<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
</TABLE>
COMMISSION FILE NUMBER 0-19946
LINCARE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 51-0331330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
19337 US 19 NORTH, SUITE 500 33758
CLEARWATER, FLORIDA (Zip Code)
(Address of principal executive office)
</TABLE>
Registrant's telephone number, including area code: (813) 530-7700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Title of Class
Common Stock, $.01 par value per share
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. X Yes ___ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's common stock, $.01 par
value, held by non-affiliates of the registrant, based on the closing sale price
of the common stock on February 28, 1998, as reported in the NASDAQ National
Market System, was approximately $1,866,431,419.
As of February 28, 1998, there were 28,755,915 outstanding shares of the
registrant's common stock, par value $.01, which is the only class of capital
stock of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the 1998 Annual Meeting of Stockholders of
Lincare Holdings Inc. which will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1997.
================================================================================
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Lincare Holdings Inc. and subsidiaries ("Lincare" or the "Company") is one
of the nation's largest providers of oxygen and other respiratory therapy
services to patients in the home. The Company's customers typically suffer from
chronic obstructive pulmonary disease ("COPD"), such as emphysema, chronic
bronchitis or asthma, and require supplemental oxygen or other respiratory
therapy services in order to alleviate the symptoms and discomfort of
respiratory dysfunction. Lincare currently serves over 140,000 customers in 39
states through 308 operating centers.
On November 30, 1990, the Company acquired the outstanding capital stock of
Lincare Inc., a subsidiary of Union Carbide Corporation. The Company was formed
by investment partnerships affiliated with the venture capital firms of Welsh,
Carson, Anderson & Stowe and Summit Partners, Dean Witter Capital Corporation,
and members of the management of Lincare Inc.
THE HOME RESPIRATORY MARKET
The Company estimates that the home respiratory therapy market (including
home oxygen equipment and respiratory therapy services) had revenues of
approximately $3.3 billion in 1997, having grown by an estimated 8% to 10% per
year over the last five years. This growth reflects the significant increase in
the number of persons afflicted with COPD, which is attributable, to a large
extent, to the increasing proportion of the population over the age of 65.
Growth in the home respiratory market is further driven by the continued trend
towards treatment of patients in the home as a lower cost alternative to the
acute care setting.
BUSINESS STRATEGY
The Company's strategy is to increase its market share through internal
growth and acquisitions. Lincare focuses primarily on growth within its existing
geographic markets, which the Company believes is generally more profitable than
adding additional operating centers in new markets. In addition, the Company
expands into new geographic markets on a selective basis, either through
acquisitions or by opening new operating centers, when it believes such
expansion will enhance its business. In 1997, Lincare acquired 24 local and
regional competitors with combined annual revenues of approximately $53.0
million. These acquisitions established Lincare in one new state and expanded
its presence in the states where the Company had existing locations.
Revenue growth will be dependent upon the overall growth rate of the home
respiratory care market, as well as on opportunities to increase market share
through effective marketing efforts and selective acquisitions of local or
regional competitors. The Company believes that the growing cost containment
efforts of government and private insurance reimbursement programs and an
increasingly competitive environment have accelerated consolidation trends
within the home health care industry.
The Company will continue to concentrate on providing oxygen and other
respiratory therapy services to patients in the home and to provide home medical
equipment and other services where it believes such services will enhance the
Company's primary business. In 1997, oxygen and other respiratory therapy
services accounted for approximately 90% of the Company's revenues.
PRODUCTS AND SERVICES OF LINCARE
Lincare primarily provides oxygen and other respiratory therapy services to
patients in the home. Lincare also provides a variety of infusion therapies in
certain geographic markets. When a patient is referred to one of the Company's
operating centers by a physician, hospital discharge planner or other source,
the Company's customer representative obtains the necessary medical and
insurance coverage information and coordinates the delivery of patient care. The
prescribed therapy is administered by one of the Company's representatives in
the customer's home, where instructions and training are given to the customer
and the customer's family
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regarding appropriate equipment use and maintenance and the therapy to be
administered. Following the initial setup, Company representatives make periodic
visits to the customer's home, the frequency of which is dictated by the type of
therapy. The Company's services are coordinated with the customer's physician.
During the period that the Company performs services for a customer, the
customer remains under the physician's care and medical supervision. The Company
employs respiratory therapists and nurses to perform certain training and other
functions in connection with the Company's services. The respiratory therapists
and nurses are licensed where required by applicable law.
HOME OXYGEN EQUIPMENT. The major types of oxygen delivery equipment are
liquid oxygen systems and oxygen concentrators. Each method of delivery has
different characteristics that make it more or less suitable to specific patient
applications.
Liquid oxygen systems are thermally insulated containers of liquid
oxygen, consisting of a stationary unit and a portable unit, which are most
commonly used by ambulatory patients.
Oxygen concentrators are stationary units that provide a continuous
flow of oxygen by filtering ordinary room air. Concentrators are most
commonly used by patients confined to the home or with only minimal
mobility.
OTHER RESPIRATORY THERAPY SERVICES. Other respiratory therapy services
offered by the Company include the following:
Nebulizers and associated respiratory medications provide aerosol
therapy for patients suffering from COPD and asthma;
Non-invasive ventilation provides nocturnal ventilatory support for
neuromuscular and COPD patients. This therapy improves daytime function and
decreases incidents of acute illness;
Apnea monitors provide respiratory alarm systems for infants at risk
for sudden infant death syndrome;
Ventilators support respiratory function in severe cases of
respiratory failure where the patient can no longer sustain the mechanics
of breathing without the assistance of a machine;
Continuous positive airway pressure devices maintain open airways in
patients suffering from obstructive sleep apnea by providing airflow at
prescribed pressures during sleep;
INFUSION THERAPY. Lincare provides a variety of infusion therapies
including the following:
Parenteral nutrition involves the intravenous feeding of
life-sustaining nutrients to patients with impaired or altered digestive
tracts or conditions that prohibit adequate oral nutritional support;
Intravenous antibiotic therapy is the infusion of anti-infective
medications into the patient's bloodstream for the treatment of a variety
of infectious diseases;
Enteral nutrition is administered to patients who cannot eat as a
result of an obstruction to the upper gastrointestinal tract or other
medical condition;
Chemotherapy is the administration of cytotoxic drugs to patients
suffering from various types of cancer;
Dobutamine infusions are provided to patients to treat chronic end
stage congestive heart failure that has not responded to standard drug
therapy. These patients require a long-term venous access device and
frequent blood chemistry monitoring;
Immune globulin (IVIG) therapy is utilized for a variety of immune
disorders such as B-cell and T-cell immune deficiency, acute infections,
post transplant immunodeficiency and burns;
Continuous pain management is the administration of analgesic drugs to
patients suffering from acute or chronic pain;
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Central catheter management provides monitoring and supplies to
patients requiring access via a peripherally inserted line into the
superior vena cava.
Lincare also supplies home medical equipment, such as hospital beds,
wheelchairs and other supplies that may be required by patients.
COMPANY OPERATIONS
Management. The Company is managed at the executive level as a portfolio
of local businesses. Decentralization of managerial decision-making enables the
Company's operating centers to respond promptly and effectively to local market
demands and opportunities. The Company believes that the personalized nature of
customer requirements and referral relationships characteristic of the home
health care business mandates the Company's localized operating structure.
Each of the Company's 308 operating centers is managed by a center manager
who has responsibility and accountability for the operating and financial
performance of the center. Service and marketing functions are performed at the
local operating level, while strategic development, financial control and
operating policies are administered at the executive level. Reporting mechanisms
are in place at the operating center level to monitor performance and ensure
field accountability.
A regional management team consisting of 32 area managers directly
supervises individual operating center managers, serving as an additional
mechanism for assessing and improving performance of the Company's operations.
The Company's operating centers are served by 15 billing centers which control
all of the Company's billing and reimbursement functions.
MIS Systems. The Company believes that the proprietary management
information systems developed by the Company are one of its key competitive
advantages and provide management with a critical asset in measuring and
evaluating performance levels throughout the Company. Management reviews monthly
reports containing information critical to the evaluation process, including
revenues and profitability by individual center, accounts receivable and cash
collection management, equipment controls and utilization, customer activity,
and manpower trends. The Company has a staff of 14 full-time computer
programmers which permits the Company to continually enhance its computer
systems in order to provide timely financial and operational information and to
respond promptly to changes in reimbursement regulations and policies.
Accounts Receivable Management. The Company derives a majority of its
revenues from reimbursement by third party payors. The Company accepts
assignment of insurance benefits from customers and, in most instances, invoices
and collects payments directly from Medicare, Medicaid and private insurance
carriers, as well as directly from customers under co-insurance provisions. The
following table sets forth, for the periods indicated, the Company's payor mix.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
PAYORS ----- ----- -----
<S> <C> <C> <C>
Medicare and Medicaid programs.............................. 63% 61% 60%
Private insurance........................................... 25 27 24
Direct payment.............................................. 12 12 16
--- ---- ----
100% 100% 100%
=== ==== ====
</TABLE>
Reimbursement is a complicated process which involves submission of claims
to multiple payors, each having its own claims requirements. To operate
effectively in this environment, the Company has designed and implemented
proprietary computer systems to decrease the time required for the submission
and processing of third party payor claims. The Company's systems are capable of
tailoring the submission of claims to the specifications of the individual
payors. The Company's in-house MIS capability also enables it to adjust quickly
to any regulatory or reimbursement changes. These features serve to decrease the
processing time of
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claims by payors, resulting in a more rapid turnover of accounts receivable. In
addition, the Company is capable of submitting claims electronically to any
Medicare carrier or other third party payor that can receive electronic claims
submissions.
The Company's net accounts receivable in terms of days sales outstanding
was 52 days as of December 31, 1997 and 48 days as of December 31, 1996.
SALES AND MARKETING
Favorable trends affecting the U.S. population and home health care have
created an environment which should produce increasing demand for the services
provided by Lincare. The average age of the American population is increasing
and, as a person ages, more health care services are required. Well-documented
changes occurring in the health care industry show a trend of more services
being provided in the home and less in institutions.
Sales activities are generally carried out by the Company's full-time sales
representatives located at the Company's operating centers with assistance from
the center managers. In addition to promoting the high quality of the Company's
services, the sales representatives are trained to provide information
concerning the advantages of home respiratory care. Sales representatives are
often licensed respiratory therapists who are highly knowledgeable in the
provision of supplemental oxygen.
The Company primarily acquires new customers through referrals. The
Company's principal sources of referrals are physicians, hospital discharge
planners, prepaid health plans, clinical case managers and nursing agencies. The
Company's sales representatives maintain continual contact with these medical
professionals in order to strengthen these relationships.
The Company's current base of referral sources recognizes the Company's
reputation for providing high-quality service to patients and provides a steady
flow of customers. While the Company views its referral sources as fundamental
to its business, no single referral source accounts for more than 1.0% of the
Company's revenues. The Company has more than 140,000 active customers, and the
loss of any single customer or group of customers would not materially impact
the Company's business.
Joint Commission on Accreditation of Healthcare Organizations,
("JCAHO"). The Company has received accreditation from the JCAHO, a private
not-for-profit organization that has established voluntary standards for the
provision of home health care services, for all its operating centers.
Accreditation by the JCAHO represents a marketing benefit to the Company's
operating centers and provides for a recognized quality assurance program
throughout the Company. Several proposals have been made to require health care
providers to be accredited or licensed by independent agencies in order to
participate in government reimbursement programs, and such a requirement has
been adopted by certain private payors.
ACQUISITIONS
In 1997, the Company acquired, in unrelated acquisitions, certain operating
assets of 16 local and regional competitors and the common stock of eight
companies. The operations acquired in 1997 had aggregate annualized revenues of
approximately $53.0 million at the time of acquisition. These acquisitions
resulted in the addition of 19 new operating centers.
In 1996, the Company acquired, in unrelated acquisitions, certain operating
assets of eight local and regional competitors, the common stock of seven
companies and, in two separate transactions, the common stock and certain assets
of two related companies and the common stock and certain assets of three
related companies. The operations acquired in 1996 had aggregate annualized
revenues of approximately $44.0 million at the time of acquisition. These
acquisitions resulted in the addition of 30 new operating centers.
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<PAGE> 6
QUALITY CONTROL
The Company is committed to providing consistently high quality products
and services. The Company's quality control procedures are designed to promote
greater responsiveness and sensitivity to individual customer needs and to
provide the highest level of quality assurance and convenience to the referring
physician. Licensed respiratory therapists and registered nurses provide
professional health care support and assist in the Company's sales and marketing
efforts.
SUPPLIERS
The Company purchases its oxygen and equipment from a variety of suppliers.
The Company is not dependent upon any single supplier and believes that its
oxygen and equipment needs can be provided by several manufacturers.
COMPETITION
The home respiratory care market is a fragmented and highly competitive
market that is served by the Company and other national providers and, by
Company estimates, over 2,000 regional and local companies.
Quality of service is the single most important competitive factor within
the home respiratory care market. The relationships between a home respiratory
care company and its customers and referral sources are highly personal. There
is no incentive for either the physician or the patient to alter this
relationship so long as the home respiratory care company is providing
responsive, professional and high-quality service. Other key competitive factors
are strength of local ties to the referral community and efficiency of
reimbursement and accounts receivable management systems.
Home respiratory care companies normally compete based on service.
Reimbursement levels are established by the fee schedules promulgated by
Medicare, Medicaid or by the individual determinations of private insurance
companies. Furthermore, marketing efforts by home respiratory care companies are
directed toward referral sources which do not share financial responsibility for
the payment of services provided to customers.
MEDICARE REIMBURSEMENT
As a supplier of home oxygen and other respiratory therapy services for the
home health care market, the Company participates in Medicare Part B, the
Supplementary Medical Insurance Program, which was established by the Social
Security Act of 1965. Suppliers of home oxygen and other respiratory therapy
services have historically been heavily dependent on Medicare reimbursement due
to the high proportion of elderly suffering from respiratory disease.
On August 5, 1997, the Balanced Budget Act of 1997 ("BBA") was signed into
law. The legislation, among other things, reduces Medicare expenditures by $115
billion over five years. The BBA reduces Medicare payment amounts for oxygen and
oxygen equipment furnished after January 1, 1998, to 75 percent of the fee
schedule amounts in effect during 1997. Payment amounts for oxygen and oxygen
equipment furnished after January 1, 1999, and each subsequent year thereafter
are reduced to 70 percent of the fee schedule amounts in effect during 1997.
The BBA freezes the Consumer Price Index (U.S. urban average) update for
covered items of durable medical equipment for each of the years 1998 through
2002 while limiting fees for parenteral and enteral nutrients, supplies and
equipment to 1995 reasonable charge levels over the same period. The BBA reduces
payment amounts for covered drugs and biologicals to 95 percent of the average
wholesale price of such covered items for each of the years 1998 through 2002.
The BBA authorizes the Department of Health and Human Services to conduct
up to five competitive bidding demonstration projects for the acquisition of
durable medical equipment and requires that one such project be established for
oxygen and oxygen equipment. Each demonstration project is to be operated over a
three-year period and is to be conducted in not more than three competitive
acquisition areas. The BBA also
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includes provisions designated to reduce health care fraud and abuse including a
surety bond requirement for durable medical equipment providers.
On August 10, 1993, Congress passed the Omnibus Reconciliation Act of 1993
("OBRA 93"). The OBRA 93 legislation, among other things, provided for consumer
price index updates to Medicare fee schedule amounts for durable medical
equipment for 1995 and 1996. A Medicare fee schedule update of 2.8% was
established for durable medical equipment provided in 1997.
Federal and state budgetary and other cost-containment pressures will
continue to impact the home respiratory care industry. The Company cannot
predict what new federal and state budgetary proposals will be adopted and, if
adopted, what effect, if any, such proposals would have on the Company's
business.
GOVERNMENT REGULATION
The federal government and all states in which the Company currently
operates regulate various aspects of its business. In particular, the Company's
operating centers are subject to federal laws covering the repackaging and
dispensing of drugs (including oxygen) and regulating interstate motor-carrier
transportation. The Company's locations also are subject to state laws
governing, among other things, pharmacies, nursing services and certain types of
home health agency activities. Certain of the Company's employees are subject to
state laws and regulations governing the ethics and professional practice of
respiratory therapy, pharmacy and nursing.
As a supplier of services under the Medicare and Medicaid programs, the
Company is subject to the Medicare and Medicaid fraud and abuse laws. These
laws, among other things, prohibit any payment, kickback or rebate in return for
the referral of patients receiving benefits from Medicare, Medicaid or other
federally funded health care programs. Violations of these provisions may result
in civil and criminal penalties and exclusion from participation in such
programs.
Health care is an area of rapid regulatory change. Changes in the law or
new interpretations of existing laws can have an effect on permissible
activities, the relative costs associated with doing business, and the amount of
reimbursement by government and third party payors. The Company cannot predict
the future course of federal, state and local regulation or legislation,
including Medicare and Medicaid statutes and regulations, and of possible
changes in national health care policies, including those pertaining to managed
care organizations. Future legislative and regulatory changes could have an
adverse impact on the Company.
YEAR 2000 REMEDIATION PROGRAM
The Company has assessed the impact of the upcoming change in the century
and has begun converting many of its computer software programs and information
systems to be Year 2000 compliant. The cost to the Company of converting its
existing computer systems is not material in nature and the Company does not
expect the Year 2000 issue, with respect to the remediation of its own systems,
to have a material effect on its future financial results. However, the Company
is highly dependent upon government and private third party payors for payment
of claims for services and equipment. The Company cannot be assured of the
timely remediation of third party claims processing and reimbursement systems.
The failure by a significant government or private payor to correct Year 2000
systems issues, to the extent that such issues delay or prevent timely or
appropriate payment of claims, could have a material impact on the Company's
cash flow from operations. The Company is monitoring the Year 2000 progress of
Medicare payors and other significant government agencies and private payors to
determine the potential impact to the Company.
INSURANCE
The Company currently has in force general liability and product liability
insurance, each with a coverage limit of $10.0 million. In addition, the Company
has professional liability insurance with a coverage limit of $1.0 million per
occurrence and $3.0 million in the aggregate. The Company's product liability
insurance provides coverage on a claims-made basis, while its general and
professional liability insurance are on an
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occurrence basis. All policies are subject to annual renewal and the Company
anticipates adequate amounts of insurance coverage to be available at such
renewal dates.
EMPLOYEES
As of February 28, 1998, the Company had approximately 3,500 employees.
None of the Company's employees are currently covered by collective bargaining
agreements. The Company believes that the relations between the Company's
management and its employees are good.
ENVIRONMENTAL MATTERS
Management believes that the Company is currently in compliance, in all
material respects, with applicable federal, state and local statutes and
ordinances regulating the discharge of hazardous materials into the environment.
Management does not believe it will be required to expend any material amounts
in order to remain in compliance with these laws and regulations or that such
compliance will materially affect its capital expenditures, earnings or
competitive position.
ITEM 2. PROPERTIES
All but one of the Company's 308 operating center locations are leased from
third parties. Each operating center is a combination warehouse and office, with
warehouse space generally comprising approximately 50% of the facility.
Warehouse space is used for storage of adequate supplies of equipment necessary
to conduct the Company's business. The Company also leases a headquarters
facility and 15 separate billing centers.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain other claims and legal actions arising
in the ordinary course of business. In the opinion of the Company, the ultimate
disposition of all matters will not have a material adverse impact on the
Company's financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of 1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market System
under the symbol LNCR. The following table sets forth the high and low closing
sale prices as reported by NASDAQ for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997
First quarter............................................... $44.25 $36.00
Second quarter.............................................. 44.50 35.25
Third quarter............................................... 53.75 40.00
Fourth quarter.............................................. 59.00 50.00
1996
First quarter............................................... $34.00 $24.75
Second quarter.............................................. 43.50 32.75
Third quarter............................................... 42.25 36.00
Fourth quarter.............................................. 42.88 35.25
</TABLE>
There were approximately 232 holders of record of the common stock as of
February 28, 1998.
The Company has not paid any cash dividends on its capital stock and does
not anticipate paying cash dividends in the foreseeable future. It is the
present intention of the Company's Board of Directors to retain all earnings in
the Company in order to support the future growth of the Company's business.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below under the caption
"Statements of Operations Data" for the years ended December 31, 1997, 1996,
1995, 1994, and 1993 are derived from the consolidated financial statements of
the Company, which consolidated financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants.
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The data set forth below is qualified by reference to, and should be read
in conjunction with, the consolidated financial statements and related notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in this report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues................................ $443,181 $348,870 $274,800 $201,142 $154,506
Cost of goods and services.................. 65,932 53,711 41,329 29,058 21,115
Operating expenses.......................... 93,830 75,158 60,272 44,347 34,388
Selling, general and administrative
expenses.................................. 90,225 71,259 57,275 43,249 34,623
Bad debt expense............................ 4,432 3,472 2,190 1,546 1,832
Depreciation expense........................ 27,603 20,790 16,511 13,403 11,764
Amortization expense........................ 14,229 13,128 11,099 7,281 4,695
Non-recurring expense(1).................... 15,557 3,932 1,921 -- --
-------- -------- -------- -------- --------
Operating income............................ 131,373 107,420 84,203 62,258 46,089
Interest income............................. 202 153 294 434 611
Interest expense............................ 1,161 497 892 473 387
Gain (loss) on disposal of property and
equipment................................. (93) (80) 68 101 233
-------- -------- -------- -------- --------
Income before income taxes.................. 130,321 106,996 83,673 62,320 46,546
Income tax expense.......................... 50,173 40,422 32,634 24,367 18,294
-------- -------- -------- -------- --------
Net income available for common............. $ 80,148 $ 66,574 $ 51,039 $ 37,953 $ 28,252
======== ======== ======== ======== ========
Income per common share:
Basic..................................... $ 2.82 $ 2.38 $ 1.86 $ 1.43 $ 1.09
======== ======== ======== ======== ========
Diluted................................... $ 2.73 $ 2.31 $ 1.79 $ 1.34 $ 1.01
======== ======== ======== ======== ========
Weighted average number of common shares
outstanding............................... 28,419 27,998 27,511 26,629 25,852
======== ======== ======== ======== ========
Weighted average number of common shares and
common share equivalents outstanding...... 29,328 28,863 28,567 28,294 27,881
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) In 1997 the Company recorded a non-recurring expense of $15,557,000 of which
$11,849,000 was related to the write-off of obsolete capital equipment and
$3,708,000 was related to an impairment write down of intangible assets
(see Note 11 to the consolidated financial statements). In 1996 the Company
recorded a non-recurring expense of $3,932,000 of which $2,682,000 was
related to the restructuring of certain senior management employment
agreements and $1,250,000 was related to the resolution of an investigation
and associated legal expenses. In 1995 the Company recorded a non-recurring
expense of $1,921,000 related to the abandoned merger between the Company
and Coram Healthcare Corporation. Such non-recurring expense was comprised
of (a) $1,448,000 of professional fees, (b) $199,000 of printing and
mailing expenses, (c) $153,000 of filing fees, and (d) $121,000 of other
direct costs.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 42,106 $ 23,633 $ 16,510 $ 18,517 $ 35,642
Total assets................................ 440,388 347,408 260,206 195,778 147,084
Long-term obligations, excluding current
installments.............................. 4,602 8,234 7,383 6,717 7,512
Stockholders' equity........................ 393,067 299,248 221,383 162,088 117,058
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company continues to pursue its strategy of focusing on increasing
market share within its existing geographical markets, through internal growth
and through selective acquisitions of regional or local competitors. In
addition, the Company will continue to expand into new geographical markets on a
selective basis, either through acquisitions or by opening new operating
centers, when the Company believes it will enhance its business. The Company's
focus remains primarily on oxygen and other respiratory therapy services, which
represents approximately 90% of the Company's revenues.
NET REVENUES
The following table sets forth for the periods indicated a summary of the
Company's net revenues by source:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Oxygen and other respiratory therapy................... $397,390 $316,816 $250,287
Home medical equipment and other....................... 45,791 32,054 24,513
-------- -------- --------
Total........................................ $443,181 $348,870 $274,800
======== ======== ========
</TABLE>
Net revenues for the year ended December 31, 1997 increased by $94,311,000
(or 27.0%) over 1996. Net revenues for the year ended December 31, 1996
increased by $74,070,000 (or 27.0%) over 1995. The increases are attributable to
the Company's sales and marketing efforts that emphasize quality and customer
service, and the effect of the acquisitions completed by the Company. The
Company estimates that approximately $45,561,000 of the increase in revenues for
year ended December 31, 1997, and $37,905,000 of the increase in revenues for
the year ended December 31, 1996, were attributable to the acquired businesses.
Approximately $41,950,000 of the net revenue increase for the year ended
December 31, 1997 and $31,265,000 for the year ended December 31, 1996, were
attributable to volume growth in the Company's business.
The Company experienced price increases in each of the years 1997, 1996,
and 1995 from Medicare consumer price index updates for durable medical
equipment of 2.8%, 3.0%, and 2.5%, respectively. The company estimates that
price increases from Medicare and other third party payors increased revenue by
$6,800,000, $4,900,000, and $3,100,000 in the years 1997, 1996, and 1995,
respectively.
The Balanced Budget Act of 1997 ("BBA") was signed into law on August 5,
1997. The legislation, among other things, reduces Medicare expenditures by $115
billion over five years. The BBA reduces Medicare payment amounts for oxygen and
oxygen equipment furnished after January 1, 1998, to 75 percent of the fee
schedule amounts in effect during 1997. Payment amounts for oxygen and oxygen
equipment furnished after January 1, 1999, and each subsequent year thereafter
are reduced to 70 percent of the fee schedule amounts in effect during 1997.
The BBA freezes the Consumer Price Index (U.S. urban average) update for
covered items of durable medical equipment for each of the years 1998 through
2002 while limiting fees for parenteral and enteral nutrients, supplies and
equipment to 1995 reasonable charge levels over the same period. The BBA reduces
payment amounts for covered drugs and biologicals to 95 percent of the average
wholesale price of such covered items for each of the years 1998 through 2002.
COST OF GOODS AND SERVICES
Cost of goods and services as a percentage of net revenues was 14.9% for
the year ended December 31, 1997 and was 15.4% and 15.0% for the years ended
December 31, 1996 and 1995, respectively. The decrease in 1997 is attributable
to the maturity of the Company's respiratory pharmacy operations which commenced
operations in the fourth quarter of 1996.
10
<PAGE> 12
OPERATING AND OTHER EXPENSES
The Company continues to maintain a cost structure that, with increased net
revenues, has permitted the Company to spread its fixed operating expenses and
overhead over a larger base of revenues, resulting in improvement in operating
income. Operating expenses expressed as a percentage of net revenues for the
years ended December 31, 1997, 1996, and 1995 were 21.2%, 21.5%, and 21.9%,
respectively. Selling, general and administrative expenses expressed as a
percentage of net revenues for the years ended December 31, 1997, 1996, and 1995
were 20.4%, 20.4%, and 20.8%, respectively.
Bad debt expense as a percentage of net revenues was 1.0% for the years
ended December 31, 1997 and 1996 and 0.8% for the year ended December 31, 1995.
Depreciation expense as a percentage of net revenues increased to 6.2% for
the year ended December 31, 1997 compared with 6.0% for the years ended December
31, 1996 and 1995. The Company's increased depreciation expense reflects
increased capital expenditures primarily for additional oxygen and respiratory
therapy equipment to service the Company's growing customer base.
AMORTIZATION EXPENSE
The Company's net intangible assets were $253,731,000 as of December 31,
1997. Of this total, $5,262,000 (consisting of the value assigned to customer
lists) is being amortized over a period of 3 years, $2,869,000 (consisting of
various covenants not to compete) over a period of three to five years, and
$245,600,000 (consisting of goodwill) over a period of 40 years.
During 1997, the Company amortized $14,229,000 of its intangible assets
compared to $13,128,000 in 1996 and $11,099,000 in 1995.
OPERATING INCOME
As shown in the table below, operating income before non-recurring expense
for the year ended December 31, 1997 increased by $35,578,000 over 1996. In
1997, the Company recorded a non-recurring expense of $15,557,000 relating to
the write-off of obsolete capital equipment and an impairment write down of
intangible assets. Operating income before non-recurring expense for the year
ended December 31, 1996 increased by $25,228,000 over 1995. In 1996, the Company
recognized a non-recurring charge of $3,932,000 related to the restructuring of
certain senior management employment agreements and the resolution of an
investigation. The percentage increases in operating income are attributable to
the Company's continued revenue growth, while maintaining effective control over
expenses.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating income before non-recurring expense.............. $146,930 $111,352 $ 86,124
Percentage of net revenues................................. 33.2% 31.9% 31.3%
</TABLE>
INTEREST EXPENSE
Interest expense for the year ended December 31, 1997 was $1,161,000,
compared to $497,000 and $892,000 for the years ended December 31, 1996 and
1995, respectively. The respective increase or decrease in interest expense for
the years 1997, 1996, and 1995 is primarily attributable to fluctuations in the
average borrowings outstanding under the Company's then effective loan
agreements.
INCOME TAXES
The Company's effective income tax rate was 38.5% for the year ended
December 31, 1997, 37.8% for 1996 and 39.0% for 1995.
11
<PAGE> 13
ACQUISITIONS
In 1997, the Company acquired, in unrelated acquisitions, certain operating
assets of 16 local and regional competitors and the common stock of eight
companies. The operations acquired in 1997 had aggregate annualized revenues of
approximately $53.0 million at the time of acquisition. The cost of these
acquisitions was $79.7 million and was allocated to acquired assets as follows:
$4.5 million to current assets, $3.8 million to property and equipment, $6.9
million to intangible assets, and $64.5 million to goodwill. These acquisitions
resulted in the addition of 19 new operating centers.
In 1996, the Company acquired, in unrelated acquisitions, certain operating
assets of eight local and regional competitors, the common stock of seven
companies and, in two separate transactions, the common stock and certain assets
of two related companies and the common stock and certain assets of three
related companies. The operations acquired in 1996 had aggregate annualized
revenues of approximately $44.0 million at the time of acquisition. The cost of
these acquisitions was $73.1 million and was allocated to acquired assets as
follows: $6.4 million to current assets, $3.2 million to property and equipment,
$6.4 million to intangible assets, and $57.1 million to goodwill. These
acquisitions resulted in the addition of 30 new operating centers.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company's working capital was $42,106,000, as
compared to $23,633,000 at December 31, 1996, and $16,510,000 at December 31,
1995.
Net cash provided by operating activities was $126,550,000 for the year
ended December 31, 1997, compared with $106,883,000 for the year ended December
31, 1996, and $79,523,000 for the year ended December 31, 1995. A significant
portion of the Company's assets consists of accounts receivables from third
party payors that provide reimbursement for the services provided by the
Company. Because of the Company's ability to collect its accounts receivable on
a timely basis, the Company has not been required to obtain interim financing of
its accounts receivable to satisfy operating needs.
Net cash used in investing and financing activities amounted to
$124,013,000, $106,351,000 and $94,537,000 for the years ended December 31,
1997, 1996 and 1995, respectively. Activity in the year ended December 31, 1997
included the Company's investment of $66,249,000 in business acquisitions,
investment in capital equipment of $50,676,000, proceeds of $100,500,000 from
its revolving credit loan and other long-term obligations, and payments of
$115,073,000 related to long-term obligations.
As of December 31, 1997, the Company's principal sources of liquidity
consisted of $42,106,000 of working capital and $96,000,000 available under its
revolving credit loan and line of credit. On November 25, 1997, the Company
entered into a new revolving credit loan and line of credit, increasing its
borrowing capacity from $50,000,000 to $100,000,000. The Company believes that
internally generated funds, together with funds that may be borrowed under such
credit facility, will be sufficient to meet the Company's anticipated capital
requirements for the foreseeable future.
The Company anticipates that capital expenditures for 1998 will be
approximately $60,000,000. The Company believes that it will be able to generate
sufficient funds internally to meet its short-term and long-term capital
expenditure requirements.
The Company's future liquidity will continue to be dependent upon its
operating cash flow and management of accounts receivable. The Company is not
aware of any impact on liquidity due to pending litigation arising in the
ordinary course of business.
NEW ACCOUNTING STANDARDS
For 1998 the Company will be required to adopt Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", No. 131
"Disclosures About Segments of An Enterprise and Related Information", and No.
132 "Employers' Disclosure about Pensions and Other Postretirement Benefits."
Statement 130 establishes rules for reporting and displaying comprehensive
income. Comprehensive income is
12
<PAGE> 14
defined as essentially all changes in stockholders' equity exclusive of
transactions with owners. The Company has no items to be reported as
comprehensive income; therefore, adoption of this standard is not expected to
have a material effect on the Company's financial statements. Statement No. 131
requires the disclosure of selected information about operating segments based
on a "management approach." Under the management approach, the operating
segments are determined based on the organization units that the Company's
management uses internally to monitor performance and make operating decisions.
The Company operates in one segment and does not expect the implementation of
this standard to have a significant effect on future financial statement
disclosures. Statement No. 132 standardizes the disclosure requirements of
previous Statements No. 87 (Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits), and
No. 106 (Employers' Accounting for Postretirement Benefits Other Than Pensions).
Statement No. 132 disclosure requirements for the Company's defined contribution
plan are substantially unchanged; therefore, adoption of this standard is not
expected to have a significant effect on future financial statement disclosures.
INFLATION
The Company has not experienced large increases in either the cost of
supplies or operating expenses due to inflation. Because of restrictions on
reimbursement by government and private medical insurance programs and the
pressures to contain the costs of such programs, the Company bears the risk that
reimbursement rates set by such programs will not keep pace with inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are listed in Item 14(a)(1)
and are submitted at the end of this Annual Report on Form 10-K. The
supplementary data required by this Item is included on page S-1. The financial
statements and supplementary data are herein incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is included in the definitive proxy statement for
the Annual Meeting of Stockholders to be held May 11, 1998, under "Information
Regarding the Board of Directors and Executive Officers" and is herein
incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is included in the definitive proxy statement for
the Annual Meeting of Stockholders to be held May 11, 1998, under "Executive
Compensation" and is herein incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is included in the definitive proxy statement for
the Annual Meeting of Stockholders to be held May 11, 1998, under "Security
Ownership of Principal Stockholders and Management" and is herein incorporated
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
13
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of Lincare Holdings
Inc. and subsidiaries are filed as part of this Form 10-K starting at page F-1:
Independent Auditors' Report
Consolidated Balance Sheets -- December 31, 1997 and 1996
Consolidated Statements of Operations -- Years ended December 31, 1997,
1996, and 1995.
Consolidated Statements of Stockholders' Equity -- Years ended December
31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows -- Years ended December 31, 1997,
1996, and 1995
Notes to Consolidated Financial Statements
(2) The following consolidated financial statement schedule of Lincare
Holdings Inc. and subsidiaries is included in this Form 10-K at page S-1:
Schedule VIII -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and
therefore have been omitted.
(3) Exhibits included or incorporated herein:
See Exhibit Index.
(b) The Company did not file a Current Report on Form 8-K during the three
months ended December 31, 1997.
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LINCARE HOLDINGS INC.
/s/ PAUL G. GABOS
-------------------------------------
Paul G. Gabos
Secretary, Chief Financial and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<C> <S> <C>
/s/ JAMES T. KELLY Chairman of the Board March 26, 1998
- ------------------------------------------------
James T. Kelly
/s/ JOHN P. BYRNES Director, President and Chief March 26, 1998
- ------------------------------------------------ Executive Officer
John P. Byrnes
/s/ PAUL G. GABOS Secretary, Chief Financial and March 26, 1998
- ------------------------------------------------ Principal Accounting Officer
Paul G. Gabos
/s/ CHESTER B. BLACK Director March 26, 1998
- ------------------------------------------------
Chester B. Black
/s/ FRANK T. CARY Director March 26, 1998
- ------------------------------------------------
Frank T. Cary
/s/ WILLIAM F. MILLER, III Director March 26, 1998
- ------------------------------------------------
William F. Miller, III
/s/ ANDREW M. PAUL Director March 26, 1998
- ------------------------------------------------
Andrew M. Paul
/s/ THOMAS O. PYLE Director March 26, 1998
- ------------------------------------------------
Thomas O. Pyle
</TABLE>
15
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Lincare Holdings Inc.:
We have audited the consolidated financial statements of Lincare Holdings
Inc. and subsidiaries as listed in the index on page 14. In connection with our
audits of the consolidated financial statements, we also have audited the
consolidated financial statement schedule listed in the index on page 14. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used, and significant estimates made, by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lincare
Holdings Inc. and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
January 28, 1998
F-1
<PAGE> 18
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,078 $ 1,541
Accounts and notes receivable (note 2).................... 68,383 51,090
Income taxes receivable................................... 2,530 187
Inventories............................................... 1,542 1,689
Prepaid expenses.......................................... 516 466
-------- --------
Total current assets.............................. 77,049 54,973
-------- --------
Property and equipment (notes 3 and 4)...................... 181,438 150,598
Less accumulated depreciation............................... 73,148 57,068
-------- --------
Net property and equipment........................ 108,290 93,530
-------- --------
Other assets:
Goodwill, less accumulated amortization of $16,954 in 1997
and $11,135 in 1996.................................... 245,600 184,817
Intangible assets, less accumulated amortization of
$36,457 in 1997
and $30,036 in 1996.................................... 5,262 8,867
Covenants not to compete, less accumulated amortization of
$9,531 in 1997
and $7,543 in 1996..................................... 2,869 4,478
Other..................................................... 1,318 743
-------- --------
Total other assets................................ 255,049 198,905
-------- --------
$440,388 $347,408
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations (note 5).... $ 8,580 $ 5,783
Accounts payable.......................................... 14,390 16,958
Accrued expenses:
Compensation and benefits.............................. 8,781 6,895
Other.................................................. 3,192 1,704
-------- --------
Total current liabilities......................... 34,943 31,340
-------- --------
Long-term obligations, excluding current installments (note
5)........................................................ 4,602 8,234
Deferred income taxes (note 6).............................. 6,861 7,681
Minority interest........................................... 915 905
Stockholders' equity (notes 6, 7, and 8):
Common stock, $.01 par value. Authorized 50,000,000
shares; issued and outstanding 28,720,545 in 1997 and
28,254,996 in 1996..................................... 287 282
Additional paid-in capital................................ 111,001 97,335
Retained earnings......................................... 281,779 201,631
-------- --------
Total stockholders' equity........................ 393,067 299,248
Commitments and contingencies (notes 4 and 14)..............
-------- --------
$440,388 $347,408
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 19
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues (note 9).................................. $443,181 $348,870 $274,800
-------- -------- --------
Costs and expenses:
Cost of goods and services........................... 65,932 53,711 41,329
Operating expenses................................... 93,830 75,158 60,272
Selling, general and administrative expenses......... 90,225 71,259 57,275
Bad debt expense..................................... 4,432 3,472 2,190
Depreciation expense................................. 27,603 20,790 16,511
Amortization expense................................. 14,229 13,128 11,099
Non-recurring expense (note 11)...................... 15,557 3,932 1,921
-------- -------- --------
311,808 241,450 190,597
-------- -------- --------
Operating income............................. 131,373 107,420 84,203
-------- -------- --------
Other income (expenses):
Interest income...................................... 202 153 294
Interest expense..................................... (1,161) (497) (892)
Net gain (loss) on disposal of property and
equipment......................................... (93) (80) 68
-------- -------- --------
(1,052) (424) (530)
-------- -------- --------
Income before income taxes................... 130,321 106,996 83,673
Income tax expense (note 6)............................ 50,173 40,422 32,634
-------- -------- --------
Net income................................... $ 80,148 $ 66,574 $ 51,039
======== ======== ========
Income per common share (note 10):
Basic................................................ $ 2.82 $ 2.38 $ 1.86
======== ======== ========
Diluted.............................................. $ 2.73 $ 2.31 $ 1.79
======== ======== ========
Weighted average number of common shares outstanding... 28,419 27,998 27,511
======== ======== ========
Weighted average number of common shares and common
share equivalents outstanding........................ 29,328 28,863 28,567
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 20
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balances at December 31, 1994........................ $271 $ 77,799 $ 84,018 $162,088
Exercise of stock options (note 8)................... 6 2,800 -- 2,806
Tax benefit related to exercise of employee stock
options (notes 6 and 8)............................ -- 5,450 -- 5,450
Net income........................................... -- -- 51,039 51,039
---- -------- -------- --------
Balances at December 31, 1995........................ 277 86,049 135,057 221,383
Exercise of stock options (note 8)................... 5 4,895 -- 4,900
Tax benefit related to exercise of employee stock
options (notes 6 and 8)............................ -- 6,391 -- 6,391
Net income........................................... -- -- 66,574 66,574
---- -------- -------- --------
Balances at December 31, 1996........................ 282 97,335 201,631 299,248
Exercise of stock options (note 8)................... 5 7,113 -- 7,118
Tax benefit related to exercise of employee stock
options (notes 6 and 8)............................ -- 6,553 -- 6,553
Net income........................................... -- -- 80,148 80,148
---- -------- -------- --------
Balances at December 31, 1997........................ $287 $111,001 $281,779 $393,067
==== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 21
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 80,148 $ 66,574 $ 51,039
Adjustments to reconcile net income to net cash provided
by operating activities:
Increase in provision for losses on accounts and notes
receivable........................................... (750) (1,433) (1,989)
Depreciation expense................................... 27,603 20,790 16,511
Loss (gain) on disposal of property and equipment...... 93 80 (68)
Amortization expense................................... 14,229 13,128 11,099
Amortization of imputed interest....................... 22 80 130
Deferred income taxes.................................. (1,549) 1,090 2,369
Minority interest in net earnings of subsidiary........ 254 252 196
Non-recurring expense (note 11)........................ 15,557 -- --
Change in operating assets and liabilities:
Increase in accounts and notes receivable............ (13,698) (6,883) (5,524)
Decrease (increase) in inventories................... 441 (256) (53)
(Increase) decrease in prepaid expenses.............. (118) 81 78
(Decrease) increase in accounts payable.............. (2,568) 6,743 336
Increase (decrease) in accrued expenses.............. 2,676 (339) 1,927
Decrease in income taxes............................. 4,210 6,976 3,472
--------- --------- ---------
Net cash provided by operating activities......... 126,550 106,883 79,523
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment.............. 127 276 1,269
Capital expenditures...................................... (50,676) (38,241) (30,148)
Increase in other assets.................................. (575) (524) (13)
Business acquisitions, net of cash acquired (note 13)..... (66,249) (64,764) (58,590)
--------- --------- ---------
Net cash used by investing activities............. (117,373) (103,253) (87,482)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term obligations....................... 101,559 58,000 44,506
Payment of long-term obligations.......................... (115,073) (65,772) (54,247)
Decrease in minority interest............................. (244) (226) (120)
Proceeds from issuance of common stock.................... 7,118 4,900 2,806
--------- --------- ---------
Net cash used by financing activities............. (6,640) (3,098) (7,055)
--------- --------- ---------
Net increase (decrease) in cash................... 2,537 532 (15,014)
Cash and cash equivalents, beginning of year................ 1,541 1,009 16,023
--------- --------- ---------
Cash and cash equivalents, end of year...................... $ 4,078 $ 1,541 $ 1,009
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 22
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996, AND 1995
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Lincare Holdings Inc. and subsidiaries (the "Company") provides oxygen,
respiratory therapy services, and infusion therapy services to the home health
care market and also supplies home medical equipment, such as hospital beds,
wheelchairs and other medical supplies. The Company's customers are located in
39 states. The Company's supplies are readily available and the Company is not
dependent on a single supplier or even a few suppliers.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Significant estimates included in these financial statements are related
to the allowance for uncollectible accounts and self-insurance accruals. Actual
results could differ from those estimates.
(c) Principles of Consolidation
The consolidated financial statements include the accounts of Lincare
Holdings Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
(d) Revenue Recognition
Revenues are recognized on an accrual basis in the period in which services
and related products are provided to patients and are recorded at net realizable
amounts estimated to be received from patients and third party payors.
(e) Financial Instruments
The Company believes the book value of its cash equivalents, accounts and
notes receivable, income taxes receivable, accounts payable and accrued expenses
approximates fair value due to their short-term nature. The book value of the
Company's credit facility and long-term obligations approximates their fair
value as the current interest rates approximate rates at which similar types of
borrowing arrangements could be currently obtained by the Company. The Company
had no derivative financial instruments at December 31, 1997 or 1996.
(f) Inventories
Inventories, consisting of equipment, supplies and replacement parts, are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
(g) Property and Equipment
Property and equipment is stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over the estimated useful
lives of the assets as set forth in the table below.
<TABLE>
<S> <C>
Land improvements........................................... 15 years
Buildings and improvements.................................. 5 to 40 years
Equipment and furniture..................................... 3 to 11 years
</TABLE>
F-6
<PAGE> 23
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Leasehold improvements are amortized on the straight-line method over the
lesser of the lease term or estimated useful life of the asset. Amortization is
included with depreciation expense.
(h) Other Assets
Goodwill results from the excess of cost over net assets of acquired
businesses and is amortized on a straight-line basis over 40 years.
Intangible assets (customer base) are amortized on a straight-line basis
over the estimated life of three years.
Covenants not to compete are amortized on a straight-line basis over the
life of the respective covenants, three to five years.
The Company annually evaluates goodwill and other intangible assets by
utilizing an operating income realization test. In addition, the Company
considers the effects of external changes to the Company's business environment,
including competitive pressures, market changes and technological and regulatory
changes.
(i) Income Taxes
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
recovered or settled. The effect on deferred taxes of a change in tax rate is
recognized in income in the period that includes the enactment date.
(j) Pension Plan
The Company has a defined contribution pension plan covering substantially
all employees. The Company makes monthly contributions to the plan equal to the
amount accrued for pension expense. Employer contributions (net of applied
forfeitures) were approximately $1,895,000 in 1997, $1,362,000 in 1996, and
$1,271,000 in 1995.
(k) Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers all
short-term investments with a purchased maturity of three months or less to be
cash equivalents.
(l) Stock Options
Prior to January 1, 1995, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1995, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25, and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
F-7
<PAGE> 24
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(m) New Accounting Standards
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share". It replaces the standards for computing
earnings per share (EPS) under APB Opinion No. 15, "Earnings Per Share" and
makes the computations comparable to international EPS standards. The Company
adopted this statement for financial statements issued for the period ending
December 31, 1997 and restated all prior period EPS data presented accordingly.
Also in 1997, the Company adopted Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure", which
designates certain disclosure requirements for public entities. The Company
adopted this statement for financial statements issued for the period ended
December 31, 1997. As the Company already disclosed any information required by
SFAS No. 129, adoption of this statement did not have any effect on the
financial disclosures of the Company.
(2) ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable at December 31, 1997 and 1996 consist of:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Trade....................................................... $76,161 $56,697
Other....................................................... 173 310
------- -------
76,334 57,007
Less allowance for uncollectible accounts................... 7,951 5,917
------- -------
$68,383 $51,090
======= =======
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1996 consist of:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements....................................... $ 85 $ 85
Building and improvements................................... 1,151 1,344
Equipment and furniture..................................... 180,202 149,169
-------- --------
$181,438 $150,598
======== ========
</TABLE>
Rental equipment of approximately $138,667,000 in 1997 and $118,719,000 in
1996 are included with equipment and furniture.
(4) LEASES
The Company has several noncancelable operating leases, primarily for
buildings, office equipment and vehicles, that expire over the next five years
and provide for purchase or renewal options. Operating lease expense was
approximately $16,012,000 in 1997, $12,617,000 in 1996, and $9,781,000 in 1995.
F-8
<PAGE> 25
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998........................................................ $13,219
1999........................................................ 9,237
2000........................................................ 5,571
2001........................................................ 2,341
2002........................................................ 563
-------
Total minimum lease payments...................... $30,931
=======
</TABLE>
(5) LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1997 and 1996 consist of:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under revolving credit portion of bank credit
agreement bearing interest at the Interbank Offered Rate
(5.96% at December 31, 1997), adjusted for changes in
reserve requirements, plus an applicable margin based upon
the Company's consolidated leverage ratio (consolidated
funded indebtedness to consolidated EBITDA) payable in
2000...................................................... $4,000 $9,000
Unsecured, deferred acquisition obligations net of imputed
interest, payable in various installments through 1998.... 8,225 4,890
Computer equipment purchases financed through installment
loans; interest (4.17% to 4.52%) and principal are payable
monthly through 2000...................................... 957 127
------ ------
Total long-term obligations....................... 13,182 14,017
Less: current installments........................ 8,580 5,783
------ ------
Long-term debt, excluding current installments.... $4,602 $8,234
====== ======
</TABLE>
The credit agreement with a commercial bank dated November 25, 1997 permits
the Company to borrow amounts up to $75,000,000 on a revolving credit facility
and $25,000,000 on a line of credit facility. The revolving credit facility has
a termination date of three years from the date of the credit agreement
(November 24, 2000) and the line of credit has a termination date of 364 days
from the date of the credit agreement (November 24, 1998). Outstanding
borrowings under the line of credit at the termination date of the facility may
be converted to a term loan at the option of the Company and shall mature on the
revolving credit facility termination date. At December 31, 1997, there were no
borrowings outstanding on the line of credit. Upon entering into the credit
agreement, an origination fee of $150,000 was paid and is being amortized over
three years. Commitment fees on the unused portion of the facilities (.175% on
the revolving credit facility and .125% on the line of credit at December 31,
1997) are based upon the Company's consolidated leverage ratio for the most
recent four fiscal quarters. Interest accrued on the outstanding principal
balance that is not termed for repayment is payable quarterly. The credit
agreement contains several financial and other covenants and is secured by a
pledge of the stock of the wholly-owned subsidiaries of Lincare Holdings Inc.
Unamortized imputed interest on the deferred acquisition obligations and
installment loans at 4.17% to 8.25% was $103,000 in 1997 and $4,000 in 1996.
F-9
<PAGE> 26
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate maturities of long-term obligations for each of the five
years subsequent to December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 8,580
1999........................................................ 344
2000........................................................ 4,258
2001........................................................ --
2002........................................................ --
-------
$13,182
=======
</TABLE>
(6) INCOME TAXES
The tax effects of temporary differences that account for significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
uncollectible
accounts............................................... -- $(1,748)
Accrued expenses, principally due to deferral for income
tax reporting purposes................................. (3,388) (2,311)
Intangible assets and covenants not to compete,
principally due to differences in amortization......... (7,927) (4,431)
Net operating loss carryforward........................... (220) (489)
-------- -------
Total gross deferred tax assets................... (11,535) (8,979)
-------- -------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation........................................... 9,524 9,291
Goodwill, principally due to differences in
amortization........................................... 6,415 4,232
Other..................................................... 2,457 3,137
-------- -------
Total gross deferred tax liabilities.............. 18,396 16,660
-------- -------
Net deferred tax liability........................ $ 6,861 $ 7,681
======== =======
</TABLE>
There is no valuation allowance for deferred tax assets. The Company
expects that the results of future operations will generate sufficient taxable
income to allow for the utilization of deferred tax assets.
F-10
<PAGE> 27
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense attributable to operations consists of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................. $44,641 $35,149 $27,164
State................................................... 7,081 4,183 3,102
------- ------- -------
Total current................................... $51,722 $39,332 $30,266
Deferred:
Federal................................................. (1,347) 959 2,072
State................................................... (202) 131 296
------- ------- -------
Total deferred.................................. (1,549) 1,090 2,368
------- ------- -------
Total income tax expense........................ $50,173 $40,422 $32,634
======= ======= =======
Total income tax expense was allocated:
Income from operations.................................. $50,173 $40,422 $32,634
Stockholders' equity for compensation expense for tax
purposes............................................. (6,553) (6,391) (5,450)
------- ------- -------
$43,620 $34,031 $27,184
======= ======= =======
</TABLE>
Total income tax expense differs from the amounts computed by applying a
U.S. federal income tax rate of 35% to income before income taxes as a result of
the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense........................... $45,612 $37,449 $29,286
State income taxes, net of federal income tax benefit..... 4,471 2,804 2,209
Other..................................................... 90 169 1,139
------- ------- -------
Total income tax expense........................ $50,173 $40,422 $32,634
======= ======= =======
</TABLE>
(7) STOCKHOLDERS' EQUITY
The Company has 4,879,238 authorized shares of preferred stock, all of
which are unissued. The Board of Directors has the authority to issue up to such
number of shares of preferred stock in one or more series and to fix the rights,
preferences, privileges, qualifications, limitations and restrictions thereof
without any further vote or action by the stockholders.
(8) STOCK OPTIONS
The Company has four stock option plans that provide for the grant of
options to directors, officers and employees. To date, stock options have been
granted with an exercise price equal to the stock's fair value at the date of
grant. Stock options generally have ten-year terms and generally vest over four
years.
The Company has reserved a total of 2,973,768 shares of common stock for
issuance under its Non-Qualified Stock Option Plan (the "Plan"). At December 31,
1997, there were options for 110,371 shares outstanding and options for 980
shares available for issuance under the Plan. The Company has reserved a total
of 1,600,000 shares of common stock for issuance under its 1991 Stock Plan (the
"1991 Plan"). At December 31, 1997 there were options for 563,500 shares
outstanding and options for 16,800 shares available for issuance under the 1991
Plan. The Company has reserved a total of 500,000 shares of common stock for
F-11
<PAGE> 28
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issuance under its 1994 Stock Plan (the "1994 Plan"). At December 31, 1997,
there were options for 447,000 shares outstanding and options for 20,000 shares
available for issuance under the 1994 Plan. The Company has reserved a total of
1,000,000 shares of common stock for issuance under its 1996 Stock Plan (the
"1996 Plan"). At December 31, 1997, there were options for 847,000 shares
outstanding and options for 153,000 shares available for issue under the 1996
Plan.
The per share weighted average fair value of stock options granted during
1997, 1996, and 1995 was $22.71, $17.48 and $11.56 on the date of grant using
the Black Scholes option pricing model with the following weighted average
assumptions: 1997 -- expected dividend yield 0%, risk-free interest rate of
5.71%, expected life of 9 years, and volatility of 39.9%; 1996 -- expected
dividend yield 0%, risk-free interest rate of 6.2%, expected life of 7 years,
and volatility of 42.2%; 1995 -- expected dividend yield 0%, risk-free interest
rate of 6.2%, expected life of 6 years, and volatility of 43.5%.
The Company applies APB Opinion No. 25 in accounting for its stock plans
and, accordingly, no compensation cost has been recognized for its stock options
in the financial statements. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net income would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net income:
As reported..................................... $80,148 $66,574 $51,039
======= ======= =======
Pro forma....................................... $75,843 $64,093 $49,775
======= ======= =======
Income per common share:
Basic -- as reported............................ $ 2.82 $ 2.38 $ 1.86
======= ======= =======
Diluted -- as reported.......................... $ 2.73 $ 2.31 $ 1.79
======= ======= =======
Basic -- pro forma.............................. $ 2.67 $ 2.29 $ 1.81
======= ======= =======
Diluted -- pro forma............................ $ 2.59 $ 2.22 $ 1.74
======= ======= =======
</TABLE>
Pro forma net income reflects only options granted in 1997, 1996, and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income or per share
amounts presented above because compensation cost is reflected over the options
vesting period of four years and compensation cost for options granted prior to
January 1, 1995 is not considered.
F-12
<PAGE> 29
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information related to the plans is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994........................... 2,155,062 $10.49
Exercised in 1995.......................................... (562,704) 4.99
Canceled in 1995........................................... (91,379) 3.83
Options issued in 1995..................................... 542,000 25.05
---------
Outstanding at December 31, 1995........................... 2,042,979 16.17
Exercised in 1996.......................................... (568,159) 8.74
Canceled in 1996........................................... (29,400) 15.78
Options issued in 1996..................................... 530,000 32.44
---------
Outstanding at December 31, 1996........................... 1,975,420 22.67
Exercised in 1997.......................................... (465,549) 15.15
Canceled in 1997........................................... (16,000) 29.38
Options issued in 1997..................................... 474,000 38.26
---------
Outstanding at December 31, 1997........................... 1,967,871 $28.15
=========
</TABLE>
At December 31, 1997, the range of exercise prices and weighted average
remaining contractual life of outstanding options was as follows:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED
OUTSTANDING AS OF AVERAGE
RANGE OF DECEMBER 31, REMAINING
EXERCISE PRICES 1997 CONTRACTUAL LIFE
--------------- ----------------- ----------------
<S> <C> <C>
$ 0.25-$19.00.......................................... 498,871 4.5 years
$24.63-$25.25 ......................................... 615,000 6.2 years
$28.75-$37.81 ......................................... 675,000 7.1 years
$39.00-$39.00 ......................................... 179,000 8.9 years
---------
$ 0.25-$39.00 ......................................... 1,967,871 6.3 years
=========
</TABLE>
At December 31, 1997, 1996 and 1995 the number of options exercisable was
700,371, 825,920, and 1,074,152, respectively, and the weighted average exercise
price of those options was $19.39, $15.62, and $13.25, respectively.
In connection with the exercise of certain stock options, the Company
receives a tax deduction for the difference between the fair value of the common
stock at the date of exercise and the exercise price. The related income tax
benefit of approximately $6,553,000 in 1997, $6,391,000 in 1996, and $5,450,000
in 1995 has been recorded as a reduction of income taxes payable and an increase
to additional paid-in capital.
(9) NET REVENUES
Included in the Company's net revenues is reimbursement from the federal
government under the Medicare, Medicaid and other federally funded programs,
which aggregated approximately 63% in 1997, 61% in 1996, and 60% in 1995 of such
net revenues.
F-13
<PAGE> 30
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) INCOME PER COMMON SHARE
A reconciliation of the numerators and the denominators of the basic and
diluted per common share computations is as follows:
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Basic:
Income available to common stockholders.... $80,148 28,419 $2.82
=====
Effect of Dilutive Securities:
Stock Options.............................. -- 909
------- ------
Diluted:
Income available to common stockholders and
holders of dilutive securities........... $80,148 29,328 $2.73
======= ====== =====
YEAR ENDED DECEMBER 31, 1996
Basic:
Income available to common stockholders.... $66,574 27,998 $2.38
=====
Effect of Dilutive Securities:
Stock Options.............................. -- 865
------- ------
Diluted:
Income available to common stockholders and
holders of dilutive securities........... $66,574 28,863 $2.31
======= ====== =====
YEAR ENDED DECEMBER 31, 1995
Basic:
Income available to common stockholders.... $51,039 27,511 $1.86
=====
Effect of Dilutive Securities:
Stock Options.............................. -- 1,056
------- ------
Diluted:
Income available to common stockholders and
holders of dilutive securities........... $51,039 28,567 $1.79
======= ====== =====
</TABLE>
(11) NON-RECURRING EXPENSE
In 1997, the Company recorded a non-recurring expense of $15,557,000 of
which $11,849,000 was related to the write-off of obsolete oxygen rental
equipment and $3,708,000 was related to the impairment write down of certain
customer list intangible assets. The charges were intended to adjust the
carrying value of certain assets affected by provisions contained in the
Balanced Budget Act of 1997. This legislation reduces Medicare reimbursement for
home oxygen equipment and services by 30 percent over the next two years. The
Company is disposing of the obsolete equipment without proceeds; accordingly,
the carrying value was reduced to zero. The fair value of the customer list was
determined based on discounted cash flows taking into account the reduced
reimbursement rates. In 1996, the Company recorded a non-recurring expense of
$3,932,000 of which $2,682,000 was related to the restructuring of certain
senior management employment agreements. The remainder of the charge related to
the resolution of an investigation in the amount of $1,000,000, together with
related legal fees of $250,000. In 1995, the Company recorded a non-recurring
expense of $1,921,000 related to the abandoned merger between the Company and
Coram Healthcare Corporation. Such non-recurring
F-14
<PAGE> 31
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expense was comprised of (a) $1,448,000 of professional fees, (b) $199,000 of
printing and mailing expenses, (c) $153,000 of filing fees, and (d) $121,000 of
other direct costs.
(12) SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid for:
Interest.................................................. $ 1,139 $ 414 $ 762
======= ======= =======
Income taxes.............................................. $47,512 $31,566 $25,036
======= ======= =======
</TABLE>
(13) BUSINESS COMBINATIONS
During 1997, the Company acquired the outstanding stock or certain assets
of 24 businesses in 24 separate transactions. During 1996, the Company acquired
the outstanding stock or certain assets of 17 businesses in 17 separate
transactions. Consideration for the acquisitions generally included cash,
unsecured non-interest bearing obligations and the assumption of certain
liabilities.
None of the businesses acquired were related to the Company prior to
acquisition. Each acquisition during 1997 and 1996 was accounted for as a
purchase. The results of operations of the acquired companies are included in
the accompanying consolidated statement of operations since the respective date
of acquisition. Each of the acquired companies conducted operations similar to
that of the Company.
The aggregate cost of the acquisitions described above was as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $66,597 $64,764
Deferred acquisition obligations............................ 11,583 7,905
Assumption of liabilities................................... 1,475 383
------- -------
$79,655 $73,052
======= =======
</TABLE>
The aggregate purchase price of the acquisitions described above was
allocated as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current assets (including cash acquired of $348 in 1997 and
$275 in 1996)............................................. $ 4,547 $ 6,362
Property and equipment...................................... 3,755 3,205
Intangible assets........................................... 6,904 6,379
Goodwill.................................................... 64,449 57,106
------- -------
$79,655 $73,052
======= =======
</TABLE>
F-15
<PAGE> 32
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma supplemental information on the results
of operations for the years ended December 31, 1997 and 1996 include the
acquisitions as if they had been combined at the beginning of the respective
years.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net revenues................................................ $466,040 $399,630
======== ========
Net income.................................................. $ 84,721 $ 76,803
======== ========
Basic -- income per common share............................ $ 2.98 $ 2.74
======== ========
Diluted -- income per common share.......................... $ 2.89 $ 2.66
======== ========
</TABLE>
This unaudited pro forma financial information is not necessarily
indicative of either the results of operations that would have occurred had the
transactions been effected at the beginning of the respective years or of future
results of operations of the combined companies.
(14) CONTINGENCIES
The Company is involved in certain claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of all matters will not have a material adverse impact on the
Company's financial position, results of operations or liquidity.
(15) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly financial results for the years
ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1997:
Net revenues................................ $101,012 $108,702 $114,772 $118,695
======== ======== ======== ========
Operating income(1)......................... $ 32,825 $ 35,995 $ 38,498 $ 24,055
======== ======== ======== ========
Net income(1)............................... $ 20,055 $ 21,843 $ 23,548 $ 14,702
======== ======== ======== ========
Income per common share:
Basic....................................... $ .71 $ .77 $ .83 $ .51
======== ======== ======== ========
Diluted..................................... $ .69 $ .75 $ .80 $ .50
======== ======== ======== ========
1996:
Net revenues................................ $ 79,772 $ 84,970 $ 89,633 $ 94,495
======== ======== ======== ========
Operating income (2)........................ $ 25,138 $ 27,581 $ 28,787 $ 25,914
======== ======== ======== ========
Net income (2).............................. $ 15,424 $ 16,945 $ 17,637 $ 16,568
======== ======== ======== ========
Income per common share:
Basic....................................... $ .56 $ .61 $ .63 $ .59
======== ======== ======== ========
Diluted..................................... $ .54 $ .59 $ .61 $ .57
======== ======== ======== ========
</TABLE>
- ---------------
(1) The 1997 fourth quarter operating income included a non-recurring expense of
$15,557,000 ($9,568,000 after-tax) (see note 11).
(2) The 1996 fourth quarter operating income included a non-recurring expense of
$3,932,000 ($1,649,000 after-tax) (see note 11).
F-16
<PAGE> 33
SCHEDULE VIII
LINCARE HOLDINGS INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Deducted from asset accounts:
Allowance for uncollectible
accounts......................... $5,917 $4,432 $3,724(1) $6,122(2) $7,951
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1996
Deducted from asset accounts:
Allowance for uncollectible
accounts......................... $4,535 $3,472 $2,788(1) $4,878(2) $5,917
====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1995
Deducted from asset accounts:
Allowance for uncollectible
accounts......................... $4,723 $2,190 $1,713(1) $4,091(2) $4,535
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) To record allowance on business combinations
(2) To record write-offs
S-1
<PAGE> 34
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------ ------- ----
<S> <C> <C>
+3.1- Amended and Restated Certificate of Incorporation of Lincare Holdings Inc. . . . .
+3.2- Amended and Restated By-Laws of Lincare Holdings Inc. . . . . . . . . . . . . . . .
+10.6- Purchase Agreement dated as of September 25, 1991 among the Registrant and the
several purchasers named therein . . . . . . . . . . . . . . . . . . . . . . . . .
+10.10- Non-Qualified Stock Option Plan of Registrant . . . . . . . . . . . . . . . . . . .
+10.11- Lincare Holdings Inc. 1991 Stock Plan . . . . . . . . . . . . . . . . . . . . . . .
+10.12- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended,
between the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . .
+10.13- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended,
between the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . .
+10.14- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended,
between the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . . .
+10.15- Lincare Inc. 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+10.19- Asset Purchase Agreement dated as of September 25, 1991, between Lincare Inc. and
Glasrock Home Health Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
++10.20- Asset Purchase Agreement dated as of October 2, 1992, among Lincare Inc., Advance
Home Health Services, Inc. and Diversified Diagnostics Inc., Richard Levy and
Michael D. Moore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+++10.21- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992, between
the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . .
+++10.22- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992, between
the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------ ------- ----
<S> <C> <C>
+++10.23- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992,
between the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . .
++++10.24- Asset Purchase Agreement effective March 31, 1993, between Lincare Inc. and T2
Medical, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.26- Loan Agreement dated February 10, 1995, between Registrant and NationsBank of
Florida, N.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.27- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc.
and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.28- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc.
and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*10.29- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc.
and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
**10.30- Asset Purchase Agreement dated as of May 24, 1995 between Lincare Inc. and
PrimaCare Health Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . .
***10.31- Non-Qualified Stock Option Agreements dated as of January 23, 1995, between
the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . .
***10.32- Non-Qualified Stock Option Agreements dated as of January 23, 1995, between
the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . .
***10.33- Non-Qualified Stock Option Agreements dated as of January 23, 1995, between
the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . .
10.34- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc.
and John P. Byrnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
****10.35- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc.
and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
****10.36- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc.
and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
****10.37- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc.
and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
****10.38- Non-Qualified Stock Option Agreements dated as of January 26, 1996, between
the Registrant and John P. Byrnes . . . . . . . . . . . . . . . . . . . . . . . .
****10.39- Non-Qualified Stock Option Agreements dated as of July 15, 1996 between
the Registrant and John P. Byrnes . . . . . . . . . . . . . . . . . . . . . . . .
10.40- Employment Agreement dated as of June 1, 1997 between Lincare Holdings Inc. and
Paul G. Gabos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.41- Employee Stock Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.42- Credit Agreement dated November 25, 1997 between Registrant and NationsBank of
Florida N.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.43- Form of Non-employee Director Stock Option Agreement . . . . . . . . . . . . . . 40
10.44- Form of Non-qualified Stock Option Agreement . . . . . . . . . . . . . . . . . . 41
+++++22.2- List of Subsidiaries of Lincare Holdings Inc. . . . . . . . . . . . . . . . . . .
23.1- Consent of KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . . . . . . . . 43
27.1- Financial Data Schedule 12/31/97 (for SEC Use Only) . . . . . . . . . . . . . .
27.2- Financial Data Schedule 12/31/96 (for SEC Use Only) . . . . . . . . . . . . . .
27.3- Financial Data Schedule 12/31/95 (for SEC Use Only) . . . . . . . . . . . . . .
</TABLE>
- ---------------
+ Incorporated by reference to the corresponding exhibit to the
Registrant's Registration Statement on Form S-1 (No. 33-44672)
<PAGE> 36
++ Incorporated by reference to Exhibit A to the Registrant's Form 8-K
dated October 14, 1992.
+++ Incorporated by reference to the corresponding exhibit to the
Registrant's Registration Statement on Form S-1 (No. 33-55260).
++++ Incorporated by reference to the Registrant's Form 8-K dated April 28,
1993.
+++++ Incorporated by reference to the Registrant's Form 10-K dated March
22, 1994.
* Incorporated by reference to the Registrant's Form 10-K dated
March 22, 1995.
** Incorporated by reference to the Registrant's Form 8-K dated May 24,
1995.
*** Incorporated by reference to the Registrant's Form 10-K dated March 27,
1996.
**** Incorporated by reference to the Registrant's Form 10-K dated March 25,
1997.
<PAGE> 1
Exhibit 10.34
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 1, 1997, by and
between LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), and JOHN
P. BYRNES (the "Employee").
W I T N E S S E T H:
WHEREAS, prior to the date hereof, the Employee has been an
employee of the Company; and
WHEREAS, the Company desires to induce the Employee to
continue in the employ of the Company for the period provided in this
Agreement, and the Employee is willing to accept such employment with the
Company on a full-time basis, all in accordance with the terms and conditions
set forth below;
NOW, THEREFORE, for and in consideration of the premises
hereof and the mutual covenants contained herein, the parties hereto do hereby
covenant and agree as follows:
1. Employment. (a) The Company hereby employs the
Employee, and the Employee hereby accepts such employment with the Company, for
the period set forth in Section 2 hereof, all upon the terms and conditions
hereinafter set forth.
(b) The Employee affirms and represents that he is under
no obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, the Employee's
acceptance of employment hereunder with the Company, the employment of the
Employee by the Company, or the Employee's undertakings under this Agreement.
2. Term of Employment. Unless earlier terminated
as hereinafter provided, the initial term of the Employee's employment under
this Agreement shall be for a period beginning on the date hereof and ending on
December 31, 2001 (such period from the date hereof until December 31, 2001 or,
if the Employee's employment hereunder is earlier terminated, such shorter
period, being hereinafter called the "Initial Employment Term"). In the event
that the Employee continues in the full-time employ of the Company after the
end of the Initial Employment Term (it being expressly understood and agreed
that the Company does not now, nor hereafter shall, have any obligation to
continue the Employee in its employ, whether or not
<PAGE> 2
on a full-time basis), then, unless otherwise expressly agreed to by the
Employee and the Company in writing, the Employee's continued employment with
the Company shall, notwithstanding anything to the contrary expressed or
implied herein, continue to be subject to the terms and conditions of this
Agreement. As used in this Agreement, the term "Employment Term" shall mean
the period beginning on the date hereof and ending on the date of the
Employee's cessation of employment with the Company, whether such date is
before, on or after the expiration of the Initial Employment Term.
3. Duties. The Employee shall be employed as the Chief
Executive Officer of the Company, shall faithfully and competently perform such
duties as are specified in the By-laws of the Company and shall also perform
and discharge such other reasonable employment duties and responsibilities as
the Board of Directors of the Company may from time to time prescribe. The
Employee shall perform his duties at such places and times as the Board of
Directors of the Company may reasonably prescribe. Except as may otherwise be
approved in advance by the Company, and except during vacation periods and
reasonable periods of absence due to sickness, personal injury or other
disability, the Employee shall devote his full time throughout the Employment
Term to the services required of him hereunder. Except as may otherwise be
approved in advance by the Company, the Employee shall render his services
exclusively to the Company during the Employment Term and shall use his best
efforts, judgment and energy to improve and advance the business and interests
of the Company in a manner consistent with the duties of his position.
4. Salary and Bonus. (a) Salary. As compensation for
the complete and satisfactory performance by the Employee of the services to be
performed by the Employee hereunder during the Employment Term, the Company
shall pay the Employee a base salary at the annual rate of THREE HUNDRED FIFTY
THOUSAND DOLLARS ($350,000) (said amount, together with any increases thereto
during the Employment Term, being hereinafter referred to as the "Salary").
Any Salary payable hereunder shall be paid in regular intervals in accordance
with the Company's payroll practices. The Salary payable to the Employee
pursuant to this Section 4(a) shall be increased annually as of January 1, 1998
and each January 1 thereafter for the twelve (12) month period then commencing,
by an amount equal to: (i) the annual percentage increase in the Consumer Price
Index for All Urban Consumers, All Items, for the most recent twelve (12) month
period for which such figures are then available as reported in the Monthly
Labor
-2-
<PAGE> 3
Review published by the Bureau of Labor Statistics of the U.S. Department
of Labor or (ii) such higher amount as may be determined from time to time by
the Board of Directors of the Company in its sole discretion.
(b) Bonus. During the Employment Term, in addition to
Salary, the Company shall also pay bonus compensation to the Employee in
respect of each calendar year (or applicable portion thereof) during the
Employment Term, such bonus compensation ("Bonus") to be an amount equal to the
Bonus Amount (as hereinafter defined) for such calendar year (or applicable
portion thereof).
For the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Bonus Amount" for any full calendar year shall mean an amount
equal to: (a) the Employee's Salary for such calendar year; MULTIPLIED
BY (b) the percentage set forth on the table below which corresponds
to the increase in the Company's fully diluted earnings per share in
respect of such calendar year over the fully diluted earnings per
share of the Company during the immediately preceding calendar year.
<TABLE>
<CAPTION>
FULLY DILUTED BONUS AS % OF
EPS GROWTH BASE SALARY
---------- -----------
<S> <C>
Less than 20% 0%
20% or more but less than 21% 40%
21% or more but less than 22% 46%
22% or more but less than 23% 52%
23% or more but less than 24% 58%
24% or more but less than 25% 64%
25% or more but less than 26% 70%
26% or more but less than 27% 76%
27% or more but less than 28% 82%
28% or more but less than 29% 88%
29% or more but less than 30% 94%
30% 100%*
</TABLE>
* If the fully diluted EPS growth is greater than 30%, then the
Employee shall receive an additional 6% of his Base Salary for each full
percentage point of EPS growth achieved.
In the event that the Employment Term ends at any time other
than the conclusion of a full calendar year, the Employee's
-3-
<PAGE> 4
Bonus Amount in respect of such calendar year shall be prorated, and shall be an
amount equal to: (a) the Employee's Salary for such calendar year; MULTIPLIED BY
(b) the percentage set forth on the table above which corresponds to the
increase in the Company's year-to-date fully diluted earnings per share (as
determined by the then-most recently announced fully diluted earnings per share
of the Company) over the fully diluted earnings per share of the Company during
the comparable period in the immediately preceding calendar year; MULTIPLIED BY
(c) a percentage equal to the number of full calendar months included in the
Employment Term for the current calendar year divided by twelve.
The Company's Board of Directors (or an authorized committee
thereof) shall have the discretion to adjust upward or downward the Bonus
Amount for any applicable period to account equitably for: (a) any
extraordinary charges; (b) any unusual non-recurring items; or (c) changes
after the date hereof in accounting principles required under generally
accepted accounting principles; which events impacted the Company's fully
diluted earnings per share in respect of any such applicable period or
comparable prior year period.
Nothing contained herein and no action taken in respect of any
Bonus (or otherwise in respect of this Section 4(b)) shall create or be
construed to create a trust of any kind. The Employee's right to receive any
Bonus pursuant to this Section 4(b) shall be no greater than the right of an
unsecured general creditor of the Company to receive payment from the Company.
All Bonuses under this Section 4(b) shall be paid from the general funds of the
Company, and no special or separate fund shall be established, and no
segregation of assets shall be made, to assure payment of any Bonuses
hereunder.
(c) Withholding. The payment of any Salary and Bonus
hereunder shall be subject to applicable withholding and payroll taxes, and
such other deductions as may be required under the Company's employee benefit
plans.
5. Benefits. During the Employment Term, the Employee
shall:
(a) be eligible to participate in all employee fringe
benefits and any pension and/or profit sharing plans that may be
provided by the Company for its key executive employees in accordance
with the provisions of any such
-4-
<PAGE> 5
plans, as same may be in effect on and after the date hereof;
(b) be eligible to participate in any medical and health
plans or other employee welfare benefit plans that may be provided by
the Company for its key executive employees in accordance with the
provisions of any such plans, as same may be in effect on and after
the date hereof;
(c) be entitled to annual paid vacation in accordance
with the Company policy that may be applicable on and after the date
hereof to key executive employees;
(d) be entitled to sick leave, sick pay and disability
benefits in accordance with any Company policy that may be applicable
on and after the date hereof to key executive employees; and
(e) be entitled to reimbursement for all reasonable and
necessary out-of-pocket living and travel expenses incurred by the
Employee while away from his usual place of business in the
performance of his duties hereunder in accordance with the Company's
policies applicable on and after the date hereof in respect thereto.
6. Inventions and Confidential Information. The
Employee hereby covenants, agrees and acknowledges as follows:
(a) The Company is engaged in a continuous program of
research, design, development, production, marketing and servicing
with respect to its business and that as part of the Employee's
employment by the Company the Employee is (or may be) expected to make
new contributions and inventions of value to the Company.
(b) The Employee's employment hereunder creates a
relationship of confidence and trust between the Employee and the
Company with respect to certain information pertaining to the business
of the Company and its Affiliates (as hereinafter defined) or
pertaining to the business of any client or customer of the Company or
its Affiliates which may be made known to the Employee by the Company
or any of its Affiliates or by any client or customer of the Company
or any of its Affiliates or learned by the Employee during the period
of his employment.
-5-
<PAGE> 6
(c) The Company possesses and will continue to possess
information that has been created, discovered or developed by, or
otherwise become known to it (including, without limitation,
information created, discovered, developed or made known by the
Employee during the period of or arising out of his employment
hereunder) or in which property rights have been or may be assigned or
otherwise conveyed to the Company, which information has commercial
value in the business in which the Company is engaged and is treated
by the Company as confidential.
(d) Any and all inventions, products, discoveries,
improvements, processes, manufacturing, marketing and service methods
or techniques, formulae, designs, styles, specifications, data bases,
computer programs (whether in source code or object code), know-how,
strategies and data, whether or not patentable or registrable under
copyright or similar statutes, made, developed or created by the
Employee (whether at the request or suggestion of the Company, any of
its Affiliates, or otherwise, whether alone or in conjunction with
others, and whether during regular hours of work or otherwise) during
the period of his employment by the Company (collectively, hereinafter
referred to as "Inventions"), which may pertain to the business,
products, or processes of the Company or any of its Affiliates, will
be promptly and fully disclosed by the Employee to an appropriate
executive officer of the Company (other than the Employee) and shall
be the Company's exclusive property, and the Employee will promptly
execute and/or deliver to an appropriate executive officer of the
Company (other than the Employee) without any additional compensation
therefor, all papers, drawings, models, data, documents and other
material pertaining to or in any way relating to any Inventions made,
developed or created by him as aforesaid. For the purposes of this
Agreement, the term "Affiliate" or "Affiliates" of the Company shall
mean any corporation or other entity which is controlled, directly or
indirectly, by the Company. As used in the preceding sentence, the
word "control" shall mean, with respect to any entity, the power to
vote or direct the voting of more than 50% of the voting equity
interests in such entity.
(e) The Employee will keep confidential and will hold for
the Company's sole benefit any Invention which is to be the exclusive
property of the Company under this Section 6
-6-
<PAGE> 7
for which no patent, copyright, trademark or other right or protection
is issued.
(f) The Employee also agrees that he will not without the
prior written consent of an appropriate executive officer of the
Company (other than the Employee) use for his benefit or disclose at
any time during his employment by the Company, or thereafter, except
to the extent required by the performance by him of his duties as an
employee of the Company, any information obtained or developed by him
while in the employ of the Company with respect to any Inventions or
with respect to any customers, clients, suppliers, products,
employees, financial affairs, or methods of design, distribution,
marketing, service, procurement or manufacture of the Company or any
of its Affiliates, or any confidential matter, except information
which at the time is generally known to the public other than as a
result of disclosure by him not permitted hereunder, or if such
information is required to be disclosed under court order or other
applicable law.
(g) The Employee acknowledges and agrees that a remedy at
law for any breach or threatened breach of the provisions of this
Section 6 would be inadequate and, therefore, agrees that the Company
and its Affiliates shall be entitled to injunctive relief in addition
to any other available rights and remedies in case of any such breach
or threatened breach; provided, however, that nothing contained herein
shall be construed as prohibiting the Company or any of its Affiliates
from pursuing any other rights and remedies available for any such
breach or threatened breach.
(h) The Employee agrees that upon termination of his
employment hereunder for any reason, the Employee shall forthwith
return to the Company all documents and other property in his
possession belonging to the Company or any of its Affiliates.
(i) Without limiting the generality of Section 10 hereof,
the Employee hereby expressly agrees that the foregoing provisions of
this Section 6 shall be binding upon the Employee's heirs, successors
and legal representatives.
-7-
<PAGE> 8
7. Termination. (a) The Employment Term shall end
and the Employee's employment hereunder shall be terminated upon the occurrence
of any of the following:
(i) the death of the Employee;
(ii) termination of the Employee's employment hereunder by the
Company based upon the inability of the Employee to perform his duties
on account of disability or incapacity for a period of one hundred
eighty (180) or more days, whether or not consecutive, occurring
within any period of twelve (12) consecutive months; provided,
however, that such employment shall not be terminated by the Company
if it can reasonably accommodate the Employee's disability or
incapacity;
(iii) the termination of the Employee's employment hereunder by
the Employee at any time for any reason whatsoever (including, without
limitation, resignation or retirement);
(iv) termination of the Employee's employment hereunder by the
Company at any time for "cause", such termination to take effect
immediately upon written notice from the Company to the Employee;
(v) termination of the Employee's employment hereunder by
the Company at any time other than for "cause", such termination to
take effect immediately upon written notice from the Company to the
Employee; or
(vi) upon a Change of Control of the Company.
The following actions, failures or events by or affecting the
Employee shall constitute "cause" for termination within the meaning of clause
(iv) above: (1) conviction of having committed a felony; (2) determination by
at least two-thirds of the members of the Board of Directors that the Employee
has committed acts of dishonesty or moral turpitude; (3) failure to follow
reasonable and lawful directives of the Board of Directors of the Company; or
(4) gross negligence or willful misconduct by the Employee in the performance
of his obligations hereunder. The term "willful" shall mean any act or failure
to act taken or omitted to be taken by the Employee not in good faith and
without reasonable belief that the act or omission was in the best interest of
the Company.
-8-
<PAGE> 9
As used herein the term "Change of Control of the Company"
shall mean any of the following:
(i) sale or other disposition (or the last such
sale or other disposition) resulting in the transfer of more than 50% of the
outstanding common stock of the Company to an unrelated and unaffiliated third
party purchaser; or
(ii) the consolidation or merger of the Company
with or into any other entity (other than a merger in which the Company is the
surviving corporation and which does not result in more than 50% of the capital
stock of the Company outstanding immediately after the effective date of such
merger being owned of record or beneficially by persons other than the holders
of its capital stock immediately prior to such merger); or
(iii) a sale of substantially all of the properties
and assets of the Company as an entirety to an unrelated and unaffiliated third
party purchaser; or
(iv) the time at which any person (including a
person's affiliates and associates) or group (as that term is understood under
Section 13(d) of the Exchange Act and the rules and regulations thereunder),
files a Schedule 13-D or 14D-1 (or any successor schedule, form or report under
the Exchange Act) disclosing that such person or group has become the
beneficial owner (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of shares of capital stock of
the Company giving such person or group a majority of the voting power of all
outstanding capital stock of the Company with the right to vote generally in an
election for directors or other capital stock of the Company into which the
common stock or other voting stock is reclassified or changed.
(b) (i) If the Initial Employment Term ends by reason
of Employee being terminated by the Company other than for "cause", then the
Company shall pay to the Employee, as severance pay or liquidated damages or
both, an amount equal to his then-current annual Salary in effect immediately
prior to such termination.
(ii) If the Initial Employment Term ends by reason
of the occurrence of an event described in Section 7(a)(vi) hereof, then the
Company shall pay to the Employee, as severance pay or liquidated damages or
both, an amount equal to his then-current annual Salary in effect immediately
prior to the
-9-
<PAGE> 10
occurrence of such event plus an amount equal to his bonus compensation in
respect of the immediately preceding calendar year.
(iii) If, after the expiration of the Initial
Employment Term, the Employment Term ends by reason of the Employee being
terminated by the Company other than for "cause", the occurrence of an event
described in Section 7(a)(vi) hereof, or the Employee voluntarily terminating
his employment with the Company for any reason whatsoever (including, without
limitation, resignation or retirement), then the Company shall pay to the
Employee, as severance pay or liquidated damages or both, an amount equal to
his then-current annual Salary in effect immediately prior to such termination
plus an amount equal to his bonus compensation in respect of the immediately
preceding calendar year.
(iv) If the Employee's employment is terminated by
the Company other than for "cause", or if the Employee voluntarily terminates
his employment with the Company, then any such payable amounts shall be paid in
twelve (12) equal monthly installments commencing on the first day of the
calendar month immediately following the termination of the Employment Term.
In the event the Employment Term ends by reason of the occurrence of an event
described in Section 7(a)(vi) hereof, then such amounts shall be payable no
later than ten (10) business days after the end of the Employment Term. It is
understood and agreed that this Section 7(b) shall survive the expiration or
termination of this Agreement and the provisions hereof shall be binding upon
any successor in interest of the Company. It is expressly acknowledged and
agreed that the provisions of this Section 7(b) shall supersede any and all
payment obligations of Lincare Inc., a wholly-owned subsidiary of the Company,
to the Employee under the provisions of Section 3 of that certain Agreement by
and between the Employee and Lincare Inc., dated December 28, 1990.
(c) Notwithstanding anything to the contrary expressed or
implied herein, and except as set forth in Section 7(b) hereof, the Company
(and its Affiliates) shall not be obligated to make any payments to the
Employee or on his behalf of whatever kind or nature by reason of the
Employee's cessation of employment other than: (A) such amounts, if any, of his
Salary and bonus compensation as shall have accrued and remained unpaid as of
the date of said cessation (including, but not limited to, the amount of any
bonus compensation payable in respect of the then-current calendar year); and
(B) such other amounts which may be
-10-
<PAGE> 11
otherwise payable to the Employee from the Company's retirement plans or other
benefit plans on account of such cessation of employment (including, but not
limited to, payment for any vested but unused vacation); and (C) Company shall
cover the Employee under its medical and dental plan, and life insurance through
the end of the last calendar day of the month during which the Employment Term
ends, thereafter, the Employee shall be given COBRA conversion rights for the
Company's medical and dental plan. Nothing in this Section 7(c) shall limit the
Employee's right to contest any termination of the Employee's employment
hereunder by appropriate legal proceedings. It is understood and agreed that
this Section 7(c) shall survive the expiration or termination of this Agreement
and the provisions hereof shall be binding upon any successor in interest of the
Company.
(d) No interest shall accrue on or be paid with respect
to any portion of any payments hereunder paid in accordance with the terms of
this Agreement.
8. Non-Assignability. (a) Neither this Agreement nor
any right or interest hereunder shall be assignable by the Employee, his
beneficiaries, or legal representatives without the Company's prior written
consent; provided, however, that nothing in this Section 8(a) shall preclude
the Employee from designating a beneficiary to receive any benefit payable
hereunder upon his death. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Company, nor shall any obligations of the
Company hereunder be delegated.
(b) Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
9. Competition. During the Employee's employment by the
Company and during the twelve (12) month period commencing on the date of
cessation of the Employee's employment for any reason whatsoever:
(a) The Employee will not make any statement or perform
any act intended to advance an interest of any existing or prospective
competitor of the Company or any of its Affiliates in any way that
will or may injure an interest of the Company or any of its Affiliates
in its relationship and dealings with existing or potential
-11-
<PAGE> 12
customers or clients, or solicit or encourage any other employee of the
Company or any of its Affiliates to do any act that is disloyal
to the Company or any of its Affiliates or inconsistent with the
interest of the Company or any of its Affiliate's interests or in
violation of any provision of this Agreement;
(b) The Employee will not discuss with any existing or
potential customers or clients of the Company or any of its Affiliates
the present or future availability of services or products by a
business, if the Employee has or expects to acquire a proprietary
interest in such business or is or expects to be an employee, officer
or director of such business, where such services or products are
competitive with services or products which the Company or any of its
Affiliates provides during the Employment Term;
(c) The Employee will not make any statement or do any
act intended to cause any existing or potential customers (with whom
the Company has made contact) or clients of the Company or any of its
Affiliates to make use of the services or purchase the products of any
competitive business in which the Employee has or expects to acquire a
proprietary interest or in which the Employee is or expects to be made
an employee, officer or director, if such services or products in any
way relate to or arise out of the services or products sold or
provided by the Company or any of its Affiliates to any such existing
customer or client during the Employment Term;
(d) The Employee will not directly or indirectly (as a
director, officer, employee, manager, consultant, independent
contractor, advisor or otherwise) engage in competition with, or own
any interest in, perform any services for, participate in or be
connected with (i) any business or organization which engages in
competition with the Company or any of its Affiliates in any
geographical area where any business is presently carried on by the
Company or any of its Affiliates, or (ii) any business or organization
which engages in competition with the Company or any of its Affiliates
in any geographical area where any business shall be hereafter, during
the period of the Employee's employment by the Company, carried on by
the Company or any of its Affiliates, if such business is then being
carried on by the Company or any of its Affiliates in such
geographical area; provided, however, that the provisions of this
Section 9(d) shall not be deemed to prohibit the Employee's ownership
of not more than 1% of the
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<PAGE> 13
total shares of all classes of stock outstanding of any publicly held
company;
(e) The Employee will not directly or indirectly solicit
for employment, or advise or recommend to any other person that they
employ or solicit for employment, any employee of the Company or any
of its Affiliates; and
(f) The Employee will not directly or indirectly hire,
engage, send any work to, place orders with, or in any manner be
associated with any supplier, contractor, subcontractor or other
person or firm which rendered manufacturing or other services, or sold
any products, to the Company or any of its Affiliates if such action
by him would have a material adverse effect on the business, assets or
financial condition of the Company or any of its Affiliates.
For purposes of this Section 9, a person or entity (including,
without limitation, the Employee) shall be deemed to be a competitor of the
Company or any of its Affiliates, or a person or entity (including, without
limitation, the Employee) shall be deemed to be engaging in competition with
the Company or any of its Affiliates, if such person or entity in any way
conducts, operates, carries out or engages (i) in the business of delivering
medical oxygen, respiratory therapy services, or durable medical equipment to
customers in their homes or (ii) in any other business engaged in by the
Company or any of its Affiliates on or prior to the date upon which such
Employee ceases to be employed hereunder.
In connection with the foregoing provisions of this Section 9,
the Employee represents that his experience, capabilities and circumstances are
such that such provisions will not prevent him from earning a livelihood. The
Employee further agrees that the limitations set forth in this Section 9
(including, without limitation, any time or territorial limitations) are
reasonable and properly required for the adequate protection of the business of
the Company (and of its Affiliates). It is understood and agreed that the
covenants made by the Employee in this Section 9 (and in Section 6 hereof)
shall survive the expiration or termination of this Agreement.
-13-
<PAGE> 14
For purposes of this Section 9, proprietary interest in a
business is ownership, whether through direct or indirect stock holdings or
otherwise, of one percent (1%) or more of such business.
The Employee acknowledges and agrees that a remedy at law for
any breach or threatened breach of the provisions of this Section 9 would be
inadequate and, therefore, agrees that the Company and any of its Affiliates
shall be entitled to injunctive relief in addition to any other available
rights and remedies in cases of any such breach or threatened breach; provided,
however, that nothing contained herein shall be construed as prohibiting the
Company or any of its Affiliates from pursuing any other rights and remedies
available for any such breach or threatened breach.
10. Binding Effect. Without limiting or diminishing the
effect of Section 8 hereof, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors, legal
representatives and permitted assigns.
11. Notices. Any notice required or permitted to be
given under this Agreement shall be sufficient if in writing and either
delivered in person or sent by first class certified or registered mail,
postage prepaid, if to the Company, at the Company's principal place of
business, and if to the Employee, at his home address most recently filed with
the Company, or to such other address or addresses as either party shall have
designated in writing to the other party hereto.
12. Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida.
13. Severability. If any provision of this Agreement
shall be determined to be invalid, illegal or unenforceable in whole or in
part, neither the validity of the remaining part of such provision nor the
validity of any other provision of this Agreement shall in any way be affected
thereby.
14. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at
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<PAGE> 15
any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times.
15 Entire Agreement; Modifications. This Agreement
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements, oral and written, between
the parties hereto with respect to the subject matter hereof. This Agreement
may be modified or amended only by an instrument in writing signed by both
parties hereto. It is acknowledged and agreed that this Agreement shall
supersede the Employment Agreement between the Employee and Lincare Inc., dated
November 30, 1990, which agreement shall be of no further force or effect from
the date of this Agreement.
16 Survival. The provisions of Sections 6, 7 and 9
hereof shall survive and continue after the expiration or termination of this
Agreement.
17 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have duly executed
and delivered this Agreement as of the day and year first above written.
LINCARE HOLDINGS INC.
By:__________________________
Title:_______________________
_____________________________
JOHN P. BYRNES
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<PAGE> 1
Exhibit 10.40
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of June 1, 1997, by and between
LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), and PAUL G.
GABOS ("Employee").
W I T N E S S E T H:
WHEREAS, prior to the date hereof, the Employee has been an
employee of the Company; and
WHEREAS, the Company desires to induce the Employee to
continue in the employ of the Company for the period provided in this
Agreement, and the Employee is willing to accept such employment with the
Company on a full-time basis, all in accordance with the terms and conditions
set forth below.
NOW, THEREFORE, for and in consideration of the premises
hereof and the mutual covenants contained herein, the parties hereto do hereby
covenant and agree as follows:
1. Employment. (a) The Company hereby employs the
Employee, and the Employee hereby accepts such employment with the Company, for
the period set forth in Section 2 hereof, all upon the terms and conditions
hereinafter set forth.
(b) The Employee affirms and represents that he is under
no obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, the Employee's
acceptance of employment hereunder with the Company, the employment of the
Employee by the Company, or the Employee's undertakings under this Agreement.
2. Term of Employment. Unless earlier terminated as
hereinafter provided, the initial term of the Employee's employment under this
Agreement shall be for a period beginning on the date hereof and ending on
December 31, 2001 (such period from the date hereof until December 31, 2001 or,
if the Employee's employment hereunder is earlier terminated, such shorter
period, being hereinafter called the "Initial Employment Term"). In the event
that the Employee continues in the full-time employ of the Company after the
end of the Initial Employment Term (it being expressly understood and agreed
that
<PAGE> 2
the Company does not now, nor hereafter shall, have any obligation to
continue the Employee in its employ, whether or not on a full-time basis),
then, unless otherwise expressly agreed to by the Employee and the Company in
writing, the Employee's continued employment with the Company shall,
notwithstanding anything to the contrary expressed or implied herein, continue
to be subject to the terms and conditions of this Agreement. As used in this
Agreement, the term "Employment Term" shall mean the period beginning on the
date hereof and ending on the date of the Employee's cessation of employment
with the Company, whether such date is before, on or after the expiration of
the Initial Employment Term.
3. Duties. The Employee shall be employed as the Chief
Financial Officer of the Company, shall faithfully and competently perform such
duties as are specified by the By-laws of the Company and shall also perform
and discharge such other reasonable employment duties and responsibilities as
the Board of Directors of the Company may from time to time prescribe. The
Employee shall perform his duties at such places and times as the Board of
Directors of the Company may reasonably prescribe. Except as may otherwise be
approved in advance by the Company, and except during vacation periods and
reasonable periods of absence due to sickness, personal injury or other
disability, the Employee shall devote his full time throughout the Employment
Term to the services required of him hereunder. Except as may otherwise be
approved in advance by the Company, the Employee shall render his services
exclusively to the Company during the Employment Term and shall use his best
effort, judgment and energy to improve and advance the business and interest of
the Company in a manner consistent with the duties of his position.
4. Salary and Bonus. (a) Salary. As compensation for
the complete and satisfactory performance by the Employee of the services to be
performed by the Employee hereunder during the Employment Term, the Company
shall pay the Employee a base salary at the annual rate of ONE HUNDRED SEVENTY
FIVE THOUSAND DOLLARS ($175,000) (said amount, together with any increases
thereto during the Employment Term, being hereinafter referred to as the
"Salary"). Any Salary payable hereunder shall be paid in regular intervals in
accordance with the Company's payroll practices. The Salary payable to the
Employee pursuant to this Section 4(a) shall be increased annually as of
January 1, 1998 and each January 1 thereafter for the twelve (12) month period
then commencing, by an amount equal to: (i) the annual percentage increase in
the Consumer Price Index for All Urban Consumers, All
2
<PAGE> 3
Items, for the most recent twelve (12) month period for which such figures are
then available as reported in the Monthly Labor Review published by the Bureau
of Labor Statistics of the U.S. Department of Labor or (ii) such higher amount
as may be determined from time to time by the Board of Directors of the Company
in its sole discretion.
(b) Bonus. During the Employment Term, in addition to
Salary, the Company shall also pay bonus compensation to the Employee in
respect of each calendar year (or applicable portion thereof) during the
Employment Term, such bonus compensation ("Bonus") to be an amount equal to the
Bonus Amount (as hereinafter defined) for such calendar year (or applicable
portion thereof).
For the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Bonus Amount" for any full calendar year shall mean an amount
equal to: (a) the Employee's Salary for such calendar year; MULTIPLIED
BY (b) the percentage set forth on the table below which corresponds
to the increase in the Company's fully diluted earnings per share in
respect of such calendar year over the fully diluted earnings per
share of the Company during the immediately preceding calendar year.
<TABLE>
<CAPTION>
FULLY DILUTED BONUS AS % OF
EPS GROWTH BASE SALARY
---------- -----------
<S> <C>
Less than 20% 0%
20% or more but less than 21% 40%
21% or more but less than 22% 46%
22% or more but less than 23% 52%
23% or more but less than 24% 58%
24% or more but less than 25% 64%
25% or more but less than 26% 70%
26% or more but less than 27% 76%
27% or more but less than 28% 82%
28% or more but less than 29% 88%
29% or more but less than 30% 94%
30% 100%*
</TABLE>
*If the fully diluted EPS growth is greater than 30%, then the
Employee shall receive an additional 6% of his Base Salary for each full
percentage point of EPS growth achieved.
3
<PAGE> 4
In the event that the Employment Term ends at any time other
than the conclusion of a full calendar year, the Employee's Bonus Amount in
respect of such calendar year shall be prorated, and shall be an amount equal
to: (a) the Employee's Salary for such calendar year; MULTIPLIED BY (b) the
percentage set forth on the table above which corresponds to the increase in
the Company's year-to-date fully diluted earnings per share (as determined by
the then-most recently announced fully diluted earnings per share of the
Company) over the fully diluted earnings per share of the Company during the
comparable period in the immediately preceding calendar year; MULTIPLIED BY (c)
a percentage equal to the number of full calendar months included in the
Employment Term for the current calendar year divided by twelve.
The Company's Board of Directors (or an authorized committee
thereof) shall have the discretion to adjust upward or downward the Bonus
Amount for any applicable period to account equitably for: (a) any
extraordinary charges; (b) any unusual non-recurring items; or (c) changes
after the date hereof in accounting principles required under generally
accepted accounting principles; which events impacted the Company's fully
diluted earnings per share in respect of any such applicable period or
comparable prior year period.
Nothing contained herein and no action taken in respect of any
Bonus (or otherwise in respect of this Section 4(b)) shall create or be
construed to create a trust of any kind. The Employee's right to receive any
Bonus pursuant to this Section 4(b) shall be no greater than the right of an
unsecured general creditor of the Company to receive payment from the Company.
All Bonuses under this Section 4(b) shall be paid from the general funds of the
Company, and no special or separate fund shall be established, and no
segregation of assets shall be made, to assure payment of any Bonuses
hereunder.
(c) Withholding. The payment of any Salary and Bonus
hereunder shall be subject to applicable withholding and payroll taxes, and
such other deductions as may be required under the Company's employee benefit
plans.
5. Benefits. During the Employment Term, the Employee
shall:
(a) be eligible to participate in all employee fringe
benefits and any pension and/or profit sharing plans that
4
<PAGE> 5
may be provided by the Company for its key executive employees in
accordance with the provisions of any such plans, as same may be in
effect on and after the date hereof;
(b) be eligible to participate in any medical and health
plans or other employee welfare benefit plans that may be provided by
the Company for its key executive employees in accordance with the
provisions of any such plans, as same may be in effect on and after
the date hereof;
(c) be entitled to annual paid vacation in accordance
with the Company policy that may be applicable on and after the date
hereof to key executive employees;
(d) be entitled to sick leave, sick pay and disability
benefits in accordance with any Company policy that may be applicable
on and after the date hereof to key executive employees; and
(e) be entitled to reimbursement for all reasonable and
necessary out-of-pocket living and travel expenses incurred by the
Employee while away from his usual place of business in the
performance of his duties hereunder in accordance with the Company's
policies applicable on and after the date hereof in respect thereto.
6. Inventions and Confidential Information. The
Employee hereby covenants, agrees and acknowledges as follows:
(a) The Company is engaged in a continuous program of
research, design, development, production, marketing and servicing
with respect to its business and that as part of the Employee's
employment by the Company the Employee is (or may be) expected to make
new contributions and inventions of value to the Company.
(b) The Employee's employment hereunder creates a
relationship of confidence and trust between the Employee and the
Company with respect to certain information pertaining to the business
of the Company and its Affiliates (as hereinafter defined) or
pertaining to the business of any client or customer of the Company or
its Affiliates which may be made known to the Employee by the Company
or any of its Affiliates or by any client or customer of the
5
<PAGE> 6
Company or any of its Affiliates or learned by the Employee during the
period of his employment.
(c) The Company possesses and will continue to possess
information that has been created, discovered or developed by, or
otherwise become known to it (including, without limitation,
information created, discovered, developed or made known by the
Employee during the period of or arising out of his employment
hereunder) or in which property rights have been or may be assigned or
otherwise conveyed to the Company, which information has commercial
value in the business in which the Company is engaged and is treated
by the Company as confidential.
(d) Any and all inventions, products, discoveries,
improvements, processes, manufacturing, marketing and service methods
or techniques, formulae, designs, styles, specifications, data bases,
computer programs (whether in source code or object code), know-how,
strategies and data, whether or not patentable or registrable under
copyright or similar statutes, made, developed or created by the
Employee (whether at the request or suggestion of the Company, any of
its Affiliates, or otherwise, whether alone or in conjunction with
others, and whether during regular hours of work or otherwise) during
the period of his employment by the Company (collectively, hereinafter
referred to as "Inventions"), which may pertain to the business,
products, or processes of the Company or any of its Affiliates, will
be promptly and fully disclosed by the Employee to an appropriate
executive officer of the Company (other than the Employee) and shall
be the Company's exclusive property, and the Employee will promptly
execute and/or deliver to an appropriate executive officer of the
Company (other than the Employee) without any additional compensation
therefor, all papers, drawings, models, data, documents and other
material pertaining to or in any way relating to any Inventions made,
developed or created by him as aforesaid. For the purposes of this
Agreement, the term "Affiliate" or "Affiliates" of the Company shall
mean any corporation or other entity which is controlled, directly or
indirectly, by the Company. As used in the preceding sentence, the
word "control" shall mean, with respect to any entity, the power to
vote or direct the voting of more than 50% of the voting equity
interests in such entity.
6
<PAGE> 7
(e) The Employee will keep confidential and will hold for
the Company's sole benefit any Invention which is to be the exclusive
property of the Company under this Section 6 for which no patent,
copyright, trademark or other right or protection is issued.
(f) The Employee also agrees that he will not without the
prior written consent of an appropriate executive officer of the
Company (other than the Employee) use for his benefit or disclose at
any time during his employment by the Company, or thereafter, except
to the extent required by the performance by him of his duties as an
employee of the Company, any information obtained or developed by him
while in the employ of the Company with respect to any Inventions or
with respect to any customers, clients, suppliers, products,
employees, financial affairs, or methods of design, distribution,
marketing, service, procurement or manufacture of the Company or any
of its Affiliates, or any confidential matter, except information
which at the time is generally known to the public other than as a
result of disclosure by him not permitted hereunder, or if such
information is required to be disclosed under court order or other
applicable law.
(g) The Employee acknowledges and agrees that a remedy at
law for any breach or threatened breach of the provisions of this
Section 6 would be inadequate and, therefore, agrees that the Company
and its Affiliates shall be entitled to injunctive relief in addition
to any other available rights and remedies in case of any such breach
or threatened breach; provided, however, that nothing contained herein
shall be construed as prohibiting the Company or any of its Affiliates
from pursuing any other rights and remedies available for any such
breach or threatened breach.
(h) The Employee agrees that upon termination of his
employment hereunder for any reason, the Employee shall forthwith
return to the Company all documents and other property in his
possession belonging to the Company or any of its Affiliates.
(i) Without limiting the generality of Section 10 hereof,
the Employee hereby expressly agrees that the foregoing provisions of
this Section 6 shall be binding upon the Employee's heirs, successors
and legal representatives.
7
<PAGE> 8
7. Termination. (a) The Employment Term shall
end and the Employee's employment hereunder shall be terminated upon the
occurrence of any of the following:
(i) the death of the Employee;
(ii) termination of the Employee's employment hereunder by
the Company based upon the inability of the Employee to perform his
duties on account of disability or incapacity for a period of one
hundred eighty (180) or more days, whether or not consecutive,
occurring within any period of twelve (12) consecutive months;
provided, however, that such employment shall not be terminated by the
Company if it can reasonably accommodate the Employee's disability or
incapacity;
(iii) the termination of the Employee's employment hereunder
by the Employee at any time for any reason whatsoever (including,
without limitation, resignation or retirement);
(iv) termination of the Employee's employment hereunder by
the Company at any time for "cause", such termination to take effect
immediately upon written notice from the Company to the Employee;
(v) termination of the Employee's employment hereunder by
the Company at any time other than for "cause", such termination to
take effect immediately upon written notice from the Company to the
Employee; or
(vi) upon a Change of Control of the Company.
The following actions, failures or events by or affecting the
Employee shall constitute "cause" for termination within the meaning of clause
(iv) above: (1) conviction of having committed a felony; (2) determination by
at least two-thirds of the members of the Board of Directors that the Employee
has committed acts of dishonesty or moral turpitude; (3) failure to follow
reasonable and lawful directives of the Board of Directors of the Company; or
(4) gross negligence or willful misconduct by the Employee in the performance
of his obligations hereunder. The term "willful" shall mean any act or failure
to act taken or omitted to be taken by the Employee not in good faith and
without reasonable belief that the act or omission was in the best interest of
the Company.
8
<PAGE> 9
As used herein the term "Change of Control of the Company"
shall mean any of the following:
(i) sale or other disposition (or the last such
sale or other disposition) resulting in the transfer of more than
50% of the outstanding common stock of the Company to an unrelated
and unaffiliated third party purchaser; or
(ii) the consolidation or merger of the Company
with or into any other entity (other than a merger in which the
Company is the surviving corporation and which does not result in more
than 50% of the capital stock of the Company outstanding immediately
after the effective date of such merger being owned of record or
beneficially by persons other than the holders of its capital stock
immediately prior to such merger); or
(iii) a sale of substantially all of the
properties and assets of the Company as an entirety to an unrelated
and unaffiliated third party purchaser; or
(iv) the time at which any person (including a
person's affiliates and associates) or group (as that term is
understood under Section 13(d) of the Exchange Act and the rules and
regulations thereunder), files a Schedule 13-D or 14D-1 (or any
successor schedule, form or report under the Exchange Act) disclosing
that such person or group has become the beneficial owner (as defined
under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of shares of capital stock of the Company giving
such person or group a majority of the voting power of all outstanding
capital stock of the Company with the right to vote generally in an
election for directors or other capital stock of the Company into
which the common stock or other voting stock is reclassified or
changed.
(b) (i) If the Employment Term ends by reason of
Employee being terminated by the Company other than for "cause", then the
Company shall pay to the Employee, as severance pay or liquidated damages or
both, an amount equal to his then-current annual Salary in effect immediately
prior to such termination.
(ii) If the Employment Term ends by reason of the
occurrence of an event described in Section 7(a)(vi), the Company shall pay to
the Employee, as severance pay or liquidated damages or both, an amount equal
to his then-current annual Salary in
9
<PAGE> 10
effect immediately prior to the occurrence of such event plus an amount equal to
his bonus compensation in respect of the immediately preceding calendar year.
(iii) If the Employment Term ends by reason of the
Employee being terminated by the Company other than for "cause", then any such
payable amounts shall be paid in twelve (12) equal monthly installments
commencing on the first day of the calendar month immediately following the
termination of the Employment Term. If the Employment Term ends by reason of
the occurrence of an event described in Section 7(a)(vi) hereof, then such
amounts shall be payable no later than ten (10) business days after the end of
the Employment Term. It is understood and agreed that this Section 7(b) shall
survive the expiration or termination of this Agreement and the provisions
hereof shall be binding upon any successor in interest of the Company.
(c) Notwithstanding anything to the contrary expressed or
implied herein, and except as set forth in Section 7(b) hereof, the Company
(and its Affiliates) shall not be obligated to make any payments to the
Employee or on his behalf of whatever kind or nature by reason of the
Employee's cessation of employment other than: (A) such amounts, if any, of his
Salary and bonus compensation as shall have accrued and remained unpaid as of
the date of said cessation (including, but not limited to, the amount of any
bonus compensation payable in respect of the then-current calendar year); and
(B) such other amounts which may be otherwise payable to the Employee from the
Company's retirement plans or other benefit plans on account of such cessation
of employment (including, but not limited to, payment for any vested but unused
vacation); and (C) Company shall cover the Employee under its medical and
dental plan, and life insurance through the end of the last calendar day of the
month during which the Employment Term ends, thereafter, the Employee shall be
given COBRA conversion rights for the Company's medical and dental plan.
Nothing in this Section 7(c) shall limit the Employee's right to contest any
termination of the Employee's employment hereunder by appropriate legal
proceedings. It is understood and agreed that this Section 7(c) shall survive
the expiration or termination of this Agreement and the provisions hereof shall
be binding upon any successor in interest of the Company.
(d) No interest shall accrue on or be paid with respect
to any portion of any payments hereunder paid in accordance with the terms of
this Agreement.
10
<PAGE> 11
8. Non-Assignability. (a) Neither this
Agreement nor any right or interest hereunder shall be assignable by the
Employee, his beneficiaries, or legal representatives without the Company's
prior written consent; provided, however, that nothing in this Section 8(a)
shall preclude the Employee from designating a beneficiary to receive any
benefit payable hereunder upon his death. Neither this Agreement nor any right
or interest hereunder shall be assignable by the Company, nor shall any
obligations of the Company hereunder be delegated.
(b) Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
9. Competition. During the Employee's employment by the
Company and during the twelve (12) month period commencing on the date of
cessation of the Employee's employment for any reason whatsoever:
(a) The Employee will not make any statement or perform
any act intended to advance an interest of any existing or prospective
competitor of the Company or any of its Affiliates in any way that
will or may injure an interest of the Company or any of its Affiliates
in its relationship and dealing with existing or potential customers
or clients, or solicit or encourage any other employee of the Company
or any of its Affiliates to do any act that is disloyal to the Company
or any of its Affiliates or inconsistent with the interest of the
Company or any of its Affiliate's interests or in violation of any
provision of this Agreement;
(b) The Employee will not discuss with any existing or
potential customers or clients of the Company or any of its Affiliates
the present or future availability of services or products by a
business, if the Employee has or expects to acquire a proprietary
interest in such business or is or expects to be an employee, officer
or director of such business, where such services or products are
competitive with services or products which the Company or any of its
Affiliates provides during the Employment Term;
11
<PAGE> 12
(c) The Employee will not make any statement or do any
act intended to cause any existing or potential customers (with whom
the Company has made contact) or clients of the Company or any of its
Affiliates to make use of the services or purchase the products of any
competitive business in which the Employee has or expects to acquire a
proprietary interest or in which the Employee is or expects to be made
an employee, officer or director, if such services or products in any
way relate to or arise out of the services or products sold or
provided by the Company or any of its Affiliates to any such existing
customer or client during the Employment Term;
(d) The Employee will not directly or indirectly (as a
director, officer, employee, manager, consultant, independent
contractor, advisor or otherwise) engage in competition with, or own
any interest in, perform any services for, participate in or be
connected with (i) any business or organization which engages in
competition with the Company or any of its Affiliates in any
geographical area where any business is presently carried on by the
Company or any of its Affiliates, or (ii) any business or organization
which engages in competition with the Company or any of its Affiliates
in any geographical area where any business shall be hereafter, during
the period of the Employee's employment by the Company, carried on by
the Company or any of its Affiliates, if such business is then being
carried on by the Company or any of its Affiliates in such
geographical area; provided, however, that the provisions of this
Section 9(d) shall not be deemed to prohibit the Employee's ownership
of not more than 1% of the total shares of all classes of stock
outstanding of any publicly held company;
(e) The Employee will not directly or indirectly solicit
for employment, or advise or recommend to any other person that they
employ or solicit for employment, any employee of the Company or any
of its Affiliates; and
(f) The Employee will not directly or indirectly hire,
engage, send any work to, place orders with, or in any manner be
associated with any supplier, contractor, subcontractor or other
person or firm which rendered manufacturing or other services, or sold
any products, to the Company or any of its Affiliates if such action
by him would have a material adverse effect on the business, assets
12
<PAGE> 13
or financial condition of the Company or any of its Affiliates.
For purposes of this Section 9, a person or entity (including,
without limitation, the Employee) shall be deemed to be a competitor of the
Company or any of its Affiliates, or a person or entity (including, without
limitation, the Employee) shall be deemed to be engaging in competition with
the Company or any of its Affiliates, if such person or entity in any way
conducts, operates, carries out or engages (i) in the business of delivering
medical oxygen, respiratory therapy services, or durable medical equipment to
customers in their homes or (ii) in any other business engaged in by the
Company or any of its Affiliates on or prior to the date upon which such
Employee ceases to be employed hereunder.
In connection with the foregoing provisions of this Section 9,
the Employee represents that his experience, capabilities and circumstances are
such that such provisions will not prevent him from earning a livelihood. The
Employee further agrees that the limitations set forth in this Section 9
(including, without limitation, any time or territorial limitations) are
reasonable and properly required for the adequate protection of the business of
the Company (and of its Affiliates). It is understood and agreed that the
covenants made by the Employee in this Section 9 (and in Section 6 hereof)
shall survive the expiration or termination of this Agreement.
For purposes of this Section 9, proprietary interest in a
business is ownership, whether through direct or indirect stock holdings or
otherwise, of one percent (1%) or more of such business.
The Employee acknowledges and agrees that a remedy at law for
any breach or threatened breach of the provisions of this Section 9 would be
inadequate and, therefore, agrees that the Company and any of its Affiliates
shall be entitled to injunctive relief in addition to any other available
rights and remedies in cases of any such breach or threatened breach; provided,
however, that nothing contained herein shall be construed as prohibiting the
Company or any of its Affiliates from pursuing any other rights and remedies
available for any such breach or threatened breach.
10. Binding Effect. Without limiting or diminishing the
effect of Section 8 hereof, this Agreement shall inure to the
13
<PAGE> 14
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns.
11. Notices. Any notice required or permitted to be
given under this Agreement shall be sufficient if in writing and either
delivered in person or sent by first class certified or registered mail,
postage prepaid, if to the Company, at the Company's principal place of
business, and if to the Employee, at his home address most recently filed with
the Company, or to such other address or addresses as either party shall have
designated in writing to the other party hereto.
12. Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida.
13. Severability. If any provision of this Agreement
shall be determined to be invalid, illegal or unenforceable in whole or in
part, neither the validity of the remaining part of such provision nor the
validity of any other provision of this Agreement shall in any way be affected
thereby.
14. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
15. Entire Agreement; Modifications. This Agreement
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements, oral and written, between
the parties hereto with respect to the subject matter hereof. This Agreement
may be modified or amended only by an instrument in writing signed by both
parties hereto
16. Survival. The provisions of Sections 6, 7 and 9
hereof shall survive and continue after the expiration or termination of this
Agreement.
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<PAGE> 15
17. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have duly
executed and delivered this Agreement as of the day and year first above
written.
LINCARE HOLDINGS INC.
By:_____________________________________
Title:__________________________________
________________________________________
PAUL G. GABOS
15
<PAGE> 1
Exhibit 10.41
LINCARE HOLDINGS INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan. The purpose of the Lincare
Holdings Inc. Employee Stock Purchase Plan (the "Plan"), is to provide
employees of Lincare Holdings Inc. (the "Company") and its subsidiaries with an
opportunity to acquire a proprietary interest in the Company through the
purchase of shares of common stock (par value $0.01 per share) of the Company
(the "shares").
2. Employees Eligible to Participate. Any person,
including officers (as such term is defined in Rule 16a-1(f) promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act")) and directors, who is
in the employment of the Company or any of its subsidiaries during an Offering
Period (as defined and described below) is eligible to participate in the Plan;
provided, however, that the Committee shall have the authority, in its sole
discretion (but in all events consistent with the provisions of Section 423 of
the Internal Revenue Code of 1986, as amended) to establish from time to time
the eligibility requirements with respect to such employees' participation in
the Plan. Notwithstanding any provisions of the Plan to the contrary, no
employee shall be granted an option to participate in the Plan:
(a) if, immediately after the grant, such employee
would own stock, and/or hold outstanding options to purchase stock, possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company; or
(b) which permits his or her rights to purchase stock
under all employee stock purchase plans of the Company to accrue at a rate
which exceeds $25,000 in fair market value of the stock (determined at the time
such option is granted) for each calendar year in which such option is
outstanding; or
(c) which is exercisable more than 5 years after the
date such option is granted.
3. Offering Periods. Subject to change or modification
at any time and from time to time by the Employee Stock Purchase Plan Committee
(the "Committee"), there will be four (4) offering periods--December 1 through
February 28 (or February 29, as the case may be), March 1 through May 31, June
1 through August 31 and September 1 through November 30--for each twelve (12)
month period during the term of the Plan (an "Offering Period"). The last day
of each Offering Period shall be referred to herein as an "Offering Date."
Except for the limitation contained in Section 5(a) of the Plan and limitations
which the Committee may impose from time to time in its discretion on the
number of shares for which each eligible employee may subscribe, there shall be
no limit on the aggregate number of shares for which subscriptions may be made
during any particular Offering Period. The right of an eligible employee to
subscribe for shares
<PAGE> 2
under the Plan during an offering period shall accrue on the Offering Date
preceding the first day of each such Offering Period.
4. Price and Methods of Purchase. All matters regarding
the purchase price of the shares and method of purchase of the shares under this
Plan shall be conducted so as to at all times comply with the provisions of the
Rules promulgated under the Exchange Act. Unless otherwise necessary in order
to comply with the foregoing, the purchase price per share on any Offering Date
shall be the lesser of (i) 85% of the fair market value of the Company's common
stock as of the immediately preceding Offering Date, or (ii) 85% of the fair
market value of the Company's common stock as of the current Offering Date. For
purposes of paragraph 4, "fair market value" shall mean the closing price on the
last trading day before the Offering Date of the Company's common stock as
reported on the Composite Tape, or if not reported thereon, then such price as
reported in the trading reports of the principal securities exchange in the
United States on which such stock is listed, or if such stock is not listed on a
securities exchange in the United States, then the closing price as reported in
the trading reports of the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or NASDAQ's successor, or if not reported on
NASDAQ, the fair market value of such stock as determined in good faith and
based on all relevant factors.
5. Number of Shares Available for Purchase.
(a) The Committee shall have the authority, in its sole
discretion, to establish from time to time a minimum and/or maximum number of
shares which eligible employees are allowed to purchase under the Plan during
any given Offering Period; provided, however, that in no event shall an
aggregate number of shares greater than 300,000 be issued under the Plan, and
provided further that no employee shall be permitted to purchase shares with an
aggregate value in excess of 10% of such employee's base salary in any calendar
year.
(b) Subscriptions shall be allowed for full shares
only. Any rights to subscribe for fractional shares shall be void, and any
computation relating to fractional shares shall be rounded down to the next
lowest whole number of shares.
6. Participation and Payment.
(a) An eligible employee may become a participant in
any Offering Period by completing and delivering a Payroll Deduction
Authorization at least 20 days prior to the end of the payroll period for which
the employee desires such election to be effective; provided, however, that an
employee who previously has participated in the Plan and has terminated such
participation shall be ineligible to participate again until a period of six
months has elapsed from the date of such termination of participation. The
Payroll
2
<PAGE> 3
Deduction Authorization Form shall state the percentage of the employee's base
compensation that he or she desires to have withheld. Notwithstanding the
foregoing, any amounts of salary or wages deferred by the Employee for the
purpose of purchasing stock under the Plan shall be subject to all income tax,
social security and other withholdings under state and federal law.
(b) The designated percentage of compensation
shall be withheld by the Company for such pay period and for each succeeding
pay period until the employee submits a Payroll Deduction Authorization Form
changing such election. Changes to the percentage of compensation to be
withheld may be made at any time, but not more frequently than 4 times per
year; provided, however, that regardless of the number of changes previously
made, an employee may discontinue participation in the Plan at any time, as
provided in Section 7.
(c) The Company will accumulate and hold the
amounts deducted from the participant's compensation for each participant's
account. On each Offering Date, the Company will use the funds accumulated to
purchase shares for the benefit of the participants. Such shares shall be held
by an agent designated by the Company. No interest will be paid on any funds
of the participant under any circumstances. Once funds have been withheld from
the participant's compensation, the participant shall have no right to obtain
the release of such funds, except upon termination of participation in the
Plan.
(d) Shares purchased shall be allocated to the
individual accounts established by the Company's agent for participants in
proportion to the respective amounts withheld for participants' accounts.
Allocations shall be made in whole shares. Any funds which would result in the
purchase of fractional shares shall be carried over to the next purchase date.
7. Termination of Participation in Plan.
(a) A participant may terminate his or her
participation in the Plan at any time by delivering to the Company written
notice terminating his or her payroll deduction authorization, which will
become effective as soon as practicable after receipt.
(b) Participation in the Plan and payroll
deduction authorizations terminate automatically without notice upon death or
other termination of employment with the Company. Any funds submitted in
payment for shares prior to termination of participation in the Plan shall be
promptly returned to the participant.
8. Delivery of Certificates Representing Shares.
Periodically throughout the operation of the Plan (but in no event less than
quarterly), the Company shall cause the agent designated by it to prepare and
deliver to each participating employee a statement
3
<PAGE> 4
with respect to the employee's account activity in the Plan. All shares
purchased under the Plan shall be held in street name by the Company or its
designee for the benefit of the employees. Alternatively, the Committee may,
in its sole discretion, from time to time direct that certificates representing
the purchased shares be issued in the purchasing employee's name and delivered
to the employee. In the event the Plan is terminated for any reason, the
Company shall cause certificates to be issued in the name(s) of the employees
holding shares in the Plan with respect to such shares held. In the event of
termination for any reason of the employment of an employee participant of the
Plan, the Company shall cause to be issued to such employee, one or more
certificates representing the Company shares owned by such terminated employee
held in street name on behalf of such terminated employee, if any.
Notwithstanding any other provision of this Plan, shares purchased hereunder
must be held by participating employees for a minimum of one year from the date
of purchase. The Company or its designee may require appropriate legends or
stop orders to enforce such restriction.
9. Employees' Rights as Stockholders. No participating
employee shall have any right as a stockholder until he or she becomes a record
or beneficial owner of the shares purchased under the Plan. No adjustment
shall be made for dividends or other rights for which the record date is prior
to such date.
10. Termination of Employment. An employee whose
employment is terminated for any reason shall have no right to purchase shares
or otherwise participate in the Plan after the date of termination. No shares
may be issued to any person who is not an employee on the date the shares are
issued. Any funds submitted in payment for shares that may not be issued as a
result of non-employee status shall be promptly returned to the subscriber.
11. Rights Not Transferable. The right of an employee to
participate in the Plan shall not be transferable by an employee nor be
exercisable after death, by his or her personal representative or anyone else,
or during his or her lifetime by any person other than the employee.
12. Dividend, Recapitalization, Etc. If shares are
distributed by the Company as a stock dividend or pursuant to a stock split,
combination, or exchange of shares of the Company's common stock, or other
increase or decrease in the number of the outstanding shares without receipt by
the Company of consideration:
(a) the aggregate number of shares which shall
thereafter be available under the Plan shall be equitably and appropriately
adjusted; and
(b) the number and kind of shares then subject to
subscription by employees under the Plan shall be equitably and appropriately
adjusted.
4
<PAGE> 5
13. Administration.
(a) The Board of Directors of the Company shall appoint
an Employee Stock Purchase Plan Committee composed of at least two persons who
shall be employees of the Company, but who are not required to be Directors of
the Company. The Committee shall have the sole and exclusive authority to
administer the Plan. The Committee may prescribe rules and regulations from
time to time for the administration of the Plan, may make exceptions to such
rules and regulations and to the provisions set forth in the Plan, and may
decide questions which may arise with respect to its interpretation or
application.
(b) All shares purchased under the Plan shall be
purchased in accordance with applicable state and federal securities laws such
that the shares, when purchased, will be freely tradable by the respective
Employees purchasing such shares, subject to the restriction imposed by Section
8 of the Plan. The Committee may establish procedures and restrictions in its
discretion to ensure compliance with applicable securities laws.
14. Term of Plan. Unless sooner terminated as provided
in paragraph 15, the Plan shall commence on satisfaction of the condition of
paragraph 17 and shall terminate on December 31, 2007. Notwithstanding
anything in the Plan to the contrary, if (i) the Company is merged or
consolidated with another corporation, and the Company is not a surviving
corporation or (ii) the Company is liquidated or dissolved, then the Plan shall
immediately terminate and all rights to purchase stock hereunder to the extent
not then exercised shall cease and become void.
15. Amendment or Termination. The Board of Directors of
the Company shall have the right to amend, modify, or terminate the Plan at any
time without notice. Upon termination, all rights to purchase stock hereunder
to the extent not then exercised shall cease and become void.
16. Notices.
(a) All notices or other communications by an employee
to the Company under or in connection with the Plan shall be deemed to have
been duly given when actually received by the Secretary of the Company or when
actually received in the form specified by the Company at the locations, or by
the person, designated by the Company for the receipt thereof.
(b) All notices or other communications by the
Company to an employee under or in connection with the Plan shall be deemed to
have been duly
5
<PAGE> 6
given by the Company to the employee if hand delivered to the employee or
delivered to the employee's location of employment, or if sent by U.S. mail to
the residence or business address of the employee as reflected on the books of
the Company or to such other address as the employee may designate from time to
time by notice given in accordance with the provisions in paragraph 16(a).
17. Condition Precedent to Effectiveness. The Plan shall
become effective upon the adoption of the Plan by the Board of Directors of the
Company. Further, the Company shall submit the Plan for stockholder approval
at the next annual meeting of stockholders after its adoption.
6
<PAGE> 1
================================================================================
Exhibit 10.42
CREDIT AGREEMENT
by and among
LINCARE HOLDINGS INC.
as Borrower,
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent and as Lender
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
November 25, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
Definitions and Terms
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE II
The Credit Facilities
2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.2. Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3. Payment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.4. Non-Conforming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.5. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.6. Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.7. Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.8. Conversions and Elections of Subsequent Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . 31
2.9. Increase and Decrease in Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.10. Facility Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.11. Deficiency Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.12. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.13. Line of Credit Extension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.14. Swing Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III
Letters of Credit
3.1. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.3. Letter of Credit Facility Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IV
Security
4.1. Facility Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2. Stock Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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4.3. Pledge of Partnership Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.4. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.2. Limitation on Types of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.3. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.4. Treatment of Affected Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.5. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.7. Replacement Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.2. Conditions of Revolving Loans, Line of Credit Loans and Letter of Credit . . . . . . . . . . . . . . . . 49
ARTICLE VII
Representations and Warranties
7.1. Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.2. Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.3. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.4. Subsidiaries and Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.5. Ownership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.6. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.7. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.9. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.11. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.12. Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.13. Patents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.14. No Untrue Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.15. No Consents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.16. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.17. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.18. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.19. Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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7.20. RICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.21. Security Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII
Affirmative Covenants
8.1. Financial Reports, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.2. Maintain Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.3. Existence, Qualification, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.4. Regulations and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.6. True Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.7. Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.8. Observe all Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.9. Governmental Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.10. Covenants Extending to Other Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.11. Officer's Knowledge of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.12. Suits or Other Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.13. Notice of Discharge of Hazardous Material or Environmental Complaint . . . . . . . . . . . . . . . . . . 61
8.14. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.16. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.17. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.18. Continued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.19. New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE IX
Negative Covenants
9.1. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.2. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.4. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.5. Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.6. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.7. Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.8. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.9. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.10. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.11. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.12. Prepayments, Etc. of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.13. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.14. Rate Hedging Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
9.15. Negative Pledge Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE X
Events of Default and Acceleration
10.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.2. Agent to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.3. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.4. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.5. Allocation of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE XI
The Agent
11.1. Appointment, Powers, and Immunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.2. Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.3. Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.4. Rights as Lender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.5. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.6. Non-Reliance on Agent and Other Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.7. Resignation of Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.8. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE XII
Miscellaneous
12.1. Assignments and Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
12.3. Right of Set-off; Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.4. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.5. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.6. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.9. Indemnification; Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.12. Agreement Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.13. Usury Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.14. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
12.15. GOVERNING LAW; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
EXHIBIT A Applicable Commitment Percentages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Form of Assignment and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D-1 Form of Borrowing Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-3
EXHIBIT E Form of Interest Rate Selection Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F-1 Form of Revolving Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT F-2 Form of Line of Credit Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
EXHIBIT F-3 Form of Swing Line Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
EXHIBIT G Form of Opinion of Borrower's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
EXHIBIT H Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
EXHIBIT I Form of Facility Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT J Form of Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-1
EXHIBIT K Form of LC Account Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K-1
EXHIBIT L Form of Collateral Assignment of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . L-1
Schedule 1.1(a) Non-cash Non-recurring Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1.1(a)
Schedule 1.1(b) Existing Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1.1(b)
Schedule 4.1 Excluded Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Schedule 7.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Schedule 7.6 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Schedule 7.7 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Schedule 7.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Schedule 8.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Schedule 9.6 Investments in Other Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 25, 1997 (the
"Agreement"), is made by and among LINCARE HOLDINGS INC., a Delaware
corporation having its principal place of business in Clearwater, Florida (the
"Borrower"), NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States, in its capacity as
a Lender ("NationsBank"), and each other financial institution executing and
delivering a signature page hereto and each other financial institution which
may hereafter execute and deliver an instrument of assignment with respect to
this Agreement pursuant to Section 12.1 (hereinafter such financial
institutions may be referred to individually as a "Lender" or collectively as
the "Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States, in its
capacity as agent for the Lenders (in such capacity, and together with any
successor agent appointed in accordance with the terms of Section 11.7, the
"Agent");
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower certain credit facilities in the maximum aggregate principal
amount at any time outstanding of $100,000,000, which shall include a line of
credit facility of up to $25,000,000 and a revolving credit facility of up to
$75,000,000, which shall include a letter of credit facility of up to
$5,000,000 for the issuance of standby letters of credit and a swing line
facility of up to $5,000,000, which swing line facility shall be available
according to the conditions under Section 2.14 hereof; and
WHEREAS, the Borrower desires to use a portion of the proceeds of the
Revolving Credit Facility and Line of Credit Facility to refinance outstanding
indebtedness under the existing Restated Loan Agreement by and between the
Borrower and NationsBank dated as of February 10, 1995; and
WHEREAS, the Lenders are willing to make such revolving credit, line
of credit, letter of credit and swing line facilities available to the Borrower
upon the terms and conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree
as follows:
<PAGE> 8
ARTICLE I
Definitions and Terms
1.1. Definitions. For the purposes of this Agreement, in addition
to the definitions set forth above, the following terms shall have the
respective meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling
equity interest in another Person, whether by purchase of such equity
interest or upon exercise of an option or warrant for, or conversion
of securities into, such equity interest, or (ii) assets of another
Person which constitute all or substantially all of the assets of such
Person or of a line or lines of business conducted by such Person.
"Advance" means a borrowing under the Revolving Credit
Facility or Line of Credit Facility consisting of a Base Rate Loan or
a Eurodollar Rate Loan.
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or
is under common control with the Borrower; or (ii) which beneficially
owns or holds 5% or more of any class of the outstanding voting stock
(or in the case of a Person which is not a corporation, 5% or more of
the equity interest) of the Borrower; or 5% or more of any class of
the outstanding voting stock (or in the case of a Person which is not
a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Borrower. The term "control" means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through ownership of voting stock, by contract or otherwise.
"Applicable Commitment Percentage" means, with respect to each
Lender that portion of the Total Credit Commitment (including its
Participations and its obligations hereunder to the Issuing Bank to
acquire Participations) allocable to such Lender (i) with respect to
Lenders as of the Closing Date, as set forth in Exhibit A and (ii)
with respect to any Person who becomes a Lender hereafter, as
reflected in each Assignment and Acceptance to which such Lender is a
party Assignee; provided that the Applicable Commitment Percentage of
each Lender shall be increased or decreased to reflect any assignments
to or by such Lender effected in accordance with Section 12.1.
"Applicable Lending Office" means, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for such Type of Loan on the
signature pages hereof or such other office of such Lender (or an
affiliate of such Lender) as such Lender may from time to time specify
to the Agent and the Borrower by written notice in accordance with the
terms hereof as the office by which its Loans of such Type are to be
made and maintained.
2
<PAGE> 9
"Applicable Margin" means for each Eurodollar Rate Loan that
percent per annum set forth below, which shall be based upon the
Consolidated Leverage Ratio for the Four-Quarter Period most recently
ended as specified below:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
for Revolving for Line of
Tier Consolidated Leverage Ratio Credit Facility Credit Facility
---- --------------------------- --------------- ----------------
<S> <C> <C> <C>
IV Equal to or Greater than .525% .575%
2.00 to 1.00
III Less than 2.00 to 1.00 .425% .475%
and equal to or Greater than
1.50 to 1.00
II Less than 1.50 to 1.00 .325% .375%
and equal to or Greater than
1.00 to 1.00
I Less than 1.00 to 1.00 .275% .325%
</TABLE>
The Applicable Margin shall be established at the end of each fiscal
quarter of the Borrower (each, a "Determination Date". Any change in
the Applicable Margin following each Determination Date shall be
determined based upon the computations set forth in the certificate
furnished to the Agent pursuant to Section 8.1(a)(ii) and Section
8.1(b)(ii), subject to review and approval of such computations by the
Agent, and shall be effective commencing on the date following the
date such certificate is received (or, if earlier, the date such
certificate was required to be delivered) until the date following the
date on which a new certificate is delivered or is required to be
delivered, whichever shall first occur; provided however, if the
Borrower shall fail to deliver any such certificate within the time
period required by Section 8.1, then the Applicable Margin shall be
Tier IV until the appropriate certificate is so delivered. From the
Closing Date to the first Determination Date, the Applicable Margin
shall be Tier I.
3
<PAGE> 10
"Applicable Unused Fee" means, with respect to the Line of
Credit Facility and the Revolving Credit Facility, that percent per
annum set forth below, which shall be based upon the Consolidated
Leverage Ratio for the Four-Quarter Period most recently ended as
specified below:
<TABLE>
<CAPTION>
Applicable Unused Applicable Unused
Fee Revolving Fee for Line of
Tier Consolidated Leverage Ratio Credit Credit
---- --------------------------- --------------- ----------------
<S> <C> <C> <C>
IV Equal to or Greater than .225% .175%
2.00 to 1.00
III Less than 2.00 to 1.00 .200% .150%
and equal to or Greater than
1.50 to 1.00
II Less than 1.50 to 1.00 .175% .125%
and equal to or Greater than
1.00 to 1.00
I Less than 1.00 to 1.00 .175% .125%
</TABLE>
The Applicable Unused Fee shall be established at the end of each
fiscal quarter of the Borrower (the "Determination Date"). Any change
in the Applicable Unused Fee following each Determination Date shall
be determined based upon the computations set forth in the certificate
furnished to the Agent pursuant to Section 8.1(a)(ii) and Section
8.1(b)(ii), subject to review and approval of such computations by the
Agent and shall be effective commencing on the date following the date
such certificate is received (or, if earlier, the date such
certificate was required to be delivered) until the date following the
date on which a new certificate is delivered or is required to be
delivered, whichever shall first occur; provided however, if the
Borrower shall fail to deliver any such certificate within the time
period required by Section 8.1, then the Applicable Unused Fee
shall be Tier IV until the appropriate certificate is so delivered.
From the Closing Date to the first Determination Date, the Applicable
Unused Fee shall be Tier I.
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit,
or similar documentation, executed by the Borrower from time to time
and delivered to the Issuing Bank to support the issuance of Letters
of Credit.
"Assigned Interests" has the meaning given to such term in the
Collateral Assignment of Partnership Interests.
4
<PAGE> 11
"Assignment and Acceptance" shall mean an Assignment and
Acceptance in the form of Exhibit B (with blanks appropriately filled
in) delivered to the Agent in connection with an assignment of a
Lender's interest under this Agreement pursuant to Section 12.1.
"Authorized Representative" means any of the Chief Executive
Officer, the President, the Chief Financial Officer, the Treasurer or
the Corporate Controller of the Borrower or, with respect to financial
matters, the Chief Financial Officer or Corporate Controller of the
Borrower, or any other Person expressly designated by the Board of
Directors of the Borrower (or the appropriate committee thereof) as an
Authorized Representative of the Borrower, as set forth from time to
time in a certificate in the form of Exhibit C.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (b) the Prime Rate for such day; provided,
however, that at any time there shall be outstanding under Section 5.4
an Affected Loan, the "Base Rate" with respect to such Affected Loan
shall mean the lesser of (a) or (b). Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the Prime Rate or
Federal Funds Rate.
"Base Rate Loan" means a Loan for which the rate of interest
is determined by reference to the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan or Swing
Line Loan made either to (i) satisfy Reimbursement Obligations arising
from a drawing under a Letter of Credit or (ii) pay NationsBank in
respect of Swing Line Outstandings.
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body).
"Borrower's Account" means a demand deposit account number
0095020624 or any successor account with the Agent, which may be
maintained at one or more offices of the Agent or an agent of the
Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under (i) the Revolving
Credit Facility or the Line of Credit Facility or, (ii) a Swing Line
Loan, in the forms of Exhibits D-1 and D-2 respectively.
"Business Day" means, (i) with respect to any Base Rate Loan,
any day which is not a Saturday, Sunday or a day on which banks
in the States of New York and North Carolina are authorized or
obligated by law, executive order or governmental decree to be closed
and, (ii) with respect to any Eurodollar Rate Loan, any day which is a
Business Day, as described above, and on which the relevant
international financial markets are open for the transaction of
business contemplated by this Agreement in London, England, New York,
New York and Charlotte, North Carolina.
5
<PAGE> 12
"Capital Expenditures" means, with respect to the Borrower
and its Subsidiaries, for any period the sum of (without duplication)
(i) all expenditures (whether paid in cash or accrued as liabilities)
by the Borrower or any Subsidiary during such period for items that
would be classified as "property, plant or equipment" or
comparable items on the consolidated balance sheet of the Borrower and
its Subsidiaries, including without limitation all transactional costs
incurred in connection with such expenditures provided the same have
been capitalized, excluding, however, the amount of any Capital
Expenditures paid for with proceeds of casualty insurance as evidenced
in writing and submitted to the Agent together with any compliance
certificate delivered pursuant to Section 8.1(a) or (b), and (ii) with
respect to any Capital Lease entered into by the Borrower or its
Subsidiaries during such period, the present value of the lease
payments due under such Capital Lease over the term of such Capital
Lease applying a discount rate equal to the interest rate provided in
such lease (or in the absence of a stated interest rate, that rate used
in the preparation of the financial statements described in Section
8.1(a)), all the foregoing in accordance with GAAP applied on a
Consistent Basis.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof.
"Certificate and Receipt of Registrar" means, collectively or
individually as the context may indicate (i) that certain Certificate
and Receipt of Registrar dated as of the Closing Date between certain
Subsidiaries and the Agent in the form attached to the Collateral
Assignment of Partnership Interests as Exhibit A and (ii) any
additional Certificate and Receipt of Registrar delivered to the Agent
pursuant to Section 8.19, as any of the foregoing may be hereafter
amended, supplemented or restated from time to time.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other
than Persons owning thirty percent (30%) or more of the Voting
Stock of the Borrower on the Closing Date, either (A) becomes
the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of Voting Stock of the
Borrower (or securities convertible into or exchangeable for
such Voting Stock) representing thirty percent (30%) or more
of the combined voting power of all Voting Stock of the
Borrower (on a fully diluted basis) or (B) otherwise has the
ability, directly or indirectly, to elect a majority of the
board of directors of the Borrower; or
(ii) during any period of up to 12 consecutive
months, commencing on the Closing Date, individuals who at
the beginning of such 12-month period were directors of the
Borrower shall cease for any reason (other than the death,
disability or retirement of an officer of the Borrower that is
serving as a director at such time so long as another officer
of the Borrower replaces such Person as a director) to
constitute a majority of the board of directors of the
Borrower; provided, however,
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<PAGE> 13
to the extent there exist vacancies on the Board of Directors
as of the Closing Date, the individuals named to fill such
vacancies, if selected by a majority of directors sitting as of
the Closing Date, shall be deemed for purposes of this clause
(ii) to have been appointed prior to the Closing Date.
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Lenders and the Agent and on which the
conditions set forth in Section 6.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
"Collateral" means, collectively, all property of the
Borrower, any Subsidiary or any other Person in which the Agent or any
Lender is granted a Lien as security for all or any portion of the
Obligations under any Security Instrument.
"Collateral Assignment of Partnership Interests" means,
collectively (i) the Collateral Assignment of Partnership Interests
dated as of the Closing Date between the Borrower, Lincare Inc. and
the Agent and (ii) each Collateral Assignment of Partnership Interests
substantially in the form of Exhibit L delivered to the Agent pursuant
to Section 8.19 hereof as any of the foregoing may be amended,
supplemented or restated from time to time.
"Consistent Basis" in reference to the application of GAAP
means the accounting principles observed in the period referred to are
comparable in all material respects to those applied in the
preparation of the audited financial statements of the Borrower and
its Subsidiaries referred to in Section 7.6(a).
"Consolidated EBITDA" means, with respect to the Borrower and
its Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii)
taxes on income, (iv) amortization and (v) depreciation and (vi) the
non-cash non-recurring expenses described in Schedule 1.1(a), all
determined on a consolidated basis in accordance with GAAP applied on
a Consistent Basis.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to the Borrower and its Subsidiaries for any Four-Quarter Period
ending on the date of computation thereof, the ratio of (i)
Consolidated EBITDA for such period less (without duplication) Capital
Expenditures for such period, to (ii) Consolidated Fixed Charges for
such period.
"Consolidated Fixed Charges" means, with respect to the
Borrower and its Subsidiaries for any Four-Quarter Period ending
on the date of computation thereof, the sum of, without duplication
(i) Consolidated Interest Expense, (ii) current maturities of
Consolidated Funded Indebtedness having an original term (including
rights of renewal) of greater than one year, excluding in all events
Outstandings and (iii) all Restricted Payments,
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<PAGE> 14
all determined on a consolidated basis in accordance with GAAP
applied on a Consistent Basis.
"Consolidated Funded Indebtedness" means, without duplication,
all Indebtedness for Money Borrowed and all Guaranties of the Borrower
and its Subsidiaries, all determined on a consolidated basis.
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries, including without limitation (i) the
current amortized portion of debt discounts to the extent included in
gross interest expense, (ii) the current amortized portion of all fees
(including fees payable in respect of any Swap Agreement) payable in
connection with the incurrence of Indebtedness to the extent included
in gross interest expense and (iii) the portion of any payments made
in connection with Capital Leases allocable to interest expense, all
determined on a consolidated basis in accordance with GAAP applied on
a Consistent Basis.
"Consolidated Leverage Ratio" means, as of the date of
computation thereof, the ratio of (i) the sum of (without duplication)
Consolidated Funded Indebtedness (determined as at such date) to (ii)
Consolidated EBITDA (for the Four-Quarter Period ending on (or most
recently ended prior to) such date).
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries (excluding payments received by the Borrower and its
Subsidiaries of (a) interest income, and (b) dividends and
distributions made in the ordinary course of their businesses by
Persons in which investment is permitted pursuant to this Agreement
and not related to an extraordinary event), less all operating and
non-operating expenses of the Borrower and its Subsidiaries including
taxes on income, all determined on a consolidated basis in accordance
with GAAP applied on a Consistent Basis; but excluding as income: (i)
net gains or losses on the sale, conversion or other disposition of
capital assets, (ii) net gains or losses on the acquisition,
retirement, sale or other disposition of capital stock and other
securities of the Borrower or its Subsidiaries, (iii) net gains or
losses on the collection of proceeds of life insurance policies, (iv)
any write-up of any asset, and (v) any other net gain or loss or
credit of an extraordinary nature as determined in accordance with
GAAP applied on a Consistent Basis.
"Consolidated Shareholders' Equity" means, as of any date on
which the amount thereof is to be determined, the sum of the following
in respect of the Borrower and its Subsidiaries (determined on a
consolidated basis and excluding any upward adjustment after the
Closing Date due to revaluation of assets): (i) the amount of issued
and outstanding share capital, plus (ii) the amount of additional
paid-in capital and retained earnings (or, in the case of a deficit,
minus the amount of such deficit), plus (iii) the amount of any
foreign currency translation adjustments (if positive, or, if
negative, minus the amount of such translation adjustment), minus (iv)
the amount of any treasury stock, all as determined in accordance with
GAAP applied on a Consistent Basis.
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<PAGE> 15
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring
thereof, would be required) to be included in the financial statements
(including footnotes) of such Person in accordance with GAAP applied
on a Consistent Basis, including Statement No. 5 of the Financial
Accounting Standards Board, all Letters of Credit, Rate Hedging
Obligations and any obligation of such Person guaranteeing or in
effect guaranteeing any Indebtedness, dividend or other obligation of
any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including obligations of such Person however
incurred:
(1) to purchase such Indebtedness or other
obligation or any property or assets constituting security
therefor;
(2) to advance or supply funds in any manner (i)
for the purchase or payment of such Indebtedness or other
obligation, or (ii) to maintain a minimum working capital, net
worth or other balance sheet condition or any income statement
condition of the primary obligor;
(3) to grant or convey any lien, security
interest, pledge, charge or other encumbrance on any property
or assets of such Person to secure payment of such
Indebtedness or other obligation;
(4) to lease property or to purchase securities
or other property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
(5) otherwise to assure the owner of the
Indebtedness or such obligation of the primary obligor against
loss in respect thereof.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.8 hereof of a Eurodollar Rate Loan
of one Type as a Eurodollar Rate Loan of the same Type from one
Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to Section 2.8 of one Type of Loan into another
Type of Loan.
"Cost of Acquisition" means, with respect to any Acquisition,
as at the date of entering into any agreement therefor for the
purpose of determining whether approval of the Required Lenders is
necessary prior to the Acquisition, or as at the date of closing of an
Acquisition for the purpose of determining whether the Cost of
Acquisition exceeds the limitations set forth in Section 9.2 hereof,
the sum of the following (without duplication): (i) the value of the
capital stock, warrants or options to acquire capital stock of Borrower
or any Subsidiary to be transferred in connection therewith, (ii) the
amount of any cash and fair market value of other property (excluding
property described in clause (i) and the unpaid principal amount of any
debt instrument) given as consideration, (iii) the amount (determined
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<PAGE> 16
by using the face amount or the amount payable at maturity, whichever
is greater) of any Indebtedness incurred, assumed or acquired by the
Borrower or any Subsidiary in connection with such Acquisition, (iv)
all additional purchase price amounts in the form of earnouts and other
contingent obligations that should be recorded on the financial
statements of the Borrower and its Subsidiaries in accordance with
GAAP, (v) all amounts paid in respect of covenants not to compete,
consulting agreements that should be recorded on financial statements
of the Borrower and its Subsidiaries in accordance with GAAP, and other
affiliated contracts in connection with such Acquisition, (vi) the
aggregate fair market value of all other consideration given by the
Borrower or any Subsidiary in connection with such Acquisition, and
(vii) out of pocket transaction costs for the services and expenses of
attorneys, accountants and other consultants incurred in effecting such
transaction, and other similar transaction costs so incurred. For
purposes of determining the Cost of Acquisition for any transaction,
(A) the capital stock of the Borrower shall be valued (I) in the case
of capital stock that is then designated as a national market system
security by the National Association of Securities Dealers, Inc.
("NASDAQ") or is listed on a national securities exchange, the average
of the last reported bid and ask quotations or the last prices reported
thereon, and (II) with respect to shares that are not freely tradeable,
as determined by the Board of Directors of the Borrower and, if
requested by the Agent, determined to be a reasonable valuation by the
independent public accountants referred to in Section 8.1(a), (B) the
capital stock of any Subsidiary shall be valued as determined by the
Board of Directors of such Subsidiary and, if requested by the Agent,
determined to be a reasonable valuation by the independent public
accountants referred to in Section 8.1(a), and (C) with respect to any
Acquisition accomplished pursuant to the exercise of options or
warrants or the conversion of securities, the Cost of Acquisition shall
include both the cost of acquiring such option, warrant or convertible
security as well as the cost of exercise or conversion.
"Default" means any event or condition which, with the giving
or receipt of notice or lapse of time or both, would constitute an
Event of Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate
Loan, until the end of the Interest Period applicable thereto, a rate
of two percent (2%) above the Eurodollar Rate applicable to such Loan,
and thereafter at a rate of interest per annum which shall be two
percent (2%) above the Base Rate, (ii) with respect to Base Rate
Loans, at a rate of interest per annum which shall be two percent (2%)
above the Base Rate and (iii) in any case, the maximum rate permitted
by applicable law, if lower.
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United
States of America.
"Eligible Assignee" means (i) a Lender, (ii) an affiliate of
a Lender, and (iii) any other Person approved by the Agent and,
unless an Event of Default has occurred and is continuing at the time
any assignment is effected in accordance with Section 12.1, the
Borrower, each such approval not to be unreasonably withheld or
delayed by the Borrower, as the case may be, and such approval to be
deemed given by the Borrower if no objection is received by the
assigning Lender and the Agent from the Borrower within two
Business Days after notice of
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<PAGE> 17
such proposed assignment has been provided by the assigning Lender to
the Borrower; provided, however, that neither the Borrower nor an
affiliate of the Borrower shall qualify as an Eligible Assignee.
"Eligible Securities" means the following obligations and any
other obligations previously approved in writing by the Agent:
(a) Government Securities;
(b) obligations of any corporation organized
under the laws of any state of the United States of America or
under the laws of any other nation, payable in the United
States of America, expressed to mature not later than 92 days
following the date of issuance thereof and rated in an
investment grade rating category of A-1 or better by S&P and
P-1 or better by Moody's;
(c) interest bearing demand or time deposits
issued by any Lender or certificates of deposit maturing
within one year from the date of issuance thereof and issued
by a bank or trust company organized under the laws of the
United States or of any state thereof having capital surplus
and undivided profits aggregating at least $400,000,000 and
being rated "A-1" or better by S&P or "P-1" or better by
Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations;
(f) Pre-Refunded Municipal Obligations;
(g) shares of mutual funds which invest in
obligations described in paragraphs (a) through (f) above, the
shares of which mutual funds are at all times rated "AAA" by
S&P;
(h) tax-exempt or taxable adjustable rate
preferred stock issued by a Person having a rating of its long
term unsecured debt of "A" or better by S&P or "A-1" or better
by Moody's; and
(i) asset-backed remarketed certificates of
participation representing a fractional undivided interest in
the assets of a trust, which certificates are rated at least
"A-1" by S&P and "P-1" by Moody's.
"Employee Benefit Plan" means any employee benefit plan
within the meaning of Section 3(3) of ERISA which (i) is maintained for
employees of the Borrower or any of its ERISA Affiliates or is assumed
by the Borrower or any of its ERISA Affiliates in connection
with any Acquisition or (ii) has at any time been maintained for the
employees of the Borrower or any current or former ERISA Affiliate.
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<PAGE> 18
"Environmental Laws" means any federal, state or local
statute, law, ordinance, code, rule, regulation, order, decree, permit
or license regulating, relating to, or imposing liability or standards
of conduct concerning, any environmental matters or conditions,
environmental protection or conservation, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; the Superfund Amendments and
Reauthorization Act of 1986, as amended; the Resource Conservation and
Recovery Act, as amended; the Toxic Substances Control Act, as
amended; the Clean Air Act, as amended; the Clean Water Act, as
amended; together with all regulations promulgated thereunder, and any
other "Superfund" or "Superlien" law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute and all
rules and regulations promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower, means any
Person or trade or business which is a member of a group which is
under common control with the Borrower, who together with the
Borrower, is treated as a single employer within the meaning of
Section 414(b) and (c) of the Code.
"Eurodollar Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
-------------------------
Rate 1- Reserve Requirement Margin
"Event of Default" means any of the occurrences set forth as
such in Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.
"Existing Credit Facility" means that certain Restated Loan
Agreement dated as of February 10, 1995, as amended, by and between
the Borrower and the Agent providing for loans of up to a maximum
principal amount of $50,000,000.
"Existing Letters of Credit" means those certain letters of
credit issued by NationsBank for the benefit of the Borrower including
those listed on Schedule 1.1(b) hereto.
"Facility Guaranty" means each Guaranty and Suretyship
Agreement between one or more Guarantors and the Agent for the benefit
of the Lenders substantially in the form of Exhibit I, delivered as of
the Closing Date and otherwise pursuant to Section 8.19, as the same
may be amended, modified or supplemented.
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<PAGE> 19
"Facility Termination Date" means the date on which both the
Revolving Credit Termination Date and Line of Credit Termination Date
shall have occurred, no Letters of Credit shall remain outstanding and
the Borrower shall have fully, finally and irrevocably paid and
satisfied all Obligations.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day;
provided that (a) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the
average rate charged to the Agent (in its individual capacity) on such
day on such transactions as determined by the Agent.
"Fiscal Year" means the twelve month fiscal period of the
Borrower commencing on January 1 of each calendar year and ending on
December 31 of the following calendar year.
"Foreign Benefit Law" means any applicable statute, law,
ordinance, code, rule, regulation, order or decree of any foreign
nation or any province, state, territory, protectorate or other
political subdivision thereof regulating, relating to, or imposing
liability or standards of conduct concerning, any Employee Benefit
Plan.
"Four-Quarter Period" means a period of four full consecutive
fiscal quarters of the Borrower and its Subsidiaries, taken together
as one accounting period.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of
accounting set forth in pronouncements of the Financial Accounting
Standards Board, the American Institute of Certified Public
Accountants or which have other substantial authoritative support and
are applicable in the circumstances as of the date of a report.
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of America.
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, court, agency or instrumentality or political
subdivision thereof or any entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a
foreign entity or government.
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<PAGE> 20
"Guaranties" means all obligations of the Borrower or any
Subsidiary directly or indirectly, or in effect, guaranteeing, any
Indebtedness or other obligation to pay money of any other Person.
"Guarantors" means, at any date, the Subsidiaries who are
parties to a Facility Guaranty at such date.
"Hazardous Material" means and includes any pollutant,
contaminant, or hazardous, toxic waste, substance or material
(including without limitation petroleum products, asbestos-containing
materials and lead), the generation, handling, storage,
transportation, disposal, treatment, release, discharge or emission of
which is subject to any Environmental Law.
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of
such Person for the acquisition of property or arising under Rate
Hedging Obligations, all indebtedness secured by any Lien on the
property of such Person whether or not such indebtedness is assumed,
all liability of such Person by way of endorsements (other than for
collection or deposit in the ordinary course of business), all
Contingent Obligations, all Guaranties, that portion of obligations
with respect to Capital Leases and other items which in accordance
with GAAP is required to be classified as a liability on a balance
sheet; but excluding all accounts payable in the ordinary course of
business so long as payment therefor is due within one year; provided
that in no event shall the term Indebtedness include surplus and
retained earnings, lease obligations (other than pursuant to Capital
Leases), reserves for deferred income taxes and investment credits,
other deferred credits or reserves.
"Indebtedness for Money Borrowed" means with respect to any
Person, without duplication, all indebtedness in respect of money
borrowed, including without limitation all Capital Leases and the
deferred purchase price of any property or asset, evidenced by a
promissory note, bond, debenture or similar written obligation for the
payment of money (including conditional sales or similar title
retention agreements), other than accounts payable incurred in the
ordinary course of business.
"Interbank Offered Rate" means, with respect to any Eurodollar
Rate Loan for the Interest Period applicable thereto, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If for
any reason such rate is unavailable, the term "Interbank Offered Rate"
shall mean, with respect to any Eurodollar Rate Loan for the Interest
Period applicable thereto, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars
at approximately 11:00 A.M. (London time) two Business Days prior to
the first day of such Interest Period for a term comparable to such
Interest Period, provided, however; if more than one rate is specified
on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.
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<PAGE> 21
"Interest Period" means, for each Eurodollar Rate Loan, a
period commencing on the date such Eurodollar Rate Loan is made or
Converted and ending, at the Borrower's option, on the date one, two,
three or six months thereafter as notified to the Agent by the
Authorized Representative three (3) Business Days prior to the
beginning of such Interest Period; provided, that,
(i) if the Authorized Representative fails to
notify the Agent of the length of an Interest Period three (3)
Business Days prior to the first day of such Interest Period,
the Loan for which such Interest Period was to be determined
shall be deemed to be a Base Rate Loan as of the first day
thereof;
(ii) if an Interest Period for a Eurodollar Rate
Loan would end on a day which is not a Business Day, such
Interest Period shall be extended to the next Business Day
(unless such extension would cause the applicable Interest
Period to end in the succeeding calendar month, in which case
such Interest Period shall end on the next preceding Business
Day);
(iii) any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month;
(iv) no Interest Period shall extend past the
Revolving Credit Termination Date in the case of Revolving
Loans and the Line of Credit Termination Date in the case of
Line of Credit Loans; and
(v) there shall not be more than ten (10)
Interest Periods in effect on any day.
"Interest Rate Selection Notice" means the written notice
delivered by an Authorized Representative in connection with the
election of a subsequent Interest Period for any Eurodollar Rate Loan
or the Conversion of any Eurodollar Rate Loan into a Base Rate Loan or
the Conversion of any Base Rate Loan into a Eurodollar Rate Loan, in
the form of Exhibit E.
"Issuing Bank" means initially NationsBank and thereafter any
Lender which is successor to NationsBank as issuer of Letters of
Credit under Article III.
"LC Account Agreement" means the LC Account Agreement
substantially in the form of Exhibit K attached hereto and dated as of
the date hereof between the Borrower and the Agent, as amended,
modified or supplemented from time to time.
"Letter of Credit" means a standby letter of credit issued by
the Issuing Bank for the account of the Borrower in favor of a Person
advancing credit or securing an obligation on behalf of the Borrower,
including without limitation the Existing Letters of Credit.
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<PAGE> 22
"Letter of Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to acquire Participations in
respect of Letters of Credit and Reimbursement Obligations up to an
aggregate amount at any one time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Letter of Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in
Article III hereof providing for the issuance by the Issuing Bank for
the account of the Borrower of Letters of Credit in an aggregate
stated amount at any time outstanding not exceeding the Total Letter
of Credit Commitment.
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount remaining undrawn under all
Letters of Credit plus Reimbursement Obligations then outstanding.
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or
contract, and including but not limited to the lien or security
interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. For the purposes of this
Agreement, the Borrower and any Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a
conditional sale agreement, financing lease, or other arrangement
pursuant to which title to the property has been retained by or vested
in some other Person for security purposes.
"Line of Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to make Line of Credit Loans
to the Borrower in a principal amount equal to such Lender's
Applicable Commitment Percentage of the Total Line of Credit
Commitment.
"Line of Credit Facility" means the facility described in
Section 2.1(b) providing for Line of Credit Loans to the
Borrower by the Lenders in the original principal amount of the Total
Line of Credit Commitment.
"Line of Credit Loan" means a loan made pursuant to the Line
of Credit Facility in accordance with Section 2.1(b).
"Line of Credit Notes" means, collectively, the promissory
notes of the Borrower evidencing Line of Credit Loans executed and
delivered to the Lenders as provided in Section 2.5(b) substantially
in the form of Exhibit F-2.
"Line of Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of Line of
Credit Loans then outstanding and all interest accrued thereon.
"Line of Credit Termination Date" means (i) the Stated
Termination Date or (ii) such earlier date of termination of
Lenders' obligations pursuant to Section 10.1 upon the
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<PAGE> 23
occurrence of an Event of Default, or (iii) such date as the Borrower
may voluntarily and permanently terminate the Line of Credit
Facility by written notice to Agent together with payment in full of
all Line of Credit Outstandings.
"Loan" or "Loans" means any borrowing pursuant to an Advance
under the Revolving Credit Facility, including Swing Line Loans, or
the Line of Credit Facility.
"Loan Documents" means this Agreement, the Notes, the Security
Instruments, the Facility Guaranties, the LC Account Agreement, the
Applications and Agreements for Letter of Credit, and all other
instruments and documents heretofore or hereafter executed or
delivered to or in favor of any Lender or the Agent in connection with
the Loans made and transactions contemplated under this Agreement, as
the same may be amended, supplemented or replaced from the time to
time.
"Loan Parties" means the Borrower and the Guarantors.
"Material Adverse Effect" means a material adverse effect on
(i) the business, properties, prospects, operations or condition,
financial or otherwise, of the Borrower and its Subsidiaries, taken as
a whole, (ii) the ability of any Loan Party to pay or perform its
respective obligations, liabilities and indebtedness under the Loan
Documents as such payment or performance becomes due in accordance
with the terms thereof, or (iii) the rights, powers and remedies of
the Agent or any Lender under any Loan Document or the validity,
legality or enforceability thereof.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions
within the preceding six (6) Fiscal Years.
"Municipal Obligations" means general obligations issued by,
and supported by the full taxing authority of, any state of the United
States of America or of any municipal corporation or other public body
organized under the laws of any such state which are rated in the
highest investment rating category by both S&P and Moody's.
"NationsBank" means NationsBank, National Association.
"Notes" means, collectively, the Line of Credit Notes, the
Revolving Notes, and the Swing Line Note.
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrower with respect to (i) the principal and
interest on the Loans as evidenced by the Notes, (ii) the
Reimbursement Obligations and otherwise in respect of the Letters of
Credit, (iii) all liabilities of Borrower to any Lender which arise
under a Swap Agreement, and (iv) the payment and
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performance of all other obligations, liabilities and Indebtedness of
the Borrower to the Lenders or the Agent hereunder, under any one or
more of the other Loan Documents or with respect to the Loans.
"Outstandings" means, collectively, at any date, the Letter of
Credit Outstandings, Swing Line Outstandings, Line of Credit
Outstandings and Revolving Credit Outstandings on such date.
"Participation" means, (i) with respect to any Lender (other
than the Issuing Bank) and a Letter of Credit, the extension of credit
represented by the participation of such Lender hereunder in the
rights and obligations of the Issuing Bank in respect of a Letter of
Credit issued by the Issuing Bank in accordance with the terms hereof
and (ii) with respect to any Lender (other than NationsBank) and a
Swing Line Loan, the extension of credit represented by the
participation of such Lender hereunder in the rights and obligations
of NationsBank in respect of a Swing Line Loan made by NationsBank in
accordance with the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means any employee pension benefit plan within
the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Section 412
of the Code and which (i) is maintained for employees of the Borrower
or any of its ERISA Affiliates or is assumed by the Borrower or any of
its ERISA Affiliates in connection with any Acquisition or (ii) has at
any time been maintained for the employees of the Borrower or any
current or former ERISA Affiliate.
"Permitted Acquisition" means an Acquisition of a Person or
the assets of a Person (i) effected with the consent and approval of
the executive officers, Board of Directors or other applicable
governing body of such Person and the duly obtained approval of such
shareholders or other holders of equity interests in such Person as may
be required to be obtained under applicable law, the charter documents
of or any shareholder agreements or similar agreements pertaining to
such Person, (ii) the line or lines of business of the Person to be
acquired are substantially the same or similar as one or more line or
lines of business conducted by the Borrower and its Subsidiaries, and
(iii) the Person acquired shall be a Subsidiary, or be merged into the
Borrower or a wholly-owned Subsidiary, upon consummation of the
Acquisition (or if assets are being acquired, the acquiror shall be the
Borrower or a wholly-owned Subsidiary).
"Person" means an individual, partnership, corporation, trust,
limited liability company, unincorporated organization, association,
joint venture or a government or agency or political subdivision
thereof.
"Pledge Agreement" means, collectively (or individually as the
context may indicate), (i) the pledge agreements dated as of the date
hereof between the Borrower, certain Guarantors and the Agent for the
benefit of the Agent and the Lenders, and (ii) any additional Pledge
Agreement delivered to the Agent pursuant to Section 8.19 hereof, in
each case,
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<PAGE> 25
substantially in the form of Exhibit J attached hereto, as such
Pledge Agreement may be amended, supplemented or replaced from time to
time.
"Pledged Stock" has the meaning given to such term in the
Pledge Agreement.
"Pledgor" means, at any date, the Borrower and the Guarantors
who are parties to a Pledge Agreement at such date.
"Pre-Refunded Municipal Obligations" means obligations of any
state of the United States of America or of any municipal corporation
or other public body organized under the laws of any such state which
are rated, based on the escrow, in the highest investment rating
category by both S&P and Moody's and which have been irrevocably
called for redemption and advance refunded through the deposit in
escrow of Government Securities or other debt securities which are (i)
not callable at the option of the issuer thereof prior to maturity,
(ii) irrevocably pledged solely to the payment of all principal and
interest on such obligations as the same becomes due and (iii) in a
principal amount and bear such rate or rates of interest as shall be
sufficient to pay in full all principal of, interest, and premium, if
any, on such obligations as the same becomes due as verified by a
nationally recognized firm of certified public accountants.
"Prime Rate" means the per annum rate of interest established
from time to time by NationsBank as its prime rate, which rate may not
be the lowest rate of interest charged by NationsBank to its
customers.
"Principal Office" means the office of NationsBank, presently
located at Independence Center, 15th Floor, NC1 001-15-04, Charlotte,
North Carolina 28255, Attention: Agency Services, or such other office
and address as the Agent may from time to time designate.
"Rate Hedging Obligations" means any and all obligations of
the Borrower or any Subsidiary, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto
from the fluctuations of interest rates, exchange rates or forward
rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, Dollar-denominated or
cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options, puts,
warrants and those commonly known as interest rate "swap" agreements;
and (ii) any and all cancellations, buybacks, reversals, terminations
or assignments of any of the foregoing.
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time.
"Regulatory Change" means any change effective after the
Closing Date in United States federal or state laws or regulations
(including Regulation D and capital adequacy
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<PAGE> 26
regulations) or foreign laws or regulations or the adoption or making
after such date of any interpretations, directives or requests applying
to a class of banks, which includes any of the Lenders, under any
United States federal or state or foreign laws or regulations (whether
or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration
thereof or compliance by any Lender with any request or directive
regarding capital adequacy, including those relating to "highly
leveraged transactions," whether or not having the force of law, and
whether or not failure to comply therewith would be unlawful and
whether or not published or proposed prior to the date hereof.
"Reimbursement Obligation" shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to
reimburse the Issuing Bank and the Lenders to the extent of their
respective Participations (including by the receipt by the Issuing
Bank of proceeds of Loans pursuant to Section 3.2) for amounts
theretofore paid by the Issuing Bank pursuant to a drawing under such
Letter of Credit.
"Repurchase Agreement" means a repurchase agreement entered
into with any financial institution whose debt obligations or
commercial paper are rated "A" by either of S&P or Moody's or "A-1" by
S&P or "P-1" by Moody's.
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating more than 50%
of the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "Credit
Exposure" of each Lender shall be equal to the aggregate principal
amount of the Loans owing to such Lender plus the aggregate unutilized
amounts of such Lender's Revolving Credit Commitment (without regard
to any Swing Line Outstandings) plus the aggregate unutilized amounts
of such Lender's Line of Credit Commitment plus the amount of such
Lender's Applicable Commitment Percentage of Letter of Credit
Outstandings; provided that, (i) if any Lender shall have failed to
pay to the Issuing Bank its Applicable Commitment Percentage of any
drawing under any Letter of Credit resulting in an outstanding
Reimbursement Obligation, such Lender's Credit Exposure attributable
to Letters of Credit and Reimbursement Obligations shall be deemed to
be held by the Issuing Bank for purposes of this definition and (ii)
if any Lender shall have failed to pay to NationsBank its Applicable
Commitment Percentage of any Swing Line Loan, such Lender's Credit
Exposure attributable to all Swing Line Outstandings shall be deemed
to be held by NationsBank for purposes of this definition.
"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained
under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) by member banks of
the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any
category of liabilities which includes deposits by reference to which
the Eurodollar Rate is to be
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<PAGE> 27
determined, or (ii) any category of extensions of credit or
other assets which include Eurodollar Rate Loans. The Eurodollar Rate
shall be adjusted automatically on and as of the effective date of any
change in the Reserve Requirement.
"Restricted Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any
class of stock of Borrower or any of its Subsidiaries (other than
those payable or distributable solely to the Borrower or a Guarantor)
now or hereafter outstanding, except a dividend payable solely in
shares of a class of stock to the holders of that class; (b) any
redemption, conversion, exchange, retirement or similar payment,
purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of the Borrower or any of its
Subsidiaries (other than those payable or distributable solely to the
Borrower or a Guarantor) now or hereafter outstanding; (c) any
payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of
stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding; and (d) any issuance and sale of capital stock of any
Subsidiary of the Borrower (or any option, warrant or right to acquire
such stock) other than to the Borrower or a Subsidiary.
"Revolving Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to make Revolving Loans to the
Borrower up to an aggregate principal amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of
the Total Revolving Credit Commitment.
"Revolving Credit Facility" means the facility described in
Section 2.1(a) hereof providing for Loans to the Borrower by the
Lenders in the aggregate principal amount of the Total Revolving
Credit Commitment.
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans
then outstanding and all interest accrued thereon.
"Revolving Credit Termination Date" means (i) November ___,
2000 or (ii) such earlier date of termination of Lenders' obligations
pursuant to Section 10.1 upon the occurrence of an Event of Default,
or (iii) such date as the Borrower may voluntarily and permanently
terminate the Revolving Credit Facility by written notice to Agent
together with payment in full of all Revolving Credit Outstandings,
Swing Line Outstandings and Letter of Credit Outstandings and
cancellation of all Letters of Credit.
"Revolving Loan" means any borrowing pursuant to an Advance
under the Revolving Credit Facility in accordance with Section 2.1(a).
"Revolving Notes" means, collectively, the promissory notes of
the Borrower evidencing Revolving Loans executed and delivered to the
Lenders as provided in Section 2.5(a) substantially in the form of
Exhibit F-1, with appropriate insertions as to amounts, dates and
names of Lenders.
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"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc.
"Security Instruments" means, collectively, the Pledge
Agreement, the Collateral Assignment of Partnership Interests, and all
other agreements, instruments and other documents, whether now
existing or hereafter in effect, pursuant to which the Borrower or any
Subsidiary shall grant or convey to the Agent or the Lenders a Lien in
property as security for all or any portion of the Obligations, as any
of them may be amended, modified or supplemented from time to time.
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA in respect of which the Borrower or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA
and which is not a Multiemployer Plan.
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(i) the fair value of its assets (both at fair
valuation and at present fair saleable value on an orderly
basis) is in excess of the total amount of its liabilities,
including Contingent Obligations; and
(ii) it is then able and expects to be able to pay
its debts as they mature; and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Stated Termination Date" means November 24, 1998 or such
later date as the parties may agree pursuant to Section 2.13(a).
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding voting stock or more than 50% of
all equity interests is owned directly or indirectly by the Borrower
and/or by one or more of the Borrower's Subsidiaries.
"Swap Agreement" means one or more agreements between the
Borrower and any Lender with respect to Indebtedness evidenced by any
or all of the Notes, on terms mutually acceptable to the Borrower and
such Lender, which agreements create Rate Hedging Obligations.
"Swing Line" means the revolving line of credit established by
NationsBank in favor of the Borrower pursuant to Section 2.14.
"Swing Line Loans" means loans made by NationsBank to the
Borrower pursuant to Section 2.14.
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"Swing Line Note" means the promissory note of the Borrower
evidencing Swing Line Loans executed and delivered to NationsBank
as provided in Section 2.5(c).
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line Loans
then outstanding.
"Termination Event" means: (i) a "Reportable Event" described
in Section 4043 of ERISA and the regulations issued thereunder (unless
the notice requirement has been waived by applicable regulation); or
(ii) the withdrawal of the Borrower or any ERISA Affiliate from a
Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or was deemed such
under Section 4068(f) of ERISA; or (iii) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA; or (iv) the institution of proceedings to
terminate a Pension Plan by the PBGC; or (v) any other event or
condition which would constitute grounds under Section 4042(a) of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; or (vi) the partial or complete
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the
Code or Section 302 of ERISA; or (viii) any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan
under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any
event or condition which results in the termination of a Multiemployer
Plan under Section 4041A of ERISA or the institution by the PBGC of
proceedings to terminate a Multiemployer Plan under Section 4042 of
ERISA.
"Total Credit Commitment" means the sum of the Total Revolving
Credit Commitment and the Total Line of Credit Commitment.
"Total Letter of Credit Commitment" means an amount not to
exceed $5,000,000.
"Total Line of Credit Commitment" means a principal amount
equal to $25,000,000, as reduced from time to time in accordance
with Section 2.7.
"Total Revolving Credit Commitment" means a principal amount
equal to $75,000,000, as reduced from time to time in accordance with
Section 2.7.,
"Type" shall mean any type of Loan (i.e., a Base Rate Loan or
a Eurodollar Rate Loan).
"Voting Stock" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
1.2. Rules of Interpretation.
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(a) All accounting terms not specifically defined herein
shall have the meanings assigned to such terms and shall be
interpreted in accordance with GAAP applied on a Consistent Basis.
(b) Each term defined in Article 1 or 9 of the Florida
Uniform Commercial Code shall have the meaning given therein unless
otherwise defined herein, except to the extent that the Uniform
Commercial Code of another jurisdiction is controlling, in which case
such terms shall have the meaning given in the Uniform Commercial Code
of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used
herein or in any other Loan Document are solely for convenience of
reference and shall not constitute a part of any such document or
affect the meaning, construction or effect of any provision thereof.
(d) Except as otherwise expressly provided, references
herein to articles, sections, paragraphs, clauses, annexes,
appendices, exhibits and schedules are references to articles,
sections, paragraphs, clauses, annexes, appendices, exhibits and
schedules in or to this Agreement.
(e) All definitions set forth herein or in any other Loan
Document shall apply to the singular as well as the plural form of
such defined term, and all references to the masculine gender shall
include reference to the feminine or neuter gender, and vice versa, as
the context may require.
(f) When used herein or in any other Loan Document, words
such as "hereunder", "hereto", "hereof" and "herein" and other words of
like import shall, unless the context clearly indicates to the
contrary, refer to the whole of the applicable document and not to any
particular article, section, subsection, paragraph or clause thereof.
(g) References to "including" means including without
limiting the generality of any description preceding such term, and
for purposes hereof the rule of ejusdem generis shall not be
applicable to limit a general statement, followed by or referable to
an enumeration of specific matters, to matters similar to those
specifically mentioned.
(h) All dates and times of day specified herein shall
refer to such dates and times at Charlotte, North Carolina.
(i) Each of the parties to the Loan Documents and their
counsel have reviewed and revised, or requested (or had the
opportunity to request) revisions to, the Loan Documents, and any rule
of construction that ambiguities are to be resolved against the
drafting party shall be inapplicable in the construing and
interpretation of the Loan Documents and all exhibits, schedules and
appendices thereto.
(j) Any reference to an officer of the Borrower or any
other Person by reference to the title of such officer shall be deemed
to refer to each other officer of such Person, however titled,
exercising the same or substantially similar functions.
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(k) All references to any agreement or document as
amended, modified or supplemented, or words of similar effect, shall
mean such document or agreement, as the case may be, as amended,
modified or supplemented from time to time only as and to the extent
permitted therein and in the Loan Documents.
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ARTICLE II
The Credit Facilities
2.1. Loans.
(a) Revolving Credit Facility. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make Advances to
the Borrower under the Revolving Credit Facility from time to time from the
Closing Date until the Revolving Credit Termination Date on a pro rata basis as
to the total borrowing requested by the Borrower on any day determined by such
Lender=s Applicable Commitment Percentage up to but not exceeding the Revolving
Credit Commitment of such Lender, provided, however, that the Lenders will not
be required and shall have no obligation to make any such Advance (i) so long
as a Default or an Event of Default has occurred and is continuing or (ii) if
the Agent has accelerated the maturity of any of the Notes as a result of an
Event of Default; provided further, however, that immediately after giving
effect to each such Advance, the principal amount of Revolving Credit
Outstandings plus Letter of Credit Outstandings plus Swing Line Outstandings
shall not exceed the Total Revolving Credit Commitment. Within such limits,
the Borrower may borrow, repay and reborrow under the Revolving Credit Facility
on a Business Day from the Closing Date until, but (as to borrowings and
reborrowings) not including, the Revolving Credit Termination Date; provided,
however, that (y) no Revolving Loan that is a Eurodollar Rate Loan shall be
made which has an Interest Period that extends beyond the Revolving Credit
Termination Date and (z) each Revolving Loan that is a Eurodollar Rate Loan
may, subject to the provisions of Section 2.8, be repaid only on the last day
of the Interest Period with respect thereto unless such payment is accompanied
by the additional payment, if any, required by Section 5.5.
(b) Line of Credit Facility. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make Advances to
the Borrower under the Line of Credit Facility from time to time from the
Closing Date until the Line of Credit Termination Date on a pro rata basis as
to the total borrowing requested by the Borrower on any day determined by such
Lender's Applicable Commitment Percentage up to but not exceeding the Line of
Credit Commitment of such Lender, provided, however, that the Lenders will not
be required and shall have no obligation to make any such Advance (i) so long
as a Default or an Event of Default has occurred and is continuing or (ii) if
the Agent has accelerated the maturity of any of the Notes as a result of an
Event of Default; provided further, however, that immediately after giving
effect to each such Advance, the principal amount of Line of Credit
Outstandings shall not exceed the Total Line of Credit Commitment. Within such
limits, the Borrower may borrow, repay and reborrow under the Line of Credit
Facility on a Business Day from the Closing Date until, but (as to borrowings
and reborrowings) not including, the Line of Credit Termination Date; provided,
however, that (y) no Line of Credit Loan that is a Eurodollar Rate Loan shall
be made which has an Interest Period that extends beyond the Line of Credit
Termination Date and (z) each Line of Credit Loan that is a Eurodollar Rate
Loan may, subject to the provisions of Section 2.8, be repaid only on the last
day of the Interest Period with respect thereto unless such payment is
accompanied by the additional payment, if any, required by Section 5.5.
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<PAGE> 33
(c) Amounts. Except as otherwise permitted by the
Lenders from time to time, the aggregate unpaid principal amount of the
Revolving Credit Outstandings plus Letter of Credit Outstandings plus Swing
Line Outstandings shall not exceed at any time the Total Revolving Credit
Commitment, and the aggregate unpaid principal amount of the Line of Credit
Outstandings shall not exceed the Total Line of Credit Commitment and, in the
event there shall be outstanding any such excess, the Borrower shall
immediately make such payments and prepayments as shall be necessary to comply
with this restriction. Each Revolving Loan and Line of Credit Loan hereunder,
other than Base Rate Refunding Loans, and each Conversion under Section 2.8,
shall be in an amount of at least $1,000,000, and, if greater than $1,000,000,
an integral multiple of $500,000.
(d) Advances. (i) An Authorized Representative shall
give the Agent (1) at least three (3) Business Days' irrevocable written notice
by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection
Notice (as applicable) with appropriate insertions, effective upon receipt, of
each Loan that is a Eurodollar Rate Loan (whether representing an additional
borrowing hereunder or the Conversion of a borrowing hereunder from Base Rate
Loans to Eurodollar Rate Loans) prior to 10:30 A.M. and (2) irrevocable written
notice by telefacsimile transmission of a Borrowing Notice or Interest Rate
Selection Notice (as applicable) with appropriate insertions, effective upon
receipt, of each Loan (other than Base Rate Refunding Loans to the extent the
same are effected without notice pursuant to Section 2.1(d)(iv)) that is a Base
Rate Loan (whether representing an additional borrowing hereunder or the
Conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate
Loans) prior to 10:30 A.M. on the day of such proposed Loan. Each such notice
shall specify the amount of the borrowing, whether the Loan is a Revolving Loan
or a Line of Credit Loan, the Type of Loan (Base Rate or Eurodollar Rate), the
date of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be
used in the computation of interest. Notice of receipt of such Borrowing
Notice or Interest Rate Selection Notice, as the case may be, together with the
amount of each Lender's portion of an Advance requested thereunder, shall be
provided by the Agent to each Lender by telefacsimile transmission with
reasonable promptness, but (provided the Agent shall have received such notice
by 10:30 A.M.) not later than 1:00 P.M. on the same day as the Agent's receipt
of such notice.
(ii) Not later than 2:00 P.M. on the date specified for each
borrowing under this Section 2.1, each Lender shall, pursuant to the terms and
subject to the conditions of this Agreement, make the amount of the Advance or
Advances to be made by it on such day available by wire transfer to the Agent
in the amount of its pro rata share, determined according to such Lender's
Applicable Commitment Percentage of the Loan or Loans to be made on such day.
Such wire transfer shall be directed to the Agent at the Principal Office and
shall be in the form of Dollars constituting immediately available funds. The
amount so received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by delivery of the proceeds
thereof to the Borrower's Account or otherwise as shall be directed in the
applicable Borrowing Notice by the Authorized Representative and reasonably
acceptable to the Agent.
(iii) The Borrower shall have the option to elect the duration of
the initial and any subsequent Interest Periods and to Convert the Loans in
accordance with Section 2.8. Eurodollar Rate Loans and Base Rate Loans may be
outstanding at the same time, provided, however, there shall not be outstanding
at any one time Eurodollar Rate Loans having more than ten (10) different
Interest
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Periods. If the Agent does not receive a Borrowing Notice or an Interest Rate
Selection Notice giving notice of election of the duration of an Interest
Period or of Conversion of any Loan to or Continuation of a Loan as a
Eurodollar Rate Loan by the time prescribed by Section 2.1(d) or 2.8, the
Borrower shall be deemed to have elected to Convert such Loan to (or Continue
such Loan as) a Base Rate Loan until the Borrower notifies the Agent in
accordance with Section 2.8.
(iv) Notwithstanding the foregoing, if a drawing is made under any
Letter of Credit, such drawing is honored by the Issuing Bank prior to the
Revolving Credit Termination Date, and the Borrower shall not immediately,
after receipt of notice of such drawing, fully reimburse the Issuing Bank in
respect of such drawing, (A) provided that the conditions to making a Revolving
Loan as herein provided shall then be satisfied, the Reimbursement Obligation
arising from such drawing shall be paid to the Issuing Bank by the Agent
without the requirement of notice to or from the Borrower from immediately
available funds which shall be advanced as a Base Rate Refunding Loan by each
Lender under the Revolving Credit Facility in an amount equal to such Lender's
Applicable Commitment Percentage of such Reimbursement Obligation, and (B) if
the conditions to making a Revolving Loan as herein provided shall not then be
satisfied, each of the Lenders shall fund by payment to the Agent (for the
benefit of the Issuing Bank) in immediately available funds for the purchase
from the Issuing Bank of their respective Participations in the related
Reimbursement Obligation based on their respective Applicable Commitment
Percentages of the Total Letter of Credit Commitment. If a drawing is
presented under any Letter of Credit in accordance with the terms thereof and
the Borrower shall not immediately reimburse the Issuing Bank in respect
thereof, then notice of such drawing or payment shall be provided promptly by
the Issuing Bank to the Agent and the Agent shall provide notice to each Lender
by telephone or telefacsimile transmission. If notice to the Lenders of a
drawing under any Letter of Credit is given by the Agent at or before 12:00
noon on any Business Day, each Lender shall, pursuant to the conditions
specified in this Section 2.1(d)(iv), either make a Base Rate Refunding Loan or
fund the purchase of its Participation in the amount of such Lender's
Applicable Commitment Percentage of such drawing or payment and shall pay such
amount to the Agent for the account of the Issuing Bank at the Principal Office
in Dollars and in immediately available funds before 2:30 P.M. on the same
Business Day. If notice to the Lenders of a drawing under a Letter of Credit
is given by the Agent after 12:00 noon on any Business Day, each Lender shall,
pursuant to the conditions specified in this Section 2.1(d)(iv), either make a
Base Rate Refunding Loan or fund the purchase of its Participation in the
amount of such Lender's Applicable Commitment Percentage of such drawing or
payment and shall pay such amount to the Agent for the account of the Issuing
Bank at the Principal Office in Dollars and in immediately available funds
before 12:00 noon on the next following Business Day. Any such Base Rate
Refunding Loan shall be advanced as, and shall Continue as, a Base Rate Loan
unless and until the Borrower Converts such Base Rate Loan in accordance with
the terms of Section 2.8.
2.2. Payment of Interest. (a) The Borrower shall pay interest to
the Agent for the account of each Lender on the outstanding and unpaid
principal amount of each Loan made by such Lender for the period commencing on
the date of such Loan until such Loan shall be due at the then applicable Base
Rate for Base Rate Loans or applicable Eurodollar Rate for Eurodollar Rate
Loans, as designated by the Authorized Representative pursuant to Section 2.1;
provided, however, that if any amount shall not be paid when due (at maturity,
by acceleration or otherwise), all amounts outstanding hereunder shall bear
interest thereafter, until paid, at the Default Rate.
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(b) Interest on each Loan shall be computed on the basis
of a year of 360 days and calculated in each case for the actual number of days
elapsed. Interest on each Loan shall be paid (i) quarterly in arrears on the
last Business Day of each March, June, September and December, commencing
December 31, 1997 for each Base Rate Loan, (ii) on the last day of the
applicable Interest Period for each Eurodollar Rate Loan and, if such Interest
Period extends for more than three (3) months, at intervals of three (3) months
after the first day of such Interest Period, and (iii) upon payment in full of
the principal amount of such Loan and termination of all commitments to make
Loans hereunder.
2.3. Payment of Principal. The principal amount of each Revolving
Loan shall be due and payable to the Agent for the benefit of each Lender in
full on the Revolving Credit Termination Date, or earlier as specifically
provided herein. The principal amount of each Line of Credit Loan shall be due
and payable to the Agent for the benefit of each Lender in full on the Line of
Credit Termination Date, or earlier as specifically provided herein. The
principal amount of any Base Rate Loan may be prepaid in whole or in part at
any time. The principal amount of any Eurodollar Rate Loan may be prepaid only
at the end of the applicable Interest Period unless the Borrower shall pay to
the Agent for the account of the Lenders the additional amount, if any,
required under Section 5.5. All prepayments of Loans made by the Borrower shall
be in the amount of $1,000,000 or such greater amount which is an integral
multiple of $500,000, or the amount equal to all Revolving Credit Outstandings
or Line of Credit Outstandings, or such other amount as necessary to comply
with Section 2.1(d) or Section 2.8.
2.4. Non-Conforming Payments. (a) Each payment of principal
(including any prepayment) and payment of interest and fees, and any other
amount required to be paid to the Lenders with respect to the Loans, shall be
made to the Agent at the Principal Office, for the account of each Lender, in
Dollars and in immediately available funds before 12:00 Noon on the date such
payment is due. The Agent may, but shall not be obligated to, debit the amount
of any such payment which is not made by such time to any ordinary deposit
account, if any, of the Borrower with the Agent.
(b) The Agent shall deem any payment made by or on behalf of the
Borrower hereunder that is not made both in Dollars and in immediately
available funds and prior to 12:00 Noon to be a non-conforming payment. Any
such payment shall not be deemed to be received by the Agent until the later of
(i) the time such funds become available funds and (ii) the next Business Day.
Any non-conforming payment may, at the option of the Agent, constitute or
become a Default or Event of Default provided, that, if the Agent determines
such non-conforming payment to be a Default or Event of Default, the Agent will
provide notification to the Borrower after such determination has been made.
Interest shall continue to accrue on any principal as to which a non-conforming
payment is made until the later of (x) the date such funds become available
funds or (y) the next Business Day at the Default Rate from the date such
amount was due and payable.
(c) In the event that any payment hereunder or under the Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided otherwise
under clause (ii) of the definition of "Interest Period"; provided that
interest shall continue to accrue during the period of any such extension and
provided
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further, that in no event shall any such due date be extended beyond the
Revolving Credit Termination Date or Line of Credit Termination Date, as the
case may be.
2.5. Notes. (a) Revolving Loans made by each Lender shall be
evidenced by the Revolving Note payable to the order of such Lender in the
respective amount of its Applicable Commitment Percentage of the Revolving
Credit Commitment, which Revolving Note shall be dated the Closing Date or a
later date pursuant to an Assignment and Acceptance and shall be duly
completed, executed and delivered by the Borrower.
(b) Line of Credit Loans made by each Lender shall be
evidenced by the Line of Credit Note payable to the order of such Lender in the
respective amount of its Applicable Commitment Percentage of the Line of Credit
Commitment, which Line of Credit Note shall be dated the Closing Date or a
later date pursuant to an Assignment and Acceptance and shall be duly
completed, executed and delivered by the Borrower.
(c) Swing Line Loans made by NationsBank shall be evidenced
by the Swing Line Note payable to the order of NationsBank in the principal
amount of $5,000,000, which Swing Line Note shall be dated the Closing Date.
2.6. Pro Rata Payments. Except as otherwise provided herein, (a)
each payment on account of the principal of and interest on the Loans and the
fees described in Section 2.10 shall be made to the Agent for the account of
the Lenders pro rata based on their Applicable Commitment Percentages, (b) all
payments to be made by the Borrower for the account of each of the Lenders on
account of principal, interest and fees, shall be made without diminution,
setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute
to the Lenders in immediately available funds payments received in fully
collected, immediately available funds from the Borrower.
2.7. Reductions. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time but not more frequently than
once each calendar month, upon not less than three (3) Business Days' written
notice to the Agent, effective upon receipt, to permanently reduce the Total
Revolving Credit Commitment. The Agent shall give each Lender, within one (1)
Business Day of receipt of such notice, telefacsimile notice, or telephonic
notice (confirmed in writing), of such reduction. Each such reduction shall be
in the aggregate amount of $5,000,000 or such greater amount which is in an
integral multiple of $1,000,000, or the entire remaining Total Revolving Credit
Commitment, and shall permanently reduce the Total Revolving Credit Commitment.
Each reduction of the Total Revolving Credit Commitment shall be accompanied by
payment of the Revolving Loans to the extent that the principal amount of
Revolving Credit Outstandings plus Letter of Credit Outstandings plus Swing
Line Outstandings exceeds the Total Revolving Credit Commitment after giving
effect to such reduction, together with accrued and unpaid interest on the
amounts prepaid. No such reduction shall result in the payment of any
Eurodollar Rate Loan other than on the last day of the Interest Period of such
Eurodollar Rate Loan unless such prepayment is accompanied by amounts due, if
any, under Section 5.5.
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2.8. Conversions and Elections of Subsequent Interest Periods.
Provided that no Default or Event of Default shall have occurred and be
continuing and subject to the limitations set forth below and in Article V, the
Borrower may:
(a) upon delivery, effective upon receipt, of a properly
completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M.
on any Business Day, Convert all or a part of Eurodollar Rate Loans under
either the Revolving Credit Facility or the Line of Credit Facility to Base
Rate Loans on the last day of the Interest Period for such Eurodollar Rate
Loans; and
(b) upon delivery, effective upon receipt, of a properly
completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M.
three (3) Business Days' prior to the date of such election or Conversion:
(i) elect a subsequent Interest Period for all or
a portion of Eurodollar Rate Loans under either the Revolving
Credit Facility or the Line of Credit Facility to begin on the
last day of the then current Interest Period for such
Eurodollar Rate Loans; and
(ii) Convert Base Rate Loans under either the
Revolving Credit Facility or the Line of Credit Facility to
Eurodollar Rate Loans on any Business Day.
Each election and Conversion pursuant to this Section 2.8 shall be
subject to the limitations on Eurodollar Rate Loans set forth in the definition
of "Interest Period" herein and in Sections 2.1, 2.3 and Article V. The Agent
shall give written notice to each Lender of such notice of election or
Conversion prior to 3:00 P.M. on the day such notice of election or Conversion
is received. All such Continuations or Conversions of Loans shall be effected
pro rata based on the Applicable Commitment Percentages of the Lenders.
2.9. Increase and Decrease in Amounts. The amount of the Total
Revolving Credit Commitment which shall be available to the Borrower as
Advances shall be reduced by the aggregate amount of Outstanding Letters of
Credit and Outstanding Swing Line Loans.
2.10. Facility Fees.
(a) Revolving Credit Facility. For the period beginning on
the Closing Date and ending on the Revolving Credit Termination Date, the
Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders
based on their Applicable Commitment Percentages, an unused fee equal to the
Applicable Unused Fee for the Revolving Credit Facility multiplied by the
average daily amount by which the Total Revolving Credit Commitment exceeds the
sum of (i) Revolving Credit Outstandings without giving effect to Swing Line
Outstandings plus (ii) Letter of Credit Outstandings. Such fees shall be due
in arrears on the last Business Day of each March, June, September and December
commencing December 31, 1997 to and on the Revolving Credit Termination Date.
Notwithstanding the foregoing, so long as any Lender fails to make available
any portion of its Revolving Credit Commitment when requested, such Lender
shall not be entitled to
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receive payment of its pro rata share of such fee until such Lender shall make
available such portion. Such fee shall be calculated on the basis of a year of
360 days for the actual number of days elapsed.
(b) Line of Credit Facility. For the period beginning on
the Closing Date and ending on the Line of Credit Termination Date, the
Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders
based on their Applicable Commitment Percentages, an unused fee equal to the
Applicable Unused Fee for the Line of Credit Facility multiplied by the average
daily amount by which the Total Line of Credit Commitment exceeds the aggregate
principal amount of Line of Credit Outstandings. Such fees shall be due in
arrears on the last Business Day of each March, June, September and December
commencing December 31, 1997 to and on Line of Credit Termination Date.
Notwithstanding the foregoing, so long as any Lender fails to make available
any portion of its Line of Credit Commitment when requested, such Lender shall
not be entitled to receive payment of its pro rata share of such fee until such
Lender shall make available such portion. Such fee shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed.
2.11. Deficiency Advances. No Lender shall be responsible for any
default of any other Lender in respect to such other Lender's obligation to
make any Loan or fund its purchase of any Participation hereunder nor shall the
Revolving Credit Commitment or Line of Credit Commitment of any Lender
hereunder be increased as a result of such default of any other Lender.
Without limiting the generality of the foregoing, in the event any Lender shall
fail to advance funds to the Borrower under the Revolving Credit Facility or
Line of Credit Facility as herein provided, the Agent may in its discretion,
but shall not be obligated to, advance under the Revolving Note or Line of
Credit Note, as the case may be, in its favor as a Lender all or any portion of
such amount or amounts (each, a "deficiency advance") and shall thereafter be
entitled to payments of principal of and interest on such deficiency advance in
the same manner and at the same interest rate or rates to which such other
Lender would have been entitled had it made such advance under its Revolving
Note or Line of Credit Note, as the case may be; provided that, upon payment to
the Agent from such other Lender of the entire outstanding amount of each such
deficiency advance, together with accrued and unpaid interest thereon, from the
most recent date or dates interest was paid to the Agent by the Borrower on
each Loan comprising such deficiency advance at the interest rate per annum for
overnight borrowing by the Agent from the Federal Reserve Bank, then such
payment shall be credited against the applicable Note of the Agent in full
payment of such deficiency advance and the Borrower shall be deemed to have
borrowed the amount of such deficiency advance from such other Lender as of the
most recent date or dates, as the case may be, upon which any payments of
interest were made by the Borrower thereon.
2.12. Use of Proceeds. The proceeds of the Loans made pursuant to
this Agreement shall be used by the Borrower to refinance existing debt,
finance Permitted Acquisitions, and for general working capital needs and other
corporate purposes, including letters of credit.
2.13. Line of Credit Extension.
(a) Extension of Stated Termination Date. At the request
of the Borrower the Lenders may, in their sole discretion, elect to extend the
Stated Termination Date then in effect for additional periods of up to 364
days each; provided, however, that at no time shall the committed
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term of the Line of Credit Facility exceed 364 days. The Borrower shall notify
the Lenders of its request for such an extension by delivering to the Agent
notice of such request signed by an Authorized Representative not more than
ninety (90) days nor less than sixty (60) days prior to the Stated Termination
Date then in effect. If the Lenders shall elect to so extend, the Agent shall
notify the Borrower in writing within sixty (60) days of its receipt of such
request for extension of the decision of the Lenders as to whether to extend
the Stated Termination Date. Failure by any Lender to respond to a request for
an extension shall constitute a refusal of such Lender to give its consent to
such extension. Failure by the Agent to give such notice shall constitute
refusal by the Lenders to extend the Stated Termination Date. In no event
shall the Stated Termination Date extend beyond the Revolving Credit
Termination Date.
(b) Term Loan Option. In the event the Borrower fails to
exercise its option to extend the Stated Termination Date or the Lenders fail
to consent to such extension, the Borrower shall have the option to convert the
Line of Credit Outstandings as of the Stated Termination Date into a term loan
in the original principal amount equal to such Line of Credit Outstandings (the
"Term Loan Option"). Line of Credit Loans so converted by the Borrower in
accordance with this subsection (b) shall be referred to as the "Term Loans".
The Term Loans shall mature on the Revolving Credit Termination Date. The Term
Loans may be comprised of Base Rate Loans and Eurodollar Rate Loans as the
Borrower may elect in accordance with the provisions hereof. The Term Loans
shall bear interest on the same terms as the Line of Credit Loans prior to
their conversion to Term Loans. Amounts repaid or prepaid on the Term Loans
may not be reborrowed. For purposes of this Agreement, in the event the
Borrower shall elect the Term Loan Option, then on and after the Line of Credit
Termination Date (i) references herein to the "Total Line of Credit Commitment"
shall mean the aggregate principal amount of the Term Loans as of the Line of
Credit Termination Date less all payments made with respect to the Term Loans
hereunder, (ii) references herein to "Line of Credit Commitment" shall mean,
with respect to each Lender, the obligation of such Lender to make Term Loans
in a principal amount equal to such Lender's Applicable Commitment Percentage
of the aggregate Term Loans and (iii) references herein to the "Line of Credit
Termination Date" shall mean the Term Loan Termination Date.
2.14. Swing Line. (a) Notwithstanding any other provision of this
Agreement to the contrary, if and when there shall be more than one Lender
under this Agreement, in order to administer the Revolving Credit Facility in
an efficient manner and to minimize the transfer of funds between the Agent and
the Lenders, NationsBank may make available Swing Line Loans to the Borrower
prior to the Revolving Credit Termination Date. NationsBank shall not make any
Swing Line Loan pursuant hereto (i) if to the actual knowledge of NationsBank
the Borrower is not in compliance with all the conditions to the making of
Revolving Loans set forth in this Agreement, (ii) if after giving effect to
such Swing Line Loan, the Swing Line Outstandings exceed $5,000,000, (iii) if
after giving effect to such Swing Line Loan, the sum of the Swing Line
Outstandings, Revolving Credit Outstandings and Letter of Credit Outstandings
exceeds the Total Revolving Credit Commitment or (iv) if the number of Lenders
is less than two. Swing Line Loans shall be limited to Base Rate Loans. The
Borrower may borrow, repay and reborrow under this Section 2.14. Unless
notified to the contrary by NationsBank, borrowings under the Swing Line shall
be made in the minimum amount of $100,000 or, if greater, in amounts which are
integral multiples of $50,000, or in the amount necessary to effect a Base Rate
Refunding Loan, upon written request by telefacsimile
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transmission, effective upon receipt, by an Authorized Representative of the
Borrower made to NationsBank not later than 12:30 P.M. on the Business Day of
the requested borrowing. Each such Borrowing Notice shall specify the amount
of the borrowing and the date of borrowing, and shall be in the form of Exhibit
D-2, with appropriate insertions. Unless notified to the contrary by
NationsBank, each repayment of a Swing Line Loan shall be in a minimum amount
of $100,000 and an integral multiple of $50,000 in excess thereof or the
aggregate amount of all Swing Line Outstandings. If the Borrower instructs
NationsBank to debit any demand deposit account of the Borrower in the amount
of any payment with respect to a Swing Line Loan, or NationsBank otherwise
receives repayment, after 12:30 P.M. on a Business Day, such payment shall be
deemed received on the next Business Day.
(b) Swing Line Loans shall bear interest at the Base Rate, the
interest payable on Swing Line Loans is solely for the account of NationsBank,
and all accrued and unpaid interest on Swing Line Loans shall be payable on the
dates and in the manner provided in Sections 2.2(b) and 2.4 with respect to
interest on Base Rate Loans. The Swing Line Outstandings shall be evidenced by
the Note delivered to NationsBank pursuant to Section 2.5(c).
(c) Upon the making of a Swing Line Loan, each Lender shall be
deemed to have purchased from NationsBank a Participation therein in an amount
equal to that Lender's Applicable Commitment Percentage of such Swing Line
Loan. Upon demand made by NationsBank, each Lender shall, according to its
Applicable Commitment Percentage of such Swing Line Loan, promptly provide to
NationsBank its purchase price therefor in an amount equal to its Participation
therein. Any Advance made by a Lender pursuant to demand of NationsBank of the
purchase price of its Participation shall be deemed (i) provided that the
conditions to making Revolving Loans shall be satisfied, a Base Rate Refunding
Loan under Section 2.1 until the Borrower Converts such Base Rate Loan in
accordance with the terms of Section 2.8, and (ii) in all other cases, the
funding by each Lender of the purchase price of its Participation in such Swing
Line Loan. The obligation of each Lender to so provide its purchase price to
NationsBank shall be absolute and unconditional and shall not be affected by
the occurrence of an Event of Default or any other occurrence or event.
The Borrower, at its option and subject to the terms hereof, may
request an Advance pursuant to Section 2.1 in an amount sufficient to repay
Swing Line Outstandings on any date and the Agent shall provide from the
proceeds of such Advance to NationsBank the amount necessary to repay such Swing
Line Outstandings (which NationsBank shall then apply to such repayment) and
credit any balance of the Advance in immediately available funds in the manner
directed by the Borrower pursuant to Section 2.1(d)(ii). The proceeds of such
Advances shall be paid to NationsBank for application to the Swing Line
Outstandings and the Lenders shall then be deemed to have made Loans in the
amount of such Advances. The Swing Line shall continue in effect until the
Revolving Credit Termination Date, at which time all Swing Line Outstandings and
accrued interest thereon shall be due and payable in full.
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ARTICLE III
Letters of Credit
3.1. Letters of Credit. The Issuing Bank agrees, subject to the
terms and conditions of this Agreement, upon request of the Borrower to issue
from time to time for the account of the Borrower Letters of Credit upon
delivery to the Issuing Bank of an Application and Agreement for Letter of
Credit relating thereto in form and content acceptable to the Issuing Bank;
provided, that (i) the Letter of Credit Outstandings shall not exceed the Total
Letter of Credit Commitment and (ii) no Letter of Credit shall be issued if,
after giving effect thereto, Letter of Credit Outstandings plus Revolving
Credit Outstandings plus Swing Line Outstandings shall exceed the Total
Revolving Credit Commitment. No Letter of Credit shall have an expiry date
(including all rights of the Borrower or any beneficiary named in such Letter
of Credit to require renewal) or payment date occurring later than the earlier
to occur of one year after the date of its issuance or the fifth Business Day
prior to the Revolving Credit Termination Date.
3.2. Reimbursement.
(a) The Borrower hereby unconditionally agrees to pay to
the Issuing Bank immediately on demand at the Principal Office all amounts
required to pay all drafts drawn or purporting to be drawn under the Letters of
Credit and all reasonable expenses incurred by the Issuing Bank in connection
with the Letters of Credit, and in any event and without demand to place in
possession of the Issuing Bank (which shall include Advances under the
Revolving Credit Facility if permitted by Section 2.1 and Swing Line Loans if
permitted by Section 2.14) sufficient funds to pay all debts and liabilities
arising under any Letter of Credit. The Issuing Bank agrees to give the
Borrower prompt notice of any request for a draw under a Letter of Credit. The
Issuing Bank may charge any account the Borrower may have with it for any and
all amounts the Issuing Bank pays under a Letter of Credit, plus charges and
reasonable expenses as from time to time agreed to by the Issuing Bank and the
Borrower; provided that to the extent permitted by Section 2.1(d)(iv) and
Section 2.14, amounts shall be paid pursuant to Advances under the Revolving
Credit Facility or, if the Borrower shall elect, by Swing Line Loans. The
Borrower agrees to pay the Issuing Bank interest on any Reimbursement
Obligations not paid when due hereunder at the Base Rate plus two percent
(2.0%), or the maximum rate permitted by applicable law, if lower, such rate to
be calculated on the basis of a year of 360 days for actual days elapsed.
(b) In accordance with the provisions of Section 2.1(d),
the Issuing Bank shall notify the Agent of any drawing under any Letter of
Credit promptly following the receipt by the Issuing Bank of such drawing.
(c) Each Lender (other than the Issuing Bank) shall
automatically acquire on the date of issuance thereof, a Participation in the
liability of the Issuing Bank in respect of each Letter of Credit in an amount
equal to such Lender's Applicable Commitment Percentage of such liability, and
to the extent that the Borrower is obligated to pay the Issuing Bank under
Section 3.2(a), each Lender (other than the Issuing Bank) thereby shall
absolutely, unconditionally and irrevocably
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assume, and shall be unconditionally obligated to pay to the Issuing Bank as
hereinafter described, its Applicable Commitment Percentage of the liability of
the Issuing Bank under such Letter of Credit.
(i) Each Lender (including the Issuing Bank in
its capacity as a Lender) shall, subject to the terms and
conditions of Article II, pay to the Agent for the account of
the Issuing Bank at the Principal Office in Dollars and in
immediately available funds, an amount equal to its Applicable
Commitment Percentage of any drawing under a Letter of Credit,
such funds to be provided in the manner described in Section
2.1(d)(iv).
(ii) Simultaneously with the making of each
payment by a Lender to the Issuing Bank pursuant to Section
2.1(d)(iv)(B), such Lender shall, automatically and without
any further action on the part of the Issuing Bank or such
Lender, acquire a Participation in an amount equal to such
payment (excluding the portion thereof constituting interest
accrued prior to the date the Lender made its payment) in the
related Reimbursement Obligation of the Borrower. The
Reimbursement Obligations of the Borrower shall be immediately
due and payable whether by Advances made in accordance with
Section 2.1(d)(iv), Swing Line Loans made in accordance with
Section 2.14, or otherwise.
(iii) Each Lender's obligation to make payment to
the Agent for the account of the Issuing Bank pursuant to
Section 2.1(d)(iv) and this Section 3.2(c), and the right of
the Issuing Bank to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance
whatsoever and shall be made without any offset, abatement,
withholding or reduction whatsoever. If any Lender is
obligated to pay but does not pay amounts to the Agent for the
account of the Issuing Bank in full upon such request as
required by Section 2.1(d)(iv) or this Section 3.2(c), such
Lender shall, on demand, pay to the Agent for the account of
the Issuing Bank interest on the unpaid amount for each day
during the period commencing on the date of notice given to
such Lender pursuant to Section 2.1(d) until such Lender pays
such amount to the Agent for the account of the Issuing Bank
in full at the interest rate per annum for overnight borrowing
by the Agent from the Federal Reserve Bank.
(iv) In the event the Lenders have purchased
Participations in any Reimbursement Obligation as set forth in
clause (ii) above, then at any time payment (in fully
collected, immediately available funds) of such Reimbursement
Obligation, in whole or in part, is received by Issuing Bank
from the Borrower, Issuing Bank shall promptly pay to each
Lender an amount equal to its Applicable Commitment Percentage
of such payment from the Borrower.
(d) Promptly following the end of each calendar quarter,
the Issuing Bank shall deliver to the Agent a notice describing the aggregate
undrawn amount of all Letters of Credit at the end of such quarter. Upon the
request of any Lender from time to time, the Issuing Bank shall deliver
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to the Agent, and the Agent shall deliver to such Lender, any other information
reasonably requested by such Lender with respect to each Letter of Credit
outstanding.
(e) The issuance by the Issuing Bank of each Letter of
Credit shall, in addition to the conditions precedent set forth in Article VI,
be subject to the conditions that such Letter of Credit be in such form and
contain such terms as shall be reasonably satisfactory to the Issuing Bank
consistent with the then current practices and procedures of the Issuing Bank
with respect to similar letters of credit, and the Borrower shall have executed
and delivered such other instruments and agreements relating to such Letters of
Credit as the Issuing Bank shall have reasonably requested consistent with such
practices and procedures and shall not be in conflict with any of the express
terms herein contained. All Letters of Credit shall be issued pursuant to and
subject to the Uniform Customs and Practice for Documentary Credits, 1993
revision, International Chamber of Commerce Publication No. 500 and all
subsequent amendments and revisions thereto.
(f) The Borrower agrees that Issuing Bank may, in its
sole discretion, accept or pay, as complying with the terms of any Letter of
Credit, any drafts or other documents otherwise in order which may be signed or
issued by an administrator, executor, trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, liquidator, receiver,
attorney in fact or other legal representative of a party who is authorized
under such Letter of Credit to draw or issue any drafts or other documents.
(g) Without limiting the generality of the provisions of
Section 12.9, the Borrower hereby agrees to indemnify and hold harmless the
Issuing Bank, each other Lender and the Agent from and against any and all
claims and damages, losses, liabilities, reasonable costs and expenses which
the Issuing Bank, such other Lender or the Agent may incur (or which may be
claimed against the Issuing Bank, such other Lender or the Agent) by any Person
by reason of or in connection with the issuance or transfer of or payment or
failure to pay under any Letter of Credit; provided that the Borrower shall not
be required to indemnify the Issuing Bank, any other Lender or the Agent for
any claims, damages, losses, liabilities, costs or expenses to the extent, but
only to the extent, (i) caused by the willful misconduct or gross negligence of
the party to be indemnified or (ii) caused by the failure of the Issuing Bank
to pay under any Letter of Credit after the presentation to it of a request for
payment strictly complying with the terms and conditions of such Letter of
Credit, unless such payment is prohibited by any law, regulation, court order
or decree. The indemnification and hold harmless provisions of this Section
3.2(g) shall survive repayment of the Obligations, occurrence of the Revolving
Credit Termination Date and expiration or termination of this Agreement.
(h) Without limiting Borrower's rights as set forth in
Section 3.2(g), the obligation of the Borrower to immediately reimburse the
Issuing Bank for drawings made under Letters of Credit and the Issuing Bank's
right to receive such payment shall be absolute, unconditional and irrevocable,
and that such obligations of the Borrower shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit and the
related Applications and Agreement for any Letter of Credit, under all
circumstances whatsoever, including the following circumstances:
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(i) any lack of validity or enforceability of the
Letter of Credit, the obligation supported by the Letter of
Credit or any other agreement or instrument relating thereto
(collectively, the "Related LC Documents");
(ii) any amendment or waiver of or any consent to
or departure from all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense
(other than the defense of payment in accordance with the
terms of this Agreement) or other rights which the Borrower
may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), the
Agent, the Lenders or any other Person, whether in connection
with the Loan Documents, the Related LC Documents or any
unrelated transaction;
(iv) any breach of contract or other dispute
between the Borrower and any beneficiary or any transferee of
a Letter of Credit (or any persons or entities for whom such
beneficiary or any such transferee may be acting), the Agent,
the Lenders or any other Person;
(v) any draft, statement or any other document
presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever; or
(vi) any delay, extension of time, renewal,
compromise or other indulgence or modification granted or
agreed to by the Agent, with or without notice to or approval
by the Borrower in respect of any of Borrower's Obligations
under this Agreement.
3.3. Letter of Credit Facility Fees. The Borrower shall pay to the
Agent, (i) for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, a fee on the aggregate amount available to be drawn on
each outstanding Letter of Credit at a rate equal to the Applicable Margin for
Eurodollar Rate Loans that are Revolving Credit Loans and (ii) for the Issuing
Bank a fee equal to an amount agreed to from time to time by the Borrower and
the Issuing Bank based on the aggregate amount available to be drawn on each
outstanding Letter of Credit provided, however, in no event shall such fee
exceed 1% per annum on the aggregate amount available to be drawn on each
outstanding Letter of Credit. Such fees shall be due with respect to each
Letter of Credit quarterly in arrears on the last day of each March, June,
September and December, the first such payment to be made on the first such
date occurring after the date of issuance of a Letter of Credit. The fees
described in this Section 3.3 shall be calculated on the basis of a year of 360
days for the actual number of days elapsed.
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ARTICLE IV
Security
4.1. Facility Guaranty. To guarantee the full and timely payment
and performance of all Obligations now existing or hereafter arising, the
Borrower shall cause the Facility Guaranty to be delivered by each Subsidiary
other than those Subsidiaries listed on Schedule 4.1, in form and substance
reasonably acceptable to the Agent, on or before the Closing Date. The
Borrower hereby agrees to cause a Facility Guaranty to be delivered by any
hereafter acquired or created Subsidiary or upon any previously existing Person
becoming a Subsidiary pursuant to the terms of Section 8.19 hereof.
4.2. Stock Pledge. As security for the full and timely payment
and performance of (i) all Obligations now existing or hereafter arising under
the Loan Documents and (ii) certain Guarantors' obligations under the Facility
Guaranty, the Borrower and each Subsidiary owning any Pledged Stock shall on or
before the Closing Date deliver to the Agent, in substantially the form of
Exhibit J hereto, the Pledge Agreement together with certificates representing
such Pledged Stock and stock powers duly executed in blank as may be required
by the Agent in accordance with the terms hereof and thereof. In addition to
any Pledge Agreement required to be delivered pursuant to Section 8.19 hereof,
the Borrower and each Subsidiary hereby agree to pledge to the Agent for the
benefit of the Lenders (x) 100% of the capital stock and related interests and
rights of any domestic Subsidiary hereafter acquired or created and owned
directly or indirectly by Borrower and (y) 65% of the Voting Stock and 100% of
the non-voting common stock and related interests and rights of any foreign
Subsidiary owned by the Borrower or any domestic Subsidiary hereafter acquired
or created and, in each case, to deliver to the Agent a Pledge Agreement in
substantially the form of Exhibit J hereto and content acceptable to the Agent
within thirty (30) days of the acquisition or creation of such domestic
Subsidiary or foreign Subsidiary, as the case may be.
4.3. Pledge of Partnership Interests. (a) As security for the
full and timely payment and performance of (i) all Obligations now existing or
hereafter arising and (ii) if applicable, the Guarantors' Obligations under the
Guaranty Agreement, the Borrower and each Person owning any Assigned Interests
shall on or before the Closing Date deliver to the Agent, in substantially the
form of Exhibit L, a Collateral Assignment of Partnership Interests together
with a Receipt and Certificate of Registrar as may be required by the Agent,
which Collateral Assignment of Partnership Interests shall pledge to the Agent
for the benefit of the Lenders 100% of the ownership interests and rights in
certain limited partnerships in accordance with the terms hereof.
(b) The Borrower and each Subsidiary hereby agree to collaterally
assign to the Agent for the benefit of the Lenders 100% of the ownership
interests and rights in limited partnership and joint ventures hereafter
acquired or created which are deemed Subsidiaries hereunder and to deliver to
the Agent a Collateral Assignment of Partership Interests substantially in the
form of Exhibit L hereto within thirty (30) days of the acquisition or creation
of such Subsidiary pursuant to the terms of Section 8.19.
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4.4. Further Assurances. At the request of the Agent, the Borrower
will or will cause its Subsidiaries, as the case may be to execute, by its duly
authorized officers, alone or with the Agent, any certificate, instrument,
statement or document, or to procure any such certificate, instrument,
statement or document, or to take such other action (and pay all reasonable
connected costs) which the Agent reasonably deems necessary from time to time
to create, continue or preserve the liens and security interests in Collateral
(and the perfection and priority thereof) of the Agent contemplated hereby and
by the other Loan Documents.
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ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return.
(a) Except with respect to Taxes (as defined in Section 5.6(a)),
as to which the provisions of Section 5.6 shall apply, if, after the date
hereof, the adoption of any applicable law, rule, or regulation, or any change
in any applicable law, rule, or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office) with any request or
directive (whether or not having the force of law) of any such governmental
authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable
Lending Office) to any tax, duty, or other charge with respect to any
Eurodollar Rate Loans, its Note, or its obligation to make Eurodollar
Rate Loans, or change the basis of taxation of any amounts payable to
such Lender (or its Applicable Lending Office) under this Agreement or
its Note in respect of any Eurodollar Rate Loans (other than taxes of
the type described in clauses (i) through (iv) of Section 5.6(a)
imposed on the overall net income of such Lender by the jurisdiction
in which such Lender has its principal office or such Applicable
Lending Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement (other
than the Reserve Requirement utilized in the determination of the
Eurodollar Rate) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities or commitments of, such
Lender (or its Applicable Lending Office), including the Revolving
Credit Commitment and Line of Credit Commitment of such Lender
hereunder; or
(iii) shall impose on such Lender (or its
Applicable Lending Office) or on the London interbank market any other
condition affecting this Agreement or its Note or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Rate Loans or to reduce any sum received or
receivable by such Lender (or its Applicable Lending Office) under this
Agreement or its Note with respect to any Eurodollar Rate Loans, then the
Borrower shall pay to such Lender on demand such amount or amounts as will
compensate such Lender for such increased cost or reduction. If any Lender
requests compensation by the Borrower under this Section 5.1(a), the Borrower
may, by notice to such Lender (with a copy to the Agent), suspend the
obligation of such Lender to make or Continue Eurodollar Rate Loans, or to
Convert Base Rate Loans into Eurodollar Rate Loans, until the event or
condition giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.4 shall be applicable); provided that such suspension
shall not affect the right of such Lender to receive the compensation so
requested with respect to outstanding Eurodollar Rate Loans.
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(b) If, after the date hereof, any Lender shall have determined
that the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or such
corporation would have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for
such reduction.
(c) Each Lender shall promptly notify the Borrower and the Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Lender to compensation pursuant to this Section 5.1 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to it. Any
Lender claiming compensation under this Section 5.1 shall furnish to the
Borrower and the Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder. In determining such amount, such Lender
may use any reasonable averaging and attribution methods.
5.2. Limitation on Types of Loans. If on or prior to the first day
of any Interest Period for any Eurodollar Rate Loan:
(a) the Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination
shall be conclusive) and notify the Agent that the Eurodollar Rate
will not adequately and fairly reflect the cost to the Lenders of
funding Eurodollar Rate Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant amounts or periods, and so long as such condition remains in effect,
the Lenders shall be under no obligation to make additional Eurodollar Rate
Loans, Continue Eurodollar Rate Loans, or to Convert Base Rate Loans into
Eurodollar Rate Loans and the Borrower shall, on the last day(s) of the then
current Interest Period(s) for the affected and outstanding Eurodollar Rate
Loans, either prepay such Loans or Convert such Loans into Base Rate Loans in
accordance with the terms of this Agreement.
5.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Rate Loans
hereunder, then such Lender shall promptly notify the Borrower thereof and such
Lender's obligation to make or Continue Eurodollar Rate Loans and to Convert
other Types of Loans into Eurodollar Rate Loans shall be suspended until such
time as such Lender may again make,
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maintain, and fund Eurodollar Rate Loans (in which case the provisions of
Section 5.4 shall be applicable).
5.4. Treatment of Affected Loans. If the obligation of any Lender
to make a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other
Type into, Eurodollar Rate Loans of a particular Type shall be suspended
pursuant to Section 5.1 or 5.3 hereof (Loans of such Type being herein called
"Affected Loans" and such Type being herein called the "Affected Type"), such
Lender's Affected Loans shall be automatically Converted into Base Rate Loans
on the last day(s) of the then current Interest Period(s) for Affected Loans
(or, in the case of a Conversion required by Section 5.3 hereof, on such
earlier date as such Lender may specify to the Borrower with a copy to the
Agent) and, unless and until such Lender gives notice as provided below that
the circumstances specified in Section 5.1 or 5.3 hereof that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have
been so Converted, all payments and prepayments of principal that
would otherwise be applied to such Lender's Affected Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued
by such Lender as Loans of the Affected Type shall be made or
Continued instead as Base Rate Loans, and all Loans of such Lender
that would otherwise be Converted into Loans of the Affected Type
shall be Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 5.1 or 5.3 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 5.4 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by the Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Revolving
Credit and Line of Credit Commitments.
5.5. Compensation. Upon the request of any Lender, the Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a
Eurodollar Rate Loan for any reason (including, without limitation,
the acceleration of the Loans pursuant to Section 10.1) on a date
other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any condition precedent
specified in Article VI to be satisfied) to borrow, Convert, Continue,
or prepay a Eurodollar Rate Loan on the date for such borrowing,
Conversion,
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Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under
this Agreement.
5.6. Taxes. (a) Any and all payments by the Borrower to or for
the account of any Lender or the Agent hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Agent, (i) franchise taxes, (ii) in addition to the
taxes described in clauses (i), (iii) and (iv) of this Section 5.6(a), any
taxes (other than withholding taxes) that would not be imposed but for a
connection between the Lender or the Agent and the jurisdiction imposing such
taxes (other than a connection arising solely by virtue of the activities of
such Lender or the Agent pursuant to or in respect of this Agreement or any
other Loan Document), (iii) any taxes imposed on or with respect to or measured
by the Agent's or any Lender's assets, income, receipts, gains, capital, net
worth or profits, and (iv) any taxes arising after the Closing Date solely as a
result of or attributable to a Lender changing its designated lending office
after the Lender becomes a party hereto (all such non-excluded taxes, duties,
levies, imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable under this Agreement
or any other Loan Document to any Lender or the Agent, (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
5.6) such Lender or the Agent receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law, and (iv) the Borrower shall furnish to the Agent, at its address referred
to in Section 12.2, the original or a certified copy of a receipt evidencing
payment thereof.
(b) In addition, the Borrower agrees to pay any and all stamp or
documentary taxes and any other excise or property taxes or charges or similar
levies (specifically excluding, without limitation, any Taxes of the type
described in clauses (i) through (iv) of Section 5.6(a)) which are imposed on
the execution or delivery of this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) If the Borrower fails to pay any Taxes or Other Taxes
(collectively, "Indemnifiable Taxes") when due to the appropriate taxing
authority (as required by Section 5.6(a) or Section 5.6(b), respectively, the
Borrower agrees to indemnify each Lender and the Agent for the full amount of
such Indemnifiable Taxes (including, without limitation, any such
Indemnifiable Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section 5.6) paid by such Lender or the Agent (as the case may be)
and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction
outside the United States, (x) on or prior to the date of its execution and
delivery of this Agreement in the case of each Lender listed on the signature
pages hereof and on or prior to the date on which it becomes a Lender in the
case of each other Lender, (y) on or prior to the date such Lender changes its
Applicable Lending Office, and (z) from time to time thereafter if requested in
writing by the Borrower or the Agent (but
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only so long as such Lender remains lawfully able to do so), shall provide the
Borrower and the Agent with (i) two properly completed and duly executed copies
of Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, certifying that such Lender is
entitled to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States, (ii)
two properly completed and duly executed copies of Internal Revenue Service
Form W-8 or W-9, as appropriate, or any successor form prescribed by the
Internal Revenue Service, and (iii) two properly completed and duly executed
copies of any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying that such Lender is entitled to an exemption
from or a reduced rate of tax on payments pursuant to this Agreement or any of
the other Loan Documents.
(e) For any period with respect to which a Lender has failed to
provide the Borrower and the Agent with the appropriate form pursuant to
Section 5.6(d) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to indemnification
under Section 5.6(a) or 5.6(b) with respect to Indemnifiable Taxes; provided,
however, that should a Lender, which is otherwise exempt from or subject to a
reduced rate of withholding tax, become subject to Indemnifiable Taxes because
of its failure to deliver a form required hereunder, the Borrower shall take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Indemnifiable Taxes.
(f) If the Borrower is required to pay additional amounts to or
for the account of any Lender pursuant to this Section 5.6, then such Lender
will agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the reasonable judgment
of such Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of
Indemnifiable Taxes, the Borrower shall furnish to the Agent the original or a
certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 5.6 shall survive the termination of the Revolving
Credit and Line of Credit Commitments and the payment in full of the Notes.
5.7. Replacement Banks. The Borrower may, in its sole discretion,
on ten (10) Business Days' prior written notice to the Agent and a Lender,
cause a Lender who has incurred increased costs or is unable to make Eurodollar
Rate Loans to (and such Lender shall) assign, pursuant to Section 12.1, all of
its rights and obligations under this Agreement to an Eligible Assignee
designated by the Borrower which is willing to become a Lender for a purchase
price equal to the outstanding principal amount of the Loans payable to such
Lender plus any accrued but unpaid interest on such Loans, any accrued but
unpaid fees with respect to such Lender's Revolving Credit Commitment and
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any other amount payable to such Lender under this Agreement; provided,
however, that any expenses or other amounts which would be owing to such Lender
pursuant to any indemnification provision hereof (including, if applicable,
Section 5.5) shall be payable by the Borrower as if the Borrower had prepaid
the Loans of such Lender rather than such Lender having assigned its interest
hereunder. The assignee shall pay the applicable processing fee under Section
12.1.
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ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Initial Advance. The obligation of the Lenders
to make the initial Advance under the Revolving Credit Facility and the Line of
Credit Facility, and of the Issuing Bank to issue any Letter of Credit, and of
NationsBank to make any Swing Line Loan, is subject to the conditions precedent
that:
(a) the Agent shall have received on the Closing Date, in
form and substance satisfactory to the Agent and Lenders, the
following:
(i) executed originals of each of this Agreement,
the Notes, the initial Facility Guaranties, the Security
Instruments, the LC Account Agreement and the other Loan
Documents, together with all schedules and exhibits thereto;
(ii) the written opinion or opinions with respect
to the Loan Documents and the transactions contemplated
thereby of special counsel to the Loan Parties dated the
Closing Date, addressed to the Agent and the Lenders and
satisfactory to the Agent, substantially in the form of
Exhibit G;
(iii) resolutions of the boards of directors or
other appropriate governing body (or of the appropriate
committee thereof) of each Loan Party certified by its
secretary or assistant secretary as of the Closing Date,
approving and adopting the Loan Documents to be executed by
such Person, and authorizing the execution and delivery
thereof;
(iv) specimen signatures of the officers of each
of the Loan Parties executing the Loan Documents on behalf of
such Loan Party, certified by the secretary or assistant
secretary of such Loan Party;
(v) the charter documents of each of the Loan
Parties certified as of a recent date by the Secretary of
State of its state of organization;
(vi) the bylaws of each of the Loan Parties
certified as of the Closing Date as true and correct by its
secretary or assistant secretary;
(vii) certificates issued as of a recent date by
the Secretaries of State of the respective jurisdictions of
formation of each of the Loan Parties as to the due existence
and good standing of such Person;
(viii) appropriate certificates of qualification to
do business and as to good standing issued in respect of each
of the Loan Parties as of a recent date by the Secretary of
State or comparable official of each jurisdiction in which the
failure to
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be qualified to do business or authorized so to conduct
business could have a Material Adverse Effect;
(ix) notice of appointment of the initial
Authorized Representative(s);
(x) certificate of an Authorized Representative
dated the Closing Date demonstrating compliance with the
financial covenants contained in Sections 9.1(a) through
9.1(c) as of the most recent quarter end, substantially in the
form of Exhibit H;
(xi) an initial Borrowing Notice, if any, and, if
elected by the Borrower, Interest Rate Selection Notice;
(xii) all stock certificates evidencing Pledged
Stock, accompanied by duly executed stock powers (or other
appropriate transfer documents) in blank affixed thereto;
(xiii) Certificate and Receipt of Registrar of all
of the Assigned Interests;
(xiv) evidence that all fees payable by the
Borrower on the Closing Date to the Agent and the Lenders have
been paid in full;
(xv) evidence of insurance required by the Loan
Documents; and
(xvi) such other documents, instruments,
certificates and opinions as the Agent or any Lender may
reasonably request on or prior to the Closing Date in
connection with the consummation of the transactions
contemplated hereby.
(b) In the good faith judgment of the Agent:
(i) there shall not have occurred or become known
to the Agent or the Lenders any event, condition, situation or
status since the date of the information contained in the
financial and business projections, budgets, pro forma data
and forecasts concerning the Borrower and its Subsidiaries
delivered to the Agent after September 30, 1997 and prior to
the Closing Date that has had or could reasonably be expected
to result in a Material Adverse Effect;
(ii) there shall not have occurred or become known
to the Agent or the Lenders any disruption or adverse change
in the financial or capital markets generally prior to the
Closing Date that has had or could reasonably be expected to
result in a Material Adverse Effect;
(iii) no litigation, action, suit, investigation or
other arbitral, administrative or judicial proceeding shall be
pending or threatened which could reasonably be likely to
result in a Material Adverse Effect;
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(iv) the Loan Parties shall have received all
approvals, consents and waivers, and shall have made or given
all necessary filings and notices as shall be required to
consummate the transactions contemplated hereby without the
occurrence of any default under, conflict with or violation of
(A) any applicable law, rule, regulation, order or decree of
any Governmental Authority or arbitral authority or (B) any
agreement, document or instrument to which any of the Loan
Parties is a party or by which any of them or their properties
is bound; and
(v) the Agent shall have completed all due
diligence with respect to the Borrower and its Subsidiaries in
scope and determination satisfactory to NationsBank in its
sole discretion.
6.2. Conditions of Revolving Loans, Line of Credit Loans and Letter
of Credit. The obligations of the Lenders to make any Revolving Loans and Line
of Credit Loans and the Issuing Bank to issue Letters of Credit and NationsBank
to make Swing Line Loans, hereunder on or subsequent to the Closing Date are
subject to the satisfaction of the following conditions:
(a) the Agent or, in the case of Swing Line Loans,
NationsBank shall have received a Borrowing Notice if required by
Article II;
(b) the representations and warranties of the Loan
Parties set forth in Article VII and in each of the other Loan
Documents shall be true and correct in all material respects on and as
of the date of such Advance, Swing Line Loan or Letter of Credit
issuance or renewal, with the same effect as though such
representations and warranties had been made on and as of such date,
except to the extent that such representations and warranties
expressly relate to an earlier date and except that the financial
statements referred to in Section 7.6(a)(i) shall be deemed to be
those financial statements most recently delivered to the Agent and
the Lenders pursuant to Section 8.1 from the date financial
statements are delivered to the Agent and the Lenders in accordance
with such Section;
(c) in the case of the issuance of a Letter of Credit,
the Borrower shall have executed and delivered to the Issuing Bank an
Application and Agreement for Letter of Credit in form and content
acceptable to the Issuing Bank together with such other instruments
and documents as it shall request;
(d) at the time of (and after giving effect to) each
Advance, Swing Line Loan or the issuance of a Letter of Credit, no
Default or Event of Default specified in Article X shall have
occurred and be continuing; and
(e) immediately after giving effect to:
(i) a Revolving Loan, the aggregate principal
balance of all outstanding Revolving Loans for each Lender
shall not exceed such Lender's Revolving Credit Commitment;
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(ii) a Line of Credit Loan, the aggregate
principal balance of all outstanding Line of Credit Loans for
each Lender shall not exceed such Lender's Line of Credit
Commitment;
(iii) a Letter of Credit or renewal thereof, the
aggregate principal balance of all outstanding Participations
in Letters of Credit and Reimbursement Obligations (or in the
case of the Issuing Bank, its remaining interest after
deduction of all Participations in Letters of Credit and
Reimbursement Obligations of other Lenders) for each Lender
and in the aggregate shall not exceed, respectively, (X) such
Lender's Letter of Credit Commitment or (Y) the Total Letter
of Credit Commitment;
(iv) a Swing Line Loan, the Swing Line
Outstandings shall not exceed $5,000,000;
(v) a Revolving Loan, Swing Line Loan or a Letter
of Credit or renewal thereof, the sum of Letter of Credit
Outstandings plus Revolving Credit Outstandings plus Swing
Line Outstandings shall not exceed the Total Revolving Credit
Commitment; and
(vi) a Line of Credit Loan, all Line of Credit
Outstandings shall not exceed the Total Line of Credit
Commitment.
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ARTICLE VII
Representations and Warranties
The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery
of the documents mentioned herein and the making of Loans), that:
7.1. Organization and Authority.
(a) The Borrower and each Subsidiary is a corporation or
partnership duly organized and validly existing under the laws of the
jurisdiction of its formation;
(b) The Borrower and each Subsidiary (x) has the
requisite power and authority to own its properties and assets and to
carry on its business as now being conducted and as contemplated in
the Loan Documents, and (y) is qualified to do business in every
jurisdiction in which failure so to qualify would have a Material
Adverse Effect;
(c) The Borrower has the power and authority to execute,
deliver and perform this Agreement and the Notes, and to borrow
hereunder, and to execute, deliver and perform each of the other Loan
Documents to which it is a party;
(d) Each Guarantor has the power and authority to
execute, deliver and perform the Facility Guaranty and each of the
other Loan Documents to which it is a party; and
(e) When executed and delivered, each of the Loan
Documents to which any Loan Party is a party will be the legal, valid
and binding obligation or agreement, as the case may be, of such Loan
Party, enforceable against such Loan Party in accordance with its
terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the effect of
general principles of equity (whether considered in a proceeding at
law or in equity);
7.2. Loan Documents. The execution, delivery and performance by
each Loan Party of each of the Loan Documents to which it is a party:
(a) have been duly authorized by all requisite corporate
action (including any required shareholder approval) of such Loan
Party required for the lawful execution, delivery and performance
thereof;
(b) do not violate any provisions of (i) applicable law,
rule or regulation, (ii) any judgment, writ, order, determination,
decree or arbitral award of any Governmental Authority or arbitral
authority binding on such Loan Party or its properties, or (iii) the
charter documents or bylaws of such Loan Party;
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(c) does not and will not be in conflict with, result in
a breach of or constitute an event of default, or an event which, with
notice or lapse of time or both, would constitute an event of default,
under any contract, indenture, agreement or other instrument or
document to which such Loan Party is a party, or by which the
properties or assets of such Loan Party are bound; and
(d) does not and will not result in the creation or
imposition of any Lien upon any of the properties or assets of such
Loan Party or any Subsidiary except any Liens in favor of the Agent
and the Lenders created by the Security Instruments;
7.3. Solvency. Each Loan Party is Solvent after giving effect to
the transactions contemplated by the Loan Documents;
7.4. Subsidiaries and Stockholders. The Borrower has no
Subsidiaries other than those Persons listed as Subsidiaries in Schedule 7.4
and no additional Subsidiaries will be created or acquired after the Closing
Date except in compliance with Section 8.19; Schedule 7.4 states as of the date
hereof the organizational form of each entity, the authorized and issued
capitalization of each Subsidiary listed thereon, the number of shares or other
equity interests of each class of capital stock or interest issued and
outstanding of each such Subsidiary and the number and/or percentage of
outstanding shares or other equity interest (including options, warrants and
other rights to acquire any interest) of each such class of capital stock or
other equity interest owned by Borrower or by any such Subsidiary; the
outstanding shares or other equity interests of each such Subsidiary have been
duly authorized and validly issued and are fully paid and nonassessable; and
Borrower and each such Subsidiary owns beneficially and of record all the
shares and other interests it is listed as owning in Schedule 7.4, free and
clear of any Lien other than Liens permitted under Section 9.3;
7.5. Ownership Interests. Borrower owns no interest in any Person
other than the Persons listed in Schedule 7.4, equity investments in Persons
not constituting Subsidiaries permitted under Section 9.6 and no additional
Subsidiaries will be created or acquired after the Closing Date except in
compliance with Section 8.19;
7.6. Financial Condition.
(a) The Borrower has heretofore furnished to each Lender
audited consolidated balance sheets of the Borrower and its
Subsidiaries as at December 31, 1996 and the notes thereto and the
related consolidated statements of operations, stockholders' equity
and cash flows for the Fiscal Year then ended as examined and
certified by KPMG Peat Marwick, L.L.P., and unaudited consolidated
interim financial statements of the Borrower and its Subsidiaries
consisting of consolidated balance sheets and related consolidated
statements of income, stockholders' equity and cash flows, in each
case without notes, for and as of the end of the three (3) month
period ending September 30, 1997. Except as set forth therein, such
financial statements (including the notes thereto) present fairly the
financial condition of the Borrower and its Subsidiaries as of the end
of such Fiscal Year and three (3) month period and results of their
operations and the changes in its stockholders' equity for the Fiscal
Year and interim period then ended, all in conformity with GAAP
applied on a
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Consistent Basis, subject however, in the case of unaudited interim
statements to year end audit adjustments;
(b) since September 30, 1997 there has been no material
adverse change in the condition, financial or otherwise, of the
Borrower or any of its Subsidiaries, taken as a whole, or in the
businesses, properties, performance, prospects or operations of the
Borrower or its Subsidiaries, taken as a whole, nor have such
businesses or properties been materially adversely affected as a
result of any fire, explosion, earthquake, accident, strike, lockout,
combination of workers, flood, embargo or act of God; and
(c) except as set forth in the financial statements
referred to in Section 7.6(a) or in Schedule 7.6 or permitted by
Section 9.4, neither Borrower nor any Subsidiary has incurred, other
than in the ordinary course of business, any material Indebtedness,
Contingent Obligation or other commitment or liability which remains
outstanding or unsatisfied;
7.7. Title to Properties. The Borrower and each of its
Subsidiaries has good and marketable title to all its real and personal
properties, subject to no transfer restrictions or Liens of any kind, except
for the transfer restrictions and Liens described in Schedule 7.7 and Liens
permitted by Section 9.3;
7.8. Taxes. The Borrower and each of its Subsidiaries has filed or
caused to be filed all federal, state and local tax returns which are required
to be filed by it and, except for taxes and assessments being contested in good
faith by appropriate proceedings diligently conducted and against which
reserves reflected in the financial statements described in Section 7.6(a) and
satisfactory to the Borrower's independent certified public accountants have
been established, have paid or caused to be paid all taxes as shown on said
returns or on any assessment received by it, to the extent that such taxes have
become due;
7.9. Other Agreements. Neither the Borrower nor any Subsidiary is
(a) a party to or subject to any judgment, order, decree,
agreement, lease or instrument, or subject to other restrictions,
which individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect; or
(b) in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which the Borrower or any
Subsidiary is a party, which default has, or if not remedied within
any applicable grace period could reasonably be likely to have, a
Material Adverse Effect;
7.10. Litigation. Except as set forth in Schedule 7.10, there is no
action, suit, or proceeding at law or in equity or by or before any
governmental instrumentality or agency or arbitral body pending, or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or affecting the Borrower or any Subsidiary or any properties or
rights of the Borrower or any Subsidiary or to the knowledge of the Borrower
any investigation pending or threatened,
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which could reasonably be likely to have a Material Adverse Effect on the
Borrower and its Subsidiaries, taken as a whole;
7.11. Margin Stock. The proceeds of the borrowings made hereunder
will be used by the Borrower only for the purposes expressly authorized herein.
Except as expressly authorized herein, none of such proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
stock or for the purpose of reducing or retiring any Indebtedness which was
originally incurred to purchase or carry margin stock or for any other purpose
which might constitute any of the Loans under this Agreement a Apurpose credit@
within the meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of
the Board. Neither the Borrower nor any agent acting in its behalf has taken
or will take any action which might cause this Agreement or any of the
documents or instruments delivered pursuant hereto to violate any regulation of
the Board or to violate the Securities Exchange Act of 1934, as amended, or the
Securities Act of 1933, as amended, or any state securities laws, in each case
as in effect on the date hereof;
7.12. Investment Company. No Loan Party is an "investment company," or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended (15 U.S.C. Section 80a-1, et seq.). The application of the
proceeds of the Loans and repayment thereof by the Borrower and the performance
by the Borrower and the other Loan Parties of the transactions contemplated by
the Loan Documents will not violate any provision of said Act, or any rule,
regulation or order issued by the Securities and Exchange Commission thereunder,
in each case as in effect on the date hereof;
7.13. Patents, Etc. The Borrower and each Subsidiary owns or has
the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to or used in the conduct
of its businesses, without known conflict with any patent, license, franchise,
trademark, trade secret, trade name, copyright, other proprietary right of any
other Person;
7.14. No Untrue Statement. Neither (a) this Agreement nor any other
Loan Document or certificate or document executed and delivered by or on behalf
of any Loan Party in accordance with or pursuant to any Loan Document nor (b)
any statement, representation, or warranty (written or oral) provided or made
to the Agent by or on behalf of any Loan Party in connection with the
negotiation or preparation of the Loan Documents contains any misrepresentation
or untrue statement of material fact or omits to state a material fact
necessary, in light of the circumstance under which it was made, in order to
make any such warranty, representation or statement contained therein not
misleading;
7.15. No Consents, Etc. Neither the respective businesses or
properties of the Borrower or any Subsidiary, nor any relationship among the
Borrower or any Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Loan Documents
and the transactions contemplated thereby, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with,
any Governmental Authority or any other Person on the part of the Borrower as
a condition to the execution, delivery and performance of, or consummation of
the transactions contemplated by the Loan Documents, which, if not obtained or
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effected, would be reasonably likely to have a Material Adverse Effect, or if
so, such consent, approval, authorization, filing, registration or
qualification has been duly obtained or effected, as the case may be;
7.16. Employee Benefit Plans.
(a) The Borrower and each ERISA Affiliate is in material
compliance with all applicable provisions of ERISA and the regulations
and published interpretations thereunder and in material compliance
with all Foreign Benefit Laws with respect to all Employee Benefit
Plans except for any required amendments for which the remedial
amendment period as defined in Section 401(b) of the Code has not yet
expired. Each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust related to such
plan has been determined to be exempt under Section 501(a) of the
Code. No material liability has been incurred by the Borrower or any
ERISA Affiliate which remains unsatisfied for any taxes or penalties
with respect to any Employee Benefit Plan or any Multiemployer Plan;
(b) Neither the Borrower nor any ERISA Affiliate has (i)
engaged in a nonexempt prohibited transaction described in Section
4975 of the Code or Section 406 of ERISA affecting any of the
Employee Benefit Plans or the trusts created thereunder which could
subject any such Employee Benefit Plan or trust to a material tax or
penalty on prohibited transactions imposed under Internal Revenue Code
Section 4975 or ERISA, (ii) incurred any accumulated funding
deficiency with respect to any Employee Benefit Plan, whether or not
waived, or any other liability to the PBGC which remains outstanding
other than the payment of premiums and there are no premium payments
which are due and unpaid, (iii) failed to make a required contribution
or payment to a Multiemployer Plan, or (iv) failed to make a required
installment or other required payment under Section 412 of the Code,
Section 302 of ERISA or the terms of such Employee Benefit Plan;
(c) No Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan or Multiemployer
Plan, and neither the Borrower nor any ERISA Affiliate has incurred
any unpaid withdrawal liability with respect to any Multiemployer
Plan;
(d) The present value of all vested accrued benefits
under each Employee Benefit Plan which is subject to Title IV of
ERISA, did not, as of the most recent valuation date for each such
plan, exceed the then current value of the assets of such Employee
Benefit Plan allocable to such benefits;
(e) To the best of the Borrower's knowledge, each
Employee Benefit Plan subject to Title IV of ERISA, maintained by the
Borrower or any ERISA Affiliate, has been administered in accordance
with its terms in all material respects and is in compliance in all
material respects with all applicable requirements of ERISA and other
applicable laws, regulations and rules;
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(f) The consummation of the Loans and the issuance of the
Letters of Credit provided for herein will not involve any prohibited
transaction under ERISA which is not subject to a statutory or
administrative exemption; and
(g) No material proceeding, claim, lawsuit and/or
investigation exists or, to the best knowledge of the Borrower after
due inquiry, is threatened concerning or involving any Employee
Benefit Plan;
7.17. No Default. As of the date hereof, there does not exist any
Default or Event of Default hereunder.
7.18. Hazardous Materials. The Borrower and each Subsidiary is in
material compliance with all applicable Environmental Laws in all material
respects. Neither the Borrower nor any Subsidiary has received written notice
of any action, suit, proceeding or investigation which (i) alleges that
Borrower or any Subsidiary is not in compliance with applicable Environmental
Laws, which noncompliance, if proven, would have a Material Adverse Effect;
(ii) seeks to suspend, revoke, or terminate any license, permit, or approval
necessary for the generation, handling, storage, treatment or disposal of
Hazardous Material, and which, if suspended, revoked or terminated would have
Material Adverse Effect; or (iii) seeks to impose on any property owned by
Borrower or any Subsidiary, a material restriction on the ownership, use,
occupancy, or transferability under applicable Environmental Laws, which
restriction would have Material Adverse Effect.
7.19. Employment Matters. (a) None of the employees of the
Borrower or any Subsidiary is subject to any collective bargaining agreement a
dispute under which is reasonably likely to result in a Material Adverse Effect
and there are no strikes, work stoppages, election or decertification petitions
or proceedings, unfair labor charges, equal opportunity proceedings, or other
material labor/employee related controversies or proceedings pending or, to the
best knowledge of the Borrower, threatened against the Borrower or any
Subsidiary or between the Borrower or any Subsidiary and any of its employees,
other than employee grievances arising in the ordinary course of business which
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; and
(b) Except to the extent a failure to maintain compliance would
not have a Material Adverse Effect, the Borrower and each Subsidiary is in
compliance in all material respects with all applicable laws, rules and
regulations pertaining to labor or employment matters, including without
limitation those pertaining to wages, hours, occupational safety and taxation
and there is neither pending or threatened any litigation, administrative
proceeding nor, to the knowledge of the Borrower, any investigation, in respect
of such matters which, if decided adversely, could reasonably be likely,
individually or in the aggregate, to have a Material Adverse Effect.
7.20. RICO. Neither the Borrower nor any Subsidiary is engaged in
or has engaged in any course of conduct that could subject any of their
respective properties to any Lien, seizure or other forfeiture under any
criminal law, racketeer influenced and corrupt organizations law, civil or
criminal, or other similar laws.
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7.21. Security Interests. Subject to the Agent taking such actions
as may be necessary to perfect its interest, the Security Instruments create
valid and perfected security interests in favor of the Agent, for the benefit
of the Lenders, in the Pledged Stock and Assigned Interests, subject to no
other security interest, lien, encumbrance or adverse claim of record noted in
the stock record books (other than restrictions on transfer imposed by
applicable securities laws) and no filings or recordations are necessary to
perfect the security interests created by the Pledge Agreement in the Pledged
Stock other than such filings or recordations as have already been made.
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ARTICLE VIII
Affirmative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and where applicable will
cause each Subsidiary to:
8.1. Financial Reports, Etc. (a) As soon as practical and in any
event within 90 days after the end of each Fiscal Year of the Borrower, deliver
or cause to be delivered to the Agent, with sufficient copies for each Lender
of, (i) a consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such Fiscal Year, and the notes thereto, and the related
consolidated statements of operations, stockholders' equity and cash flows, and
the respective notes thereto, for such Fiscal Year, setting forth comparative
financial statements for the preceding Fiscal Year, all prepared in accordance
with GAAP applied on a Consistent Basis and containing, opinions of KPMG Peat
Marwick L.L.P., or other such independent certified public accountants selected
by the Borrower and approved by the Agent, which are unqualified as to the
scope of the audit performed and as to the "going concern" status of the
Borrower and without any exception not reasonably acceptable to the Lenders,
and (ii) a certificate of an Authorized Representative demonstrating compliance
with Sections 9.1(a) through 9.1(c) and Section 9.2, which certificate shall be
in the form of Exhibit H;
(b) as soon as practical and in any event within 45 days after the
end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year),
deliver to the Agent with sufficient copies for each Lender (i) a consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal
quarter, and the related consolidated statements of income, stockholders'
equity and cash flows for such fiscal quarter and for the period from the
beginning of the then current Fiscal Year through the end of such reporting
period and setting forth comparative statements for the comparative time period
in the preceding Fiscal Year, and accompanied by a certificate of an Authorized
Representative to the effect that such financial statements present fairly the
financial position of the Borrower and its Subsidiaries as of the end of such
fiscal period and the results of their operations and the changes in their
financial position for such fiscal period, in conformity with the standards set
forth in Section 7.6(a) with respect to interim financial statements, and (ii)
a certificate of an Authorized Representative containing computations for such
quarter comparable to that required pursuant to Section 8.1(a)(ii);
(c) together with each delivery of the financial statements
required by Section 8.1(a)(i), deliver to the Agent, with sufficient copies for
each Lender a letter from the Borrower's accountants specified in Section
8.1(a)(i) stating that in performing the audit necessary to render an opinion
on the financial statements delivered under Section 8.1(a)(i), they obtained no
knowledge of any Default or Event of Default by the Borrower in the fulfillment
of the terms and provisions of this Agreement insofar as they relate to
financial matters (which at the date of such statement remains uncured); or if
the accountants have obtained knowledge of such Default or Event of Default, a
statement specifying the nature and period of existence thereof;
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(d) promptly upon their becoming available to the Borrower, the
Borrower shall deliver to the Agent with sufficient copies for each Lender a
copy of (i) all regular or special reports or effective registration statements
which Borrower or any Subsidiary shall file with the Securities and Exchange
Commission (or any successor thereto) or any securities exchange, (ii) any
proxy statement distributed by the Borrower or any Subsidiary to its
shareholders, bondholders or the financial community in general, and (iii) any
management letter submitted to the Borrower by independent accountants in
connection with any annual, interim or special audit of the Borrower;
(e) promptly, from time to time, deliver or cause to be delivered
to the Agent and each Lender such other information regarding Borrower's and
any Subsidiary's operations, business affairs and financial condition as the
Agent or such Lender may reasonably request; and
(f) promptly notify the Agent of the termination of any contract,
the loss of which would have a Material Adverse Effect on the Borrower and its
Subsidiaries taken as a whole;
Subject to Section 12.14, the Agent and the Lenders are hereby
authorized to deliver a copy of any such financial or other information
delivered hereunder to the Lenders (or any affiliate of any Lender) or to the
Agent, to any Governmental Authority having jurisdiction over the Agent or any
of the Lenders pursuant to any written request therefor or in the ordinary
course of examination of loan files, or to any other Person who shall acquire
or consider the assignment of, or acquisition of any participation interest in,
any Obligation permitted by this Agreement;
8.2. Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties to the extent failure to do so
would have a Material Adverse Effect, and maintain free from Liens, except
those permitted under Section 9.3, all trademarks, trade names, patents,
copyrights, trade secrets, know-how, and other intellectual property and
proprietary information (or adequate licenses thereto), in each case as are
reasonably necessary to conduct its business as currently conducted or as
contemplated hereby, all in accordance with customary and prudent business
practices.
8.3. Existence, Qualification, Etc. Except as otherwise expressly
permitted under Section 9.7, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and all material
rights and franchises, and maintain its license or qualification to do business
as a foreign corporation and good standing in each jurisdiction in which the
failure to maintain such license or qualification would have a Material Adverse
Effect.
8.4. Regulations and Taxes. Comply in all material respects with
or contest in good faith all statutes and governmental regulations and pay all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, would become a Lien not otherwise
permitted under Section 9.3 against any of its properties except liabilities
being contested in good faith by appropriate proceedings diligently conducted
and against which adequate reserves acceptable to the Borrower's independent
certified public accountants have been established unless and until any Lien
resulting therefrom attaches to any of its property and becomes enforceable
against its creditors.
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8.5. Insurance. (a) Keep all of its insurable properties
adequately insured at all times with responsible insurance carriers against
loss or damage by fire and other hazards to the extent and in the manner as are
customarily insured against by similar businesses owning such properties
similarly situated, (b) maintain general public liability insurance at all
times with responsible insurance carriers against liability on account of
damage to persons and property and (c) maintain insurance under all applicable
workers' compensation laws (or in the alternative, maintain required reserves
if self-insured for workers' compensation purposes) such policies of insurance
to have such limits, deductibles, exclusions, co-insurance and other provisions
providing no less coverages than that specified in Schedule 8.5, such insurance
policies to be in form reasonably satisfactory to the Agent. Each of the
policies of insurance described in this Section 8.5 shall provide that the
insurer shall give the Agent not less than thirty (30) days' prior written
notice before any such policy shall be terminated, lapse or be altered in any
manner.
8.6. True Books. Keep true books of record and account in which
full, true and correct entries will be made of all of its dealings and
transactions, and set up on its books such reserves as may be required by GAAP
with respect to doubtful accounts and all taxes, assessments, charges, levies
and claims and with respect to its business in general, and include such
reserves in interim as well as year-end financial statements.
8.7. Right of Inspection. Permit any Person designated by any
Lender or the Agent to visit and inspect any of the properties, corporate books
and financial reports of the Borrower or any Subsidiary and to discuss its
affairs, finances and accounts with its principal officers and independent
certified public accountants, all at reasonable times, at reasonable intervals
and with reasonable prior notice.
8.8. Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of
any Governmental Authority with respect to the conduct of its business.
8.9. Governmental Licenses. Obtain and maintain all licenses,
permits, certifications and approvals of all applicable Governmental
Authorities which are material to the conduct of its business except those the
failure of which to maintain would not have a Material Adverse Effect.
8.10. Covenants Extending to Other Persons. Cause each of
its Subsidiaries to do with respect to itself, its business and its assets,
each of the things required of the Borrower in Sections 8.2 through 8.9, and
8.18 inclusive.
8.11. Officer's Knowledge of Default. Upon any Authorized
Representative of the Borrower obtaining knowledge of any Default or Event of
Default hereunder or under any other obligation of the Borrower or any
Subsidiary to any Lender, or any event, development or occurrence which could
reasonably be expected to have a Material Adverse Effect, cause such Authorized
Representative to promptly notify the Agent of the nature thereof, the period
of existence thereof, and advise the Agent within three (3) Business Days what
action the Borrower or such Subsidiary proposes to take with respect thereto.
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8.12. Suits or Other Proceedings. Upon any Authorized
Representative of the Borrower obtaining knowledge of any litigation or other
proceedings being instituted against the Borrower or any Subsidiary, or any
attachment, levy, execution or other process being instituted against any
assets of the Borrower or any Subsidiary, making a claim or claims in an
aggregate amount greater than $1,000,000 not otherwise covered by insurance,
promptly deliver to the Agent written notice thereof stating the nature and
status of such litigation, dispute, proceeding, levy, execution or other
process.
8.13. Notice of Discharge of Hazardous Material or
Environmental Complaint. Promptly provide to the Agent true, accurate and
complete copies of any and all notices, complaints, orders, directives, claims,
or citations received by the Borrower or any Subsidiary relating to any (a)
violation or alleged violation by the Borrower or any Subsidiary of any
applicable Environmental Law; (b) release or threatened release by the Borrower
or any Subsidiary, or at any facility or property owned or leased or operated
by the Borrower or any Subsidiary, of any Hazardous Material, except where
occurring in compliance with applicable Environmental Laws; or (c) liability or
alleged liability of the Borrower or any Subsidiary for the costs of cleaning
up, removing, remediating or responding to a release of Hazardous Materials; in
each case, if determined adversely against Borrower or any subsidiary is likely
to result in a Material Adverse Effect.
8.14. Environmental Compliance. If the Borrower or any
Subsidiary shall receive any letter, notice, complaint, order, directive, claim
or citation alleging that the Borrower or any Subsidiary has violated any
Environmental Law or is liable for the costs of cleaning up, removing,
remediating or responding to a release of Hazardous Materials, the Borrower
shall, within the time period permitted by the applicable Environmental Law or
the Governmental Authority responsible for enforcing such Environmental Law,
remove or remedy, or cause the applicable Subsidiary to remove or remedy, such
violation or release or satisfy such liability or shall be contesting in good
faith such letter, notice, complaint, order, directive, claim or citation.
8.15. Indemnification. Without limiting the generality of
Section 12.9, the Borrower hereby agrees to indemnify and hold the Agent and
the Lenders, and their respective officers, directors, employees and agents,
harmless from and against any and all claims, losses, penalties, liabilities,
damages and expenses (including assessment and cleanup costs and reasonable
attorneys' fees and disbursements) arising directly or indirectly from, out of
or by reason of (a) the violation of any Environmental Law by the Borrower or
any Subsidiary or with respect to any property owned, operated or leased by the
Borrower or any Subsidiary or (b) the handling, storage, treatment, emission or
disposal of any Hazardous Materials by or on behalf of the Borrower or any
Subsidiary or on or with respect to property owned or leased or operated by the
Borrower or any Subsidiary. The provisions of this Section 8.15 shall survive
the Facility Termination Date and expiration or termination of this Agreement.
8.16. Further Assurances. At the Borrower's cost and
expense, upon request of the Agent, duly execute and deliver or cause to be
duly executed and delivered, to the Agent such further instruments, documents,
certificates, financing and continuation statements, and do and cause to be
done such further acts that may be reasonably necessary or advisable in the
reasonable opinion of the Agent to carry out more effectively the provisions
and purposes of this Agreement, the Security Instruments and the other Loan
Documents.
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8.17. Employee Benefit Plans.
(a) With reasonable promptness, and in any event within
thirty (30) days thereof, give notice to the Agent of (a) the
establishment of any new Pension Plan (which notice shall include a
copy of such plan), (b) the commencement of contributions to any
Employee Benefit Plan to which the Borrower or any of its ERISA
Affiliates was not previously contributing, (c) any material increase
in the benefits of any existing Employee Benefit Plan, (d) each
funding waiver request filed with respect to any Employee Benefit Plan
and all communications received or sent by the Borrower or any ERISA
Affiliate with respect to such request and (e) the failure of the
Borrower or any ERISA Affiliate to make a required installment or
payment under Section 302 of ERISA or Section 412 of the Code by the
due date;
(b) Promptly and in any event within fifteen (15) days of
becoming aware of the occurrence or forthcoming occurrence of any (a)
Termination Event or (b) nonexempt "prohibited transaction," as such
term is defined in Section 406 of ERISA or Section 4975 of the Code,
in connection with any Pension Plan or any trust created thereunder,
deliver to the Agent a notice specifying the nature thereof, what
action the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto; and
(c) With reasonable promptness but in any event within
fifteen (15) days for purposes of clauses (a), (b) and (c), deliver to
the Agent copies of (a) any unfavorable determination letter from the
Internal Revenue Service regarding the qualification of an Employee
Benefit Plan under Section 401(a) of the Code, (b) all notices
received by the Borrower or any ERISA Affiliate of the PBGC's intent
to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (c) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by the
Borrower or any ERISA Affiliate with the Internal Revenue Service with
respect to each Pension Plan and (d) all notices received by the
Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant
to Section 4202 of ERISA. The Borrower will notify the Agent in
writing within five (5) Business Days of the Borrower or any ERISA
Affiliate obtaining knowledge or reason to know that the Borrower or
any ERISA Affiliate has filed or intends to file a notice of intent to
terminate any Pension Plan under a distress termination within the
meaning of Section 4041(c) of ERISA.
8.18. Continued Operations. Continue at all times to
conduct its business and engage principally in the same or similar line or
lines of business substantially as heretofore conducted.
8.19. New Subsidiaries. Within thirty (30) days of the
acquisition or creation of any Subsidiary, cause to be delivered to the Agent
for the benefit of the Lenders each of the following:
(a) a Facility Guaranty executed by such Subsidiary
substantially in the form of Exhibit I;
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(b) (i) in the case that such Subsidiary is a
corporation or otherwise issues certificated interests and is directly
owned by the Borrower or a Subsidiary which has previously delivered a
Pledge Agreement, a Pledge Agreement Supplement substantially in the
form set forth in Exhibit A to Exhibit J of this Agreement and a
revised Schedule I to the Pledge Agreement dated the date hereof
together with stock certificates or other appropriate evidence of
ownership representing 100% of the capital stock and related interests
and rights of a domestic Subsidiary which are owned directly or
indirectly by the Borrower and duly executed stock powers or powers of
assignment in blank affixed thereto; or
(ii) in the case that such Subsidiary is a
corporation or otherwise issues certificated interests and is directly
owned by a Subsidiary which has not previously delivered a Pledge
Agreement, a Pledge Agreement substantially in the form of
Exhibit J, with appropriate revisions as to the identity of the
pledgor and securing Obligations of such Pledgor under its
Facility Guaranty, together with stock certificates or other
appropriate evidence of ownership representing 100% of the capital
stock and related interests and rights of a domestic Subsidiary which
are owned directly or indirectly by the Borrower and duly executed
stock powers or powers of assignment in blank affixed thereto;
(c) in the case that such Subsidiary is a partnership
that has not issued certificates evidencing ownership of such
partnership, the Collateral Assignment of Partnership Interests and
Certificate and Receipt of Registrar of such partnership with respect
to the registration of the Lien on Assigned Interests so long as such
assignment is not prohibited by the governing documents of such
partnership;
(d) an opinion of counsel to the Subsidiary dated as of
the date of delivery of the Facility Guaranty and other Loan Documents
provided for in this Section 8.19 and addressed to the Agent
and the Lenders, in form and substance reasonably acceptable to the
Agent (which opinion may include assumptions and qualifications of
similar effect to those contained in the opinions of counsel delivered
pursuant to Section 6.1(a)), to the effect that:
(i) such Subsidiary is duly organized, validly
existing and in good standing in the jurisdiction of its
formation, has the requisite power and authority to own its
properties and conduct its business as then owned and then
conducted and proposed to be conducted, and is duly qualified
to transact business and is in good standing as a foreign
corporation or partnership in each other jurisdiction in which
the character of the properties owned or leased, or the
business carried on by it, requires such qualification except
where the failure to so qualify would not have a Material
Adverse Effect;
(ii) the execution, delivery and performance of
the Facility Guaranty and other Loan Documents described in
this Section 8.19 to which the Borrower or such Subsidiary is
a signatory have been duly authorized by all requisite
corporate or partnership action (including any required
shareholder or partner approval), each of such agreements has
been duly executed and delivered and constitutes the valid and
binding agreement of the Borrower or such Subsidiary,
enforceable against the
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Borrower or such Subsidiary in accordance with its terms,
subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally
and to the effect of general principles of equity (whether
considered in a proceeding at law or in equity);
(e) current copies of the charter documents, including
partnership agreements and certificate of limited partnership, if
applicable, and bylaws of such Subsidiary, minutes of duly called and
conducted meetings (or duly effected consent actions) of the Board of
Directors, partners, or appropriate committees thereof (and, if
required by such charter documents, bylaws or by applicable law, of
the shareholders) of such Subsidiary authorizing the actions and the
execution and delivery of documents described in this Section 8.19.
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ARTICLE IX
Negative Covenants
Until the Obligations have been paid and satisfied in full, no Letters
of Credit remain outstanding and this Agreement has been terminated in
accordance with the terms hereof, unless the Required Lenders shall otherwise
consent in writing, the Borrower will not, nor will it permit any Subsidiary
to:
9.1. Financial Covenants.
(a) Consolidated Shareholders= Equity. Permit
Consolidated Shareholders' Equity, as at the last day of each fiscal quarter of
the Borrower and until (but excluding) the last day of the next following
fiscal quarter of the Borrower, to be less than the sum of (A) 100% of
Consolidated Shareholders' Equity at September 30, 1997 plus (B) 100% of the
proceeds (reduced only by actual payments of reasonable, out-of-pocket issuance
expenses) of each sale of equity interest (or securities other than those
constituting Indebtedness exchangeable, convertible or exercisable into equity
interests) in the Borrower or any Subsidiary, plus (C) 100% of Consolidated Net
Income greater than -0- during the immediately preceding fiscal quarter of the
Borrower ending on such day (including in Consolidated Net Income for purposes
of this Section 9.1 only any net gain or credit of an extraordinary nature)
minus (D) the amount of the purchase price of the common stock of the Borrower
purchased pursuant to Section 9.8(i) so long as such stock is carried on the
consolidated balance sheet as treasury stock.
(b) Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio as of the end of any Four-Quarter
Period be less than 2.50 to 1.00.
(c) Consolidated Leverage Ratio. Permit at any time the
Consolidated Leverage Ratio to exceed 2.00 to 1.00.
(d) Capital Expenditures. Permit Capital Expenditures to
exceed $100,000,000 in any Fiscal Year.
9.2. Acquisitions. Enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, except for Permitted Acquisitions. The
approval of the Required Lenders, which approval shall be given in the Required
Lenders' sole discretion, shall be required if the Cost of Acquisition for any
single Acquisition shall exceed $35,000,000 or if such Acquisition shall cause
the aggregate Cost of Acquisition for all Acquisitions in any Fiscal Year to
exceed $150,000,000.
9.3. Liens. Incur, create or permit to exist any Lien, charge or
other encumbrance of any nature whatsoever with respect to any property or
assets now owned or hereafter acquired by the Borrower or any Subsidiary, other
than
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(a) Liens created under the Security Instruments in favor
of the Agent and the Lenders, and otherwise existing as of the date
hereof and as set forth in Schedule 7.7;
(b) Liens imposed by law for taxes, assessments or
charges of any Governmental Authority for claims not yet due or which
are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP and which Liens may not be executed upon the property subject
thereto;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than
90 days from the date of creation thereof for amounts not yet due or
which are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP and which Liens may not be executed upon the property subject
thereto;
(d) Liens incurred or deposits made in the ordinary
course of business (including, without limitation, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), statutory obligations and other similar
obligations or arising as a result of progress payments under
government contracts;
(e) easements (including reciprocal easement agreements
and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and zoning and other
restrictions, charges or encumbrances (whether or not recorded), which
do not interfere materially with the ordinary conduct of the business
of the Borrower or any Subsidiary and which do not materially detract
from the value of the property to which they attach or materially
impair the use thereof to the Borrower or any Subsidiary;
(f) Liens on assets of Subsidiaries securing Indebtedness
owed to the Borrower or a Guarantor; provided that if such Subsidiary
is a Guarantor or such Subsidiary's stock is Pledged Stock, the
promissory note evidencing such Indebtedness shall be pledged to the
Agent as security for the Obligations;
(g) purchase money Liens to secure Indebtedness permitted
under Section 9.4(f) and incurred to purchase fixed assets or
equipment, provided such Indebtedness represents not less than 75% and
not more than 100% of the purchase price of such assets as of the date
of purchase thereof and no property other than the assets so purchased
secure such Indebtedness; and
(h) Liens arising in connection with Capital Leases
permitted under Section 9.4(g) provided that no such Lien shall extend
to any property other than the property which is the subject to such
Capital Leases.
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9.4. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness of the Borrower, howsoever evidenced, except:
(a) Indebtedness existing as of the Closing Date as set
forth in Schedule 7.6; provided, none of the instruments and
agreements evidencing or governing such Indebtedness shall be amended,
modified or supplemented after the Closing Date to change any terms of
subordination, repayment or rights of Conversion, put, exchange or
other rights from such terms and rights as in effect on the Closing
Date;
(b) Indebtedness owing to the Agent or any Lender in
connection with this Agreement, any Note or other Loan Document;
(c) the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business;
(d) Indebtedness arising from Rate Hedging Obligations
permitted under Section 9.14;
(e) intercompany Indebtedness for loans and advances made
by the Borrower or any Guarantor to the Borrower or any Guarantor,
provided that such intercompany Indebtedness is evidenced by a
promissory note or similar written instrument acceptable to the Agent
which provides that such Indebtedness is subordinated to obligations,
liabilities and undertakings of the holder or owner thereof under the
Loan Documents on terms acceptable to the Agent;
(f) purchase money Indebtedness in an aggregate amount
not to exceed $1,000,000 at any time;
(g) Capital Leases in an aggregate principal amount not
to exceed $1,000,000;
(h) Indebtedness of Guarantors guaranteed by the
Borrower; and
(i) Unsecured Indebtedness payable to the seller of
Permitted Acquisition representing all or a portion of the purchase
price of the Person or assets so acquired so long as such Indebtedness
does not cause a Default or Event of Default and so long as the
aggregate amount of such Indebtedness does not exceed $25,000,000.
9.5. Transfer of Assets. Sell, lease, transfer or otherwise
dispose of any assets of Borrower or any Subsidiary other than (a) dispositions
of inventory in the ordinary course of business, (b) dispositions of property
that is substantially worn, damaged, obsolete or, in the judgment of the
Borrower, no longer best used or useful in its business or that of any
Subsidiary, (c) transfers of assets necessary to give effect to merger or
consolidation transactions permitted by Section 9.7, and (d) the disposition of
Eligible Securities in the ordinary course of management of the investment
portfolio of the Borrower and its Subsidiaries.
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9.6. Investments. Purchase, own, invest in or otherwise acquire,
directly or indirectly, any stock or other securities, or make or permit to
exist any interest whatsoever in any other Person or permit to exist any loans
or advances to any Person, except that Borrower may maintain investments or
invest in:
(a) securities of any Person acquired in an Acquisition
permitted hereunder;
(b) Eligible Securities;
(c) investments existing as of the date hereof and as set
forth in Schedules 7.4 and 9.6;
(d) accounts receivable arising and trade credit granted
in the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in connection with
accounts of financially troubled Persons to the extent reasonably
necessary in order to prevent or limit loss; and
(e) loans to or investments in Subsidiaries which are
Guarantors.
9.7. Merger or Consolidation. (a) Consolidate with or merge into
any other Person, or (b) permit any other Person to merge into it, or (c)
liquidate, wind-up or dissolve or sell, transfer or lease or otherwise dispose
of all or a substantial part of its assets (other than sales permitted under
Section 9.5 (c)); provided, however, (i) any Subsidiary of the Borrower may
merge or transfer all or substantially all of its assets into or consolidate
with the Borrower or any wholly-owned Subsidiary of the Borrower, and (ii) any
other Person may merge into or consolidate with the Borrower or any
wholly-owned Subsidiary and any Subsidiary may merge into or consolidate with
any other Person in order to consummate an Acquisition permitted by Section
9.2, provided further, that any resulting or surviving entity shall execute and
deliver such agreements and other documents, including compliance with Section
8.19, and take such other action as the Agent may require to evidence or
confirm its express assumption of the obligations and liabilities of its
predecessor entities under the Loan Documents.
9.8. Restricted Payments. Make any Restricted Payment or apply or
set apart any of their assets therefor or agree to do any of the foregoing,
except as permitted under Section 9.6 except:
(a) the purchase of common stock of the Borrower to make
shares available pursuant to Borrower's 1998 Employee Stock Purchase
Plan, so long as the total purchase price of such stock does not
exceed $10,000,000 in the aggregate during any Fiscal Year; and
(b) pro rata distributions to Persons owning a minority
interest in any Subsidiary.
9.9. Transactions with Affiliates. Other than transactions
permitted under Sections 9.6 and 9.7, enter into any transaction after the
Closing Date, including, without limitation, the purchase, sale, lease or
exchange of property, real or personal, or the rendering of any service, with
any Affiliate of the Borrower, except (a) that such Persons may render services
to the Borrower or its Subsidiaries
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for compensation at the same rates generally paid by Persons engaged in the
same or similar businesses for the same or similar services, (b) that the
Borrower or any Subsidiary may render services to such Persons for compensation
at the same rates generally charged by the Borrower or such Subsidiary and (c)
in either case in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's (or any Subsidiary's) business
consistent with past practice of the Borrower and its Subsidiaries and upon
fair and reasonable terms no less favorable to the Borrower (or any Subsidiary)
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate.
9.10. Compliance with ERISA. With respect to any Pension Plan,
Employee Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which
would result in a liability on the part of the Borrower or any ERISA
Affiliate to the PBGC; or
(b) permit the present value of all benefit liabilities
under all Pension Plans to exceed the current value of the assets of
such Pension Plans allocable to such benefit liabilities; or
(c) permit any accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the Code) with respect to
any Pension Plan, whether or not waived; or
(d) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto; or
(e) engage, or permit any Borrower or any ERISA Affiliate
to engage, in any prohibited transaction under Section 406 of ERISA or
Sections 4975 of the Code for which a civil penalty pursuant to
Section 502(I) of ERISA or a tax pursuant to Section 4975 of the Code
may be imposed; or
(f) permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
liability to the Borrower or any ERISA Affiliate or increase the
obligation of the Borrower or any ERISA Affiliate to a Multiemployer
Plan; or
(g) fail, or permit the Borrower or any ERISA Affiliate
to fail, to establish, maintain and operate each Employee Benefit Plan
in compliance in all material respects with the provisions of ERISA,
the Code, all applicable Foreign Benefit Laws and all other applicable
laws and the regulations and interpretations thereof.
9.11. Fiscal Year. Change its Fiscal Year.
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9.12. Prepayments, Etc. of Indebtedness. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of, any
Indebtedness other than the Obligations.
9.13. Change in Control. Cause, suffer or permit to exist or occur
any Change of Control.
9.14. Rate Hedging Obligations. Incur any Rate Hedging Obligations
or enter into any agreements, arrangements, devices or instruments relating to
Rate Hedging Obligations, except (i) pursuant to Swap Agreements or (ii) for
Rate Hedging Obligations incurred to limit risks of currency or interest rate
fluctuations to which the Borrower and its Subsidiaries are otherwise subject
by virtue of the operations of their businesses, and not for speculative
purposes.
9.15. Negative Pledge Clauses. Enter into or cause, suffer or permit
to exist any agreement with any Person, other than the Agent and the Lenders
pursuant to this Agreement or any other Loan Documents, which prohibits or
limits the ability of any of the Borrower or any Subsidiary to create, incur,
assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, provided that the Borrower
and any Subsidiary may enter into such an agreement in connection with property
subject to any Lien permitted by this Agreement and not released after the date
hereof, when such prohibition or limitation is by its terms effective only
against the assets subject to such Lien.
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ARTICLE X
Events of Default and Acceleration
10.1. Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority), that is to say:
(a) if default shall be made in the due and punctual
payment of the principal of any Loan, Reimbursement Obligation or
other Obligation, when and as the same shall be due and payable
whether pursuant to any provision of Article II or Article III, at
maturity, by acceleration or otherwise; or
(b) if default shall be made in the due and punctual
payment of any amount of interest on any Loan, Reimbursement
Obligation or other Obligation or of any fees or other amounts payable
to any of the Lenders or the Agent on the date on which the same shall
be due and payable; or
(c) if default shall be made in the performance or
observance of any covenant set forth in Section 8.7, 8.11, 8.19 or
Article IX;
(d) if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or
provision contained in this Agreement or the Notes (other than as
described in clauses (a), (b) or (c) above) and such default shall
continue for 30 or more days after the earlier of receipt of notice of
such default by the Authorized Representative from the Agent (which
notice the Agent shall give on the request of any Lender), or if a
default shall be made in the performance or observance of, or shall
occur under, any covenant, agreement or provision contained in any of
the other Loan Documents (beyond any applicable grace period, if any,
contained therein) or in any instrument or document evidencing or
creating any obligation, guaranty, or Lien in favor of the Agent or
any of the Lenders or delivered to the Agent or any of the Lenders in
connection with or pursuant to this Agreement or any of the
Obligations (beyond any applicable grace period), or if any Loan
Document ceases to be in full force and effect (other than by reason
of any action by the Agent), or if without the written consent of the
Lenders, this Agreement or any other Loan Document shall be
disaffirmed or shall terminate, be terminable or be terminated or
become void or unenforceable for any reason whatsoever (other than in
accordance with its terms in the absence of default or by reason of
any action by the Lenders or the Agent); or
(e) if there shall occur (i) a default, which is not
waived, in the payment of any principal, interest, premium or other
amount with respect to any Indebtedness or Rate Hedging Obligation
(other than the Loans and other Obligations) of the Borrower or any
Subsidiary in an amount not less than $100,000 in the aggregate
outstanding, or (ii) a default,
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which is not waived, in the performance, observance or fulfillment of
any term or covenant contained in any agreement or instrument under or
pursuant to which any such Indebtedness or Rate Hedging
Obligation may have been issued, created, assumed, guaranteed or
secured by the Borrower or any Subsidiary, or (iii) any other event of
default as specified in any agreement or instrument under or pursuant
to which any such Indebtedness or Rate Hedging Obligation may have
been issued, created, assumed, guaranteed or secured by the Borrower
or any Subsidiary, and such default or event of default referred to in
clauses (i) through (iii) shall continue for more than the period of
grace, if any, therein specified, or such default or event of default
shall permit the holder of any such Indebtedness (or any agent or
trustee acting on behalf of one or more holders) to accelerate the
maturity thereof; or
(f) if any representation, warranty or other statement of
fact contained in any Loan Document or in any writing, certificate,
report or statement at any time furnished to the Agent or any Lender
by or on behalf of the Borrower or any Subsidiary pursuant to or in
connection with any Loan Document, or otherwise, shall be false in any
material respect when given or shall fail to state a material fact; or
(g) if the Borrower or any Subsidiary shall be unable to
pay its debts generally as they become due; file a petition to take
advantage of any insolvency statute; make an assignment for the
benefit of its creditors; commence a proceeding for the appointment of
a receiver, trustee, liquidator or conservator of itself or of the
whole or any substantial part of its property; file a petition or
answer seeking liquidation, reorganization or arrangement or similar
relief under the federal bankruptcy laws or any other applicable law
or statute; or
(h) if a court of competent jurisdiction shall enter an
order, judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Borrower or any Subsidiary or of the
whole or any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a period of
sixty (60) days, or approve a petition filed against the Borrower or
any Subsidiary seeking liquidation, reorganization or arrangement or
similar relief under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
state, which petition is not dismissed within sixty (60) days; or if,
under the provisions of any other law for the relief or aid of
debtors, a court of competent jurisdiction shall assume custody or
control of the Borrower or any Subsidiary or of the whole or any
substantial part of its properties, which control is not relinquished
within sixty (60) days; or if there is commenced against the Borrower
or any Subsidiary any proceeding or petition seeking reorganization,
arrangement or similar relief under the federal bankruptcy laws or any
other applicable law or statute of the United States of America or any
state which proceeding or petition remains undismissed for a period of
sixty (60) days; or if the Borrower or any Subsidiary takes any action
to indicate its consent to or approval of any such proceeding or
petition; or
(i) if (i) one or more judgments or orders where the
amount not covered by insurance (or the amount as to which the insurer
denies liability) is in excess of $100,000 is rendered against the
Borrower or any Subsidiary, or (ii) there is any attachment,
injunction or execution against any of the Borrower's or Subsidiaries'
properties for any amount in
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excess of $100,000 in the aggregate; and such judgment, attachment,
injunction or execution remains unpaid, unstayed, undischarged,
unbonded or undismissed for a period of thirty (30) days; or
(j) if the Borrower or any Subsidiary shall, other than
in the ordinary course of business (as determined by past practices),
suspend all or any part of its operations material to the conduct of
the business of the Borrower and its Subsidiaries, taken as a whole,
for a period of more than sixty (60) days; or
(k) if the Borrower or any Subsidiary shall breach any of
the material terms or conditions of any agreement under which any Rate
Hedging Obligations permitted hereby is created and such breach shall
continue beyond any grace period, if any, relating thereto pursuant to
the terms of such agreement; or
(l) if there shall occur a Termination Event; or
(m) if there shall occur and not be waived an Event of
Default as defined in any of the other Loan Documents; or
(n) if there shall occur a Change in Control;
then, and in any such event and at any time thereafter, if such Event of
Default or any other Event of Default shall have not been waived,
(A) either or both of the following actions may
be taken: (i) the Agent, with the consent of the Required
Lenders, may, and at the direction of the Required Lenders
shall, declare any obligation of the Lenders and the Issuing
Bank to make further Loans and Swing Line Loans or to issue
additional Letters of Credit terminated, whereupon the
obligation of each Lender to make further Loans, of
NationsBank to make further Swing Line Loans, and of the
Issuing Bank to issue additional Letters of Credit, hereunder
shall terminate immediately, and (ii) the Agent shall at the
direction of the Required Lenders, at their option, declare by
notice to the Borrower any or all of the Obligations to be
immediately due and payable, and the same, including all
interest accrued thereon and all other obligations of the
Borrower to the Agent and the Lenders, shall forthwith become
immediately due and payable without presentment, demand,
protest, notice or other formality of any kind, all of which
are hereby expressly waived, anything contained herein or in
any instrument evidencing the Obligations to the contrary
notwithstanding; provided, however, that notwithstanding the
above, if there shall occur an Event of Default under clause
(g) or (h) above, then the obligation of the Lenders to make
Loans, of NationsBank to make Swing Line Loans, and of the
Issuing Bank to issue Letters of Credit hereunder shall
automatically terminate and any and all of the Obligations
shall be immediately due and payable without the necessity of
any action by the Agent or the Required Lenders or notice by
the Agent or the Lenders;
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(B) The Borrower shall, upon demand of the Agent
or the Required Lenders, deposit cash with the Agent in an
amount equal to the amount of any Letter of Credit
Outstandings, as collateral security for the repayment of any
future drawings or payments under such Letters of Credit, and
such amounts shall be held by the Agent pursuant to the terms
of the LC Account Agreement; and
(C) the Agent and each of the Lenders shall have
all of the rights and remedies available under the Loan
Documents or under any applicable law.
10.2. Agent to Act. In case any one or more Events of Default shall
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or
in any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
10.3. Cumulative Rights. No right or remedy herein conferred upon
the Lenders or the Agent is intended to be exclusive of any other rights or
remedies contained herein or in any other Loan Document, and every such right
or remedy shall be cumulative and shall be in addition to every other such
right or remedy contained herein and therein or now or hereafter existing at
law or in equity or by statute, or otherwise.
10.4. No Waiver. No course of dealing between the Borrower and any
Lender or the Agent or any failure or delay on the part of any Lender or the
Agent in exercising any rights or remedies under any Loan Document or otherwise
available to it shall operate as a waiver of any rights or remedies and no
single or partial exercise of any rights or remedies shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder or of the
same right or remedy on a future occasion.
10.5. Allocation of Proceeds. If an Event of Default has occurred
and not been waived, and the maturity of the Notes has been accelerated
pursuant to Article X hereof, all payments received by the Agent hereunder, in
respect of any principal of or interest on the Obligations or any other amounts
payable by the Borrower hereunder, shall be applied by the Agent in the
following order:
(a) amounts due to the Lenders pursuant to Sections 2.10,
3.3 and 12.5;
(b) amounts due to the Agent pursuant to Section 11.8;
(c) payments of interest on Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of
the Lenders (with amounts payable in respect of Swing Line
Outstandings being included in such calculation and paid to
NationsBank);
(d) payments of principal of Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of
the Lenders (with amounts payable in
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respect of Swing Line Outstandings being included in such calculation
and paid to NationsBank);
(e) payments of cash amounts to the Agent in respect of
outstanding Letters of Credit pursuant to Section 10.1(B);
(f) amounts due to the Lenders pursuant to Sections
3.2(g), 8.15 and 12.9;
(g) payments of all other amounts due under any of the
Loan Documents, if any, to be applied for the ratable benefit of the
Lenders;
(h) amounts due to any of the Lenders in respect of
Obligations consisting of liabilities under any Swap Agreement with
any of the Lenders on a pro rata basis according to the amounts owed;
and
(i) any surplus remaining after application as provided
for herein, to the Borrower or otherwise as may be required by
applicable law.
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ARTICLE XI
The Agent
11.1. Appointment, Powers, and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Agent (which term as used in this sentence and in
Section 11.5 and the first sentence of Section 11.6 hereof shall include its
affiliates and its own and its affiliates' officers, directors, employees, and
agents):
(a) shall not have any duties or responsibilities except
those expressly set forth in this Agreement and shall not be a trustee
or fiduciary for any Lender;
(b) shall not be responsible to the Lenders for any
recital, statement, representation, or warranty (whether written or
oral) made in or in connection with any Loan Document or any
certificate or other document referred to or provided for in, or
received by any of them under, any Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability, or sufficiency
of any Loan Document, or any other document referred to or provided
for therein or for any failure by any Loan Party or any other Person
to perform any of its obligations thereunder;
(c) shall not be responsible for or have any duty to
ascertain, inquire into, or verify the performance or observance of
any covenants or agreements by any Loan Party or the satisfaction of
any condition or to inspect the property (including the books and
records) of any Loan Party or any of its Subsidiaries or affiliates;
(d) shall not be required to initiate or conduct any
litigation or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or
omitted to be taken by it under or in connection with any Loan
Document, except for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
11.2. Reliance by Agent. The Agent shall be entitled to rely upon
any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telefacsimile)
believed by it to be genuine and correct and to have been signed, sent or made
by or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel (including counsel for any Loan Party), independent
accountants, and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the holder thereof for all purposes hereof
unless and until the Agent receives and accepts an Assignment and Acceptance
executed in
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accordance with Section 12.1 hereof. As to any matters not expressly
provided for by this Agreement, the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding on all of the Lenders; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or
that is contrary to any Loan Document or applicable law unless it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking any such action.
11.3. Defaults. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless the Agent has
received written notice from a Lender or the Borrower specifying such Default
or Event of Default and stating that such notice is a "Notice of Default". In
the event that the Agent receives such a notice of the occurrence of a Default
or Event of Default, the Agent shall give prompt notice thereof to the Lenders.
The Agent shall (subject to Section 11.2 hereof) take such action with respect
to such Default or Event of Default as shall reasonably be directed by the
Required Lenders, provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in the best interest of the
Lenders.
11.4. Rights as Lender. With respect to its Revolving Credit
Commitment and Line of Credit Commitment and the Loans made by it, NationsBank
(and any successor acting as Agent) in its capacity as a Lender hereunder shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. NationsBank (and any successor acting as Agent) and
its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any Loan
Party or any of its Subsidiaries or affiliates as if it were not acting as
Agent, and NationsBank (and any successor acting as Agent) and its affiliates
may accept fees and other consideration from any Loan Party or any of its
Subsidiaries or affiliates for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
11.5. Indemnification. The Lenders agree to indemnify the Agent (to
the extent not reimbursed under Section 12.9 hereof, but without limiting the
obligations of the Borrower under such Section) ratably in accordance with
their respective Revolving Credit and Line of Credit Commitments, for any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys' fees), or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (including by any Lender) in any way relating to or arising
out of any Loan Document or the transactions contemplated thereby or any action
taken or omitted by the Agent under any Loan Document; provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the Person to be indemnified.
Without limitation of the foregoing, each Lender agrees to reimburse the Agent
promptly upon demand for its ratable share of any costs or expenses payable by
the Borrower under Section 12.5, to the extent that the Agent is not promptly
reimbursed for such costs
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and expenses by the Borrower. The agreements contained in this Section 11.5
shall survive payment in full of the Loans and all other amounts payable under
this Agreement.
11.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees
that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Loan Parties and their
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under the Loan Documents. Except for notices, reports, and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition, or business of any Loan Party or any of its Subsidiaries
or affiliates that may come into the possession of the Agent or any of its
affiliates.
11.7. Resignation of Agent. The Agent may resign at any time by
giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent which shall be a
commercial bank organized under the laws of the United States of America having
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor, such successor shall
thereupon succeed to and become vested with all the rights, powers, discretion,
privileges, and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article XI
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
11.8. Fees. The Borrower agrees to pay to the Agent, for its
individual account, an annual Agent's administrative fee to administer
borrowings hereunder not to exceed $5,000 per Lender with a minimum of $25,000
per year as from time to time agreed to by the Borrower and Agent in writing.
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ARTICLE XII
Miscellaneous
12.1. Assignments and Participations. (a) Each Lender may
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Loans, its Note, and its Revolving Credit Commitment and Line of
Credit Commitment); provided, however, that
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to another Lender
or an assignment of all of a Lender's rights and obligations under this
Agreement, any such partial assignment shall be in an amount at least equal to
$10,000,000 or an integral multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its rights and obligations
under this Agreement and the Notes; and
(iv) the parties to such assignment shall execute and
deliver to the Agent for its acceptance an Assignment and Acceptance in the
form of Exhibit B hereto, together with any Note subject to such assignment and
a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder
and the assigning Lender shall, to the extent of such assignment, relinquish
its rights and be released from its obligations under this Agreement (other
than the rights set forth in Sections 12.5 and 12.9). Upon the consummation of
any assignment pursuant to this Section, the assignor, the Agent and the
Borrower shall make appropriate arrangements so that, if required, new Notes
are issued to the assignor and the assignee. If the assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Agent certification as to exemption
from deduction or withholding of Taxes in accordance with Section 5.6.
(b) The Agent shall maintain at its address referred to in Section
12.2 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders
and the Revolving Credit Commitment and Line of Credit Commitment of, and
principal amount of the Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by
the parties thereto, together with any Note subject to such assignment and
payment of the processing fee, the Agent shall,
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if such Assignment and Acceptance has been completed and is in substantially
the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons in
all or a portion of its rights and obligations under this Agreement (including
all or a portion of its Revolving Credit Commitment, Line of Credit Commitment
and its Loans); provided, however, that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the participant shall be entitled to the benefit of the
yield protection provisions contained in Article V and the right of set-off
contained in Section 12.3, and (iv) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right
to enforce the obligations of the Borrower relating to its Loans and its Note
and to approve any amendment, modification, or waiver of any provision of this
Agreement (other than amendments, modifications, or waivers decreasing the
amount of principal of or the rate at which interest is payable on such Loans
or Note, extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Note, or extending its Revolving Credit
Commitment or Line of Credit Commitment). No sale of any participation
hereunder shall give rise to Taxes or increased costs payable by the Borrower
under Section 5.6 hereof, or otherwise increase or expose the Borrower to any
obligation or liability hereunder or reduce any rights or benefits to the
Borrower hereunder.
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign and pledge all or any portion of
its Loans and its Note to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from its
obligations hereunder.
(f) Subject to Section 12.14, any Lender may furnish any
information concerning the Borrower or any of its Subsidiaries in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants).
12.2. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of receipt at such address, telefacsimile
number or telex number as may from time to time be specified by such party in
written notice to the other parties hereto or otherwise received), in the case
of notice by telegram, telefacsimile or telex, respectively (where the receipt
of such message is verified by return), or (iii) on the fifth Business Day
after the day on which mailed, if sent prepaid by certified or registered mail,
return receipt requested, in each case delivered, transmitted or mailed, as the
case may be, to the address, telex number or telefacsimile number, as
appropriate, set forth below or such other address or number as such party
shall specify by notice hereunder:
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(a) if to the Borrower:
Lincare Holdings, Inc.
19337 US 19 North
Suite 500
Clearwater, Florida 34624
Attn: Paul G. Gabos
Telephone: (813) 530-7700
Telefacsimile: (813) 532-4091
(b) if to the Agent:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Jeff Strickland, Agency Services
Telephone: (704) 388-1107
Telefacsimile: (704) 386-9923
(c) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance;
(d) if to any other Loan Party, at the address set forth
on the signature page of the Facility Guaranty or
Security Instrument executed by such Loan Party, as
the case may be.
12.3. Right of Set-off; Adjustments. (a) Upon the occurrence and
during the continuance of any Event of Default, each Lender (and each of its
affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender (or any of its affiliates)
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note held by such Lender, irrespective of whether such Lender shall have
made any demand under this Agreement or such Note and although such obligations
may be unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 12.3 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time
receive any payment of all or part of the Loans owing to it, or interest
thereon, or receive any collateral in respect thereof (whether
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voluntarily or involuntarily, by set-off, or otherwise), in a greater
proportion than any such payment to or collateral received by any other Lender,
if any, in respect of such other Lender's Loans owing to it, or interest
thereon, such benefitted Lender shall purchase for cash from the other Lenders
a participating interest in such portion of each such other Lender's Loans
owing to it, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or
any portion of such excess payment or benefits is thereafter recovered from
such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Borrower agrees that any Lender so purchasing a participation
from a Lender pursuant to this Section 12.3 may, to the fullest extent
permitted by law, exercise all of its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Person were the
direct creditor of the Borrower in the amount of such participation.
12.4. Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of Obligations remain outstanding or any Lender has any
commitment hereunder or the Borrower has continuing obligations hereunder
unless otherwise provided herein. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and permitted assigns of such party and all covenants, provisions
and agreements by or on behalf of the Borrower which are contained in the Loan
Documents shall inure to the benefit of the successors and permitted assigns of
the Lenders or any of them.
12.5. Expenses. The Borrower agrees to pay on demand all reasonable
costs and expenses of the Agent in connection with the syndication,
preparation, execution, delivery, administration, modification, and amendment
of this Agreement, the other Loan Documents, and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
expenses of counsel for the Agent with respect thereto and with respect to
advising the Agent as to its rights and responsibilities under the Loan
Documents. The Borrower further agrees to pay on demand all costs and expenses
of the Agent and the Lenders, if any (including, without limitation,
reasonable attorneys' fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings, or otherwise) of the Loan
Documents and the other documents to be delivered hereunder.
12.6. Amendments and Waivers. Any provision of this Agreement or
any other Loan Document may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Lenders (and, if Article XI or the rights or duties of the Agent are
affected thereby, by the Agent); provided that no such amendment or waiver
shall, unless signed by all the Lenders, (i) increase the Revolving Credit
Commitments or Line of Credit Commitments of the Lenders, (ii) reduce the
principal of or rate of interest on any Loan or any fees or other amounts
payable hereunder, (iii) postpone any date fixed for the payment of any
scheduled installment of principal of or interest on any Loan or any fees or
other amounts payable hereunder or for termination of any Revolving Credit
Commitment or Line of Credit Commitment, (iv) change the percentage of the
Revolving Credit and Line of Credit Commitments or of the unpaid principal
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amount of the Notes, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action under this Section 12.6 or any other
provision of this Agreement or (v) release any Guarantor or all or any material
portion of the Collateral; and provided, further, that no such amendment or
waiver that affects the rights, privileges or obligations of NationsBank as
provider of Swing Line Loans, shall be effective unless signed in writing by
NationsBank or that affects the rights, privileges or obligations of the
Issuing Bank as issuer of Letters of Credit, shall be effective unless signed
in writing by the Issuing Bank;
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No delay
or omission on any Lender's or the Agent's part in exercising any right, remedy
or option shall operate as a waiver of such or any other right, remedy or
option or of any Default or Event of Default.
12.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
12.8. Termination. The termination of this Agreement shall not
affect any rights of the Borrower, the Lenders or the Agent or any obligation
of the Borrower, the Lenders or the Agent, arising prior to the effective date
of such termination, and the provisions hereof shall continue to be fully
operative until all transactions entered into or rights created or obligations
incurred prior to such termination have been fully disposed of, concluded or
liquidated and the Obligations arising prior to or after such termination have
been irrevocably paid in full. The rights granted to the Agent for the benefit
of the Lenders under the Loan Documents shall continue in full force and
effect, notwithstanding the termination of this Agreement, until all of the
Obligations have been paid in full after the termination hereof (other than
Obligations in the nature of continuing indemnities or expense reimbursement
obligations not yet due and payable, which shall continue) or the Borrower has
furnished the Lenders and the Agent with an indemnification satisfactory to the
Agent and each Lender with respect thereto. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination
hereof until payment in full of the Obligations unless otherwise provided
herein. Notwithstanding the foregoing, if after receipt of any payment of all
or any part of the Obligations, any Lender is for any reason compelled to
surrender such payment to any Person because such payment is determined to be
void or voidable as a preference, impermissible setoff, a diversion of trust
funds or for any other reason, this Agreement shall continue in full force and
the Borrower shall be liable to, and shall indemnify and hold the Agent or such
Lender harmless for, the amount of such payment surrendered until the Agent or
such Lender shall have been finally and irrevocably paid in full. The
provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agent or
the Lenders in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Agent or the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment having
become final and irrevocable.
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12.9. Indemnification; Limitation of Liability. (a)
The Borrower agrees to indemnify and hold harmless the Agent and each Lender
and each of their affiliates and their respective officers, directors,
employees, agents, and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities, costs, and expenses
(including, without limitation, reasonable attorneys' fees) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation, or proceeding or
preparation of defense in connection therewith) the Loan Documents, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Loans, except to the extent such claim, damage, loss, liability, cost,
or expense is found in a judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
In the case of an investigation, litigation or other proceeding to which the
indemnity in this Section 12.9 applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by the
Borrower, its directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. The
Borrower agrees not to assert any claim against the Agent, any Lender, any of
their affiliates, or any of their respective directors, officers, employees,
attorneys, agents, and advisers, on any theory of liability, for special,
indirect, consequential, or punitive damages arising out of or otherwise
relating to the Loan Documents, any of the transactions contemplated herein or
the actual or proposed use of the proceeds of the Loans.
(b) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 12.9 shall survive the payment in full of the Loans
and all other amounts payable under this Agreement.
12.10. Severability. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more
of the parties hereto, then such provision shall remain in effect with respect
to all parties, if any, as to whom such provision is neither illegal nor
invalid, and in any event all other provisions hereof shall remain effective
and binding on the parties hereto.
12.11. Entire Agreement. This Agreement, together with the other
Loan Documents, constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all previous proposals,
negotiations, representations, commitments and other communications between or
among the parties, both oral and written, with respect thereto.
12.12. Agreement Controls. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any express term of
this Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
12.13. Usury Savings Clause. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under applicable law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest Lawful
Rate (as defined below), the
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outstanding amount of the Loans made hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder equals the
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect. In
addition, if when the Loans made hereunder are repaid in full the total
interest due hereunder (taking into account the increase provided for above) is
less than the total amount of interest which would have been due hereunder if
the stated rates of interest set forth in this Agreement had at all times been
in effect, then to the extent permitted by law, the Borrower shall pay to the
Agent an amount equal to the difference between the amount of interest paid and
the amount of interest which would have been paid if the Highest Lawful Rate
had at all times been in effect. Notwithstanding the foregoing, it is the
intention of the Lenders and the Borrower to conform strictly to any applicable
usury laws. Accordingly, if any Lender contracts for, charges, or receives any
consideration which constitutes interest in excess of the Highest Lawful Rate,
then any such excess shall be canceled automatically and, if previously paid,
shall at such Lender's option be applied to the outstanding amount of the Loans
made hereunder or be refunded to the Borrower. As used in this paragraph, the
term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that
at any time or from time to time may be contracted for, charged, or received
under the laws applicable to such Lender which are presently in effect or, to
the extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
12.14. Confidentiality. The Agent and each Lender (each, a "Lending
Party") agrees to keep confidential any information furnished or made available
to it by the Borrower pursuant to this Agreement that is marked confidential;
provided that nothing herein shall prevent any Lending Party from disclosing
such information (a) to any other Lending Party or any affiliate of any Lending
Party, or any officer, director, employee, agent, or advisor of any Lending
Party or affiliate of any Lending Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any law, rule or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand or any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Lending Party other than as a result of a disclosure
by any Lending Party prohibited by this Agreement, (g) in connection with any
litigation to which such Lending Party or any of its affiliates may be a party,
(h) to the extent necessary in connection with the exercise of any remedy under
this Agreement or any other Loan Document, and (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.
12.15. GOVERNING LAW; WAIVER OF JURY TRIAL.
(A) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER
THAN THOSE SECURITY INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT THEY
SHALL BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF FLORIDA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY
PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
85
<PAGE> 92
(B) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES
AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN
MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY
OF PINELLAS, STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS
PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING,
AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING.
(C) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY
REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE
BORROWER PROVIDED IN SECTION 12.2, OR BY ANY OTHER METHOD OF SERVICE
PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF
FLORIDA.
(D) NOTHING CONTAINED IN SUBSECTIONS (A) OR (B) HEREOF
SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE
COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED
BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND
EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING,
OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY
ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE
UNDER APPLICABLE LAW.
(E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE
AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH
86
<PAGE> 93
PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
[Signatures on following pages]
87
<PAGE> 94
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
LINCARE HOLDINGS INC.
WITNESS:
/s/ Terry J. Witcher By: /s/ Paul G. Gabos
- ---------------------- --------------------------------
Name: Paul G. Gabos
Title: Chief Financial Officer,
/s/ Angela Bryant Secretary & Treasurer
- ----------------------
Signature Page 1 of 2
<PAGE> 95
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: /s/ James E. Harden, Jr.
------------------------------
Name: James E. Harden, Jr.
Title: Vice President
NATIONSBANK, NATIONAL ASSOCIATION
By: /s/ James E. Harden, Jr.
-------------------------------
Name: James E. Harden, Jr.
Title: Vice President
Lending Office:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Jeff Strickland, Agency
Services
Telephone: (704) 388-1107
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, National Association
ABA# 063100277
Account No.: _________________
Reference: Lincare Holdings, Inc.
Attention: Agency Services
Signature Page 2 of 2
<PAGE> 1
Exhibit 10.43
LINCARE HOLDINGS INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
Optionee: [Grantee Name]
Number of shares of
Common Stock subject
to this Agreement: [Number of Options Granted]
Pursuant to the Lincare Holdings Inc. [Plan Year] Stock Plan (the
"Plan"), the [Plan Year] Stock Plan Committee (the "Committee") of the Board of
Directors of Lincare Holdings Inc. (the "Company") has granted to you an option
(the "Option") to purchase the number of shares of the Company's Common Stock,
$.01 par value ("Common Stock"), set forth above. Such shares (as the same may
be adjusted as described in Section 9 below) are herein referred to as the
"Option Shares". The Option shall constitute and be treated at all times by
you and the Company as a "non-qualified stock option" for Federal income tax
purposes and shall not constitute and shall not be treated as an "incentive
stock option" as defined under Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"). The terms and conditions of the Option are set
out below.
1. Date of Grant. The Option is granted to you on [Grant Date].
2. Termination of Option. Your right to exercise the Option (and
to purchase the Option Shares) shall expire and terminate in all events on the
earlier of: (i) [Expiration Date] or (ii) the date provided in Section 7 below
in the event you cease to be a non-employee director of the Company or any
subsidiary or parent thereof.
3. Option Price. The purchase price to be paid upon the exercise
of the Option is $[Exercise Price] per share, the price at which the Company's
shares of Common Stock were traded on the NASDAQ National Market System at the
close of business on the date hereof (subject to adjustment as provided in
Section 9(a) hereof).
4. Automatic Vesting Provisions. Commencing on [First Vesting
Date] and on the first anniversary of that date on which you shall continue to
be a non-employee director of the Company or any subsidiary or parent thereof,
you shall become entitled to
<PAGE> 2
exercise the Option with respect to 50% of the Option Shares (rounded to the
nearest whole share) until the Option expires and terminates pursuant to
Section 2 hereof.
5. Exercise of Option. To exercise the Option, you must
deliver a completed copy of the attached Option Exercise Form to the address
indicated on the Form, specifying the number of Option Shares being purchased
as a result of such exercise, together with payment of the full option price
for the Option Shares being purchased. Payment of the option price must be
made in cash or by check.
6. [Restriction on Transferability if Applicable]
7. Termination of Directorship. In the event that you cease to
be a non-employee director of the Company for any reason whatsoever, then the
Option may only be exercised within one (1) year after the date you ceased to
be a non-employee director, and only to the same extent that you were entitled
to exercise the Option on the date you ceased to be a non-employee director of
the Company and had not previously done so.
8. Tax Consequences. You represent and warrant that you
understand the Federal, state and local income tax consequences of the granting
of the Option to you, the acquisition of rights to exercise the Option with
respect to any Option Shares, the exercise of the Option and purchase of Option
Shares, and the subsequent sale or other disposition of any Option Shares. In
addition, you understand that the Company will be required to withhold Federal,
state and local taxes in respect of any compensation income realized by you
upon exercise of the Option granted hereunder. To the extent that the Company
is required to withhold any such taxes, you hereby agree that the Company may
deduct from any payments of any kind otherwise due to you an amount equal to
the total Federal, state and local taxes required to be so withheld, or if such
payments are inadequate to satisfy such Federal, state and local taxes, or if
no such payments are due or to become due to you, then you agree to provide the
Company with cash funds or make other arrangements satisfactory to the Company
regarding such payment. It is understood that all matters with respect to the
total amount of taxes to be withheld in respect of any such compensation income
shall be determined by the Company in its sole discretion; provided, however,
that the Company shall consult with you regarding such determination and shall
promptly advise you of any such determination made by the Company hereunder
with the intention that such advice shall be given in time to permit you to
express your views regarding such determination.
2
<PAGE> 3
9. Adjustments; Reorganization, Reclassification, Consolidation,
Merger or Sale.
(a) In the event that, after the date hereof, the
outstanding shares of the Company's Common Stock shall be increased or decreased
or changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company through stock split, split-up, combination or
exchange of shares or declaration of any dividends payable in Common Stock, the
Committee shall appropriately adjust the number of shares of Common Stock (and
the option price per share) subject to the unexercised portion of the Option (to
the nearest possible full share), and such adjustment shall be effective and
binding for all purposes of this Agreement and the Plan.
(b) If any capital reorganization or reclassification of
the capital stock of the Company or any consolidation or merger of the Company
with another corporation, or the sale of all or substantially all its assets to
another corporation, shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, subject to Section 9(c) below, each
holder of an Option shall thereafter have the right to receive upon the basis
and upon the terms and conditions specified therein and in lieu of the shares
of Common Stock of the Company immediately theretofore receivable upon the
exercise of such Option, such shares of stock, securities or assets (including
cash) as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of
such stock immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place.
(c) Notwithstanding the foregoing, in the event of any
offer to holders of the Company's Common Stock generally relating to the
acquisition of their shares, including, without limitation, through purchase,
merger or otherwise, or any transaction generally relating to the acquisition
of substantially all of the assets or business of the Company (herein sometimes
referred to as an "Acquisition"), the Committee may, in its sole discretion,
cancel the Option and pay or deliver to you, or cause to be paid or delivered
to you, an amount in cash or securities having a value (as determined by the
Committee acting in good faith) equal to the product of: (i) the number of
Option Shares that, as of the date of the consummation of such Acquisition, you
had become entitled to purchase (and had not purchased), multiplied by (ii) the
amount, if any, by which (x) the formula or fixed price per share paid to
3
<PAGE> 4
holders of shares of Common Stock pursuant to such Acquisition exceeds (y) the
option price set forth in Section 3 hereof.
10. Certain Notices. In case at any time there shall be any
capital reorganization or reclassification or any consolidation or merger or
sale of all or substantially all of the assets of the Company as described in
Sections 9(b) or 9(c) above, then the Company shall give, by first class mail,
postage prepaid, addressed to you at your address as shown on the books of the
Company, at least 20 days' prior written notice of the date when such
transaction or event shall take place, which notice shall contain a reasonably
detailed summary of the terms of such transaction or event. The Company shall
promptly provide upon request (to the extent permitted under any applicable
agreements with third parties) additional relevant information relating to such
transaction or event reasonably requested by you.
11. Continuation of Directorship. Neither the Plan nor the Option
shall confer upon you any right to continue as a director of the Company or any
subsidiary or parent thereof, or limit in any respect the right of the Company
or any subsidiary or parent thereof to remove you as a director or terminate
your relationship with the Company or any subsidiary or parent thereof, as the
case may be, at any time.
12. Plan Documents. This Agreement is qualified in its entirety
by reference to the provisions of the Plan, which are hereby incorporated
herein by reference.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. If any one or
more provisions of this Agreement shall be found to be illegal or unenforceable
in any respect, the validity and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby.
4
<PAGE> 5
Please acknowledge receipt of this Agreement by signing the enclosed
copy of this Agreement in the space provided below and returning it promptly to
the Secretary of the Company.
LINCARE HOLDINGS INC.
By: _____________________________
AGREED TO AND ACCEPTED AS OF
THE DATE FIRST WRITTEN ABOVE:
______________________________
Optionee
5
<PAGE> 6
EXHIBIT A
LINCARE HOLDINGS INC.
STOCK OPTION EXERCISE FORM
I hereby elect to exercise my non-qualified stock option rights as follows:
<TABLE>
<CAPTION>
GRANT DATE NUMBER OF SHARES PRICE TOTAL PRICE
---------- ---------------- ----- -----------
<S> <C> <C> <C>
_______________ ________________________ ______________ ___________________
_______________ ________________________ ______________ ___________________
</TABLE>
Please register and deliver my shares as follows:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
NAME:___________________________________________________________________________
ADDRESS:________________________________________________________________________
________________________________________________________________________________
SOCIAL SECURITY NUMBER:_________________________________________________________
PHONE NUMBER: HOME(____)______________________ WORK(____)___________________
__________ I am currently an Executive Officer or Director of Lincare
Holdings Inc.
GENERAL
A. __________________________________, is authorized to pay the stock
option exercise price and withhold taxes (if applicable) to Lincare
Holdings Inc. and to provide duplicate confirmations to Lincare
Holdings Inc.
B. Upon the sale of my stock option shares through _____________________,
my authorization and direction to deliver those shares to my account at
___________________________________________, shall be irrevocable.
___________________________________________ ___________________
SIGNATURE OF OPTIONEE DATE
6
<PAGE> 1
Exhibit 10.44
LINCARE HOLDINGS INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
[Grant Date]
Employee/Optionee: [Grantee Name]
Number of shares of
Common Stock subject
to this Agreement: [Number of Options Granted]
Pursuant to the Lincare Holdings Inc. [Plan Year] Stock Plan (the
"Plan"), the [Plan Year] Stock Plan Committee (the "Committee") of the Board of
Directors of Lincare Holdings Inc. (the "Company") has granted to you on this
date an option (the "Option") to purchase the number of shares of the Company's
Common Stock, $.01 par value ("Common Stock"), set forth above. Such shares
(as the same may be adjusted as described in Section 11 below) are herein
referred to as the "Option Shares". The Option shall constitute and be treated
at all times by you and the Company as a "non-qualified stock option" for
Federal income tax purposes and shall not constitute and shall not be treated
as an "incentive stock option" as defined under Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"). The terms and conditions of the
Option are set forth below.
1. Date of Grant. The Option is granted to you on [Grant
Date].
2. Termination of Option. Your right to exercise the Option (and
to purchase the Option Shares) shall expire and terminate in all events on the
earlier of (a) [Expiration Date], or (b) the date provided in Section 9 below
in the event you cease to be employed by the Company or any subsidiary or
parent thereof (other than as a result of your death or disability as described
in Section 9(c) hereof, in which case you shall be deemed for purposes hereof
to continue to be employed on a full-time basis).
3. Option Price. The purchase price to be paid upon the exercise
of the Option is $[Exercise Price] per share, the price at which the Company's
shares of Common Stock were traded on the NASDAQ National Market System at the
close of business on the date hereof (subject to adjustment as provided in
Section 11 hereof).
<PAGE> 2
4. Vesting Provisions. Except as otherwise provided in
Section 5 below, you will not be entitled to exercise the Option (and purchase
any Option Shares) prior to [First Vesting Date]. Commencing on [First Vesting
Date], you shall become entitled to exercise the Option (rounded to the nearest
whole share) in accordance with the following schedule, until the Option
expires and terminates pursuant to Section 2 hereof:
(a) Commencing on [First Vesting Date], you shall be
entitled to exercise [Percentage Vested] of the Option Shares; and
(b) Commencing on [Second Vesting Date], you shall be
entitled to exercise [Percentage Vested] of the Option Shares.
[Additional Vesting Schedule if Applicable]
5. Change of Control.
(a) All Options granted hereunder shall vest and shall
become immediately exercisable upon a "Change of Control" of the Company. As
used herein, the term "Change of Control" shall mean any of the following:
(i) a sale or other disposition (or the last such
sale or other disposition) resulting in the transfer of more than 50% of the
Common Stock of the Company to unrelated and unaffiliated third parties; or
(ii) the consolidation or merger of the Company
with or into any other entity (other than a merger in which the Company is the
surviving corporation and which does not result in more than 50% of the capital
stock of the Company outstanding immediately after the effective date of such
merger being owned of record or beneficially by persons other than the holders
of its capital stock immediately prior to such merger); or
(iii) a sale of substantially all of the properties
and assets of the Company as an entirety to an unrelated and unaffiliated third
party purchaser; or
(iv) the time at which any person (including a
person's affiliates and associates) or group (as that term is understood under
Section 13(d) of the Exchange Act and the rules and regulations thereunder),
files a Schedule 13-D or 14D-1 (or any successor schedule, form or report under
the Exchange Act) disclosing that such person or group has become the
beneficial owner (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of shares of capital stock of
the Company giving such person or group a
-2-
<PAGE> 3
majority of the voting power of all outstanding capital stock of the Company
with the right to vote generally in an election for directors or other capital
stock of the Company into which the common stock or other voting stock is
reclassified or changed.
(b) If one of the events specified in Section 5(a)(ii)-(iv)
occurs, then on the busin ess day immediately preceding the occurrence of such
event, you shall become entitled to exercise the Option with respect to all
Option Shares that you had theretofore not otherwise become entitled to purchase
hereunder (with the effect that you shall be deemed eligible to include such
Option Shares in any transaction contemplated by Section 5(a) hereof to the
extent that you (i) purchase such Option Shares and (ii) are otherwise entitled
to participate in such transaction.
(c) Notwithstanding anything contained herein to the contrary,
no new rights to exercise the Option with respect to any Option Shares shall be
acquired under this Section 5 after the date on which you cease to be employed
on a full-time basis by the Company or any subsidiary or parent thereof (unless
you have ceased to be employed on a full-time basis by reason of death or
disability, as described in Section 9(c) below, in which case you shall be
deemed for purposes hereof to continue to be employed on a full-time basis).
6. Additional Provisions Relating to Exercise.
(a) Once you become entitled to exercise the Option (and
purchase Option Shares) as provided in Sections 4 and 5 hereof, such right will
continue until the date on which the Option expires and terminates pursuant to
Section 2 hereof.
(b) The Committee, in its sole discretion, may at any time
accelerate the time set forth in Sections 4 or 5 at which the Option may be
exercised by you with respect to any Option Shares.
7. Exercise of Option. To exercise the Option, you must deliver a
completed copy of the Stock Option Exercise Form attached hereto to the
principal office of the Company, specifying the number of Option Shares being
purchased as a result of such exercise. The purchase price for the Option
Shares for which an Option is exercised shall be paid in full, in cash, on the
date of exercise, or, at the Company's sole discretion, within ten (10)
business days thereafter.
8. [Restriction on Transferability if Applicable]
-3-
<PAGE> 4
9. Termination of Employment.
(a) In the event that (i) the Company or any subsidiary or parent
thereof terminates your employment by such entity "for cause" or (ii) you
terminate your employment by such entity for any reason whatsoever (other than
as a result of your death or disability as defined in the Contract), then the
Option may only be exercised within one (1) month after such termination, and
only to the same extent that you were entitled to exercise the Option on the
date your employment was so terminated and had not previously done so. For the
purposes of Sections 9(a) and 9(b) hereof, the term "for cause" shall have the
meaning set forth in that certain Employment Agreement, dated as of [Agreement
Date] (herein referred to as the "Contract"), between you and Lincare Holdings
Inc.
(b) In the event that you cease to be employed on a full-time basis by
the Company or any subsidiary or parent thereof as a result of the termination
of your employment by the Company or any subsidiary or parent thereof at any
time other than "for cause", the Option may only be exercised within one year
after the date you cease to be so employed, and only to the same extent that
you were entitled to exercise the Option on the date you ceased to be so
employed by reason of such termination and had not previously done so.
(c) In the event that you (i) die while employed by the Company or any
subsidiary or parent thereof (or within a period of one month after ceasing to
be employed by the Company or any subsidiary or parent thereof for any reason
described in Section 9(b) above) or (ii) cease to be employed on a full-time
basis by the Company or any subsidiary or parent thereof by reason of a
disability as defined in the Contract, the Option may be exercised as if you
continued to be employed on a full-time basis by the Company or any subsidiary
or parent thereof in accordance with the terms of this Agreement without giving
effect to any applicability of Section 9(b) hereof. In the event of clause (i)
of this subsection, the Option may be exercised by the executor or
administrator of your estate or by any person who shall have acquired the
Option through bequest or inheritance.
(d) Notwithstanding any provision contained in this Section 9 to the
contrary, in no event may the Option be exercised to any extent by anyone after
[Expiration Date].
-4-
<PAGE> 5
10. Representations. You represent and warrant that you understand
the Federal, state and local income tax consequences of the granting of the
Option to you, the acquisition of rights to exercise the Option with respect to
any Option Shares, the exercise of the Option and purchase of Option Shares,
and the subsequent sale or other disposition of any Option Shares. In
addition, you understand that the Company will be required to withhold Federal,
state or local taxes in respect of any compensation income realized by you upon
exercise of the Option granted hereunder. To the extent that the Company is
required to withhold any such taxes, you hereby agree that the Company may
deduct from any payments of any kind otherwise due to you an amount equal to
the total Federal, state and local taxes required to be so withheld, or if such
payments are inadequate to satisfy such Federal, state and local taxes, or if
no such payments are due or to become due to you, then you agree to provide the
Company with cash funds or make other arrangements satisfactory to the Company
regarding such payment. It is understood that all matters with respect to the
total amount of taxes to be withheld in respect of any such compensation income
shall be determined by the Company in its sole discretion; provided, however,
that the Company shall consult with you regarding such determination and shall
promptly advise you of any such determination made by the Company hereunder
with the intention that such advice shall be given in time to permit you to
express your views regarding such determination.
11. Adjustments; Reorganization, Reclassification, Consolidation,
Merger or Sale.
(a) In the event that, after the date hereof, the outstanding shares
of the Company's Common Stock shall be increased or decreased or changed into
or exchanged for a different number or kind of shares of stock or other
securities of the Company through stock split, split-up, combination or
exchange of shares or declaration of any dividends payable in Common Stock, the
Committee shall appropriately adjust the number of shares of Common Stock (and
the option price per share) subject to the unexercised portion of the Option
(to the nearest possible full share), and such adjustment shall be effective
and binding for all purposes of this Agreement and the Plan.
(b) If any capital reorganization or reclassification of the capital
stock of the Company or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all its assets to another
corporation, shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, subject to
-5-
<PAGE> 6
Section 11(c) below, each holder of an Option shall thereafter have the right
to receive upon the basis and upon the terms and conditions specified therein
and in lieu of the shares of Common Stock of the Company immediately
theretofore receivable upon the exercise of such Option, such shares of stock,
securities or assets (including cash) as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore so receivable had
such reorganization, reclassification, consolidation, merger or sale not taken
place.
(c) Notwithstanding the foregoing, in the event of any offer to
holders of the Company's Common Stock generally relating to the acquisition of
their shares, including, without limitation, through purchase, merger or
otherwise, or any transaction generally relating to the acquisition of
substantially all of the assets or business of the Company (herein sometimes
referred to as an "Acquisition"), the Committee may, in its sole discretion,
cancel the Option and pay or deliver to you, or cause to be paid or delivered
to you, an amount in cash or securities having a value (as determined by the
Board of Directors acting in good faith) equal to the product of (i) the number
of Option Shares that, as of the date of the consummation of such Acquisition,
you had become entitled to purchase (and had not purchased), multiplied by (ii)
the amount, if any, by which (x) the formula or fixed price per share paid to
holders of shares of Common Stock pursuant to such Acquisition exceeds (y) the
option price set forth in Section 3 hereof.
12. Certain Notices. In case at any time there shall be: (i) a Change
of Control as described in Section 5(a)(ii)-(iv) above; or (ii) any capital
reorganization or reclassification or any consolidation or merger or sale of
all or substantially all of the assets of the Company as described in Sections
11(b) or 11(c) above, then the Company shall give, by first class mail, postage
prepaid, addressed to you at your address as shown on the books of the Company,
at least 20 days' prior written notice of the date when such transaction or
event shall take place, which notice shall contain a reasonably detailed
summary of the terms of such transaction or event. The Company shall promptly
provide upon request (to the extent permitted under any applicable agreements
with third parties) additional relevant information relating to such
transaction or event reasonably requested by you.
-6-
<PAGE> 7
13. Continuation of Employment. Neither the Plan nor the Option shall
confer upon you any right to continue in the employ of the Company or any
subsidiary or parent thereof, or limit in any respect the right of the Company
or any subsidiary or parent thereof to terminate your employment or other
relationship with the Company or any subsidiary or parent thereof, as the case
may be, at any time.
14. Plan Documents. This Agreement is qualified in its entirety by
reference to the provisions of the Plan, which are hereby incorporated herein
by reference.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. If any one or more
provisions of this Agreement shall be found to be illegal or unenforceable in
any respect, the validity and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby.
Please acknowledge receipt of this Agreement by signing the enclosed copy of
this Agreement in the space provided below and returning it promptly to the
Secretary of the Company.
LINCARE HOLDINGS, INC.
By:_________________________
AGREED TO AND ACCEPTED AS OF
THE DATE FIRST WRITTEN ABOVE:
__________________________________
Employee/Optionee
-7-
<PAGE> 8
EXHIBIT A
LINCARE HOLDINGS INC.
STOCK OPTION EXERCISE FORM
I hereby elect to exercise my non-qualified stock option rights as follows:
<TABLE>
<CAPTION>
GRANT DATE NUMBER OF SHARES PRICE TOTAL PRICE
---------- ---------------- ----- -----------
<S> <C> <C> <C>
_______________ ________________________ ______________ ___________________
_______________ ________________________ ______________ ___________________
</TABLE>
Please register and deliver my shares as follows:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
NAME:___________________________________________________________________________
ADDRESS:________________________________________________________________________
________________________________________________________________________________
SOCIAL SECURITY NUMBER:_________________________________________________________
PHONE NUMBER: HOME(____)______________________ WORK(____)___________________
__________ I am currently an Executive Officer or Director of Lincare
Holdings Inc.
GENERAL
A. __________________________________, is authorized to pay the stock
option exercise price and withhold taxes (if applicable) to Lincare
Holdings Inc. and to provide duplicate confirmations to Lincare
Holdings Inc.
B. Upon the sale of my stock option shares through _____________________,
my authorization and direction to deliver those shares to my account at
___________________________________________, shall be irrevocable.
___________________________________________ ___________________
SIGNATURE OF OPTIONEE DATE
-8-
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Lincare Holdings Inc.:
We consent to incorporation by reference in the Registration Statements Nos.
33-55202, 33-595656, 33-90602 and 333-46969 on Form S-8 of Lincare Holdings
Inc. of our report dated January 28, 1998, relating to the consolidated balance
sheets of Lincare Holdings Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows and related consolidated financial statement schedule
for each of the years in the three-year period ended December 31, 1997, which
report appears in the December 31, 1997 annual report on Form 10-K of Lincare
Holdings Inc.
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
March 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LINCARE HOLDINGS, INC. FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,078
<SECURITIES> 0
<RECEIVABLES> 76,334
<ALLOWANCES> 7,951
<INVENTORY> 1,542
<CURRENT-ASSETS> 77,049
<PP&E> 181,438
<DEPRECIATION> 73,148
<TOTAL-ASSETS> 440,388
<CURRENT-LIABILITIES> 34,943
<BONDS> 0
0
0
<COMMON> 287
<OTHER-SE> 392,780
<TOTAL-LIABILITY-AND-EQUITY> 440,388
<SALES> 443,181
<TOTAL-REVENUES> 443,181
<CGS> 65,932
<TOTAL-COSTS> 65,932
<OTHER-EXPENSES> 245,876
<LOSS-PROVISION> 4,432
<INTEREST-EXPENSE> 1,161
<INCOME-PRETAX> 130,321
<INCOME-TAX> 50,173
<INCOME-CONTINUING> 80,148
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,148
<EPS-PRIMARY> 2.82
<EPS-DILUTED> 2.73
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,541
<SECURITIES> 0
<RECEIVABLES> 51,090
<ALLOWANCES> 5,917
<INVENTORY> 1,689
<CURRENT-ASSETS> 54,973
<PP&E> 150,598
<DEPRECIATION> 57,068
<TOTAL-ASSETS> 347,408
<CURRENT-LIABILITIES> 31,340
<BONDS> 0
0
0
<COMMON> 282
<OTHER-SE> 298,966
<TOTAL-LIABILITY-AND-EQUITY> 347,408
<SALES> 348,870
<TOTAL-REVENUES> 348,870
<CGS> 53,711
<TOTAL-COSTS> 53,711
<OTHER-EXPENSES> 183,807
<LOSS-PROVISION> 3,472
<INTEREST-EXPENSE> 497
<INCOME-PRETAX> 106,996
<INCOME-TAX> 40,422
<INCOME-CONTINUING> 66,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,574
<EPS-PRIMARY> 2.38
<EPS-DILUTED> 2.31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,009
<SECURITIES> 0
<RECEIVABLES> 36,610
<ALLOWANCES> 4,535
<INVENTORY> 1,299
<CURRENT-ASSETS> 40,364
<PP&E> 121,786
<DEPRECIATION> 48,534
<TOTAL-ASSETS> 260,206
<CURRENT-LIABILITIES> 23,854
<BONDS> 0
0
0
<COMMON> 277
<OTHER-SE> 221,106
<TOTAL-LIABILITY-AND-EQUITY> 260,206
<SALES> 274,800
<TOTAL-REVENUES> 274,800
<CGS> 41,329
<TOTAL-COSTS> 41,329
<OTHER-EXPENSES> 147,078
<LOSS-PROVISION> 2,190
<INTEREST-EXPENSE> 892
<INCOME-PRETAX> 83,673
<INCOME-TAX> 32,634
<INCOME-CONTINUING> 32,634
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,634
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.79
</TABLE>
