security is being acquired for the Transferor's own account,
without transfer in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture.
|_| Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.6(a)(ii)(B), Section 2.6(b)(i) or Section 2.6(d)(i)(B) of the Indenture), to
an institutional "accredited investor" within the meaning of subparagraph
(a)(1),(2),(3) or (7) of Rule 501 under the Securities act that is acquiring the
security for its own account, or for the account of such an
- - --------
7 The following should be included only for Initial
Securities.
A-16
<PAGE>
institutional "accredited investor," for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act (in satisfaction of Section 2.6(a)(ii)(C) or Section
2.6(d)(i)(C) of the Indenture).
|_| Such Security is being transferred in accordance with Rule 144
under the Securities Act, or pursuant to an effective registration statement
under the Securities Act (in satisfaction of Section 2.6(a)(ii)(C) or Section
2.6(d)(i)(C) of the Indenture).
|_| Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than as provided in the immediately preceding paragraph. An Opinion of
Counsel to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
[INSERT NAME OF TRANSFEROR]
By:
Date:
A-17
- - --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 28, 1996
by and among
REGENCY HEALTH SERVICES, INC.
as Issuer,
the Guarantors named herein
and
BEAR, STEARNS & CO. INC.
and
NATIONSBANC CAPITAL MARKETS, INC.
as Initial Purchasers
- - --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agree-
ment") is made and entered into as of June 28, 1996 among
REGENCY HEALTH SERVICES, INC., a Delaware corporation
(the "Issuer"), the Guarantors named herein and BEAR,
STEARNS & CO. INC. and NATIONSBANC CAPITAL MARKETS, INC.
(together, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement,
dated June 24, 1996, among the Issuer, the Guarantors named therein and the
Initial Purchasers (the "Purchase Agreement"), which provides for the sale by
the Issuer to the Initial Purchasers of $50,000,000 aggregate principal amount
of 12 1/4% Subordinated Notes due 2003 and related guarantees by the Guarantors
(collectively, the "Securities"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Issuer and the Guarantors named herein
have agreed to provide to the Initial Purchasers and their respective direct and
indirect transferees, among other things, the registration rights for the
Securities set forth in this Agreement. The execution of this Agreement is a
condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings (and, unless otherwise indicated, capitalized terms used
herein without definition shall have the respective meanings ascribed to them by
the Purchase Agreement):
Applicable Period: See Section 2(b) hereof.
Effectiveness Period: See Section 3(a) hereof.
Effectiveness Target Date: See Section
4(a)(ii) hereof.
1
<PAGE>
Exchange Act: The Securities Exchange Act of
1934, as amended, and the rules and regulations of the
SEC promulgated thereunder.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See
Section 2(a) hereof.
Guarantors: The Guarantors, as defined in the
Indenture.
Holder: Any registered owner of Transfer Re-
stricted Securities.
Indenture: The Indenture, dated as of June 28, 1996, among the
Issuer, the Guarantors and U.S. Trust Company of California, N.A., as trustee,
pursuant to which the Securities are being issued, as amended or supplemented
from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory
paragraph to this Agreement.
Issue Date: See Section 2(a) hereof.
Issuer: See the introductory paragraph of this
Agreement.
Liquidated Damages: See Section 4(a) hereof.
New Notes: See Section 2(a) hereof.
Participating Broker-Dealer: See Section 2(b)
hereof.
Person or person: An individual, trustee, corporation,
partnership, joint stock company, trust, unincorporated association, union,
business association, limited liability company, limited liability partnership,
firm or other legal entity.
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
2
<PAGE>
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the New Notes and/or the Transfer Restricted Securities (as
applicable) covered by such Registration Statement, 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.
Registration Default: See Section 4(a) hereof.
Registration Statement: Any registration statement of the
Issuer and the Guarantors, including, but not limited to, the Exchange Offer
Registration Statement or a registration statement of the Issuer and the
Guarantors that otherwise covers any of the Transfer Restricted Securities
pursuant to the provisions of this Agreement, 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.
Rule 144: Rule 144 promulgated pursuant to the Securities Act,
as currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A promulgated pursuant to the Securities
Act, as currently in effect, as such rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated pursuant to 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.
Securities: See the introductory paragraphs to
this Agreement.
3
<PAGE>
Securities Act: The Securities Act of 1933, as
amended, and the rules and regulations of the SEC promul-
gated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as
amended, and the rules and regulations of the SEC promul-
gated thereunder.
Transfer Restricted Securities: The Securities upon original
issuance thereof and at all times subsequent thereto, until in the case of any
such Securities (i) a Registration Statement covering such Securities has been
declared effective by the SEC and such Securities have been disposed of in
accordance with such effective Registration Statement, (ii) a Registration
Statement which covers such Securities and has been declared effective by the
Commission ceases to be effective, (iii) such Securities are sold in compliance
with Rule 144, or (iv) such Securities cease to be outstanding.
Trustee: The trustee under the Indenture and,
if existent, the trustee under any indenture governing
the New Notes.
Underwritten registration or underwritten offering: A
registration in which securities of the Issuer and the Guarantors are sold to an
underwriter for reoffering to the public.
2. Exchange Offer
(a) The Issuer and the Guarantors agree to file with the SEC
within 60 days after the date of issuance of the Securities (the "Issue Date")
an offer to exchange (the "Exchange Offer") any and all of the Transfer
Restricted Securities for a like aggregate principal amount of debt securities
of the Issuer and the Guarantors (the "New Notes") which New Notes will be (i)
substantially identical in all material respects to the Securities, except that
such New Notes will not contain terms with respect to transfer restrictions and
the identity of the Guarantors may change in accordance with the terms of the
Indenture, (ii) entitled to the benefits
4
<PAGE>
of the Indenture or a trust indenture which is identical to the Indenture (other
than such changes to the Indenture or any such identical trust indenture as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA), and which, in either case, has been
qualified under the TIA, and (iii) registered pursuant to an effective
Registration Statement in compliance with the Securities Act. The Exchange Offer
will be registered pursuant to the Securities Act on an appropriate form of
Registration Statement (the "Exchange Offer Registration Statement"), and will
comply with all applicable tender offer rules and regulations promulgated
pursuant to the Exchange Act and shall be duly registered or qualified pursuant
to all applicable state securities or Blue Sky laws. The Exchange Offer shall
not be subject to any condition, other than that neither of the following events
occur: (a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer, or
there shall have been proposed, adopted or enacted any law or regulation that in
the judgment of the Issuer, based upon advice of outside counsel, might impair
the ability of the Issuer to proceed with the Exchange Offer or (b) there shall
occur a change in the current interpretation by the staff of the SEC which, in
the Issuer's judgment,based upon advice of outside counsel, might materially
impair the Issuer's ability to proceed with the Exchange Offer. No securities
shall be included in the Exchange Offer Registration Statement other than the
New Notes. The Issuer and the Guarantors agree to use their reasonable best
efforts to (x) cause the Exchange Offer Registration Statement to become
effective pursuant to the Securities Act within 135 days after the Issue Date;
(y) keep the Exchange Offer open for not less than 30 days (or such longer
period required by applicable law) after the date that the notice of the
Exchange Offer referred to below is mailed to Holders; and (z) consummate the
Exchange Offer as to all properly tendered Transfer Restricted Securities within
forty-five (45) days after the date specified herein for effectiveness of such
Exchange Offer Registration Statement. Each Holder who participates in the
Exchange Offer will be required to represent that any New Notes 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 partici-
5
<PAGE>
pate in the distribution of the New Notes, and that such Holder is not an
"affiliate" of the Issuer within the meaning of Rule 405 of the Securities Act
(or that if it is such an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable). Each Holder that is not a Participating Broker-Dealer will be
required to represent that it is not engaged in, and does not intend to engage
in, the distribution of the New Notes. Each Holder that (i) is a Participating
Broker-Dealer and (ii) will receive New Notes for its own account in exchange
for the Transfer Restricted Securities that it acquired as the result of
market-making or other trading activities will be required to acknowledge that
it will deliver a prospectus as required by law in connection with any resale of
such New Notes. Upon consummation of the Exchange Offer in accordance with this
Agreement, the Issuer and the Guarantors shall have no further obligation to
register Transfer Restricted Securities pursuant to Section 3 of this Agreement.
(b) The Issuer and the Guarantors shall include within the
Prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," reasonably acceptable to the Initial
Purchasers, which shall contain a summary statement of the positions taken or
policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), of New Notes received by such
broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"). Such
"Plan of Distribution" section shall also allow the use of the Prospectus by all
persons subject to the prospectus delivery requirements of the Securities Act,
including all Participating Broker-Dealers, and include a statement describing
the means by which Participating Broker-Dealers may resell the New Notes.
The Issuer and the Guarantors shall use their reasonable 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 such
persons must comply with such requirements in order to resell the
6
<PAGE>
New Notes; provided that such period shall not exceed 180 days after
consummation of the Exchange Offer (or such longer period if extended pursuant
to the last paragraph of Section 5 hereof) (the "Applicable Period").
In connection with the Exchange Offer, the Issuer and the
Guarantors shall:
(x) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal and
related documents;
(y) utilize the services of a depository for
the Exchange Offer with an address in the Borough of
Manhattan, The City of New York; and
(z) permit Holders to withdraw tendered Securities 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 by sending to the
institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder,
the principal amount of Transfer Restricted Securities delivered for
exchange and a statement that such Holder is withdrawing his or her
election to have such Transfer Restricted Securities exchanged.
As soon as practicable after the expiration of time period for
the acceptance of the Exchange Offer, the Issuer and the Guarantors shall:
(i) accept for exchange all Securities properly
tendered and not validly withdrawn pursuant to the
Exchange Offer;
(ii) deliver to the Trustee for cancellation
all Securities so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Securities, New Notes equal in principal amount at
maturity to the Securities of such Holder so accepted for exchange
7
<PAGE>
(the foregoing being referred to as the "consumma-
tion of the Exchange Offer").
(c) If (1) prior to the consummation of the Exchange Offer,
applicable interpretations of the staff of the SEC do not permit the Issuer and
the Guarantors to effect the Exchange Offer, (2) if for any other reason the
Exchange Offer is not consummated within 180 days of the Issue Date, or (3) any
Holder of Transfer Restricted Securities notifies the Issuer within the time
specified in clause (2) above that (A) it is prohibited by a change in
applicable law or SEC policy from participating in the Exchange Offer or (B)
that it may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales or (C) that it is a broker-dealer and owns Securities acquired directly
from the Issuer or an affiliate of the Issuer, then the Issuer shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice"), and the Issuer and the Guarantors shall file a Registration Statement
pursuant to Section 3 hereof. Following the delivery of a Shelf Notice to the
Holders of Transfer Restricted Securities, the Issuer and the Guarantors shall
not have any further obligation to conduct the Exchange Offer pursuant to this
Section 2, provided that the Issuer and the Guarantors shall have the right,
nonetheless, to proceed to consummate the Exchange Offer notwithstanding their
obligations pursuant to this Section 2(c) (and, upon such consummation, their
obligation to consummate a Shelf Registration shall terminate).
3. Shelf Registration
If the Issuer and the Guarantors are required to deliver a
Shelf Notice as contemplated by Section 2(c) hereof, then:
(a) Shelf Registration. The Issuer and the Guarantors shall
prepare and file with the SEC, within 45 days after such filing obligation
arises, a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Transfer Restricted Securities
then outstanding (the "Shelf Registration"). The Shelf Registration shall be on
Form S-3 or another appropriate form permitting registration of
8
<PAGE>
the Transfer Restricted Securities for resale by the Holders in the manner or
manners reasonably designated by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities then outstanding
(including, without limitation, one or more underwritten offerings). The Issuer
and the Guarantors shall not permit any securities other than the Transfer
Restricted Securities to be included in the Shelf Registration. The Issuer and
the Guarantors shall use their reasonable best efforts, as described in Section
5(b) hereof, to cause the Shelf Registration to be declared effective pursuant
to the Securities Act on or prior to the 135th day after such filing obligation
arises and to keep the Shelf Registration continuously effective under the
Securities Act until the date which is 36 months after the Issue Date or such
shorter period ending when either (1) all Transfer Restricted Securities covered
by the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf Registration, or (2) there ceases to be outstanding
any Transfer Restricted Securities (the "Effectiveness Period").
(b) Supplements and Amendments. The Issuer and the Guarantors
shall use their reasonable best efforts to keep the Shelf Registration
continuously effective during the Effectiveness Period by supplementing and
amending the 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 Transfer
Restricted Securities covered by such Registration Statement or by any
underwriter of such Transfer Restricted Securities.
4. Liquidated Damages
(a) The Issuer, the Guarantors and the Initial Purchasers
agree that the Holders of Transfer Restricted Securities will suffer damages if
the Issuer or the Guarantors fail to fulfill their obligations pursuant to
Section 2 or Section 3 hereof and that it would not be possible to ascertain the
extent of such damages. Accordingly, in the event of such failure by the Issuer
or the Guarantors to fulfill such obligations, the Issuer and the Guarantors
hereby agree to pay liquidated damages ("Liquidated Damages") to each Holder of
Transfer Re-
9
<PAGE>
stricted Securities under the circumstances and to the
extent set forth below:
(i) if neither the Exchange Offer Registration
Statement nor the Shelf Registration has been filed with the SEC on or
prior to the date specified for such filing; or
(ii) if neither the Exchange Offer Registration
Statement nor the Shelf Registration is declared effective by the SEC
on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"); or
(iii) if an Exchange Offer Registration Statement is
declared effective by the SEC, on or prior to 45 days following the
earlier of (A) the effective date of such Registration Statement
thereof or (B) the Effectiveness Target Date, the Issuer and the
Guarantors have not exchanged New Notes for all Securities validly
tendered in accordance with the terms of the Exchange Offer; or
(iv) the Shelf Registration has been declared
effective by the SEC and such Shelf Registration ceases to be effective
or usable at any time during the Effectiveness Period, without being
succeeded on the same day immediately by a post-effective amendment to
such Shelf Registration that cures such failure and that is itself
immediately declared effective on the same day;
(any of the foregoing, a "Registration Default") then, with respect to the first
90-day period following such Registration Default, the Issuer and the Guarantors
shall pay to each Holder of Transfer Restricted Securities with respect to which
such Registration Default has occurred Liquidated Damages in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The amount of such Liquidated Damages will increase by an additional
$.05 per week per $1,000 principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults in
respect of such Holder have been cured; provided,
10
<PAGE>
however, that Liquidated Damages shall not at any time exceed $.40 per week per
$1,000 principal amount of Transfer Restricted Securities (regardless of whether
one or more than one Registration Default has occurred and is continuing).
Following the cure of all Registration Defaults relating to any Transfer
Restricted Securities, the accrual of Liquidated Damages with respect to such
Transfer Restricted Securities will cease. A Registration Default under clause
(i) above shall be cured on the date that either the Exchange Offer Registration
Statement or the Shelf Registration is filed with the SEC; a Registration
Default under clause (ii) above shall be cured on the date that either the
Exchange Offer Registration Statement or the Shelf Registration is declared
effective by the SEC; a Registration Default under clause (iii) above shall be
cured on the earlier of the date (A) the Exchange Offer is consummated or (B)
the Issuer delivers a Shelf Notice to the Holders of Transfer Restricted
Securities; and a Registration Default under clause (iv) above shall be cured on
the earlier of (A) the date the Shelf Registration is declared effective or (B)
the Effectiveness Period expires.
(b) The Issuer shall notify the Trustee within one business
day after each and every date on which a Registration Default first occurs.
Liquidated Damages shall be paid by the Issuer and the Guarantors to the Holders
by wire transfer of immediately available funds to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts have
been specified on or before the semi-annual interest payment date provided in
the Indenture (whether or not any interest is then payable on the Securities)
and on each payment date provided in the Indenture including, without
limitation, whether upon redemption, maturity (by acceleration or otherwise),
purchase upon a change of control or purchase upon a sale of assets. Each
obligation to pay Liquidated Damages shall be deemed to commence accruing on the
date of the applicable Registration Default and to cease accruing when all
Registration Defaults have been cured. In no event shall the Issuer pay
Liquidated Damages in excess of the applicable maximum weekly amount set forth
above, regardless of whether one or multiple Registration Defaults exist.
(c) The parties hereto agree that the Liqui-
dated Damages provided for in this Section 4 constitute a
11
<PAGE>
reasonable estimate of the damages that will be suffered by Holders by reason of
the failure to file the Exchange Offer Registration Statement or the Shelf
Registration, the failure of the Exchange Offer Registration Statement to be
declared effective, the failure to consummate the Exchange Offer or the failure
of the Shelf Registration to remain effective, as the case may be, in accordance
with this Agreement.
(d) Notwithstanding anything herein to the contrary, in the
event that the Issuer elects on or before 60 days from the Issue Date to redeem
the Securities the Issuer will not be obligated to register the Securities or
pay Liquidated Damages.
5. Registration Procedures
In connection with the registration of any New Notes or
Transfer Restricted Securities pursuant to Sections 2 or 3 hereof, the Issuer
and the Guarantors shall effect such registration to permit the sale of such New
Notes or Transfer Restricted Securities (as applicable) in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Issuer and the Guarantors shall:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Section 2 or Section 3 hereof, and use
their reasonable best efforts to cause such Registration Statement to become
effective and remain effective as provided herein; provided that, if (1) such
filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in an
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 New Notes during the Applicable Period, before
filing any Registration Statement or Prospectus or any amendments or supplements
thereto, the Issuer shall furnish to and afford the Holders of the Transfer
Restricted Securities and each such Participating Broker-Dealer, as the case may
be, covered by such Registration Statement, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (excluding, however, copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least 3
business days prior to
12
<PAGE>
such filing, or such later date as is reasonable under the circumstances). The
Issuer and the Guarantors shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders, pursuant to this Agreement, must be afforded an opportunity to review
prior to the filing of such document, if the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities covered by such
Registration Statement, or such Participating Broker-Dealer, as the case may be,
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 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, as the case may be or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to it; the Issuer
and the Guarantors shall be deemed not to have used their reasonable best
efforts to keep a Registration Statement effective during the Applicable Period
if they voluntarily take any action that would result in selling Holders of the
Transfer Restricted Securities covered thereby or Participating Broker-Dealers
seeking to sell New Notes not being able to sell such Transfer Restricted
Securities or such New Notes during that period, unless (i) such action is
required by applicable law, or (ii) such action is taken by them in good faith
and for valid business reasons (not including avoidance of their obligations
hereunder), including the acquisition or divestiture of assets.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating BrokerDealer who seeks to sell New Notes
during the Applicable
13
<PAGE>
Period, notify the selling Holders of Transfer Restricted Securities then
outstanding, or each known Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters, if any, promptly 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
(including in such notice a written statement that any Holder of Transfer
Restricted Securities then outstanding may, upon request, obtain, without
charge, 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 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 Transfer Restricted Securities the representations
and warranties of the Issuer or any Guarantor contained in any agreement
(including any underwriting agreement) contemplated by Section 5(l) hereof cease
to be true and correct, and (iv) of the receipt by the Issuer or any Guarantor
of any notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the Transfer
Restricted Securities or the New Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation of any
proceeding for such purpose, (v) of the happening of any event 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 such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
14
<PAGE>
therein, in light of the circumstances under which they
were made, not misleading.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating BrokerDealer who seeks to sell New Notes
during the Applicable Period, 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 Transfer
Restricted Securities or the New Notes (as applicable) to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use their reasonable best efforts to obtain the withdrawal
of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3
hereof and if requested by the managing underwriters, if any, or the Holders of
a majority in aggregate principal amount of the Transfer Restricted Securities
being sold in connection with an underwritten offering, (i) promptly incorporate
in a prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or counsel 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
Issuer has 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 with such information as the managing
underwriters, if any, or such Holders or counsel reasonably request to be
included therein.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating BrokerDealer who seeks to sell New Notes
during the Applicable Period, furnish to each selling Holder of Transfer
Restricted Securities and to each such Participating Broker-Dealer who so
requests and to counsel and each manag-
15
<PAGE>
ing underwriter, if any, without charge, 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 (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating BrokerDealer who seeks to sell New Notes
during the Applicable Period, deliver to each selling Holder of Transfer
Restricted Securities, or each such Participating BrokerDealer, as the case may
be, their counsel, and the underwriters, if any, without charge, as many copies
of the Prospectus or Prospectuses (including each form of preliminary
Prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5 hereof, the Issuer and the
Guarantors hereby consent to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Transfer Restricted
Securities or each such Participating BrokerDealer, 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 Transfer Restricted Securities covered by or the sale
by Participating BrokerDealers of the New Notes pursuant to such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Transfer Restricted
Securities or any delivery of a Prospectus contained in the Exchange Offer
Registration Statement by any Participating Broker-Dealer who seeks to sell New
Notes during the Applicable Period, to use its reasonable best efforts to
register or qualify, and to cooperate with the selling Holders of Transfer
Restricted Securities or each such Participating Broker-Dealer, as the case may
be, the underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as any selling Holder,
Participating
16
<PAGE>
Broker-Dealer, or the managing underwriters reasonably request in writing,
provided that where New Notes held by Participating Broker-Dealers or Transfer
Restricted Securities are offered other than through an underwritten offering,
the Issuer and the Guarantors 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
New Notes held by Participating Broker-Dealers or the Transfer Restricted
Securities covered by the applicable Registration Statement; provided that the
Issuer and the Guarantors shall not be required to (A) qualify generally to do
business or as a securities dealer in any jurisdiction where they are not then
so qualified, (B) take any action that would subject them to general service of
process in any such jurisdiction where they are not then so subject or (C)
subject themselves to taxation in excess of a nominal dollar amount in any such
jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Transfer Restricted Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities 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 (the "DTC"), and enable
such Transfer Restricted Securities to be in such denominations and registered
in such names as the managing underwriters, if any, or Holders may reasonably
request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating BrokerDealer who seeks to sell New Notes
during the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) above, as promptly as practicable prepare and (subject to
Section 5(a) hereof) file with the SEC, at the expense of the Issuer and the
Guarantors,
17
<PAGE>
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 Transfer Restricted
Securities being sold thereunder or to the purchasers of the New 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 light of the circumstances under which they were made,
not misleading.
(k) Prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, (i) provide the
Trustee with certificates for the Transfer Restricted Securities in a form
eligible for deposit with the DTC and (ii) provide a CUSIP number for the
Transfer Restricted Securities.
(l) In connection with an underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings and take all
such other actions as are reasonably requested by the managing underwriters in
order to expedite or facilitate the registration or the disposition of such
Transfer Restricted Securities, and in such connection, (i) make such
representations and warranties to the underwriters, with respect to the business
of the Issuer, the Guarantors 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, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Issuer and Guarantors and updates thereof in form and
substance reasonably satisfactory to the managing underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
underwriters; (iii) obtain "cold comfort" letters and updates thereof in form
and substance reasonably satisfactory to the managing underwriters from the
independent certified public accountants of the Issuer and the Guarantors (and,
if necessary, any other independent certified public
18
<PAGE>
accountants of any subsidiary of the Issuer or the Guarantors or of any business
acquired by any of them for which financial statements and financial data are,
or are required to be, included in the Registration Statement), addressed to
each of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings and such other matters as are reasonably requested
by underwriters as permitted by 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 parties 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 outstanding
Transfer Restricted Securities covered by such Registration Statement and the
managing underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(m) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating BrokerDealer who seeks to sell New Notes
during the Applicable Period, make available for inspection by any selling
Holder of such Transfer Restricted Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Transfer Restricted Securities, 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 properties of the Issuer, the Guarantors 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 Issuer, the Guarantors and their subsidiaries to
supply all information in each case reasonably requested by any such Inspector
in connection with such Registration Statement. Records which the
19
<PAGE>
Issuer determines, in good faith, to be confidential and any Records which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors, unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or (iii) the information in such Records has
been made generally available to the public.
(n) Provide an indenture trustee for the Transfer Restricted
Securities or the New Notes, as the case may be, and cause the Indenture to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Transfer Restricted
Securities; and in connection therewith, cooperate with the trustee under any
such indenture and the Holders of the Transfer Restricted Securities, 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.
(o) Comply with all applicable rules and regulations of the
SEC and, as soon as reasonably practicable, make generally available to its
securityholders consolidated earnings statements of the Issuer (including a
condensed consolidating footnote if required under SEC rules) (which need not be
certified by an independent public accountant) that satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
(p) If an Exchange Offer is to be consummated, upon delivery
of the Transfer Restricted Securities by Holders to the Issuer (or to such other
Person as directed by the Issuer) in exchange for the New Notes, the Issuer and
the Guarantors shall mark, or cause to be marked, on such Transfer Restricted
Securities that such Transfer Restricted Securities are being cancelled in
exchange for the New Notes; in no event shall such Transfer Restricted
Securities be marked as paid or otherwise satisfied.
20
<PAGE>
(q) Cooperate with each seller of Transfer Restricted
Securities covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(r) Use their best efforts to take all other steps necessary
to effect the registration of the Transfer Restricted Securities to be covered
by a Shelf Registration Statement.
(s) Use their best efforts to cause the Transfer Restricted
Securities or the New Notes, as applicable, covered by an effective registration
statement required by Section 2 or Section 3 hereof to be rated with appropriate
rating agencies, if so requested by the Holders of a majority in aggregate
principal amount of Transfer Restricted Securities relating to such registration
statement or the managing underwriters in connection therewith, if any.
The Issuer may require each seller of Transfer Restricted
Securities or Participating Broker-Dealer as to which any registration is being
effected to furnish to the Issuer such information regarding such seller or
Participating Broker-Dealer and the distribution of such Transfer Restricted
Securities or New Notes to be sold by such Participating Broker-Dealer, as the
case may be, as the Issuer may, from time to time, reasonably request. The
Issuer may exclude from such registration the Transfer Restricted Securities or
New Notes of any seller or Participating Broker-Dealer, as the case may be, who
fails to furnish such information within a reasonable time after receiving such
request.
Each Holder of Transfer Restricted Securities and each
Participating Broker-Dealer agrees by acquisition of such Transfer Restricted
Securities or New Notes to be sold by such Participating Broker-Dealer, as the
case may be, that, upon receipt of any notice from the Issuer of the happening
of any event of the kind described in Section 5(c)(ii), 5(c)(iv) or 5(c)(v)
hereof, such Holder shall forthwith discontinue disposition of such Transfer
Restricted Securities covered by such Registration Statement or Prospectus or
New Notes to be
21
<PAGE>
sold by such Participating Broker-Dealer, as the case may be, until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof, or until it is advised in writing by the
Issuer that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer and the Guarantors shall be borne
by the Issuer and the Guarantors, whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, 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
Transfer Restricted Securities or New Notes and determination of the eligibility
of the Transfer Restricted Securities or New Notes for investment under the laws
of such jurisdictions (x) where the Holders of Transfer Restricted Securities
are located, in the case of the New Notes, or (y) as provided in Section 5(h)
hereof, in the case of Transfer Restricted Securities or New Notes to be sold by
a Participating BrokerDealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Transfer Restricted Securities or New Notes in a form eligible for deposit with
the DTC and of printing Prospectuses if the printing of Prospectuses is
requested by the managing underwriters, if any, or, in respect of Transfer
Restricted Securities or New Notes to be sold by any Participating Broker-Dealer
during the Applicable Period, by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities included in any
Registration Statement or of such New Notes, as the case may be), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuer and the Guarantors, (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(l)(iii) hereof
(including, without limitation, the
22
<PAGE>
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Issuer and the Guarantors desire such insurance, (viii) fees
and expenses of all other Persons retained by the Issuer and the Guarantors,
(ix) internal expenses of the Issuer and the Guarantors (including, without
limitation, all salaries and expenses of officers and employees of the Issuer
and the Guarantors performing legal or accounting duties), (x) the expense of
any annual audit, (xi) the fees and expenses incurred in connection with the
listing of the securities required to be registered on any securities exchange
and (xii) the expenses relating to printing, word processing and distributing
all Registration Statements, underwriting agreements, securities sales
agreements, and indentures. Nothing contained in this Section 6 shall create an
obligation on the part of the Issuer or any Guarantor to pay or reimburse any
Holder for any underwriting commission or discount attributable to any such
Holder's Transfer Restricted Securities included in an underwritten offering
pursuant to a Registration Statement filed in accordance with the terms of this
Agreement, or to guarantee such Holder any profit or proceeds from the sale of
such Securities.
(b) In connection with any Shelf Registration hereunder, the
Issuer and the Guarantors shall reimburse the Holders of the Transfer Restricted
Securities being registered in such registration for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities to be included in such Registration Statement
and other reasonable out-of-pocket expenses of the Holders of Transfer
Restricted Securities reasonably incurred in connection with the registration of
the Transfer Restricted Securities.
7. Indemnification
The Issuer and each of the Guarantors, jointly and severally,
agree to indemnify and hold harmless (i) each of the Initial Purchasers, each
Holder of Transfer Restricted Securities, each Holder of New Notes and each
Participating Broker Dealer and (ii) each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) any of
23
<PAGE>
such persons (any of the persons referred to in this clause (ii) being
hereinafter referred to as a "controlling person"), and (iii) the respective
officers, directors, partners, employees, representatives and agents of any of
such persons or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Person") to the
fullest extent lawful, from and against any and all losses, claims, damages,
judgments, actions, costs, assessments, expenses and other liabilities
(collectively, "Liabilities"), including, without limitation and as incurred,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Person, directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, or any omission or alleged omission to state therein a
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, except insofar as such Liabilities are caused by (i) an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the
Indemnified Persons furnished to the Issuer in writing by or on behalf of such
person expressly for use therein. The Issuer shall notify you promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involves the Issuer or an Indemnified Person.
In case any action or proceeding (for all purposes of this
Section 7, including any governmental investigation) shall be brought or
asserted against any of the Indemnified Persons with respect to which indemnity
may be sought against the Issuer or any Guarantor, such Indemnified Person (or
the Indemnified Person controlled by such controlling person) promptly shall
notify the Issuer in writing unless and only to the extent that such omission
results or defenses by the Issuer and the Guarantors, as determined by a court
of competent jurisdiction by final judgment; provided that the failure to
24
<PAGE>
give such notice shall not relieve the Issuer or any Guarantor of its
obligations pursuant to this Agreement, unless and only to the extent that such
omission results in the loss or compromise of any material rights or defenses by
the Issuer and the Guarantors, as determined by a court of competent
jurisdiction by final judgment. In case any such action or proceeding shall be
brought against any Indemnified Person and it shall notify the Issuer of the
commencement thereof, the Issuer shall be entitled to participate therein and,
to the extent that it shall wish, jointly with any other indemnifying Person
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Person and shall pay as reasonably incurred the
reasonable fees and disbursements of such counsel related to such action or
proceeding. In any such action or proceeding, any Indemnified Person shall have
the right to retain its own counsel at its own expense, except that the Issuer
or any Guarantor shall pay as they are incurred the fees and expenses of counsel
retained by the Indemnified Person in the event that (i) the Issuer and the
Indemnified Person shall have mutually agreed to the retention of such counsel
or, (ii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Issuer and the Indemnified Person and
representation of both parties by the same counsel would be inappropriate, in
the reasonable opinion of the Indemnified Person, due to actual or potential
differing interests between them; provided, however, in no event shall the
Issuer or any Guarantor be required to pay the fees and expenses under this
indemnity for more than one firm of attorneys in any one legal action or group
of related legal actions in the same jurisdiction arising out of the same
general allegations or circumstances. The Issuer and the Guarantors shall not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Persons, which firm shall be
designated by Bear, Stearns. The Issuer and the Guarantors shall not, without
the prior written consent of each Indemnified Person, settle or compromise or
consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action, claim, litigation
25
<PAGE>
or proceeding in respect of which indemnification or contribution may be sought
pursuant hereto (whether or not any Indemnified Person is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all Liabilities arising
out of such action, claim, litigation or proceeding. The Issuer and Guarantors
shall not be liable for any settlement of any action or proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent or if there be a final judgment for the
plaintiff, the Issuer and Guarantors agree to indemnify the Indemnified Person
from and against any loss or liability by reason of such settlement or judgment.
Each of the Initial Purchasers agrees, severally and not
jointly, to indemnify and hold harmless the Issuer, its directors, its officers
and any person controlling (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) the Issuer, to the same extent as the
foregoing indemnity from the Issuer to each Indemnified Person, but only with
respect to claims and actions based on information relating to such Initial
Purchaser and furnished in writing by or on behalf of such Initial Purchaser
through Bear, Stearns expressly for use in any Registration Statement or
Prospectus. In case any action or proceeding (including any governmental
investigation) shall be brought or asserted against the Issuer, any of its
directors, any such officer, or any such controlling person based on the
Registration Statement, the Prospectus or any preliminary Prospectus in respect
of which indemnity is sought against any Initial Purchaser pursuant to the
foregoing sentence, the Initial Purchaser shall have the rights and duties given
to the Issuer, and the Issuer, its directors, any such officers and each such
controlling person shall have the rights and duties given to the Indemnified
Person above.
If the indemnification provided for in this Section 7 is
finally determined by a court of competent jurisdiction to be unavailable to an
Indemnified Person in respect of any Liabilities referred to herein, then each
indemnifying person, in lieu of indemnifying such Indemnified Person, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such
26
<PAGE>
Liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying person on the one hand and the Indemnified
Person on the other hand from the offering of the Securities or (ii), if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the indemnifying
parties and the Indemnified Person, as well as any other relevant equitable
considerations. The relative benefits received by the Issuer and the Guarantors,
on the one hand, and any of the Initial Purchasers (and their related
Indemnified Persons), on the other hand, 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) received by the Issuer and the
Guarantors bear to the total discounts and commissions received by such Initial
Purchaser, in each case as set forth in the Prospectus. The relative fault of
the Issuer and the Guarantors, on the one hand, and the Indemnified Party, on
the other, 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 related to information provided by the Issuer
or a Guarantor, on the one hand, or an Indemnified Party, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The indemnity and contribution
obligations of the Issuer and the Guarantors set forth herein shall be in
addition to any liability or obligation the Issuer and the Guarantors may
otherwise have to any Indemnified Person.
The Issuer, the Guarantors and the Initial Purchasers 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 Indemnified Parties were
treated as one entity for such purpose) or by any other method of allocation
which 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 or
expenses referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably
27
<PAGE>
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, none of the Initial Purchasers (and their related Indemnified
Persons) shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total discount applicable to the Securities purchased
by such Initial Purchaser exceeds the amount of any damages or Liabilities which
such Initial Purchaser (and its related Indemnified Persons) has otherwise been
required to pay or incur by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute pursuant to
this Section 7 are several in proportion to the respective aggregate principal
amount of Securities purchased by each of the Initial Purchasers hereunder and
not joint.
8. Rules 144 and 144A
The Issuer and the Guarantors covenant that they will file the
reports required to be filed by them pursuant to the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Issuer and the Guarantors are not required
to file such reports, they will, upon the request of any Holder of Transfer
Restricted Securities, make available information required by Rule 144 and Rule
144A under the Securities Act in order to permit sales pursuant to Rule 144 and
Rule 144A. The Issuer and the Guarantors further covenant that they will take
such further action as any Holder of Transfer Restricted Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
and Rule 144A under the Securities Act, as such rules may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the SEC.
28
<PAGE>
9. Underwritten Registrations
(a) If any of the Transfer Restricted Securities 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 Transfer Restricted Securities included in such
offering and reasonably acceptable to the Issuer.
No Holder of Transfer Restricted Securities may participate in
any underwritten registration hereunder, unless such Holder (a) agrees to sell
such Holder's Transfer Restricted Securities 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.
(b) Each Holder of Transfer Restricted Securities agrees, if
requested (pursuant to a timely written notice) by the managing underwriters in
an underwritten offering or placement agent in a private offering of the
Issuer's or the Guarantors' debt securities, not to effect any private sale or
distribution (including a sale pursuant to Rule 144(k) or Rule 144A under the
Securities Act, but excluding non-public sales to any of its affiliates,
officers, directors, employees and controlling persons) of any of the Securities
except pursuant to an Exchange Offer, during the period beginning 10 days prior
to, and ending 90 days after, the closing date of the underwritten offering.
The foregoing provisions shall not apply to any Holder of
Transfer Restricted Securities if such Holder is prevented by applicable statute
or regulation from
entering into any such agreement.
10. Miscellaneous
(a) Remedies. In the event of a breach by the
Issuer or any Guarantor of any of its obligations under
this Agreement, each Holder of Transfer Restricted Secu-
rities, in addition to being entitled to exercise all
29
<PAGE>
rights provided herein, in the Indenture or, in the case of the Initial
Purchasers, in the Purchase Agreement, or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Issuer and the Guarantors agree that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by any of
them of any of the provisions of this Agreement and hereby further agree that,
in the event of any action for specific performance in respect of such breach,
they shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuer and the Guarantors
have not, as of the date hereof, and they shall not, after the date of this
Agreement, enter into any agreement with respect to any of their respective
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Issuer and the Guarantors have not entered, and will not
enter, into any agreement with respect to any of their respective securities
which will grant to any Person piggy-back registration rights with respect to a
Registration Statement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Issuer has obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Transfer Restricted
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Transfer Restricted Securities may be given by
Holders of at least a majority in aggregate principal amount of the Transfer
Restricted Securities being sold by such Holders pursuant to such Registration
Statement; provided that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
30
<PAGE>
(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 handdelivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Transfer Restricted
Securities, at the most current address given by the
Trustee to the Issuer; and
(ii) if to the Issuer or the Guarantors,
Regency Health Services, Inc., 2742 Dow Avenue,
Tustin, California 92680, Attention: Chief Finan-
cial Officer, with a copy to Sidley & Austin, 555
West Fifth Street, 40th Floor, Los Angeles, Califor-
nia 90013, Attention: Moshe J. Kupietzky.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier, if made by next-day
air courier; and when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(e) Successors. Except as otherwise provided, this Agreement
has been and is made solely for the benefit of and shall be binding upon the
Issuer, the Guarantors, the Initial Purchasers, any Indemnified Person referred
to herein and Holders of the Securities (as set forth below) and their
respective successors and assigns, including, without limitation and without the
need for an express assignment, subsequent Holders of Transfer Restricted
Securities, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
Issuer and the Guarantors agree that the Holders of the Securities shall be
third party creditor beneficiaries to the agreements made hereunder by the
Initial Purchasers, the Issuer and the Guarantors, and it is expressly
understood and agreed that each purchaser of the Securities
31
<PAGE>
from the Initial Purchasers is intended to be a beneficiary of the Issuer's and
the Guarantors' covenants contained herein to the same extent as if the
Securities were sold and such covenants were made directly to such purchaser by
the Issuer or the Guarantors, as applicable, and each such purchaser shall have
the right to take action against the Issuer and the Guarantors to enforce, and
obtain damages for any breach of, such covenants.
(f) Counterparts. This Agreement may be executed in one or
more counterparts and, if executed in one or more counterpart, the executed
counterparts shall each be deemed to be an original, not all such counterparts
shall together constitute one and the same instrument.
(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 INTERNAL 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. THE ISSUER, ON BEHALF OF
ITSELF AND THE GUARANTORS, HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW
YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT
OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF
LACK OF PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.
THE ISSUER, ON BEHALF OF ITSELF AND THE GUARANTORS, IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(i) Severability. Any determination that any
provision of this Agreement may be, or is, unenforceable
shall not affect the enforceability of the remainder of
this Agreement.
32
<PAGE>
(j) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties hereto as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
33
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Very truly yours,
REGENCY HEALTH SERVICES, INC.
By: ________________________
Name:
Title:
IN WITNESS WHEREOF, I have, in the name and on behalf of the
Guarantors listed below, executed this Agreement as of the date first written
above.
By: _________________________________
Name:
Title:
GUARANTORS:
BRASWELL ENTERPRISES, INC.
BREL, INC.
BRITTANY REHABILITATION CENTER, INC.
CARE ENTERPRISES, INC.
CARE FINANCE, INC.
CARE HOME HEALTH SERVICES
CARMICHAEL REHABILITATION CENTER
CASA DE VIDA REHABILITATION CENTER
COALINGA REHABILITATION CENTER
COVINA REHABILITATION CENTER
EVERGREEN REHABILITATION CENTER
FAIRFIELD REHABILITATION CENTER
FIRST CLASS PHARMACY, INC.
FULLERTON REHABILITATION CENTER
GLENDORA REHABILITATION CENTER
GRAND TERRACE REHABILITATION CENTER
HALLMARK HEALTH SERVICES, INC.
HARBOR VIEW REHABILITATION CENTER
HAWTHORNE REHABILITATION CENTER
<PAGE>
HEALTHCARE NETWORK
HERITAGE REHABILITATION CENTER
HUNTINGTON BEACH CONVALESCENT HOSPITAL
JACKSON REHABILITATION CENTER, INC.
LINDA-MAR REHABILITATION CENTER
MEADOWBROOK REHABILITATION CENTER
MEADOWVIEW REHABILITATION CENTER
NEWPORT BEACH REHABILITATION CENTER
NORTH STATE HOME HEALTH CARE, INC.
PARADISE REHABILITATION CENTER, INC.
PASO ROBLES REHABILITATION CENTER
RHS MANAGEMENT CORPORATION
ROSE REHABILITATION CENTER
ROSEWOOD REHABILITATION CENTER, INC.
SHANDIN HILLS REHABILITATION CENTER
STOCKTON REHABILITATION CENTER, INC.
VISTA KNOLL REHABILITATION
CENTER, INC.
WILLOWVIEW REHABILITATION CENTER
AMERICARE HOMECARE, INC.
AMERICARE MIDWEST, INC.
CIRCLEVILLE HEALTH CARE CORP.
MARION HEALTH CARE CORP.
NEW LEXINGTON HEALTH CARE CORP.
SCRS & COMMUNICOLOGY, INC. OF OHIO
CARE ENTERPRISES WEST
AMERICARE OF WEST VIRGINIA, INC.
BECKLEY HEALTH CARE CORP.
DUNBAR HEALTH CARE CORP.
GLENVILLE HEALTH CARE, INC.
PUTNAM HEALTH CARE CORP.
SALEM HEALTH CARE CORP.
OASIS MENTAL HEALTH TREATMENT
CENTER, INC.
REGENCY - NORTH CAROLINA, INC.
REGENCY - TENNESSEE, INC.
<PAGE>
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
BEAR, STEARNS & CO. INC.
By: _______________________
Name:
Title:
NATIONSBANC CAPITAL MARKETS, INC.
By: _______________________
Name:
Title:
0071808.06-21S2a
36
