<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-14316
APRIA HEALTHCARE GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0488566
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3560 Hyland Avenue, Costa Mesa, CA 92626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 427-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
There were 51,779,059 shares of Common Stock, $.001 par value, outstanding at
October 30, 1998.
<PAGE> 2
APRIA HEALTHCARE GROUP INC.
FORM 10-Q
For the period ended September 30, 1998
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Price
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 3
<TABLE>
APRIA HEALTHCARE GROUP INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
(dollars in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 95,686 $ 16,317
Accounts receivable, less allowance for
doubtful accounts of $45,738 and
$58,413 at September 30, 1998 and
December 31, 1997, respectively 157,680 256,845
Inventories 16,227 26,082
Prepaid expenses and other current assets 5,703 12,329
--------- ---------
TOTAL CURRENT ASSETS 275,296 311,573
PATIENT SERVICE EQUIPMENT, less accumulated
depreciation of $268,141 and $245,772 at
September 30, 1998 and December 31, 1997,
respectively 136,931 184,704
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET 53,766 87,583
INTANGIBLE ASSETS, NET 85,825 167,620
OTHER ASSETS 877 5,690
--------- ---------
$ 552,695 $ 757,170
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 48,278 $ 50,691
Accrued payroll and related taxes and
benefits 30,760 40,397
Accrued insurance 12,437 12,247
Other accrued liabilities 53,142 30,463
Current portion of long-term debt 118,513 8,685
--------- ---------
TOTAL CURRENT LIABILITIES 263,130 142,483
LONG-TERM DEBT 423,619 540,220
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock,
$.001 par value:
10,000,000 shares authorized; none
issued - -
Common stock, $.001 par value:
150,000,000 shares authorized; 51,771,259
and 51,568,525 shares issued and
outstanding at September 30, 1998
and December 31, 1997, respectively 52 51
Additional paid-in capital 325,832 324,090
Accumulated deficit (459,938) (249,674)
--------- ---------
(134,054) 74,467
$ 552,695 $ 757,170
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
<TABLE>
APRIA HEALTHCARE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $ 219,367 $304,356 $ 710,532 $913,954
Costs and expenses:
Cost of net revenues 96,996 104,650 263,651 337,792
Selling, distribution and
administrative 164,016 151,782 446,366 449,148
Impairment of intangible
assets 76,223 - 76,223 -
Impairment of long-lived
assets and internally
developed software 22,187 - 22,187 -
Provision for doubtful
accounts 36,860 15,194 63,471 101,141
Amortization of intangible
assets 3,463 4,256 10,528 12,633
-------- -------- -------- --------
399,745 275,882 882,426 900,714
-------- -------- -------- --------
OPERATING (LOSS) INCOME (180,378) 28,474 (171,894) 13,240
Interest expense, net 12,823 12,288 35,870 37,779
-------- -------- -------- --------
LOSS) INCOME BEFORE TAXES (193,201) 16,186 (207,764) (24,539)
Income taxes 1,500 - 2,500 9,911
-------- -------- -------- --------
NET (LOSS) INCOME $(194,701) $ 16,186 $(210,264) $(34,450)
======== ======== ======== ========
Net (loss) income per common
share $ (3.76) $ 0.31 $ (4.07) $ (0.67)
========= ======== ========= ========
Net (loss) income per common
share assuming dilution $ (3.76) $ 0.31 $ (4.07) $ (0.67)
========= ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
<TABLE>
APRIA HEALTHCARE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Nine Months Ended
September 30,
1998 1997
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(210,264) $(34,450)
Items included in net loss not requiring
(providing) cash:
Provision for doubtful accounts 63,471 101,141
Provision for revenue adjustments 14,642 20,000
Provision for excess/obsolete equipment 22,563 23,000
Depreciation 81,291 89,076
Amortization of intangible assets 10,528 12,633
Amortization of deferred debt costs 1,256 860
Impairment of intangible assets 76,223 -
Impairment of long-lived assets and
internally developed software 22,187 -
Loss (gain) on disposition of assets 3,628 (1,596)
Deferred income taxes - 8,911
Changes in operating assets and liabilities,
net of effects of acquisitions:
Decrease (increase) in accounts receivable 23,943 (86,085)
Decrease in inventories 807 1,220
Decrease in prepaids and other assets 7,088 25,213
Decrease in accounts payable (3,136) (20,105)
Increase (decrease) in accrued payroll and
other liabilities 12,849 (22,250)
Net purchases of patient service equipment,
net of effects of acquisitions (26,931) (51,795)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 100,145 65,773
INVESTING ACTIVITIES
Purchases of property, equipment and
improvements, net of effects of
acquisitions (12,005) (17,561)
Proceeds from disposition of assets 200 6,835
Acquisitions and payments of contingent
consideration (2,348) (3,862)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (14,153) (14,588)
FINANCING ACTIVITIES
Proceeds under revolving credit facility - 129,950
Payments under revolving credit facility - (174,950)
Payments of senior and other long-term debt (6,803) (9,411)
Capitalized debt costs, net (1,467) (711)
Issuances of common stock 1,647 3,580
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (6,623) (51,542)
-------- --------
NET INCREASE (DECREASE) IN CASH 79,369 (357)
CASH AT BEGINNING OF PERIOD 16,317 26,930
-------- --------
CASH AT END OF PERIOD $ 95,686 $ 26,573
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
APRIA HEALTHCARE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of Apria
Healthcare Group Inc. ("the Company") and its subsidiaries. All significant
intercompany transactions and accounts have been eliminated.
In the opinion of management, all adjustments, consisting of normal recurring
accruals necessary for a fair presentation of the results of operations for the
interim periods presented, have been reflected herein. The unaudited results of
operations for interim periods are not necessarily indicative of the results to
be expected for the entire year. For further information, refer to the
consolidated financial statements and footnotes thereto for the year ended
December 31, 1997, included in the Company's 1997 Form 10-K, as amended.
NOTE B - RECLASSIFICATIONS, USE OF ACCOUNTING ESTIMATES AND SIGNIFICANT
ACCOUNTING POLICIES
Reclassifications: Certain amounts from prior periods have been reclassified to
conform to the current year presentation.
Use of Accounting Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make assumptions that affect the amounts reported in the financial statements
and accompanying notes. Such amounts include, among others, the allowance for
doubtful accounts, revenue adjustment reserves, patient service equipment
reserves, other asset valuation allowances and certain liabilities. Management
periodically reevaluates the estimates inherent in certain financial statement
amounts and may adjust accounts accordingly.
Significant Accounting Policies: The Company has adopted the provisions of
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income. There is no difference between comprehensive income (loss) and net
income (loss) for the periods presented herein.
NOTE C - DISPOSITIONS AND BUSINESS COMBINATIONS
During the third quarter, the Company sold its infusion business in California
to Crescent Healthcare, Inc. and is exiting the infusion business in Texas,
Louisiana, West Virginia and Western Pennsylvania. Third quarter charges related
to the wind-down of unprofitable infusion operations amounted to $6,883,000 and
a loss on sale of the California business of $3,798,000 (included in selling,
distribution and administrative) was recorded. The operations of these infusion
locations had revenues and gross profits of $35,175,000 and $12,431,000,
respectively, for the nine months ended September 30, 1998, compared to
$50,783,000 and $23,001,000 for the same period in 1997.
<PAGE> 7
The Company periodically makes acquisitions of complementary businesses in
specific geographic markets. Acquisitions that closed during the nine-month
period ended September 30, 1998 resulted in cash payments of approximately
$2,098,000. The transactions were accounted for as purchases.
NOTE D - ACCOUNTS RECEIVABLE
In August 1998, management reviewed the historic performance and collectibility
of the Company's accounts receivable portfolio. Management also reviewed its
existing policies and procedures for estimating the collectibility of its
accounts receivable. In this review, management considered the continued
high-level of bad debt write-offs and revenue adjustments. Also considered were
initiatives introduced earlier in the year: a special quality assurance function
designed to improve workflow and billing accuracy, and software enhancements to
simplify the order-intake process and thereby reduce billing errors. Based upon
this review, management has decided to change its policy on collection and is
formally shifting the focus of the collection function to the more current
balances. Management believes this concentration on more current balances will
limit the amount of receivables that age. Consequently, the accounts that do age
will undoubtedly be receivables where collection will be difficult.
With this change in collection policy, management has developed a new estimate
of the allowance for doubtful accounts and revenue adjustments. Specifically,
management refined and changed their procedures used to estimate the
collectibility of its accounts receivable by increasing the allowance related to
balances over 180 days. As a result of this change in policy, the Company
recorded an adjustment to reduce revenue and accounts receivable by $14,642,000
and increase bad debt expense and the allowance for doubtful accounts by
$12,065,000. Also recorded was a provision for specific uncollectible accounts
totaling $1,529,000 and an increase to the allowance for doubtful accounts
related to the infusion sale and the exited businesses totaling $9,128,000.
NOTE E - LONG-TERM DEBT
The Company's credit agreement with a syndicate of banks was amended twice in
1997 and further amended in January, March, April and November of 1998. The
latest amendment required a $50 million permanent repayment of the loan upon
execution. The remaining indebtedness under the credit agreement was
restructured into a $288 million term loan and a $30 million revolving credit
facility with a maturity date of August 9, 2001. Term loan principal payments
are payable quarterly, in varying amounts, commencing on March 31, 1999 and
continuing through June 30, 2001. Also, the amended agreement requires that the
Company issue not less than $50 million of convertible subordinated debentures
by February 28, 1999, the net proceeds of which must be applied to the term
loan. Further, between the effective date of the latest amendment and the
earlier of February 28, 1999 or the issuance date of the convertible
subordinated debentures, the Company is subject to prepayments on the term loan
based on excess cash flow (as defined by the agreement).
<PAGE> 8
The credit agreement, as amended, allows the Company to make acquisitions under
an acquisition "basket" provision of up to $62 million, subject to certain
restrictions, that may be increased given certain levels of financial
performance by the Company. In 1999, the acquisition limit is subject to dollar
for dollar reduction by the amount of any unusual cash expenses (as defined by
the agreement) incurred and paid in 1999.
The credit agreement, as amended, permits the Company to elect one of two
variable rate interest options at the time an advance is made. The first option
is a rate expressed as 2.5% plus the higher of the Federal Funds Rate plus 0.50%
per annum or the Bank of America "reference" rate. The second option is a rate
based on the London Interbank Offered Rate ("LIBOR") plus an additional
increment of 3.5% per annum. The agreement requires payment of commitment fees
of 0.75% on the unused portion of the revolving credit facility.
Borrowings under the credit agreement are secured by substantially all the
assets of the Company and the agreement also contains numerous restrictions,
including, but not limited to, covenants requiring the maintenance of certain
financial ratios, limitations on additional borrowings, capital expenditures,
mergers, acquisitions and investments and restrictions on cash dividends, loans
and other distributions.
As of September 30, 1998, as required in its amended credit agreement, the
Company was in compliance with the credit agreement covenants.
In October 1998, the Company announced that it expects to make a distribution of
rights entitling stockholders to subscribe, on a prorata basis, for an aggregate
of $50 million principal amount of the Company's convertible subordinated
debentures. The Company has entered into a standby commitment agreement with one
of its institutional stockholders on behalf of certain of its affiliates
pursuant to which the stockholder has agreed, subject to certain conditions, to
purchase any of the debentures not purchased by others in the offering. A
registration statement for the rights offering is expected to be filed with the
Securities and Exchange Commission in the near future; the record date is set
for December 1, 1998.
NOTE F - EQUITY
The change in stockholders' equity, other than from net loss, resulted primarily
from the exercise of stock options. For the nine months ended September 30,
1998, proceeds from the exercise of stock options amounted to $1,647,000.
NOTE G - IMPAIRMENT OF INTANGIBLE ASSETS
The deterioration in the infusion therapy industry and the Company's decision to
withdraw from the infusion business in certain geographic markets served as
potential indicators of intangible asset impairment. Other potential indicators
of impairment identified by management include, among other issues, the
Company's depressed common stock price, failure to meet its already lowered
financial expectations, the threat of continued Medicare reimbursement
reductions, government investigations against the Company, slower than expected
progress in improving its revenue management process, and reported financial
difficulties within major managed care organizations with which the Company does
business which has resulted in collection difficulties.
<PAGE> 9
In the third quarter of 1998, management conducted an evaluation of the carrying
value of the Company's recorded intangible assets. Management considered current
and anticipated industry conditions, recent changes in its business strategies,
and current and anticipated operating results. The evaluation resulted in an
impairment charge of $71,452,000 of which $32,145,000 related to infusion
therapy and $39,307,000 related to respiratory/home medical equipment.
The impairment charge recognized for the infusion business line resulted
primarily from the deteriorating operating and industry trends and lower future
earnings expectations. The impairment recognized for the RT/HME business line
resulted primarily from the scheduled and potential Medicare reimbursement
reductions and to the adverse impact that withdrawal from the infusion business
in certain areas is expected to have on the RT/HME business. The Company had,
until recently, marketed itself as an integrated, full-service provider. The
Company's inability to provide infusion therapy in certain geographic areas may
result in the loss of RT/HME contract business.
Also included in the impairment charge is the write-off of $4,771,000 in
intangible assets primarily associated with the exit of the infusion business in
certain areas.
NOTE H - IMPAIRMENT OF LONG-LIVED ASSETS AND INTERNALLY DEVELOPED
SOFTWARE
One of the actions taken as a result of the management's new strategic direction
is the termination of the project to implement an enterprise resource planning
(ERP) system. Accordingly, the Company wrote off related software and other
capitalized costs of $7,548,000 in the third quarter of 1998. As part of the
decision to terminate the ERP project, management evaluated its current systems
to determine their long-term viability in the context of the Company's new
overall strategic direction. It was determined that the Company was at some risk
in continuing to run the infusion billing system on its current platform which
is no longer supported by the computer industry. To eliminate the risk, the
Company is currently converting the infusion system to the IBM AS/400 operating
platform on which the respiratory/home medical equipment system currently
operates. Also, the Company is now proceeding with a number of enhancements to
the systems, rendering certain previously developed modules obsolete. Further,
pharmacy and branch consolidations and closures resulted in a variety of
computer equipment that was no longer needed. Due to its age and technological
obsolescence, it was deemed to have no future value. As a result of these
actions, the Company recorded an impairment charge of $11,843,000.
NOTE I - OTHER SIGNIFICANT CHARGES
The Company recorded charges totaling $3,939,000 for severance, stay bonuses and
other employee costs (included in selling, distribution and administrative) and
a charge of $5,400,000 (included in cost of net revenues) to settle several
procurement contracts.
NOTE J - INCOME TAXES
Current income tax expense includes state tax amounts accrued and paid on a
basis other than or in addition to taxable income.
<PAGE> 10
At December 31, 1997 the Company had a federal net operating loss carryforward
of approximately $230,000,000 which will begin to expire in 2003. Additionally,
the Company has various state operating loss carryforwards which began to expire
in 1997. As a result of an ownership change in 1992 which met specified criteria
of Section 382 of the Internal Revenue Code, future use of a portion of the
federal and state operating loss carryforwards generated prior to 1992 are
limited to approximately $5,000,000 per year. Because of the annual limitation,
approximately $57,000,000 of the Company's net operating loss carryforwards may
expire unused.
NOTE K - PER SHARE AMOUNTS
<TABLE>
The following table sets forth the computation of basic and diluted per share
amounts:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net (loss) income $(194,701) $16,186 $(210,264) $(34,450)
Numerator for basic per
share amounts - (loss)
income available to common
stockholders $(194,701) $16,186 $(210,264) $(34,450)
Numerator for diluted per
share amounts - (loss)
income available to common
stockholders $(194,701) $16,186 $(210,264) $(34,450)
Denominator:
Denominator for basic per
share amounts - weighted
average shares 51,765 51,481 51,717 51,384
Effect of dilutive securities:
Employee stock options - 413 - -
-------- -------- -------- --------
Dilutive potential common
shares - 413 - -
-------- -------- -------- --------
Denominator for diluted per
share amounts - adjusted
weighted average shares 51,765 51,894 51,717 51,384
======== ======== ======== ========
Basic (loss) income pe share
amounts $ (3.76) $ 0.31 $ (4.07) $ (0.67)
======== ======== ======== ========
Diluted (loss) income per share
amounts $ (3.76) $ 0.31 $ (4.07) $ (0.67)
======== ======== ======== ========
Employee stock options excluded from the
computation of diluted per share
amounts:
Exercise price exceeds
average market price of
common stock 6,041,496 1,984,663 3,522,753 1,277,619
Other 23,671 - 78,487 513,720
--------- --------- --------- ---------
6,065,167 1,984,663 3,601,240 1,791,339
========= ========= ========= =========
Average exercise price per
share that exceeds average
market price of common stock $11.20 $19.99 $14.55 $21.48
====== ====== ====== ======
</TABLE>
<PAGE> 11
Due to the net losses incurred for the three months ended September 30, 1998 and
for the nine months ended September 30, 1998 and 1997, the impact of employee
stock options is antidilutive and there is no difference between basic and
diluted per share amounts for these periods.
NOTE L - COMMITMENTS AND CONTINGENCIES
The Company is engaged in the defense of certain claims and lawsuits, the
outcomes of which are not determinable at this time. The Company has insurance
policies covering potential losses from claims and lawsuits where such coverage
is available and cost effective. In the opinion of management, any liability
that might be incurred by the Company upon the resolution of these claims and
lawsuits will not, in the aggregate, have a material adverse effect on the
consolidated results of operations or financial position of the Company. The
Company is also in the process of responding to subpoenas from the United States
Attorney's office, as to which the Company is unaware of what claims or
proceedings, if any, may result.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995: The Company's business is subject to a
number of risks, some of which are beyond the Company's control. The Company has
described certain of those risks in this Form 10-Q and in previous documents
filed with the Securities and Exchange Commission (including the Current Report
on Form 8-K filed on June 26, 1997 and the Form 10-K filed on April 15, 1998).
Such reports may be used for purposes of the Private Securities Litigation
Reform Act of 1995 as readily available documents containing meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in any forward-looking
statements the Company may make from time to time. These risks include ongoing
issues pertaining to management stability and recruiting, the collectibility of
its accounts receivable, the cost of and the Company's ability to implement its
reorganization plan, healthcare reform and the effect of federal and state
healthcare regulations, the ongoing U.S. Attorney investigation regarding the
Company's billing practices, pricing pressures (including changes in
governmental reimbursement levels), the effectiveness of its information systems
and controls, the highly competitive market, recent losses, the concentration
and market power of large payors, the Company's high leverage and restrictions
on its borrowing capacity, dependence on relationships with third parties and
the availability and adequacy of insurance.
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Background: In June 1997, the Company announced that it retained an investment
banking firm as its financial advisor to explore strategic alternatives to
enhance shareholder value, including the possible sale, merger, or
recapitalization of the Company. During the first quarter of 1998, the Company
entered into a recapitalization agreement, however, the agreement was terminated
by mutual consent of the parties on April 3, 1998. By May 1998, the Company's
active exploration of strategic alternatives was terminated as a result of the
hiring of a new Chief Executive Officer and other key management executives and
the reconfiguration of the Board of Directors. This process and resulting
uncertainties are believed to have adversely affected the Company's financial
results.
In July 1998, after an evaluation of the business, the Company's new
management team announced its strategic plan, or "reorganization", to improve
the Company's performance. The key elements of the reorganization are: (1) no
change would be made to the fundamental nature of the business, (2) the Company
would withdraw from unprofitable components of the business, which would include
exiting the infusion therapy business in certain geographic areas (3) a
comprehensive cost reduction and capital conservation program would be
instituted, (4) the debt and capital structure would be reexamined, and (5) the
Company would pursue expansion through internal growth and acquisitions.
Significant actions taken by the Company's new management team since it
announced the reorganization include the change in management's collection
policy and a refinement of the accounts receivable collectibility estimation
methodologies as described below in Liquidity and Capital Resources - Accounts
Receivable, the sale of the California component of the infusion therapy
business ("the infusion sale"), the decision to exit the infusion therapy
business in Texas, Louisiana, West Virginia and Western Pennsylvania, the
decision to close or sell its operations in downstate New York, and the
consolidation or closure of certain small branch locations throughout the United
States (collectively, "the exited businesses"). Other significant actions
include, the termination of plans to proceed with the capital-intensive
implementation of an enterprise resource planning system, a significant
reduction of corporate and regional labor and general administrative costs and
the development of a comprehensive plan to capture cost savings in the areas of
purchasing, distribution and inventory management. Each of these measures is
discussed more fully below.
Results of Operations
- ---------------------
Net Revenues: Net revenues were $219.4 million for the three-month period
ended September 30, 1998 compared with $304.4 million for the same period in
1997. For the nine months ended September 30, 1998, net revenues decreased to
$710.5 million from $914.0 million for the same period last year. A number of
factors impacted revenue, the most significant of which was the reduction in
Medicare reimbursement rates. The Balanced Budget Act of 1997 contained several
provisions affecting reimbursement rates for products and services provided by
the Company. The reimbursement rates for home oxygen therapy were reduced by 25%
effective January 1, 1998 with an additional 5% reduction scheduled for 1999,
and the reimbursement rates for respiratory drugs were reduced by 5%. The
estimated impact of the rate reductions on revenues for the first nine months in
1998 was approximately $43.4 million; the impact of the additional 5% reduction
on 1999 revenues is estimated at approximately $9.0 million. Also included in
<PAGE> 13
the Balanced Budget Act of 1997 was a freeze on Consumer Price Index-based
reimbursement rate increases for 1998 through 2002. Further, authority has been
granted to the Secretary of Health and Human Services to reduce Medicare
reimbursement under an inherent reasonableness rulemaking procedure. In
September 1998, at least two products the Company provides were identified as
potential 1999 reimbursement reduction candidates (estimated impact on revenues
in 1999: $5.7 million) with many other products under review for future
reductions.
The Company's 1997 decisions to discontinue the medical supply, women's
health and nursing management service lines, which represented combined 1997
revenues of approximately $55.8 million, contributed to revenue declines in
1998. However, some small portion of the medical supply and nursing management
business has continued due to core- business customer requirements.
Additionally, the Company's planned exiting of unprofitable managed care
contracts represented approximately $25.0 million and $15.2 million in annual
revenues during 1997 and during the first nine months of 1998, respectively.
Also, the Company disposed of several unprofitable branch locations in
California and Arizona in the latter part of 1997 with annual revenues of
approximately $3.3 million.
As part of the reorganization, the Company reviewed its procedures for
estimating the collectibility of accounts receivable. The review resulted in an
adjustment to the estimate for unidentified revenue adjustments, and
accordingly, a charge of $14.6 million was recorded in the third quarter of 1998
(see Accounts Receivable). Such revenue adjustments result from (1) differences
in contract prices due to complex contract terms, a biller's lack of familiarity
with a contract, payor, or system price, (2) subsequent changes to estimated
revenue amounts for services not covered by a preexisting contract and (3)
failure subsequent to service delivery to qualify a patient for reimbursement
due to lack of written authorization or a missed filing or appeal deadline. The
nine-month period in 1997 reflects a $20.0 million charge recorded in the second
quarter to provide for estimated revenue adjustments.
Other conditions and factors had an adverse impact on net revenues in 1998,
but are difficult to quantify. First, the process discussed above to identify a
strategic alternative to enhance shareholder value created uncertainties that
affected the Company's ability to retain current business and secure new
business. Next, formidable competition at both the local and national levels
affected revenues and margins, especially in the infusion line. Finally, a
shortage in trained sales personnel also contributed to the decrease in
revenues.
<PAGE> 14
Gross Profit: Gross margins for the third quarter and the nine months
ended September 30, 1998 were 55.8% and 62.9%, respectively, compared to 65.6%
and 63.0% for the same periods in the prior year. The gross margins for the 1998
periods reflect the Medicare reimbursement rate reduction and the revenue
adjustment charge discussed above. Also reflected in the gross margins for the
third quarter and nine months periods of 1998 were $14.8 million in additional
charges consisting of $5.4 million estimated to settle certain procurement
contracts, $3.5 million to provide for an additional estimate of losses in the
Company's oxygen cylinders and $2.8 million to provide for additional losses and
obsolescence in inventory and patient service equipment as a result of the
Company upgrading its equipment quality standards. In addition, the Company
recorded a $3.5 million charge in order to write-down operational assets in
connection with its exiting of certain portions of its infusion therapy
business. The gross margins for the 1997 periods reflect the $20.0 million
revenue adjustment charge and a $23.0 million charge to provide for losses in
inventory and patient service equipment.
Selling, Distribution and Administrative: Selling, distribution and
administrative expenses as a percentage of net revenues were 74.8% and 62.8% for
the third quarter and first nine months of 1998, respectively, compared with
49.9% and 49.1% for the same periods in 1997. Reflected in the third quarter and
nine-month periods of 1998 are the following reorganization charges: $3.8
million loss on the infusion sale, $1.8 million to record certain costs
associated with the exited businesses (see Dispositions and Business
Combinations), $3.9 million in severance, stay bonuses and other employee costs
and $2.0 million in lease liability on vacant facilities due to consolidation
activities. Other charges recorded in the third quarter of 1998 include
additional amounts for legal fees and settlements.
In response to the reduction in revenues, management has taken steps to
reduce costs, the most significant of which is a reduction in the Company's
labor force. From September 30, 1997 to September 30, 1998, full-time equivalent
employees have been reduced by approximately 1,200. The labor force reduction
commenced in the fourth quarter of 1997 and continues through 1998. The labor
reductions made in the third quarter of 1998 resulted from the reorganization of
the Company's field operations into 16 geographic regions (previously 23) and
through the elimination of positions at the Company's corporate headquarters.
Impairment of Intangible Assets: The deterioration in the infusion therapy
industry and the Company's decision to withdraw from the infusion business in
certain geographic markets served as potential indicators of intangible asset
impairment. Other potential indicators of impairment identified by management
include, among other issues, the Company's depressed common stock value, failure
to meet its already lowered financial expectations, the threat of continued
Medicare reimbursement reductions, government investigations against the Company
(see Recent Developments), slower than expected progress in improving its
revenue management process, and reported financial difficulties within major
managed care organizations with which the Company does business which has
resulted in collection difficulties.
<PAGE> 15
In the third quarter of 1998, management conducted an evaluation of the
carrying value of the Company's recorded intangible assets. Management
considered current and anticipated industry conditions, recent changes in its
business strategies, and current and anticipated operating results. The
evaluation resulted in an impairment charge of $71.4 million of which $32.1
million related to infusion therapy and $39.3 million related to
respiratory/home medical equipment.
The impairment charge recognized for the infusion business line resulted
primarily from the deteriorating operating and industry trends and lower future
earnings expectations. The impairment recognized for the RT/HME business line
resulted primarily from the scheduled and potential Medicare reimbursement
reductions and to the adverse impact that withdrawal from the infusion business
in certain areas is expected to have on the RT/HME business. The Company had,
until recently, marketed itself as an integrated, full-service provider. The
Company's inability to provide infusion therapy in certain geographic areas may
result in the loss of RT/HME contract business.
Also included in the impairment charge is the write-off of $4.8 million in
intangible assets associated with the exited businesses (see Dispositions and
Business Combinations).
Impairment of Long-lived Assets and Internally Developed Software: One of
the actions taken as a result of management's new strategic direction is the
termination of the project to implement an enterprise resource planning (ERP)
system. Accordingly, the Company wrote off related software and other
capitalized costs of $7.5 million in the third quarter of 1998. As part of the
decision to terminate the ERP project, management evaluated its current systems
to determine their long-term viability in the context of the Company's new
overall strategic direction. It was determined that the Company was at some risk
in continuing to run the infusion billing system on its current platform which
is no longer supported by the computer industry. To mitigate the risk, the
Company is currently converting the infusion system to the IBM AS/400 operating
platform on which the respiratory/home medical equipment system currently
operates. Also, the Company is now proceeding with a number of enhancements to
the systems rendering certain previously developed modules obsolete. Further,
pharmacy and branch consolidations and closures rendered a variety of computer
equipment obsolete. Due to its age and technological obsolescence, it was deemed
to have no future value. As a result of these actions, the Company recorded an
impairment charge of $11.8 million.
The Company also recognized additional asset impairments of $1.4 million
in conjunction with the exited businesses (see Dispositions and Business
Combinations) and $1.4 million related to other facility closures and
consolidations.
<PAGE> 16
Provision for Doubtful Accounts: The provision for doubtful accounts as a
percentage of net revenues was 16.8% and 8.9% for the quarter and nine-month
periods ended September 30, 1998 as compared to 5.0% and 11.1% for the same
periods in the prior year. The 1998 periods reflect a charge of $12.1 million to
increase the allowance for doubtful accounts due to the change in management's
collection policy as described below (see Accounts Receivable). Also recorded in
the third quarter of 1998 are charges totaling $9.1 million to increase the
allowance for doubtful accounts on accounts receivable associated with the
infusion sale and the exited businesses (see Dispositions and Business
Combinations). The provision in the nine-month period in 1997 reflects a $55.0
million charge taken in the second quarter of 1997 to increase the allowance for
doubtful accounts.
Amortization of Intangible Assets: Amortization of intangible assets was
$3.5 million and $10.5 million for the third quarter and first nine months of
1998, respectively, compared to $4.3 million and $12.6 million for the same
periods last year. The decreases are due to the $133.5 million write-off of
impaired goodwill in the fourth quarter of 1997. The resulting reduction in
amortization expense was offset somewhat by a reduction in the amortization
period for a certain class of the Company's goodwill from 40 years to 20 years.
Interest Expense: Interest expense was $12.8 million and $35.9 million for
the three- and nine-month periods ended September 30, 1998, respectively,
compared to $12.3 million and $37.8 million for the same periods in 1997.
Reflected in the 1998 periods are lower long-term debt levels, offset by higher
effective interest rates, as compared to the 1997 periods.
Income Taxes: Income tax expense for the nine months ended September 30,
1998 was $2.5 million versus $9.9 million for the same period last year. The
decrease is attributable to valuation allowances that were recorded in prior
years. The recorded tax expense in 1998 includes state taxes payable on a basis
other than or in addition to taxable income.
As of December 31, 1997, the Company has substantial federal and state net
operating losses ("NOLs") which can be carried forward to offset taxable income
recognized by the Company in the future. Additionally, based on the first three
quarters of 1998, the Company estimates there being an additional federal
carryforward of approximately $130 million, which will expire in 2018. The
Company's ability to utilize those NOLs, however, is subject to Section 382 of
the Internal Revenue Code which provides that upon the occurrence of an
ownership change the benefits of NOLs can be reduced or eliminated. Based on
information as of early October about the Company's stockholdings, the Company
was approximately halfway toward an ownership change. Additional purchases of
stock in the Company by existing 5% shareholders or acquisitions of stock by new
5% shareholders could bring the Company closer to or, if large enough, could
cause an additional ownership change and thus trigger an additional Section 382
limitation on NOLs.
<PAGE> 17
Liquidity and Capital Resources
- -------------------------------
Operating Cash Flow: Cash provided by the Company's operations for the nine
months ended September 30, 1998 was $100.1 million versus $65.8 million for the
same period last year. This increase was achieved despite the significant
decrease in net income, after adding back the non-cash charges, between the two
periods. A significant reason for the improvement in operating cash flow was the
decrease in accounts receivable during the first nine months of 1998 as compared
to a significant increase in the same period in 1997 (see Accounts Receivable).
Also contributing to the increase in operating cash flow was a 48% reduction in
net purchases of patient service equipment. Additionally, less cash was used in
1998 due to the timing of payments against accounts payable and payroll and
other accrued liabilities. Cash flow was enhanced in 1997 with a $12.0 million
federal tax refund received in the first quarter.
Accounts Receivable: Accounts receivable before allowance for doubtful
accounts decreased by $111.8 million during the first nine months of 1998. The
decrease is attributable to the decline in net revenues, a high-level of bad
debt write-offs and revenue adjustments and strong cash collections.
In August 1998, management reviewed the historic performance and
collectibility of the Company's accounts receivable portfolio. Management also
reviewed its existing policies and procedures for estimating the collectibility
of its accounts receivable. In this review, management considered the continued
high-level of bad debt write-offs and revenue adjustments. Also considered were
initiatives introduced earlier in the year: a special quality assurance function
designed to improve workflow and billing accuracy, and software enhancements to
simplify the order-intake process and thereby reduce billing errors. Based upon
this review, management has decided to change their policy on collection and is
formally shifting the focus of the collection function to the more current
balances. Management believes this concentration on more current balances will
limit the amount of receivables that age. Consequently, the accounts that do age
will undoubtedly be receivables where collection will be difficult.
With this change in collection policy, management has developed a new
estimate of the allowance for doubtful accounts and revenue adjustments.
Specifically, management refined and changed their procedures used to estimate
the collectibility of its accounts receivable by increasing the allowance
related to balances over 180 days. As a result of this change in policy, the
Company recorded an adjustment to reduce revenue and accounts receivable by
$14.6 million and increase bad debt expense and the allowance for doubtful
accounts by $12.1 million. Also recorded was a provision for specific
uncollectible accounts totaling $1.5 million and an increase to the allowance
for doubtful accounts related to the infusion sale and the exited businesses
totaling $9.1 million (see Provision for Doubtful Accounts and Dispositions and
Business Combinations).
Dispositions and Business Combinations: As part of the new strategic
direction, management performed an extensive profitability study to identify
product lines and/or geographic markets as potential candidates for exit. Most
significant of the decisions arising from the study is the decision to withdraw
from the infusion business in California, Texas, Louisiana, West Virginia and
Western Pennsylvania. Shortly after the Company announced its plans to exit the
infusion line in these geographic markets, a buyer emerged for the California
locations. Crescent Healthcare, Inc. purchased substantially all the assets
(accounts receivable excluded) and business of the California infusion
<PAGE> 18
locations. The Company recorded a $3.8 million loss on the sale in the third
quarter of 1998. In the other locations where the Company has decided to exit
the infusion business, management is currently working with its business
partners to modify contracts and transfer patients to other providers and
expects the transition to be substantially complete by the end of 1998. The
operations of these infusion locations had revenues and gross profits of $35.2
million and $12.4 million, respectively, for the nine months ended September 30,
1998, compared to $50.8 million and $23.0 million for the same period in 1997.
Another significant action taken in conjunction with the reorganization was the
decision to withdraw from the downstate New York market in all product lines.
Revenues and gross profit in this market totaled approximately $12.6 million and
$7.9 million for the nine months ended September 30, 1998, respectively,
compared to $17.2 million and $9.6 million for the same period last year.
The Company periodically makes acquisitions of complementary businesses in
specific geographic markets. The cost of acquisitions that closed during the
nine-month period ended September 30, 1998 totaled approximately $2.1 million.
Long-term Debt: The Company's credit agreement with a syndicate of banks
was amended twice in 1997 and further amended in January, March, April and
November of 1998. The latest amendment required a $50 million permanent
repayment of the loan upon execution. The remaining indebtedness under the
credit agreement was restructured into a $288 million term loan and a $30
million revolving credit facility with a maturity date of August 9, 2001. Term
loan principal payments are payable quarterly, in varying amounts, commencing on
March 31, 1999 and continuing through June 30, 2001. Also, the amended agreement
requires that the Company issue not less than $50 million of convertible
subordinated debentures by February 28, 1999 (see Recent Developments), the net
proceeds of which must be applied to the term loan. Further, between the
effective date of the latest amendment and the earlier of February 28, 1999 or
the issuance date of the convertible subordinated debentures, the Company is
subject to prepayments on the term loan based on excess cash flow (as defined by
the agreement).
The credit agreement, as amended, allows the Company to make acquisitions
under an acquisition "basket" provision of up to $62 million, subject to certain
restrictions, that may be increased given certain levels of financial
performance by the Company. In 1999, the acquisition limit is subject to dollar
for dollar reduction by the amount of any unusual cash expenses (as defined by
the agreement) incurred and paid in 1999.
The credit agreement, as amended, permits the Company to elect one of two
variable rate interest options at the time an advance is made. The first option
is a rate expressed as 2.5% plus the higher of the Federal Funds Rate plus 0.50%
per annum or the Bank of America "reference" rate. The second option is a rate
based on the London Interbank Offered Rate ("LIBOR") plus an additional
increment of 3.5% per annum. The agreement requires payment of commitment fees
of 0.75% on the unused portion of the revolving credit facility.
<PAGE> 19
Borrowings under the credit agreement are secured by substantially all the
assets of the Company and the agreement also contains numerous restrictions,
including, but not limited to, covenants requiring the maintenance of certain
financial ratios, limitations on additional borrowings, capital expenditures,
mergers, acquisitions and investments and restrictions on cash dividends, loans
and other distributions.
As of September 30, 1998, as required in its amended credit agreement, the
Company was in compliance with the credit agreement covenants.
At September 30, 1998, borrowings under the credit agreement totaled $338
million.
Under the Indenture governing the Company's $200.0 million 9 1/2% Senior
Subordinated Notes due 2002, the Company's ability to incur indebtedness becomes
restricted at times when the Company's "Fixed Charge Coverage Ratio" (as defined
in the Indenture) is less than 3.0 to 1.0. Charges taken in the second and
fourth quarters of 1997 and in the third quarter of 1998 resulted in the Fixed
Charge Coverage Ratio being less than 3.0 to 1.0. This condition is expected to
continue at least through the third quarter of 1999. The Company has changed its
cash management procedures to avoid the need to incur indebtedness that would
otherwise require a modification of the terms of the Indenture and has
accumulated a cash balance of $95.7 million ($50 million of which must be used
to make the required loan prepayment described above) as of September 30, 1998.
The Company believes that cash provided by operations will be sufficient to
finance its current operations for at least the next 12 months or until the
borrowing restriction is eliminated.
Other Balance Sheet Changes: The decrease in accrued payroll and related
taxes and benefits at September 30, 1998, compared to December 31, 1997 is due
to the difference in the number of days' costs accrued at each period-end. At
December 31, 1997, other assets was primarily comprised of payments for
businesses acquired late in the year. The payments were then allocated to the
various underlying acquired assets in early 1998.
Year 2000 Issue: As the year 2000 approaches, an issue ("Year 2000 Issue")
impacting all companies has emerged regarding how existing application software
programs and operating systems can accommodate this date value. In brief, many
existing application programs in the marketplace were designed to accommodate a
two digit date position which represents the year (e.g., "95" is stored on the
system and represents the year 1995). Consequently, the year 1999 could be the
maximum date value that systems would be able to accurately process.
Beginning in late 1997, the Company conducted a comprehensive review of its
existing computer systems, including an assessment of the nature and potential
extent of the impact of the Year 2000 Issue. As a result, the Company has begun
the modification process of its software in order for its computer systems to
function properly in the year 2000 and thereafter. The Company is utilizing
internal resources to reprogram and test the software for the year 2000
modifications. The project is currently on schedule and the Company anticipates
all phases of the project, including the testing and implementation phases, to
be completed by December 31, 1998. Further, the Company's systems underwent two
external assessments of the Year 2000 Issue and received a "low" risk rating.
The total cost of the project is not expected to have a material effect on the
Company's results of operations; all costs are being expensed as incurred.
<PAGE> 20
Additionally, a formal process has been instituted to assess other
potential risks the Company may face in light of the Year 2000 Issue. Examples
of such issues include, but are not limited to, electronic interfaces with
external agents such as payors (including Medicare and Medicaid), banks and
suppliers. As a contingency, in the event of failure on the part of an external
agent, the exchange of data and payments can continue via paper documents and
other more-traditional methods. Potential internal operational issues include
date-sensitive security systems and elevators. Another area of potential risk is
with certain patient service equipment items that have microprocessors with date
functionality that could malfunction in the year 2000. Among other steps, the
Company has initiated formal communications with all its significant suppliers
of patient service equipment to ensure those third parties are also working to
remediate their own year 2000 issues, if applicable. If the Company is unable to
resolve all its Year 2000 issues with external agents, it may have a material
adverse effect on the Company's business, results of operations or financial
condition.
Expectations about future year 2000-related costs are subject to various
uncertainties that could cause the actual results to differ materially from the
Company's expectations, including the success of the Company in identifying
systems and programs that are not year 2000-ready, the nature and amount of
programming required to upgrade or replace each of the affected programs, the
availability, rate and magnitude of related labor and consulting costs and the
success of the Company's business partners, vendors and clients in addressing
the Year 2000 Issue.
Recent Developments: In October 1998, the Company announced that it expects
to make a distribution of rights entitling stockholders to subscribe, on a
prorata basis, for an aggregate of approximately $50 million principal amount of
the Company's convertible subordinated debentures. The Company has entered into
a standby purchase agreement with one of its institutional stockholders on
behalf of certain of its affiliates pursuant to which the stockholder has
agreed, subject to certain conditions, to purchase any of the debentures not
purchased by others in the offering. A registration statement for the rights
offering is expected to be filed with the Securities and Exchange Commission in
the near future; the record date is set for December 1, 1998.
On July 8, 1998, the Company issued a press release reporting that it had
received six subpoenas from the U. S. Attorney's office in Sacramento,
California, requesting documents related to the Company's billing practices. The
documents requested include those located at the Company's corporate
headquarters and offices in San Diego and Sacramento, California, and
Canonsburg, Pennsylvania. On July 29, 1998, the Company received another
subpoena requesting additional billing-related documents from its Sacramento
office. The Company is in the process of complying with the subpoenas.
The Company has experienced problems as the result of errors and
deficiencies in supporting documentation affecting a portion of its billings,
including billings under the Medicare and Medicaid programs. If the U.S.
Attorney were to conclude that such errors and deficiencies constituted criminal
violations, or were to make claims for the maximum amount potentially
recoverable as a result, the Company could face criminal charges and/or civil
claims for amounts that would be highly material to its business and financial
condition. Such amounts could include claims for treble damages. It is the
Company's position that the assertion of criminal charges or the assertion of
any such claims would be unwarranted. If such charges or claims were asserted,
the Company believes that it would be in a position to assert numerous defenses.
However, no assurance can be provided as to the outcome of any such possible
proceedings.
Presently, the Company is unaware of what claims or proceedings, if any,
the government may be contemplating with respect to these subpoenas.
<PAGE> 21
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and certain of its present and former officers and/or
directors are defendants in a class action lawsuit, In Re Apria
Healthcare Group Securities Litigation, filed in the U.S. District
Court for the Central District of California, Southern Division (Case
No. SACV98-217 GLT). This case is a consolidation of three similar
class actions filed in March and April, 1998. Pursuant to a Court
Order dated May 27, 1998, the plaintiffs in the original three class
actions filed a Consolidated Amended Class Action Complaint on August
6, 1998. The Amended Complaint purports to establish a class of
plaintiff shareholders who purchased the Company's common stock
between May 22, 1995 and January 20, 1998. No class has been certified
at this time. The Amended Complaint alleges, among other things, that
the defendants made false and/or misleading public statements
regarding the Company and its financial condition in violation of
federal securities laws. The Amended Complaint seeks compensatory and
punitive damages as well as other relief.
Two similar class actions were filed during July, 1998 in the
Superior Court for the State of California for the County of Orange:
Schall v. Apria Healthcare Group Inc., et al. (Case No. 797060) and
Thompson v. Apria Healthcare Group Inc., et al. (Case No. 797580).
These two actions were consolidated by a Court Order dated October 22,
1998. Pursuant to that Order, a consolidated and amended complaint
must be filed by December 7, 1998. The Company anticipates that
allegations similar to those asserted in the Amended Complaint in the
federal action will be asserted in the consolidated state action,
although the claims will be founded on state law, as opposed to
federal law.
The Company believes that it has meritorious defenses to the
plaintiffs' claims in all of these class actions, and it intends to
vigorously defend itself in both the federal and state cases. In the
opinion of the Company's management, the ultimate disposition of these
class actions will not have a material adverse effect on the Company's
financial condition or results of operations.
<PAGE> 22
On July 8, 1998, the Company issued a press release reporting
that it had received six subpoenas from the U. S. Attorney's office in
Sacramento, California, requesting documents related to the Company's
billing practices. The documents requested include those located at
the Company's corporate headquarters and offices in San Diego and
Sacramento, California, and Canonsburg, Pennsylvania. On July 29,
1998, the Company received another subpoena requesting additional
billing-related documents from its Sacramento office. The Company is
in the process of complying with the subpoenas.
The Company has experienced problems as the result of errors and
deficiencies in supporting documentation affecting a portion of its
billings, including billings under the Medicare and Medicaid programs.
If the U.S. Attorney were to conclude that such errors and
deficiencies constituted criminal violations, or were to make claims
for the maximum amount potentially recoverable as a result, the
Company could face criminal charges and/or civil claims for amounts
that would be highly material to its business and financial condition.
Such amounts could include claims for treble damages. It is the
Company's position that the assertion of criminal charges or the
assertion of any such claims would be unwarranted. If such charges or
claims were asserted, the Company believes that it would be in a
position to assert numerous defenses. However, no assurance can be
provided as to the outcome of any such possible proceedings.
Presently, the Company is unaware of what claims or proceedings,
if any, the government may be contemplating with respect to these
subpoenas.
Items 2-3. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders of the Company on July 28,
1998.
(b) Directors re-elected at the Annual Meeting for a term
expiring in 2001:
Philip R. Lochner, Jr.
Beverly Benedict Thomas
Members of the Board whose terms expire in 1999:
David L. Goldsmith
Leonard Green
Richard H. Koppes
Members of the Board whose terms expire in 2000:
Philip L. Carter
H.J. Mark Tompkins
Ralph V. Whitworth
<PAGE> 23
(c) Matters Voted Upon at Annual Meeting:
Election of Directors - The Company's Board currently
consists of nine directors and is divided into three classes
with staggered three year terms. Stockholder voting results
for the two directors re-elected were as follows:
FOR WITHHELD
--------- ---------
Philip R. Lochner, Jr. 43,402,444 1,031,250
Beverly Benedict Thomas 43,402,743 1,030,951
Item 5. Other Information
David H. Batchelder was elected to the Board of Directors at the July
28, 1998 Board meeting immediately following the Annual Meeting. His
term will expire in 2001.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Reference
------- ---------
10.1 Standby Purchase Agreement dated as of November 3, 1998
between Apria Healthcare Group Inc. and Relational
Investors, LLC, on behalf of the entities named
therein.
10.2 Registration Rights Agreement dated as of November
3, 1998 between Apria Healthcare Group Inc. and
Relational Investors, LLC, on behalf of the entities
named therein.
10.3 Amended and Restated Credit Agreement dated as of
November 13, 1998 between Apria Healthcare Group Inc.
and certain of its subsidiaries and Bank of America
National Trust and Savings Association, NationsBank,
N.A., and other financial institutions.
16.1 Letter dated July 8, 1998 from Ernst & Young, LLP
addressed to the Securities and Exchange Commission.
Incorporated by reference to the Company's Current
Report on Form 8-K, filed on July 6, 1998.
27.1 Financial Data Schedule.
<PAGE> 24
(b) Reports on Form 8-K:
1. The Company filed a Current Report on Form 8-K, dated July
6, 1998, with the Securities and Exchange Commission
reporting that the Company had elected to change the
independent auditors for the Company's fiscal year ending
December 31, 1998. The Company reported the following
specific information:
(i) Effective July 6, 1998, the Company dismissed Ernst &
Young, LLP as its independent auditors for the fiscal
year ending December 31, 1998.
(ii) The reports of Ernst & Young, LLP on the financial
statements for each of the past two years contained no
adverse opinion or disclaimer of opinion, and no such
report was qualified or modified as to uncertainty,
audit scope or accounting principles.
(iii) The decision to change independent auditors was not
recommended or approved by the Audit Committee of the
Company's Board of Directors.
(iv) There were no disagreements on any matter of accounting
principles or practices, financial statement
disclosure, or auditing scope or procedure, between the
Company and its independent auditors during the
Company's two most recent fiscal years or during the
year-to-date period ended July 6, 1998.
2. The Company filed a Current Report on Form 8-K, dated July
15, 1998, with the Securities and Exchange Commission
reporting that the Company had engaged Deloitte & Touche LLP
as the principal accountants to audit the Company's
financial statements for the fiscal year ending December 31,
1998.
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APRIA HEALTHCARE GROUP INC.
---------------------------
Registrant
November 16, 1998 /s/JAMES E. BAKER
----------------------------
James E. Baker
Vice President, Controller
(Chief Accounting Officer)
<PAGE> 26
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
10.1 Standby Purchase Agreement dated as of November 3, 1998
between Apria Healthcare Group Inc. and Relational
Investors, LLC, on behalf of the entities named
therein.
10.2 Registration Rights Agreement dated as of November
3, 1998 between Apria Healthcare Group Inc. and
Relational Investors, LLC, on behalf of the entities
named therein.
10.3 Amended and Restated Credit Agreement dated as of
November 13, 1998 between Apria Healthcare Group Inc.
and certain of its subsidiaries and Bank of America
National Trust and Savings Association, NationsBank,
N.A., and other financial institutions.
16.1 Letter dated July 8, 1998 from Ernst & Young, LLP
addressed to the Securities and Exchange Commission.
Incorporated by reference to the Company's Current
Report on Form 8-K, filed on July 6, 1998.
27.1 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.1
STANDBY PURCHASE AGREEMENT
dated as of November 3, 1998
between
APRIA HEALTHCARE GROUP INC.
and
RELATIONAL INVESTORS, LLC,
ON BEHALF OF THE ENTITIES NAMED HEREIN
$50,000,000
10% Convertible Subordinated Debentures due 2004
<PAGE> 2
STANDBY PURCHASE AGREEMENT
This Standby Purchase Agreement, dated as of November 3, 1998 ("the
Agreement"), is entered into by and between Relational Investors, LLC, a
Delaware limited liability company (together with its affiliates, "Relational"),
on behalf of each of the entities set forth on Annex A hereto (collectively with
Relational, the "Investors") and Apria Healthcare Group Inc., Delaware
corporation (the "Company").
WHEREAS, the Company purposes to distribute to its stockholders rights
("Rights") to purchase approximately $50,000,000 aggregate principal amount of
its 10% Convertible Subordinated Debentures due 2004, with the exact aggregate
principal amount being equal to the number of shares of common stock outstanding
on the record date for distribution of the Rights (the "Debentures"). The
Debentures will be issued pursuant to an indenture to be entered into between
the Company and the trustee thereunder (the "Trustee"). The offering of the
Debentures pursuant to the Rights is referred to herein as the "Rights
Offering;"
WHEREAS, each Right will include a Basic Subscription Privilege, pursuant
to which each holder of 1,000 Rights will have the right to purchase $1,000
principal amount of Debentures at the subscription price of $1,000 per Debenture
(the "Subscription Price") and an Oversubscription Privilege by which persons
who exercise their Basic Subscription Privilege in full may subscribe to
purchase Debentures not purchased by other holders of Rights, subject to
proration; provided that Debentures will only be issued in minimum denominations
of $1,000 in principal amount and integral multiples thereof;
WHEREAS, the Company will file with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 covering the
registration of the Debentures and the shares of Common Stock, par value $0.001
per share (the "Common Stock"), of the Company issuable upon conversion of the
Debentures under the Securities Act of 1933, as amended (the "1933 Act"),
including the related preliminary prospectus or prospectuses. Promptly after the
Registration Statement is declared effective by the Commission, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in such prospectus that is
omitted from such registration statement at the time it becomes effective but
that will be deemed to be part of such registration statement pursuant to
paragraph (b) of Rule 430A is referred to as "Rule 430A Information." Each
prospectus used before such registration statement becomes effective is herein
called a "preliminary prospectus." Such registration statement, including the
<PAGE> 3
exhibits and schedules thereto, if any, and the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the
time it becomes effective, and including the Rule 430A Information, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall be deemed to include the Rule 462(b) Registration Statement.
The final prospectus, including the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, in the form that it was
first furnished to stockholders of the Company in connection with the Rights
Offering is herein called the "Prospectus." For purposes of this Agreement, all
references to the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this
Agreement to financial statements and schedules and other information which is
"contained," "included" or "stated" in the Registration Statement, any
preliminary prospectus or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act")
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be;
WHEREAS, in order to help assure the success of the Rights Offering, the
Investors are willing to commit to exercise all of their Basic Subscription
Privileges and their Oversubscription Privileges to subscribe for an aggregate
principal amount of $50,000,000 of Debentures, subject to the terms and
conditions set forth herein; and
<PAGE> 4
NOW THEREFORE, in consideration of the mutual agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and the Investors do hereby agree as
follows:
SECTION 1.
The Rights Offering; Standby Purchase Commitment.
(1) Subject to the terms and conditions set forth herein, on or before 5:00
p.m. on the expiration date of the Rights (the "Expiration Date"), each of the
Investors will take all such action as may be required to duly and effectively
exercise all of the Basic Subscription Privileges to which it may be entitled,
and to exercise such Investor's proportionate share of the Oversubscription
Privileges such that the aggregate amount of Debentures for which the
Oversubscription Privileges are exercised by the Investors is equal to
$50,000,000 principal amount of the Debentures less the Investors' aggregate
Basic Subscription Privileges.
The obligation of each Investor to purchase the Debentures pursuant to the
Rights Offering is subject to the Debentures containing such terms as are set
forth in the summary of Terms attached as Annex B hereto and the purchase price,
interest rate and conversion price not being any less favorable to the Investors
then those set forth in such summary of Terms.
(2) The Company hereby agrees to pay the Investors a fee equal to $1
million (the "Standby Commitment Fee") as compensation for agreeing to exercise
their Basic Subscription Privileges and their Oversubscription Privileges as
specified in Section 1(a). The Standby Commitment Fee shall be payable at the
Closing.
SECTION 2.
Representations and Warranties.
(a) The Company represents and warrants to each Investor and agrees with
each Investor, as follows:
(1) The Company meets the requirements for use of Form S-3 under the
1933 Act. The Registration Statement and rule 462(b) Registration Statement will
be prepared by the Company in conformity with the requirements of the 1933 Act
and the 1933 Act Regulations and will be filed with the Commission under the
1933 Act. Prior to the commencement of the Rights Offering, each of the
Registration Statement and any Rule 462(b) Registration Statement will become
effective under the 1933 Act and no stop order suspending the effectiveness of
the Registration Statement or any Rule 462(b) Registration Statement or the
qualification of the Indenture will have been issued and no proceedings for that
purpose will have been instituted or be pending or, to the knowledge of the
Company, contemplated by the Commission, and any request on the part of the
Commission for additional information will have been complied with. A copy of
each of the Registration Statement and the Rule 462(b) Registration Statement
will be delivered by the Company to each Investor. At the respective times the
Registration Statement or any Rule 462(b) Registration Statement become
effective, the Registration Statement and the Rule 462(b) Registration Statement
will comply in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and at the time any
post-effective amendments to the Registration Statement or any Rule 462(b)
Registration Statement become effective, any such post-effective amendments will
comply in all material respects with the requirements of the 1933 Act and the
<PAGE> 5
1933 Act Regulations and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. Neither the Prospectus nor any
amendments or supplements thereto, at the time the Prospectus or any such
amendment or supplement is issued, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Prospectus, as
amended or supplemented, at the Expiration Date will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Indenture will be qualified under and comply in all material respects with the
Trust Indenture Act of 1939, as amended (the "1939 Act") and the rules and
regulations of the Commission under the 1939 Act (the "1939 Act Regulations").
The representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the Company in
writing by either of the Investors expressly for use in the Registration
Statement or Prospectus or to that part of the Registration Statement which
shall constitute the Statement of Eligibility and Qualification under the 1939
Act (Form T-1) of the Trustee. Each preliminary prospectus and the prospectus
filed as part of the Registration Statement as originally filed or as part of
any amendment thereto, or when filed pursuant to Rule 424 under the 1933 Act,
will comply when so filed in all material respects with the 1933 Act Regulations
and each preliminary prospectus and the final Prospectus will be identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(2) The accountants who certify the financial statements and
supporting schedules included in the Registration Statement will be independent
public accountants as required by the 1933 Act and the 1933 Act Regulations.
(3) The financial statements and the supporting schedules included in
the Registration Statement and the Prospectus will present fairly the financial
position of the Company and its consolidated subsidiaries as at the dates
indicated and the results of their operations for the periods specified; said
financial statements will have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis (except as may
otherwise be indicated therein) ("GAAP"); and the supporting schedules included
in the Registration Statement will present fairly the information required to be
stated therein.
(4) Since September 30, 1998, (A) there has been no material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business, (B)
there have been no transactions entered into by the Company or its subsidiaries,
other than those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one enterprise, and
(C) there has been no dividend or distribution of any kind (other than the
distribution of the Rights ) declared, paid or made by the Company on any class
of its capital stock.
<PAGE> 6
(5) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement; and the Company
is duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure to so qualify would not have a material adverse effect
on the condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise (a "Material Adverse Effect").
(6) Each subsidiary of the Company (as such term is defined in Rule
405 of the 1933 Act Regulations) (each a "Subsidiary" and collectively, the
"Subsidiaries"), has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to so
qualify would not have a Material Adverse Effect; except as otherwise disclosed
in the Registration Statement, all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(7) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Company's quarterly report on Form 10Q for the
period ended June 30, 1998, filed with the Commission (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Registration Statement
or pursuant to the exercise of convertible securities, options or warrants
referred to in the Registration Statement). The shares of issued and outstanding
Common Stock have been duly authorized and validly issued and are fully paid and
non-assessable; the Common Stock conforms to all statements relating thereto
contained in the Registration Statement; and the issuance of the Debentures and
the shares of Common Stock issuable upon conversion of the Debentures will not
be subject to preemptive or other similar rights.
<PAGE> 7
(8) The Debentures to be issued and sold pursuant to the Rights will
have been duly authorized, and when issued, authenticated and delivered pursuant
to the Rights, against payment of the consideration set forth therein, will have
been duly executed, authenticated, issued and delivered and will constitute
legal, valid and binding obligations of the Company, subject, as to enforcement,
to bankruptcy, insolvency, reorganization or other similar laws of general
applicability now or hereafter in effect relating to or affecting creditors'
rights and to general equity principles, and will be entitled to the benefits
provided by the Indenture, which will be substantially in the form included as
an exhibit to the Registration Statement; the Indenture will have been duly
authorized and duly qualified under the 1939 Act, and when executed and
delivered by the Company and the Trustee (assuming due authorization, execution
and delivery by the Trustee), will constitute a legal, valid and binding
instrument enforceable in accordance with its terms subject, as to enforcement,
to bankruptcy, insolvency, reorganization or other similar laws of general
applicability now or hereafter in effect relating to or affecting creditors'
rights and to general equity principles; and the Debentures and the Indenture
will conform in all material respects to the descriptions thereof in the
Registration Statement and the Prospectus.
(ix) Upon issuance and delivery of the Debentures in accordance with
this Agreement and the Indenture, the Debentures shall be convertible at the
option of the holder thereof for shares of Common Stock in accordance with the
terms of the Debentures and the Indenture; the shares of Common Stock initially
issuable upon conversion of the Debentures will have been duly authorized and
reserved for issuance, and when issued and delivered, pursuant to the terms of
the Indenture, will be validly issued, fully paid and non-assessable; such
shares are sufficient in number to meet the conversion requirements of the
Debentures; and
(x) Neither the Company nor any of its Subsidiaries is in violation of
its charter or by-laws or, except where such default would not have a Material
Adverse Effect, in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them may be bound, or to
which any of the material property or assets of the Company or any subsidiary is
subject; and the execution, delivery and performance of this Agreement, the
Indenture, the Debentures and the consummation of the transactions contemplated
herein and therein and compliance by the Company with its obligations hereunder
and thereunder have been duly authorized by all necessary corporate action and
will not conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any material
property or assets of the Company or any of its subsidiaries pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
to which the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the material property or assets of the
Company or any subsidiary is subject, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
applicable law, rule, regulation, judgment, order or administrative or court
decree.
<PAGE> 8
(xi) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or any of
its subsidiaries, which is required to be disclosed in the Registration
Statement (other than as disclosed therein); all pending legal or governmental
proceedings to which the Company or any of its subsidiaries is a party or of
which any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not material to
the Company and its subsidiaries considered as one enterprise; and there are no
contracts or documents of the Company or any of its subsidiaries which are
required to be filed as exhibits to the Registration Statement by the 1933 Act
or by the 1933 Act Regulations which have not been so filed.
(xii) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the offering,
issuance or sale of the Debentures hereunder or the issuance of shares of Common
Stock upon conversion thereof, except such as may be required under the 1933 Act
or the 1933 Act Regulations, the 1939 Act or the 1939 Act Regulations or state
securities laws and the qualification of the Indenture under the 1939 Act.
(xiii) This Agreement has been duly authorized, executed and delivered
by the Company. This Agreement constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' right generally. The Board of Directors of the
Company, by action of the Special Finance Committee, has authorized and approved
this Agreement and the transactions relating thereto.
(xiv) The Company and its subsidiaries have good title to all real and
personal properties owned by them, in each case free and clear of all liens,
encumbrances and debts except (A) for property pledged and/or mortgaged pursuant
to the Credit Agreement among the Company, Bank of America, NationsBank and the
other lenders thereunder, as amended (the "Credit Agreement"), (B) as do not
materially interfere with the use made and proposed to be made of such
properties, (C) as set forth in the Registration Statement or (D) as could not
reasonably be expected to have a Material Adverse Effect.
(xv) Except as set forth in the Registration Statement or this
Agreement, there are no persons with registration or other similar rights to
have any securities (debt or equity) of the Company registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933
Act.
(xvi) The documents to be incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or are filed with the
Commission, complied and will comply as to form in all material respects with
the requirements of the 1934 Act and the rules and regulations of the Commission
under the 1934 Act (the "1934 Act Regulations"), and, when read together with
the other information in the Prospectus, at the time the Registration Statement
and any amendments thereto becomes effective and at the Closing, will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
<PAGE> 9
(xvii) Except as disclosed in the Registration Statement, and except
as to matters which, individually or in the aggregate, would not have a Material
Adverse Effect, neither the Company nor any of its subsidiaries has any material
liabilities or obligations (absolute, accrued, contingent or otherwise, known or
unknown), other than liabilities incurred in the ordinary course of business
subsequent to December 31, 1997.
(xviii) Except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect; (i) the Company and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approval (the
"Permits") of all governmental entities necessary for the operation of the
businesses of the Company and its subsidiaries, (ii) the Company and its
Subsidiaries are in compliance with the terms of the Permits and (iii) except as
disclosed in the Registration Statement, the businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance, or
regulation of any governmental entity.
(xix) Each of the Company and its Subsidiaries has filed all tax
returns required to be filed by any of them and has paid (or the Company has
paid on its behalf) or has set up an adequate reserve for the payment of, all
taxes required to be paid in respect of the periods covered by such returns. The
information contained in such tax returns is true, complete and accurate in all
material respects. Neither the Company nor any of its Subsidiaries is delinquent
in the payment of any tax, assessment or governmental charge except to the
extent of reserves established therefor. No deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its subsidiaries
that have not been finally settled or paid in full except to the extent of
reserves established therefor. No requests for waivers of the time to assess any
such tax are pending and there are no outstanding audit examinations, deficiency
litigations or refund litigations with respect to the Company or any of its
subsidiaries. The federal income tax returns of the Company and each of its
Subsidiaries consolidated in such returns have been examined by and settled with
the Internal Revenue Service for all years through December 31, 1995.
(xx) The Company and its Subsidiaries have not knowingly engaged in
activities which are prohibited under federal Medicare and Medicaid statutes,
including without limitation 42 U.S.C. 1320a-7b, or related state or local
statutes or regulations or which otherwise constitutes fraud.
(xxi) Except as set forth in the Registration Statement, and except
for such matters as will not, individually or in the aggregate, have a Material
Adverse Effect, the Company and each of its Subsidiaries (i) have obtained all
applicable permits, licenses and other authorizations which are required to be
obtained under all applicable Environmental Laws, (ii) are in compliance with
all terms and conditions of such required permits, licenses and authorizations
and also are in compliance with all other applicable requirements of
Environmental Laws and (iii) and are not aware of nor have received notice of
any past activity, practice, incident or action which will give rise to any
common law or statutory liability or otherwise form the basis of any claim,
action, suit or proceeding, against the Company or any of its Subsidiaries based
on or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling or the emission, discharge or release
into the environment, or any pollutant, contaminant or hazardous or toxic
material or waste.
<PAGE> 10
(xxii) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses in
similar industries.
(b) Any certificate identified as a certificate under this Agreement and
signed by any officer of the Company and delivered to the Investors or to
counsel for the Investors shall be deemed a representation and warranty by the
Company to each Investor as to the matters covered thereby.
(c) Each Investor severally represents and warrants to the Company as of
the date hereof, and agrees with the Company, as follows:
(i) This Agreement has been duly authorized, executed and delivered by
such Investor.
(ii) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and compliance by such
Investor with its obligations hereunder have been duly authorized by all
necessary action and will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any material property or assets of such Investor or any of its
subsidiaries pursuant to, any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which such Investor is a party or
by which it may be bound, or to which any of the material property or assets of
such Investor is subject, nor will such action result in any violation of the
provisions of the charter or by-laws, or comparable governing documents of such
Investor or any applicable law, rule, regulation, judgment, order or
administrative or court decree.
(iii) Such Investor has, or has available to it, sufficient funds for
the performance of its obligations pursuant to this Agreement.
<PAGE> 11
SECTION 3.
Closing.
--------
(a) On or prior to 10:00 a.m. on the Expiration Date, a closing (the
"Closing") shall be had at the executive offices of the Company at 3560 Hyland
Avenue, Costa Mesa, California or at such other place as the parties may agree.
At the Closing, (i) the Company shall deliver, or cause to be delivered, to the
Investors (A) each of the documents and agreements necessary to evidence
satisfaction of the conditions to the Investors' obligations as set forth herein
and (B) the Standby Commitment Fee, by wire transfer of funds to the accounts
specified by the Investors; and (ii) each Investor shall (A) deliver to the
Company all documents necessary for the exercise of its Basic Subscription
Privileges and Oversubscription Privileges in accordance with Section 1 hereto
and (B) make payment in full of the exercise price for its Basic Subscription
Privileges, by wire transfer of funds to the subscription agent for the Rights
Offering.
(b) As promptly as practicable, but in no event later than five business
days following the Expiration Date, the Company shall notify each Investor of
the principal amount of Debentures required to be purchased by it pursuant to
its Oversubscription Privileges. Not later than three business days following
receipt of such notice, each Investor shall make payment in full of the full
purchase price for the foregoing Debentures by wire transfer of funds to the
subscription agent for the Rights Offering.
(c) Delivery of the Debentures to the Investors shall by made by the
subscription agent for the Rights Offering in accordance with the terms and
provisions of the Rights Offering.
SECTION 4.
Covenants of the Company.
-------------------------
The Company covenants with each Investor as follows:
(a) The Company shall make all necessary filings with respect to the
transactions contemplated by this Agreement, under the 1933 Act and the 1934 Act
and the rules and regulations thereunder, under applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto. The Company will comply with the
requirements of Rule 430A and will notify the Investors immediately, and confirm
the notice in writing, (i) when any post-effective amendment to the Registration
Statement shall become effective, or any supplement to the Prospectus or any
amended Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission on the Registration Statement, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
and (v) of the suspension of the qualification of the Debentures or the shares
of Common Stock issuable upon the conversion of the Debentures, for offering or
sale in any jurisdiction, or the initiation or threatening of any proceedings
for any such purpose. The Company will promptly effect the filings necessary
pursuant to Rule 424(b) and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing under
Rule 424(b) was received by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
<PAGE> 12
(b) The Company will prepare and file the Registration Statement or any
amendments thereto (including any filing under Rule 462(b)) or any amendment or
supplement to either the prospectus included in the Registration Statement at
the time it becomes effective or to the Prospectus, whether pursuant to the 1933
Act, the 1934 Act or otherwise, will furnish the Investors with copies of the
Registration Statement and any such amendment or supplement a reasonable amount
of time prior to such proposed filing or use, as the case may be, and will not
file any such amendment or supplement or use any such prospectus to which any
Investor or counsel for the Investors shall reasonably object, provided that
such objection shall not prevent the filing of any such amendment or supplement
which, in the opinion of counsel for the Company, is required to be filed by the
requirements of the 1933 Act or the 1933 Act Regulations.
(c) If any event shall occur as a result of which it is necessary, in the
opinion of counsel for the Investors, to amend or supplement the Prospectus in
order to make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if for any other reason
it shall be necessary to amend or supplement the Prospectus in order to comply
with the 1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act
Regulations, the Company will forthwith amend or supplement the Prospectus (in
form and substance satisfactory to counsel for the Investors and in compliance
with the 1933 Act and the 1933 Act Regulations) so that, as so amended or
supplemented, the Prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary to make the statement therein,
in the light of the circumstances existing at the time it is delivered to a
purchaser, not misleading and will comply with the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations, and the Company will
furnish to the Investors a reasonable number of copies of such amendment or
supplement.
(d) The Company will use the net proceeds received by it from the sale of
the Debentures for the repayment of indebtedness under the Credit Agreement.
<PAGE> 13
(e) If, at the time that the Registration Statement becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A of the
1933 Act Regulations, then immediately following the execution of this
Agreement, the Company will prepare, and file or transmit for filing with the
Commission in accordance with such Rule 430A and Rule 424(b) of the 1933 Act
Regulations, copies of an amended Prospectus, or, if required by such Rule 430A,
a post-effective amendment to the Registration Statement (including an amended
Prospectus), containing all information so omitted.
(f) The Company will reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligations to issue Common Stock upon conversion of the
Debentures.
(g) The Company and its Subsidiaries shall afford to the Investors and
their accountants, counsel and other representatives reasonable access during
normal business hours (and at such other times as the parties may mutually
agree) throughout the period prior to the Closing to all of its properties,
books, contracts, commitments, records and personnel and, during such period,
the Company shall furnish promptly to the Investors (i) a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of federal or state securities laws and (ii) all other information concerning
its business, properties and personnel as such Investor may reasonably request.
(h) The Company shall enter into an amendment to its Credit Agreement with
the other parties thereto on substantially the terms set forth on Annex C. The
Company also shall seek to amend the Credit Agreement as it deems necessary or
appropriate so that none of the transactions contemplated hereby, including,
without limitation, the conversion of the Debentures into Common Stock by any
Investor, will constitute or result in a Default ( as defined in the Credit
Agreement) or an Event of Default ( as defined in the Credit Agreement) under
the Credit Agreement as so amended and otherwise as the Company or the Investors
may deem appropriate.
(i) The Company shall take all action (including, if required, redeeming
all of the outstanding rights or amending or terminating the Rights Agreement,
dated as of June 30, 1997 (the "Rights Agreement"), by and among the Company,
Norwest Bank Minnesota, N.A. (the "Rights Agent") and U.S. Stock Transfer
Corporation, as amended, so that the entering into of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
grant of any rights to any person under the Rights Agreement to purchase or
receive additional shares of capital stock of the Company or enable or require
the rights to be exercised, distributed or triggered in any way. The Company
shall take such required action to provide that no right to exercise with
respect to any awards granted under the Abbey Amended and Restated 1992 Stock
Incentive Plan shall or may be accelerated as a result of the transactions
contemplated by this Agreement.
<PAGE> 14
(j) The Company will reimburse the Investors for all out-of-pocket expenses
reasonably incurred by them in connection with this Agreement and the
consummation of the transactions contemplated hereby, whether or not the
transactions contemplated in this Agreement are consummated, including without
limitation reasonable fees and disbursements of counsel.
SECTION 5.
Conditions of Investors' Obligations.
The obligations of the Investors hereunder are subject to the satisfaction
or waiver, on or prior to the date of the Closing (the "Closing Date"), of the
following conditions:
(a) The Registration Statement, including any Rule 462(b) Registration
Statement, has become effective and at the Closing Date no stop order suspending
the effectiveness of the Registration Statement shall have been issued under the
1933 Act or proceedings therefor initiated or threatened by the Commission. A
prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) of the 1933 Act Regulations within the
prescribed time period and prior to the Closing Date the Company shall have
provided evidence satisfactory to the Investors of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the 1933 Act Regulations.
(b) The representations and warranties made by the Company shall be true
and correct in all material respects and the Company shall have performed in all
material respects all obligations required to be performed by it prior to the
Closing.
(c) On the Closing Date the Investors shall have received:
(i) The favorable opinion, dated as of the Closing Date, of Robert S.
Holcombe, Esq., substantially in the form of Annex D hereto.
(ii) Payment by wire transfer of the Standby Commitment Fee to the
accounts specified by the Investors.
(iii) A letter from Gibson, Dunn & Crutcher stating that nothing has
come to their attention that would lead them to believe that the Registration
Statement or any amendment thereto, including the Rule 430A Information (except
for the financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom and the Form T-1, as to
which counsel need make no statement), at the time such Registration Statement
or any such amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for the financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which counsel need make no
statement), at the time the Prospectus was issued, at the time any such amended
or supplemented prospectus was issued or at the Closing Date, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(iv) A certificate of the Chairman, the President or a Vice President
of the Company and of the chief financial or chief accounting officer of the
Company, dated as of the Closing Date, to the effect that (i) there has been no
Material Adverse Effect since the execution of this Agreement, (ii) the
representations and warranties in Section 2 hereof are true and correct in all
material respects with the same force and effect as though expressly made at and
as of Closing Date, (iii) the Company has complied in all material respects with
all agreements and satisfied all conditions required on its part to be performed
or satisfied at or prior to Closing Date pursuant to this Agreement.
<PAGE> 15
(v) From Deloitte & Touche, a letter dated such date, in form and
substance satisfactory to the Investors, to the effect that (i) they are
independent certified public accountants with respect to the Company and its
subsidiaries within the meaning of the 1933 Act and the 1933 Act Regulations;
(ii) it is their opinion that the consolidated financial statements and
supporting schedules included in the Registration Statement and covered by their
opinions therein comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1933 Act Regulations; (iii)
based upon limited procedures set forth in detail in such letter, nothing has
come to their attention which causes them to believe that (A) the interim
unaudited financial statements of the Company and its subsidiaries included in
the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations or are not presented in conformity with GAAP applied on a basis
substantially consistent with that of the audited consolidated financial
statements included in the Registration Statement (except as may otherwise be
indicated therein), (B) the unaudited amounts of revenue, earnings and earnings
per common and equivalent share set forth under "Selected Consolidated Financial
Data" in the Prospectus were not determined on a basis substantially consistent
with that of the audited consolidated financial statements included in the
Registration Statement, or (C) at a specified date not more than three days
prior to the Closing Date, there has been any change in the capital stock of the
Company or any increase in the consolidated long-term debt of the Company and
its subsidiary or any decrease in consolidated net current assets or net assets
as compared with the amounts shown in the balance sheet incorporated by
reference in the Registration Statement or, during the period from October 1,
1998 to a specified date not more than three days prior to the Closing Date,
there were any decreases, as compared with the corresponding period in the
preceding year, in consolidated revenues, net income or net income per share of
the Company and its subsidiaries, except in all instances for changes, increases
or decreases which the Registration Statement and the Prospectus disclose have
occurred or may occur and except as otherwise set forth in such letter; and (iv)
in addition to the examination referred to in their opinions and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included in the
Registration Statement and Prospectus and which are specified by the Investors,
and have found such amounts, percentages and financial information to be in
agreement with the relevant accounting, financial and other records of the
Company and its Subsidiaries identified in such letter.
(d) At the Closing Date:
(i) No preliminary or permanent injunction or other order by any court
or other judicial or administrative body of competent jurisdiction which
prohibits or prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
(ii) An amendment to the Credit Agreement shall have been executed and
delivered by all parties thereto and the Investors and the Company shall be
reasonably satisfied that none of the transactions contemplated hereby,
including, without limitation, the conversion of the Debentures into Common
Stock by any Investor, will constitute a Default or an Event of Default under
the Credit Agreement as so amended.
(iii) The Company shall have obtained all consents and approvals from
and shall have made all filings and registrations with, any person, including
but not limited to any governmental entity, necessary to be obtained or made in
order to consummate the transactions contemplated by this Agreement.
<PAGE> 16
(iv) The Company shall have issued certificates evidencing the
Debentures and executed and delivered to each Investor a receipt of payment for
the amount subscribed for by such Investor.
(v) The Company shall have executed and delivered or caused to be
delivered the Registration Rights Agreement substantially in the form of Annex E
hereto.
(e) At the Closing Date, the Debentures and the Common Stock issuable upon
conversion thereof shall have been approved for listing on the New York Stock
Exchange, subject only to official notice of insurance.
SECTION 6.
Indemnification.
----------------
(a) The Company agrees to indemnify and hold harmless each Investor and
each person, if any, who controls any Investor within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage or expense
whatsoever, promptly after submission for payment, arising out of or resulting
from the transactions contemplated hereunder, including, but not limited to, (A)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the statement
therein, in the light of the circumstances under which they were made, not
misleading, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, which were not made in
reliance upon and in conformity with written information furnished to the
Company by the Investors expressly for use in the Registration Statement (or any
amendment thereto); (B) any breach or default by the Company of any of the
representations or warranties under this Agreement or any other document
contemplated hereby, (C) any breach by the Company of any of the covenants or
agreements (other than breaches of covenants to be performed by the Company
after the Closing) of the Company under this Agreement or any other document
contemplated hereby or (D) any litigation or proceedings brought by any
shareholder of the Company (whether such action is brought in such shareholder's
name or derivatively on behalf of the Company) in respect of the transactions
contemplated by this Agreement or the Registration Statement or any other
document contemplated hereby (collectively, the "Indemnifiable Investor
Claims").
<PAGE> 17
(ii) against any and all loss, liability, claim, damage or expense
whatsoever, promptly after submission for payment, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any Indemnifiable Investor Claim; provided that
(subject to Section 6(d) below) any such settlement is effected with the written
consent of the Company (which shall not be unreasonably withheld); and
(iii) against any and all expense whatsoever, promptly after
submission for payment (including, subject to Section 6(c) hereof, the
reasonable fees and disbursements of counsel for the indemnified party),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any
Indemnifiable Investor Claim, to the extent that any such expense is not paid
under (i) or (ii) above; provided, however, that this indemnity agreement shall
not apply to any loss, liability, claim, damage or expense to the extent arising
out of any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished to
the Company by any Investor expressly for use in the Registration Statement (or
any amendment thereto), including the Rule 430A Information, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(b) Each Investor severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage or expense described in the indemnity contained
in subsection (a)(i)(A) of this Section, promptly after submission for payment,
but only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, or any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
<PAGE> 18
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
except to the extent the indemnifying party is materially prejudiced thereby,
and the indemnifying party may participate at its own expense in the defense of
any such action. If the indemnifying party so elects within a reasonable time
after receipt of such notice, it may assume the defense of such action, with
counsel chosen by it and approved by the indemnified parties in such action,
unless such indemnified parties reasonably object to such assumption on the
ground that there may be legal defenses available to them which are different
from, conflicting with or in addition to those available to such indemnifying
party. Absent any difference or conflict referred to in the preceding sentence,
if an indemnifying party assumes the defense of such action, the indemnifying
parties shall not be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action. In no
event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel retained for local procedural
and practice matters) separate from their own counsel for any indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification could be sought under this
Section 6 (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party, (iii) does not impugn the reputation of any
indemnified party and (iv) does not restrict any indemnified party from engaging
in any activity.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 6(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
<PAGE> 19
(e) Expenses incurred by an indemnified party in defense or settlement of
any claim that shall be subject to a right of indemnification hereunder shall be
advanced by the Company promptly upon submission for payment, provided that the
Company shall have received an undertaking by or on behalf of such indemnified
party to repay such amount to the extent that it shall be determined ultimately
that the indemnified party is not entitled to be indemnified hereunder.
SECTION 7.
Representations, Warranties and Agreements to Survive Delivery.
---------------------------------------------------------------
All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto and identified as such, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any Investor
or controlling person, or by or on behalf of the Company, and shall survive
delivery of the Debentures to the Investors.
SECTION 8.
Termination of Agreement.
-------------------------
(a) This Agreement may be terminated at any time prior to the Closing Date:
(i) by written agreement of the Company and the
Investors;
(ii) by either the Company or any Investor, by giving written notice
of such termination to other parties, if Closing shall not have occurred on or
prior to February 28, 1999 (unless the failure to consummate the Closing by such
date shall be due to the failure of the party seeking to terminate this
Agreement to have fulfilled any of its obligations under this Agreement);
(iii) by any Investor, by giving written notice to the Company, if
since the date of this Agreement or since the respective dates as of which
information is given in the Prospectus, any event has occurred or failed to
occur which would have a Material Adverse Effect, whether or not arising in the
ordinary course of business, or if there has been a breach by the Company of any
representation, warranty, covenant or agreement that would give rise to the
failure of the conditions to the obligations of the Investors set forth in
Section 5(b), which breach cannot be cured after the giving of written notice to
the Company of such breach and prior to the Closing Date;
(iv) by either the Company or any Investor in the event that any
governmental authority shall have issued a final, non-appealable order, decree
or ruling or taken any other final, non-appealable action restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable;
7
<PAGE> 20
(v) by the Company, if the Company's Board of Directors determines in
good faith that such action is in the best interests of the Company and its
stockholders.
(b) If this Agreement is terminated pursuant to this Section 8 such
termination shall be without liability of any party to any other party except as
provided in Section 4(j) and Section 8(c) hereof, except that nothing herein
will relieve any party from liability for breach of this Agreement prior to such
termination.
(c) If this Agreement is terminated:
(i) by either party prior to the effective date of the Registration
Statement, then, provided that the Investors shall not be in breach of their
obligations as set forth herein, the Investors shall be entitled to
reimbursement of their expenses as set forth in Section 4(j);
(ii) by the Company on or after the effective date of the Registration
Statement pursuant to Section 8(a)(v), other than as a result of an alternative
debt or equity financing proposal, then the Company shall promptly pay to the
Investors an amount equal to one-half of the Standby Commitment Fee in addition
to reimbursement of Investors' expenses as set forth in Section 4(j).
(iii) by the Company on or after the effective date of the
Registration Statement pursuant to Section 8(a)(v) as a result of an alternative
debt or equity financing proposal, then the Company shall promptly pay to the
Investors an amount equal to the Standby Commitment Fee in addition to
reimbursement of Investors' expenses as set forth in Section 4(j).
If this Agreement has been terminated and the Company, within six
months of the date of such termination, enters into an agreement or letter of
intent providing for, or consummates, any debt or equity financing not
contemplated herein, then the Company shall promptly pay to the Investors a fee
equal to the Standby Commitment Fee less any amount paid pursuant to subclause
(ii) or (iii) of the preceding sentence; provided, however, that no such amount
shall be payable in the event this Agreement is terminated by the Investors as a
result of Section 8(a)(iii).
<PAGE> 21
SECTION 9.
Notices.
--------
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
express courier service (charges prepaid), five days after being mailed to the
recipient (postage prepaid) or upon confirmation if transmitted by any standard
form of telecommunication. Notices shall be directed as follows:
To Relational Investors, LLC:
Relational Investors, LLC
4330 La Jolla Village Drive,
Suite 220
San Diego, California 92122
Telephone: (619) 597-9400
Telecopy: (619) 597-8200
Attn: John Sullivan
with a copy to:
Sullivan & Cromwell
1888 Century Park East
21st Floor
Los Angeles, California 90067-1725
Telephone: (310) 712-6600
Telecopy: (310) 712-8800
Attn: Alison Ressler
To the Company:
Apria Healthcare Group Inc.
3560 Highland Avenue
Costa Mesa, California 92626
Telephone: (714) 427-2000
Telecopy: (714) 427-4332
Attn: Robert S. Holcombe, Esq.
with a copy to:
Gibson Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Telephone: (213) 229-7000
Telecopy: (213) 229-7520
Attn: Andrew E. Bogen, Esq.
<PAGE> 22
SECTION 10.
Parties.
--------
This Agreement shall each inure to the benefit of and be binding upon
the Investors and the Company and their respective successors. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Investors and the Company and their
respective successors and the controlling persons and officers and directors and
their heirs and legal representatives, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Investors and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Debentures from any Investor shall
be deemed to be a successor by reason merely of such purchase.
SECTION 11.
Governing Law.
--------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California applicable to agreements made and to be
performed in said state.
SECTION 12.
Miscellaneous.
--------------
(a) Any provision of this Agreement may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and each of the Investors, or in the case of a waiver,
by the party against whom the waiver is to be effective. No failure or delay by
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
(b) No party to this Agreement may assign any of its rights or obligations
under this Agreement without the prior written consent of the other parties
hereto except that the Investors may without such consent assign their rights
hereunder to one or more of their respective affiliates.
(c) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same agreement.
(d) The heading references herein are for convenience purposes only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
APRIA HEALTHCARE GROUP INC.
By: /s/ Philip L. Carter
-------------------------------
Title: Chief Executive Officer
RELATIONAL INVESTORS, LLC
By: /s/ Ralph V. Whitworth
-------------------------------
Authorized Signatory
<PAGE> 24
Annex A
RELATIONAL ENTITIES
Debentures to
Entity be Purchased
------ ------------
Relational Investors, L.P. $50,000,000, less the
amounts allocated by
Relational to the
entities listed below*
Relational Fund Partners, L.P. *
Relational Coast Partners, L.P. *
Relational Partners, L.P. *
David H. Batchelder Trust *
*Less amounts allocated to another Investor.
<PAGE> 25
Annex B
SUMMARY TERM SHEET
Issuer: Apria Healthcare Group, Inc., a
Delaware corporation.
Issue: Approximately $50 million
principal amount of 10% Convertible
Subordinated Debentures due 2004, the ("Debentures").
Par Value/Price: $1,000 per Note.
Use of Proceeds: Repayment of bank debt.
Offering: Via registered tradable rights
offering.
Ranking: The Debentures are general, unsecured
obligations of the Company,
subordinate in right of payment to
all existing and future Senior
indebtedness of the Company and pari
passu with existing Senior
Subordinated Notes.
Interest: 10% per annum, payable semi-annually;
cumulative and, if not paid on any
interest payment date, additional
interest will accumulate on such
unpaid amount. Interest payable
prior to the anniversary of the date
of issuance of the Debentures in the
year 2002 may, at the election of the
Company, be accrued and paid in cash
on such anniversary. Interest shall
be payable on any such accrued
interest at a rate of 10% per annum.
Redemption Rights:
At option of
the Issuer: The Debentures are redeemable,
in whole or in part, at the Company's
option, at any time on or after the
third anniversary of issuance, upon
not less than 30 nor more than 60
days' notice, at the redemption
prices (expressed as percentages of
the principal amount) of 104%, 102%
and 100% in years 2002, 2003 and
2004, respectively, plus, in each
case, accrued and unpaid interest
including interest on such accrued
and unpaid interest, to the date of
redemption.
<PAGE> 26
At option of
the Holder: Upon the occurrence of a
Change of Control the Company will be
required to offer to purchase the
Debentures at a purchase price equal
to 101% of the aggregate principal
amount thereof, plus accrued and
unpaid interest to the date of
purchase.
Mandatory: On the fifth anniversary of the
initial date of Issuance the Issuer
will redeem all of the Debentures
then outstanding at a redemption
price equal to par value plus accrued
and unpaid interest to the date of
redemption.
Conversion Rights: The Debentures are convertible at the
option of the holder at any time
after June 1, 1999 and prior to the
close of business on the maturity
date, unless previously redeemed or
repurchased, into shares of common
stock at the conversion price equal
to 10% above the average trading
price of the Common Stock of the
Company for the ten trading days
ending three days prior to the
effective date of the Registration
Statement (the "Conversion Price");
provided, however, if such average
trading price (a) is equal to or less
than $3.6363, the Conversion Price
shall be deemed to equal $4.00 and
(b) is equal to or greater than
$4.5454, the Conversion Price shall
be deemed to equal $5.00.
<PAGE> 27
Annex C
[Credit Agreement Amendment Term Sheet]
[To be supplied by Apria]
<PAGE> 28
Annex D
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. The Company has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and to enter into and perform its obligations under this Agreement and
the Stockholders' Agreement.
3. To the best of such counsel's knowledge and information, the Company is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which a failure to so qualify would have a
material adverse effect on the business of the Company and its subsidiaries
considered as one enterprise.
4. The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus in the column "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to this
Agreement or pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of convertible
securities, options or warrants referred to in the Prospectus) and the shares of
issued and outstanding Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable. The shares of Common Stock issuable upon
conversion of the Debentures have been duly authorized and validly reserved by
the Company for issuance upon such conversion in the manner provided in the
Indenture, will be validly issued, fully paid and nonassessable.
5. Each Subsidiary has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the [State of Delaware], has
corporate power and authority under such laws to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and, to the best of such counsel's knowledge and information, is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which a failure to so qualify would have a material
adverse effect on the business of the Company and its subsidiaries considered as
one enterprise; except as otherwise disclosed in the Registration Statement, all
of the issued and outstanding capital stock of each Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and, to the best
of such counsel's knowledge and information, is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.
<PAGE> 29
6. The issuance of the Debentures and the Common Stock issuable upon
conversion of the Debentures is not subject to preemptive or other similar
rights arising by operation of law, under the charter or by-laws of the Company
or, to the best of such counsel's knowledge and information, otherwise.
7. The Debentures to be issued and sold by the Company pursuant to this
Agreement and the Rights have been duly authorized by requisite corporate action
on the part of the Company, and when executed and authenticated and paid for by
the Investors, will be valid and binding obligations of the Company entitled to
the benefits of the Indenture and enforceable against the Company in accordance
with their terms, except to the extent that enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, and by general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); and the Debentures, the Rights and Indenture
conform as to legal matters in all material respects to the descriptions thereof
in the Prospectus.
8. The Indenture has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement, enforceable against the Company in
accordance with its terms, except to the extent that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity); the Indenture has been duly qualified
under the 1939 Act.
9. The Standby Purchase Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement, enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and by general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
10. The Stockholders' Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement, enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and by general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
<PAGE> 30
11. The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of such counsel's
knowledge and information, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been issued
under the 1933 Act or proceedings therefor initiated or threatened by the
Commission.
12. At the time the Registration Statement became effective and at the
Closing Date, the Registration Statement (other than the financial statements
and supporting schedules included herein, as to which no opinion need be
rendered) complied as to form in all material respects with the requirements of
the 1933 Act, the 1933 Act Regulations, the 1939 Act and the 1939 Act
Regulations.
13. The Debentures, the Common Stock issuable upon the conversion of the
Debentures and the Indenture conform in all material respects as to legal
matters to the description thereof contained in the Prospectus, and the form of
certificate used to evidence the Common Stock is in due and proper form and
complies with all applicable statutory requirements.
14. There are no legal or governmental proceedings pending or, to the best
of their knowledge and information after due inquiry, threatened which are
required to be disclosed in the Registration Statement, other than those
disclosed therein, and all pending legal or governmental proceedings to which
the Company or any subsidiary is a party or to which any of their property is
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, are, considered in the
aggregate, not material.
15. To the best of such counsel's knowledge and information after due
inquiry, (a) there are no contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or referred to in
the Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, the descriptions thereof or references thereto are correct and
(b) no default exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, notes, lease or other instrument so
described, referred to, filed or incorporated by reference.
16. The execution, delivery and performance of this Agreement, the
Stockholders' Agreement and the Indenture and the consummation of the
transactions contemplated herein and therein and compliance by the Company with
its obligations hereunder and thereunder will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or any of its subsidiaries
is a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the charter or
by-laws of the Company, or any applicable law, administrative regulations or
administrative or court decree.
17. Each document filed pursuant to the 1934 Act (other than the financial
statements and supporting schedules included therein, as to which no opinion
need be rendered) and incorporated or deemed to be incorporated by reference in
the Prospectus complied when so filed as to form in all material respects with
the 1934 Act and the 1934 Act Regulations.
In rendering such opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent he deems proper, on
certificates of responsible officers of the Company and public officials.
Very truly yours,
<PAGE> 1
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
dated as of November 3, 1998
between
APRIA HEALTHCARE GROUP INC.
and
RELATIONAL INVESTORS, LLC,
ON BEHALF OF THE ENTITIES NAMED HEREIN
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 3, 1998, between
Apria Healthcare Group Inc., a Delaware corporation (the "Company") and
Relational Investors, LLC, a Delaware limited liability company (together with
its affiliates, "Relational"), on behalf of each of the entities set forth on
Annex A to the Standby Purchase Agreement (as defined below) (collectively with
Relational, the "Investors") .
W I T N E S S E T H :
WHEREAS, the Company proposes to distribute to its stockholders rights
("Rights") to purchase approximately $50,000,000 aggregate principal amount of
its 10% Convertible Subordinated Debentures due 2004, with the exact aggregate
principal amount being equal to the number of shares of common stock outstanding
on the record date for distribution of the Rights (the "Debentures"). The
offering of the Debentures pursuant to the Rights is referred to herein as the
"Rights Offering";
WHEREAS, the parties hereto entered into a Standby Purchase Agreement
dated as of November 3, 1998 (the "Standby Purchase Agreement"), pursuant to
which the Investors agreed to subscribe to purchase all Debentures not purchased
by other holders of Rights;
WHEREAS, the Company hereby agrees to grant the Investors the
registration rights contained herein in consideration of their agreement to
purchase all Debentures not purchased by other holders of Rights; and
WHEREAS, the parties hereto deem it in their best interests and in the
best interests of the Company to provide for certain matters with respect to the
governance of the Company and desire to enter into this Agreement in order to
effectuate that purpose.
<PAGE> 3
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I. Certain Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"affiliate" shall mean with respect to any Person, (a) any Person
which directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such Person, (b) any Person
who is a director or executive officer, (i) of such Person, (ii) of any
subsidiary of such Person, or (iii) of any Person described in the foregoing
clause (a), or (c) any spouse, parent, sibling, mother-in-law, father-in-law,
brother-in-law, sister-in-law, aunt, uncle, first cousin or direct descendant of
any Person described in the foregoing clause (b). For purposes of this
definition, "control" of a Person shall mean the power, direct or indirect, (i)
to vote or direct the voting of 50% or more of the outstanding shares of voting
Capital Stock of such Person, or (ii) to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Agreement" shall mean this Agreement as in effect on the date hereof
and as hereafter from time to time amended, modified or supplemented in
accordance with the terms hereof.
"Closing Date" shall have the meaning specified in
the Standby Purchase Agreement.
"Common Stock" shall mean the Common Stock, par value $0.001 per
share, of the Company.
"Company" shall have the meaning assigned to such
term in the preamble.
"Company Securities" shall have the meaning assigned to such term in
Section 2.1(g).
"Credit Agreement" shall mean that Credit Agreement dated as of August
9, 1996, between the Company and certain of its subsidiaries, Bank of America,
National Trust and Savings Association, Nationsbank of Texas, N.A. and other
financial institutions from time to time party, as amended.
"Exchange Act" shall mean, as of any date, the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
"Holder Request" shall have the meaning assigned to such term in
Section 2.1(a).
<PAGE> 4
"initial shares" shall have the meaning assigned to such term in
Section 2.3(e).
"NASD" means the National Association of Securities Dealers, Inc., or
any successor regulatory body exercising similar functions.
"Person" shall mean an individual or a corporation, limited liability
company, association, partnership, joint venture, organization, business,
individual, trust, or any other entity or organization, including a government
or any subdivision or agency thereof.
"Public Offering" shall mean the sale of shares of Common Stock to the
public subsequent to the date hereof pursuant to a registration statement under
the Securities Act which has been declared effective by the SEC (other than a
registration statement on Form S-8 or any other successor form).
"Registrable Securities" shall mean the following:
(a) all shares of Common Stock (i) outstanding on the date hereof or
hereafter acquired by any Investor or its affiliates or (ii) issuable under
warrants, options or convertible securities outstanding on the date hereof
or hereafter issued to any Investor or its affiliates, including, without
limitation, the Debentures; and
(b) any shares of Common Stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing clause
(a) by way of a pay- in-kind dividend, stock dividend or stock split or in
connection with a combination or subdivision of shares, reclassification,
recapitalization, merger, consolidation or other reorganization of the
Company.
As to any particular Registrable Securities that have been issued,
such securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144 under the Securities Act, (iii) they shall have
been otherwise transferred or disposed of by the Investors, (iv) the Company
shall have received a written opinion of counsel reasonably acceptable to the
Investors or no action advice from the SEC to the effect that such securities
may be sold by the Investors without the requirement of registration or
qualification under the Securities Act or (v) they shall have ceased to be
outstanding.
<PAGE> 5
"Registration Expenses" shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article III hereof,
including, without limitation, all SEC, stock exchange or NASD registration and
filing fees, all fees and expenses of complying with all applicable federal and
state securities laws and blue sky laws (including the reasonable fees and
disbursements of underwriters' counsel in connection with blue sky
qualifications and NASD filings), all fees and expenses of the transfer agent
and registrar for the Registrable Securities, all printing expenses, the fees
and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, and the
reasonable fees and disbursements of one firm of counsel retained by each
Investor participating in the registration, but excluding underwriting discounts
and commissions and applicable transfer and documentary stamp taxes, if any,
which shall be borne by the seller of the securities in all cases.
"SEC" shall mean the Securities and Exchange
Commission.
"Securities Act" shall mean, as of any date, the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
ARTICLE II. Registration Rights.
Section II.1. Demand Registrations.
(a) At any time after the first anniversary of the Closing Date, and
until the later of (i) the fifth anniversary of the Closing Date and (ii) such
time as the Investors own less than 10.0% of the outstanding Common Stock of the
Company (assuming, for such purpose, the conversion of all outstanding
Debentures), one or more Investors (the "Requesting Investors") may request in
writing that the Company effect the registration under the Securities Act of all
or part of their Registrable Securities, specifying in the request the number
and types of Registrable Securities to be registered by each such holder and the
intended method of disposition thereof (such notice is hereinafter referred to
as a "Holder Request"). Upon receipt of such Holder Request, the Company will
promptly give written notice of such requested registration to all other holders
of Registrable Securities, which other holders shall have the right, subject to
the provisions of Section 2.1(h) hereof, to include the Registrable Securities
held by them in such registration and thereupon the Company will, as
expeditiously as possible, use its best efforts to effect the registration under
the Securities Act of:
(i) the Registrable Securities which the Company
has been so requested to register by the Requesting
Investors; and
<PAGE> 6
(ii) all other Registrable Securities which the Company has been
requested to register by any other holder thereof (the "Other Holders" and,
together with the Requesting Investors, the "Selling Holders") by written
request given to the Company within 30 calendar days after the giving of
such written notice by the Company.
all to the extent necessary to permit the disposition of the Registrable
Securities so to be registered pursuant to an Underwritten Offering or by such
other method of disposition as the Requesting Investors may specify in the
Holder Request; provided, however, that the Company shall not be obligated to
file a registration statement pursuant to any Holder Request under this Section
2.1(a);
(A) Unless the Company shall have received requests for such
registration with respect to Registrable Securities (i) constituting
at least 20% of the Registrable Securities (assuming, for the purpose
of calculating such percentage, the conversion of all outstanding
Debentures) and (ii) having a market value of at least $5.0 million;
or
(B) Within a period of 6 months after the effective date of any
other registration statement relating to any registration request
under this Section 2.1(a); or
(C) Within three (3) months of the effective date of any
registration statement for equity securities of the Company (other
than on Form S-8 or Form S-4 or any successor form).
(b) Notwithstanding the foregoing provisions of Section 2.1(a), and
except as provided in Section 2.1(h), the Company shall not be obligated to file
more than an aggregate of two (2) registration statements pursuant to this
Section 2.1.
(c) If the Company proposes to effect a registration requested
pursuant to this Section 2.1 by the filing of a registration statement on Form
S-3 (or any successor short-form registration statement), the Company will
comply with any request by the managing underwriter to effect such registration
on another permitted form if such managing underwriter advises the Company that,
in its opinion, the use of another form of registration statement is of material
importance to the success of such proposed offering, provided that the
incremental additional cost of using such other form is borne by the Requesting
Holder.
<PAGE> 7
(d) A registration requested pursuant to this Section 2.1 shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective and remained effective in compliance with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement until such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (unless the failure to so dispose of such
Registrable Securities shall be caused solely by reason of a failure on the part
of the Selling Holders); provided that such period need not exceed 60 days; (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason not attributable solely to the
Selling Holders or (iii) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than solely by reason of a
failure on the part of the Selling Holders.
(e) The Company will pay all Registration Expenses in connection with
each of the registrations of Registrable Securities effected by it pursuant to
this Section 2.1.
(f) Subject to any existing commitments of the Company, the Requesting
Investors shall have the right to select the investment bank (or investment
banks) that shall manage the offering (collectively, the "managing underwriter")
involving a registration under this Section 2.1; provided that such managing
underwriter is reasonably acceptable to the Company.
(g) Whenever a requested registration pursuant to this Section 2.1
involves a firm commitment underwriting (an "Underwritten Offering"), the only
shares that may be included in such Underwritten Offering are (i) Registrable
Securities, and (ii) securities of the Company which are not Registrable
Securities, but which are includable by the holders thereof upon exercise
"demand" or "piggyback" registration rights similar to those applicable to
Registrable Securities pursuant to Sections 2.1 or 2.2 or securities offered for
sale by the Company ("Company Securities").
(h) If a registration pursuant to this Section 2.1 involves an
Underwritten Offering and the managing underwriter shall advise the Company
that, in its judgment, the number of shares proposed to be included in such
Underwritten Offering exceeds the number which can be sold in such offering so
as to be reasonably likely to have an adverse effect on the price, timing or
distribution of the securities offered in such offering, then the Company will
promptly so advise each holder of Registrable Securities and Company Securities
that has requested registration, and the Company Securities, if any, shall first
be excluded from such Underwritten Offering to the extent necessary to meet such
limitation; and if further exclusions are necessary to meet such limitation,
Registrable Securities requested to be registered pursuant to Section 2.1(a)(i)
or Section 2.1(a)(ii) shall be excluded pro rata, based on the respective
numbers of shares of Common Stock as to which registration shall have been
requested by such Persons. If the number of Registrable Securities requested to
be registered pursuant to Section 2.1(a)(i), but that are excluded from
registration pursuant to this Section 2.1(h), is equal or greater to 25% of the
total number of Registrable Securities requested to be so registered, then such
registration by the Company shall not count as a registration for the purposes
of Section 2.1(b) only.
<PAGE> 8
(i) It is hereby further agreed that with respect to any registration
requested pursuant to this Section 2.1 the Company may defer the filing or
effectiveness of any registration statement related thereto (or cause sales to
cease under any previously filed registration statement) for a reasonable period
of time not to exceed 120 days after such request if (A) the Company is, at such
time, working on an underwritten public offering of Common Stock and is advised
by its managing underwriter(s) that such offering would in its or their opinion
be adversely affected by such filing or (B) the Company determines, in its good
faith and reasonable judgment, that any such filing or the offering of any
Registrable Securities would materially impede, delay or interfere with any
material proposed financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction involving the Company; provided
that, with respect to clause (B), the Company gives the Requesting Investors
written notice of such determination; and provided further, however, with
respect to both clauses (A) and (B), the Company shall not be entitled to
postpone such filing or effectiveness (or to cause sales under an existing
registration statement to cease) if, within the preceding 12 months, it had
effected two postponements pursuant to this paragraph (i) and, following such
postponements, the Registrable Securities to be sold pursuant to the postponed
registration statements were not sold (for any reason).
Section II.2. Piggyback Registrations.
(a) If the Company at any time proposes to register any of its equity
or debt securities under the Securities Act (other than a registration on Form
S-4 or S-8 or any successor or similar forms thereto), whether or not for sale
for its own account, on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give written notice to all the holders of Registrable Securities promptly of its
intention to do so, describing such securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such registration will be in
connection with an underwritten offering of Registrable Securities and, if so,
the identity of the managing underwriter and whether such offering will be
pursuant to a "best efforts" or "firm commitment" underwriting and (y) the range
of prices (net of any underwriting commissions, discounts and the like) at which
the Registrable Securities are reasonably expected to be sold) if such
disclosure is reasonably acceptable to the managing underwriter. Upon the
written request of any such holder delivered to the Company within 30 calendar
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all the Registrable
Securities that the Company has been so requested to register; provided,
however, that:
<PAGE> 9
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to
each holder of Registrable Securities who made a request as provided herein
and thereupon the Company shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of the holders of the
Registrable Securities to request that such registration be effected as a
registration under Section 2.1; and
(ii) If such registration involves an Underwritten Offering, all
holders of Registrable Securities requesting some or all of their
Registrable Securities to be included in the Company's registration must
sell that portion of their Registrable Securities to the underwriters on
the same terms and conditions as apply to the Company and the other holders
participating therein; provided that prior to the effective date of the
registration statement filed in connection with such registration,
immediately upon notification to the Company from the managing underwriter
of the price at which such securities are to be sold, if such price is
below the range of prices which the Company indicated to all holders of
Registrable Securities in accordance with Section 2.2(a)(y), the Company
shall so advise such holders participating in the Underwritten Offering
(the "Participating Holders") of such price, and such Participating Holder
shall then have the right to withdraw its request to have its Registrable
Securities included in such registration statement.
No registration effected under this Section 2.2 shall. relieve the Company of
its obligation to effect registration upon request under Section 2.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 2.2 incidental to the registration of
any of its securities (on Form S-4, Form S-8 or any successor or similar form)
in connection with mergers, acquisitions, exchange offers, dividend reinvestment
plans or stock option or other employee benefit plans.
<PAGE> 10
(c) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2
shall be paid by the Company.
(d) If a registration pursuant to this Section 2.2 involves an
Underwritten Offering and the managing underwriter advises the Company that, in
its opinion, the number of securities proposed to be included in such
registration exceeds the number which can be sold in such offering so as to be
reasonably likely to have an adverse effect on the price, timing or distribution
of the securities offered in such offering, the Company will include in such
registration (A) first, the Company Securities being registered for issuance by
the Company or pursuant to "demand" registration rights and/or any Registrable
Securities being registered pursuant to Section 2.1 (in accordance with the
priorities set forth in Section 2.1, if applicable), and (B) second, the number
of Registrable Securities requested to be included in such registration pursuant
to this Section 2.2 and/or Company Securities requested to be included in such
registration pursuant to "piggyback" registration rights on a pro rata basis,
based upon the respective number of shares of Common Stock as to which
registration shall have been requested by all such persons.
(e) In connection with any Underwritten Offering with respect to which
holders of Registrable Securities shall have requested registration pursuant to
this Section 2.2, the Company shall have the right to select the managing
underwriter with respect to the offering; provided that such managing
underwriter is reasonably acceptable to each Investor if Registrable Securities
of such Investor are being registered in connection therewith.
Section II.3. Registration Procedures.
(a) If and whenever the Company is required to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in Section 2.1 or 2.2, the Company will, as expeditiously as possible:
(i) Prepare and, in any event within 60 calendar days after the
end of the period within which requests for registration may be given to
the Company, file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective, provided that the
Company may discontinue any registration of its securities that is being
effected pursuant to Section 2.2 at any time prior to the effective date of
the registration statement relating thereto.
<PAGE> 11
(ii) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period as may be requested by
any Investor (if Registrable Securities of such Investor are being
registered) not exceeding sixty days and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement, provided that
before filing a registration statement or prospectus relating to the sale
of Registrable Securities, or any amendments or supplements thereto, the
Company will furnish to counsel and to each holder of Registrable
Securities covered by such registration statement or prospectus, copies of
all documents proposed to be filed, which documents will be subject to the
review of such counsel, and the Company will give reasonable consideration
in good faith to any comments of such counsel.
(iii) Furnish to each holder of Registrable Securities covered by
the registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements of
the Securities Act, and such other documents, as such Person may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities.
(iv) Use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by such seller, in such
jurisdictions, except that the Company shall not for any such purpose be
required (A) to qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 2.3(a)(iv), it
is not then so qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to general
or unlimited service of process in any such jurisdiction where it is not
then so subject.
(v) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities.
<PAGE> 12
(vi) Immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 2.3(a)(ii), if the
Company becomes aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of any such seller,
deliver a reasonable number of copies of an amended or supplemented
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make generally available to
its security holders, in each case as soon as praticable, but not later
than 45 calendar days after the close of the period covered thereby (90
calendar days in case the period covered corresponds to a fiscal year of
the Company), an earnings statement of the Company which will satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder.
(viii) Use its reasonable best efforts in cooperation with the
underwriters to list such Registrable Securities on whatever national
securities exchange such securities are then listed.
(ix) In the event the offering is an Underwritten Offering, use
its reasonable best efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters of the type customarily covered by such letters and
as the underwriters and any Investor may reasonably request (if Registrable
Securities of such Investor are being registered), in order to effect an
underwritten public offering of such Registrable Securities.
(x) Execute and deliver all instruments and documents (including
in an Underwritten Offering an underwriting agreement in customary form,
including, without limitation, indemnities to the effect and to the extent
provided in Section 2.4) and take such other actions and obtain such
certificates and opinions as the underwriters and any Investor may
reasonably request (if Registrable Securities of such Investor are being
registered) in order to effect an underwritten public offering of such
Registrable Securities.
<PAGE> 13
(xi) Make available for inspection by the seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
(xii) Obtain for delivery to the underwriter or agent an opinion
or opinions from counsel for the Company in customary form and in form and
scope reasonably satisfactory to such underwriter or agent and their
counsel.
(xiii) Provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration statement from and after a date
later that the effective date of such registration.
(b) Each holder of Registrable Securities will, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 2.1(i) or Section 2.3(a)(vi), forthwith discontinue disposition of the
Registrable Securities pursuant to any registration statement and prospectus
covering such Registrable Securities until, as applicable, (i) such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.3(a)(vi) or (ii) sales are permitted to resume under Section 2.1(i).
(c) If a registration pursuant to or described in Section 2.1 or 2.2
involves an Underwritten Offering, each holder of Registrable Securities agrees,
whether or not such holder's Registrable Securities are included in such
registration, not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities, or
of any security convertible into or exchangeable or exercisable for any
Registrable Securities (other than as part of such Underwritten Offering),
without the consent of the managing underwriter, during a period commencing
seven calendar days before and ending 90 calendar days (or such lesser, number
as the managing underwriter shall designate) after the effective date of such
registration.
<PAGE> 14
(d) If a registration pursuant to or described in Section 2.1 or 2.2
involves an Underwritten Offering, any holder of Registrable Securities
requesting to be included in such registration may elect, in writing, prior to
the effective date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration, unless such holder has agreed with the Company or the managing
underwriter to limit its rights under this Section 2.3; provided, however, that
if a holder of Registrable Securities that has requested a registration pursuant
to Section 2.1 withdraws its request after a registration statement has been
filed in response to such request, the Investors shall be deemed to have used
one of the two (2) demand registrations provided for under Section 2.1 unless
such holder reimburses the Company for all of its costs in connection with
preparing and filing such registration statement.
(e) It is understood that in any Underwritten Offering in addition to
any shares of stock (the "initial shares") the underwriters have committed to
purchase, the underwriting agreement may grant the underwriters an option to
purchase up to a number of additional shares of stock (the "option shares")
equal to 15% of the initial shares (or such other maximum amount as the NASD may
then permit), solely to cover overallotments. Option shares to be sold shall be
allocated in accordance with the provisions of Sections 2.1(h) and 2.2(d), as
applicable.
Section II.4. Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to Section 2.1 or 2.2, the Company will, and
it hereby agrees to, indemnify and hold harmless, to the extent permitted by
law, each seller of any Registrable Securities covered by such registration
statement, each affiliate of such seller and their respective directors,
officers, employees and agents or general and limited partners (and directors,
officers, employees and agents thereof) and, if such seller is a portfolio or
investment fund, its investment advisors or agents, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any underwriter within
the meaning of the Securities Act, as follows:
<PAGE> 15
(i) against any and all loss, liability, claim, damage or expense
whatsoever, promptly after submission for payment, arising out of or
resulting from any untrue statement or alleged untrue statement of a
material fact contained in any registration statement (or any amendment or
supplement thereto), including any information included therein pursuant to
Rule 430A under the Securities Act (the "Rule 430A Information") if
applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of an untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus
or prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in a
registration statement (or any amendment thereto), including the Rule 430A
Information, which were not made in reliance upon and in conformity with
written information furnished to the Company by the Investors expressly for
use in a registration statement (or any amendment thereto);
(ii) against any and all loss, liability, claim, damage or
expense whatsoever, promptly after submission for payment, to the extent of
the aggregate amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided that
any such settlement is effected with the written consent of the Company
(which shall not be unreasonably withheld); and
(iii) against any and all expense whatsoever, promptly after
submission for payment (including, subject to Section 2.4(c) hereof, the
reasonable fees and disbursements of counsel for the indemnified parties),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or of any such alleged untrue statement
or omission, to the extent that any such expense is not paid under (i) or
(ii) above; provided, however, that this indemnity agreement shall not
apply to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with written
information furnished to the Company by any indemnified party expressly for
use in the registration statement (or any amendment thereto), including the
Rule 430A Information, or any preliminary prospectus or prospectus (or any
amendment or supplement thereto).
<PAGE> 16
(b) Each indemnified party severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
registration statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all loss, liability, claim, damage or expense described in the indemnity
contained in subsection (a)(i) of this Section, promptly after submission for
payment, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the registration statement (or any
amendment thereto), including the Rule 430A Information, or any preliminary
prospectus or prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
indemnified party expressly for use in the registration statement (or any
amendment thereto) or such preliminary prospectus or prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
except to the extent the indemnifying party is materially prejudiced thereby. An
indemnifying party may participate at its own expense in the defense of any such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action, with counsel chosen by it
and approved by the indemnified parties in such action, unless such indemnified
parties reasonably object to such assumption on the ground that there may be
legal defenses available to them which are different from, conflicting with or
in addition to those available to such indemnifying party. Absent any such
difference or conflict, if an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel retained for
local procedural and practice matters) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification could be sought under
this Section 2.4 (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim, (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party, (iii) does not impugn the reputation of any
indemnified party and (iv) does not restrict any indemnified party from engaging
in any activity.
<PAGE> 17
(d) The Company and each seller of Registrable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any registration or other qualification
of securities under any federal or state law or regulation of any governmental
authority.
Section II.5. Contributions. In order to provide for just and
equitable contribution in circumstances under which the indemnity contemplated
by Section 2.4 is for any reason not available or insufficient for any reason to
hold harmless an indemnified party in respect of any losses, claims, damages or
liabilities referred to therein, the parties required to indemnify by the terms
thereof shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement incurred by
the Company, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
by taking into account the portion of the proceeds of the offering realized by
each, and the relative fault of each party by taking into account the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. The Company and each Person selling securities agree with
each other that no seller of Registrable Securities shall be required to
contribute any amount in excess of the amount such seller would have been
required to pay to an indemnified party if the indemnity under Section 2.4 were
available. The Company and each such seller agree with each other and the
underwriters of the Registrable Securities, if requested by such underwriters,
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or for the underwriters' portion of such
contribution to exceed the percentage that the underwriting discount bears to
the public offering price of the Registrable Securities. For purposes of this
Section 2.5, each Person, if any, who controls an underwriter within the meaning
of Section 15 of the Securities Act shall have the same rights to contribution
as such underwriter, and each director and each officer of the Company who
signed the registration statement, and each Person, if any, who controls the
Company or a seller of Registrable Securities within the meaning of Section 15
of the Securities Act shall have the same rights to contribution as the Company
or a seller of Registrable Securities, as the case may be.
<PAGE> 18
Section II.6. Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder (or, if the Company is not required to file such reports, it
will, upon the request of any holder of Registrable Securities, make publicly
available other information), and it will take such further action as any holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell shares of Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any holder of Registrable Securities,
the Company will deliver to such holder a written statement as to whether it has
complied with such requirements,
ARTICLE III. Termination.
Section III.1. Termination. Except as specifically provided elsewhere
in this Agreement, this Agreement shall terminate with respect to any Investor
when such Investor no longer owns any Registrable Securities.
ARTICLE IV. Miscellaneous.
Section IV.1. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
personally to the recipient, one day after being sent to the recipient by
reputable overnight express courier service (charges prepaid), five days after
being mailed to the recipient (postage prepaid) or upon confirmation if
transmitted by any standard form of telecommunication. Notices shall be directed
as follows:
<PAGE> 19
To Relational Investors, LLC:
Relational Investors, LLC
4330 La Jolla Village Drive,
Suite 220
San Diego, California 92122
Telephone: (619) 597-9400
Telecopy: (619) 597-8200
Attn: John Sullivan
with a copy to:
Sullivan & Cromwell
1888 Century Park East
21st Floor
Los Angeles, California 90067-1725
Telephone: (310) 712-6600
Telecopy: (310) 712-8800
Attn: Alison Ressler
To the Company:
Apria Healthcare Group Inc.
3560 Highland Avenue
Costa Mesa, California 92626
Telephone: (714) 427-2000
Telecopy: (714) 427-4332
Attn: Robert Holcombe
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Telephone: (213) 229-7000
Telecopy: (213) 229-7520
Attn: Andrew E. Bogen, Esq.
Section IV.2. Parties. This Agreement shall each inure to the benefit
of and be binding upon the Investors and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Investors and the Company and their respective successors and the controlling
persons and officers and directors and their heirs and legal representatives,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of
the Investors and the Company and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Debentures from any Investor shall be deemed to be a successor by
reason merely of such purchase.
<PAGE> 20
Section IV.3. Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of
the State of California applicable to agreements made and to
be performed in said state.
Section IV.4. Miscellaneous.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and each of the Investors, or in the case of a waiver,
by the party against whom the waiver is to be effective. No failure or delay by
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
(b) No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
parties hereto except that the Investors may without such consent assign their
rights hereunder to one or more of their respective affiliates.
(c) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same agreement.
(d) The heading references herein are for convenience purposes only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
APRIA HEALTHCARE GROUP INC.
By: /s/ Philip L. Carter
--------------------------------
Title: Chief Executive Officer
RELATIONAL INVESTORS, LLC
By: /s/ Ralph V. Whitworth
-------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 10.3
$318,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 13, 1998
between
APRIA HEALTHCARE GROUP INC.
AND CERTAIN OF ITS SUBSIDIARIES,
as Borrowers,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as the Administrative and Collateral Agent,
NATIONSBANK, N.A.,
as the Syndication Agent,
and
THE OTHER FINANCIAL INSTITUTIONS
PARTY TO THE CREDIT AGREEMENT
Arranged By
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Section 1. Definitions, Interpretation And Accounting Terms............................................... 2
1.1 Defined Terms.................................................................................. 2
1.2 Accounting Terms and Determinations............................................................ 20
1.3 Interpretation................................................................................. 21
Section 2. Amount and Terms of Credit..................................................................... 21
2.1 Loans.......................................................................................... 21
2.2 Minimum Amount of Each Borrowing............................................................... 23
2.3 Notice of Borrowing............................................................................ 23
2.4 Disbursement of Funds.......................................................................... 24
2.5 Notes.......................................................................................... 25
2.6 Conversions.................................................................................... 26
2.7 Pro Rata Borrowings............................................................................ 27
2.8 Interest....................................................................................... 27
2.9 Interest Periods............................................................................... 27
2.10 Increased Costs, Illegality, etc............................................................... 28
2.11 Compensation................................................................................... 30
2.12 Reserved....................................................................................... 31
2.13 Replacement of Banks........................................................................... 31
2.14 Certain Limitation............................................................................. 32
2.15 Notices of Borrowing; Notices of Conversion; Authorized Employees.............................. 32
Section 3. Letters of Credit.............................................................................. 32
3.1 Letters of Credit.............................................................................. 32
3.2 Minimum Stated Amount.......................................................................... 33
3.3 Letter of Credit Requests...................................................................... 33
3.4 Letter of Credit Participations................................................................ 34
3.5 Agreement to Repay Letter of Credit Drawings................................................... 36
3.6 Increased Costs................................................................................ 36
Section 4. Revolving Loan Commitment Fee; Fees; Reductions of Commitment.................................. 37
4.1 Fees........................................................................................... 37
4.2 Voluntary Termination of Unutilized Commitments................................................ 38
4.3 Mandatory Reduction of Commitments............................................................. 38
Section 5. Prepayments; Payments; Taxes................................................................... 39
5.1 Voluntary Prepayments.......................................................................... 39
5.2 Mandatory Repayments........................................................................... 39
5.3 Method and Place of Payment.................................................................... 43
5.4 Net Payments................................................................................... 43
Section 6. Conditions Precedent to the Effective Date..................................................... 44
6.1 Execution of Agreement; Notes.................................................................. 45
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<TABLE>
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6.2 Officer's Certificate.......................................................................... 45
6.3 Compliance Certificate......................................................................... 45
6.4 Opinions of Counsel............................................................................ 45
6.5 Corporate Documents; Proceedings............................................................... 45
6.6 Employee Benefit Plans: Shareholders' Agreements; Management Agreements; Employment
Agreements; Tax Sharing Agreements............................................................. 45
6.7 Guaranty....................................................................................... 46
6.8 Adverse Change, etc............................................................................ 46
6.9 Litigation..................................................................................... 46
6.10 Fees, etc...................................................................................... 47
6.11 Existing Indebtedness.......................................................................... 47
6.12 Securities Account Agreement................................................................... 47
6.13 Pre-Payment.................................................................................... 47
6.14 1998 Third Quarter Charges and Reserves........................................................ 47
6.15 Second Amendment to Security Agreement......................................................... 48
6.16 Other Information.............................................................................. 48
Section 7. Conditions Precedent to All Credit Events...................................................... 48
7.1 No Default; Representations and Warranties..................................................... 48
7.2 Adverse Change, etc............................................................................ 48
7.3 Litigation..................................................................................... 48
7.4 Notice of Borrowing; Letter of Credit Request.................................................. 48
7.5 Certificate of Chief Financial Officer; Opinion of Counsel..................................... 49
Section 8. Representations, Warranties and Agreements..................................................... 49
8.1 Corporate Status............................................................................... 49
8.2 Corporate Power and Authority.................................................................. 49
8.3 No Violation................................................................................... 50
8.4 Governmental Approvals......................................................................... 50
8.5 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc........... 50
8.6 Litigation..................................................................................... 51
8.7 True and Complete Disclosure................................................................... 51
8.8 Use of Proceeds; Margin Regulations............................................................ 51
8.9 Tax Returns and Payments....................................................................... 52
8.10 Compliance with ERISA.......................................................................... 52
8.11 Properties..................................................................................... 53
8.12 Capitalization................................................................................. 53
8.13 Subsidiaries................................................................................... 53
8.14 Compliance with Statutes, etc.................................................................. 53
8.15 Investment Company Act......................................................................... 54
8.16 Public Utility Holding Company Act............................................................. 54
8.17 Environmental Matters.......................................................................... 54
8.18 Labor Relations................................................................................ 54
8.19 Patents, Licenses, Franchises and Formulas..................................................... 55
8.20 Indebtedness................................................................................... 55
</TABLE>
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<TABLE>
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8.21 Restrictions on or Relating to Subsidiaries.................................................... 55
8.22 JCAHO Accreditation............................................................................ 56
8.23 Material Contracts............................................................................. 56
8.24 Indenture Treatment............................................................................ 56
Section 9. Affirmative Covenants.......................................................................... 56
9.1 Information Covenants.......................................................................... 56
9.2 Books, Records and Inspections................................................................. 58
9.3 Maintenance of Property Insurance.............................................................. 59
9.4 Corporate Franchises........................................................................... 59
9.5 Compliance with Statutes, etc.................................................................. 59
9.6 Compliance with Environmental Laws............................................................. 59
9.7 ERISA.......................................................................................... 60
9.8 End of Fiscal Years; Fiscal Quarters........................................................... 60
9.9 Performance of Obligations..................................................................... 60
9.10 Payment of Taxes............................................................................... 60
9.11 Use of Proceeds................................................................................ 61
9.12 Intellectual Property Rights................................................................... 61
9.13 Permitted Transactions......................................................................... 61
9.14 Agent for Service of Process................................................................... 64
9.15 Senior Subordinated Convertible Debentures..................................................... 64
9.16 Deposit Accounts............................................................................... 64
Section 10. Negative Covenants............................................................................. 65
10.1 Liens.......................................................................................... 65
10.2 Consolidation, Merger, Purchase or Sale of Assets, etc......................................... 67
10.3 Dividends...................................................................................... 68
10.4 Limitation on Creation of Subsidiaries......................................................... 68
10.5 Indebtedness................................................................................... 68
10.6 Advances, Investments and Loans................................................................ 69
10.7 Transactions with Affiliates................................................................... 70
10.8 Capital Expenditures........................................................................... 70
10.10 Consolidated Funded Indebtedness to Consolidated EBITDA........................................ 71
10.11 Limitation on Voluntary Payments and Modifications of Indebtedness; Modifications of
Certificate of Incorporation, By-Laws and Certain Other Agreements; etc........................ 72
10.12 Limitation on Certain Restrictions on Subsidiaries............................................. 73
10.13 Business....................................................................................... 73
Section 11. Events of Default.............................................................................. 73
11.1 Payments....................................................................................... 73
11.2 Representations, etc........................................................................... 73
11.3 Covenants...................................................................................... 73
11.4 Default Under Other Agreements................................................................. 73
11.5 Bankruptcy, etc................................................................................ 74
11.6 ERISA.......................................................................................... 74
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<TABLE>
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11.7 Guaranty....................................................................................... 75
11.8 Judgments...................................................................................... 75
11.9 Ownership...................................................................................... 75
11.10 Security Documents............................................................................. 75
11.11 Senior Subordinated Convertible Debentures..................................................... 75
Section 12. The Agents..................................................................................... 76
12.1 Appointment and Authorization.................................................................. 76
12.2 Delegation of Duties........................................................................... 76
12.3 Liabilities of Agents.......................................................................... 76
12.4 Reliance by Agents............................................................................. 77
12.5 Notice of Default.............................................................................. 77
12.6 Credit Decision................................................................................ 77
12.7 Indemnification................................................................................ 78
12.8 Agents in Individual Capacity.................................................................. 78
12.9 Successor Agents............................................................................... 79
12.10 The Co-Arrangers............................................................................... 79
12.11 The Co-Agents.................................................................................. 79
Section 13. Miscellaneous.................................................................................. 79
13.1 Payment of Expenses, etc....................................................................... 79
13.2 Right of Set-off............................................................................... 80
13.3 Notices........................................................................................ 80
13.4 Benefit of Agreement........................................................................... 81
13.5 No Waiver; Remedies Cumulative................................................................. 83
13.6 Payments Pro Rata.............................................................................. 83
13.7 Calculations; Computations..................................................................... 84
13.8 Joint and Several.............................................................................. 84
13.9 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE............................................... 85
13.10 Counterparts................................................................................... 86
13.11 Effectiveness.................................................................................. 86
13.12 Headings Descriptive........................................................................... 86
13.13 Amendment or Waiver............................................................................ 86
13.14 Survival....................................................................................... 87
13.15 Domicile of Loans.............................................................................. 87
13.16 WAIVER OF JURY TRIAL........................................................................... 87
13.17 Entire Agreement............................................................................... 88
13.18 Severability................................................................................... 88
13.19 Waiver......................................................................................... 88
</TABLE>
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<PAGE> 6
ANNEX I Applicable Margin
SCHEDULE I Commitments
SCHEDULE II Authorized Individuals
SCHEDULE III Existing Letters of Credit
SCHEDULE IV Tax Returns
SCHEDULE V Convertible Securities
SCHEDULE VI Material Subsidiaries
SCHEDULE VII Intellectual Property Restrictions
SCHEDULE VIII Existing Indebtedness
SCHEDULE IX Material Contracts
SCHEDULE X Existing Liens
SCHEDULE XI Immaterial Subsidiaries
SCHEDULE XII Pre-Approved Acquisitions
SCHEDULE XIII Litigation
EXHIBIT A-1 Notice of Borrowing
EXHIBIT A-2 Notice of Conversion
EXHIBIT B-1 Revolving Note
EXHIBIT B-2 Term Note
EXHIBIT B-3 Swingline Note
EXHIBIT C Letter of Credit Request
EXHIBIT D-1 Form of Opinion of O'Melveny & Myers
EXHIBIT D-2 Form of Opinion of in-house counsel to the Borrower
EXHIBIT E Officers' Certificate of Credit Parties
EXHIBIT F Amended and Restated Guaranty
EXHIBIT G Compliance Certificate
EXHIBIT H Form of Assignment and Assumption Agreement
EXHIBIT I Form of Joinder Agreement
EXHIBIT J Form of Confidentiality Agreement
v
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated as
of November 13, 1998, is made between APRIA HEALTHCARE GROUP INC., a corporation
organized and existing under the laws of the State of Delaware ("Apria") and the
Subsidiaries of Apria identified on the signature pages of this Agreement and
any Subsidiary of Apria that, subject to Section 9.13(c), shall have executed a
Joinder Agreement (Apria and such Subsidiaries are referred to individually as a
"Borrower" and collectively as the "Borrowers"), each of the financial
institutions listed on Schedule I to this Agreement or that, pursuant to Section
13.4, shall become a "Bank" under this Agreement (individually, a "Bank" and
collectively the "Banks"), NATIONSBANK, N.A., as the Syndication Agent, and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as the Administrative and
Collateral Agent.
RECITALS:
WHEREAS, the Borrowers, the Banks and the Administrative and Collateral
Agent are parties to the Credit Agreement, dated as of August 9, 1996, as
amended by the First Amendment to Credit Agreement, dated as of April 22, 1997
(the "First Amendment"), the Second Amendment to Credit Agreement, dated as of
August 8, 1997 (the "Second Amendment"), the Third Amendment to Credit Agreement
and Waiver, dated as of January 30, 1998 (the "Third Amendment"), the Fourth
Amendment to Credit Agreement and Waiver, dated as of March 13, 1998 (the
"Fourth Amendment"), and the Fifth Amendment to Credit Agreement and Waiver,
dated as of April 15, 1998 (the "Fifth Amendment", collectively with the First
Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment,
the "Amendments") (as amended, the "Existing Credit Agreement");
WHEREAS, the Borrowers previously provided notice to the Administrative
and Collateral Agent that certain Events of Default (as defined in the Existing
Credit Agreement) under Sections 10.9, 10.10 and 10.11 of the Existing Credit
Agreement occurred or may occur due to the 1998 Third Quarter Charges and
Reserves (the "Financial Covenant Defaults");
WHEREAS, Apria desires to issue at least $50,000,000 of Senior
Subordinated Convertible Debentures (as defined below), the Net Indebtedness
Proceeds of which will be used to repay a portion of the Loans;
WHEREAS, the Borrowers have requested that the Banks restructure
certain provisions of the Existing Credit Agreement, waive the Financial
Covenant Defaults, and consent to Apria's issuance of the Senior Subordinated
Convertible Debentures;
WHEREAS, the Borrowers have agreed in consideration of the foregoing,
to restructure certain provisions of the Existing Credit Agreement;
WHEREAS, the Borrowers, the Banks and the Administrative and Collateral
Agent desire to amend and restate the Existing Credit Agreement to incorporate
the terms of the
<PAGE> 8
Amendments and to accommodate the requests of the Borrowers on
the terms and conditions specified herein.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties to this Agreement agree
as follows:
Section 1. Definitions, Interpretation And Accounting Terms.
1.1 Defined Terms . As used in this Agreement, unless otherwise
specified, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Additional Permitted Subordinated Indebtedness" shall mean (a) the
Senior Subordinated Convertible Debentures and (b) up to $150,000,000 of other
Indebtedness having a maturity of not less than five years and no scheduled
amortization and containing other terms, including subordination provisions,
acceptable to the Administrative and Collateral Agent.
"Administrative and Collateral Agent" shall mean BofA in its capacity
as Administrative and Collateral Agent for the Banks under this Agreement, and
shall include any successor to the Administrative and Collateral Agent appointed
pursuant to Section 12.9.
"Affected Eurodollar Loans" shall have the meaning provided in Section
5.2(b)(B)(ii).
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person; provided, however, that for purposes of Section 10.7,
an Affiliate of Apria shall include any Person that directly or indirectly owns
more than 5% of any class of the capital stock of Apria and for all purposes of
this Agreement and provided further, however, that none of the Administrative
and Collateral Agent, the Syndication Agent, any Agent-Related Person, any Bank
or any of their respective Affiliates shall be considered an Affiliate of Apria
or any of its Subsidiaries. A Person shall be deemed to control another Person
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent-Related Persons" shall mean (i) BofA and any successor
Administrative and Collateral Agent appointed under Section 12.9, together with
their respective Affiliates (including, in the case of BofA, NationsBanc
Montgomery Securities LLC), (ii) NationsBank and any successor Syndication Agent
appointed under Section 12.9, together with their respective Affiliates
(including, in the case of NationsBank, NationsBanc Montgomery Securities LLC)
and (iii) the respective officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
"Agents" shall mean, collectively, the Administrative and Collateral
Agent and the Syndication Agent.
"Agreement" shall have the meaning provided in the first paragraph of
this Agreement.
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<PAGE> 9
"Amended and Restated Revolving Note" shall have the meaning provided
in Section 2.5(a).
"Applicable Lending Office" shall mean, for each Bank, the office of
such Bank (or an affiliate of such Bank) designated on the signature page of
each Bank or such other office of such Bank (or of an affiliate of such Bank) as
such Bank may from time to time specify to the Administrative and Collateral
Agent and to the Borrowers as the lending office for its Loans.
"Applicable Margin" shall mean 3.50% with respect to all Eurodollar
Loans, 2.50% with respect to all Base Rate Loans and .75% with respect to the
Revolving Loan Commitment Fee.
"Apria" shall have the meaning provided in the first paragraph of this
Agreement.
"Apria Common Stock" shall have the meaning provided in Section 8.12.
"Arranger" shall mean NationsBanc Montgomery Securities LLC.
"Assignment and Assumption Agreement" shall mean an Assignment and
Assumption Agreement substantially in the form of Exhibit H.
"Authorized Employees" shall mean employees of Apria designated in
writing to the Agent as such from time to time by the chief financial officer or
the treasurer of Apria, and as to whom the Company has provided to the
Administrative and Collateral Agent a certificate of the Secretary or Assistant
Secretary of Apria certifying that the Board of Directors of Apria has delegated
such authority to the chief financial officer or the treasurer, as the case may
be, of Apria.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bankruptcy Code" shall have the meaning provided in Section 11.5.
"Base Rate" shall mean, for any day, the higher of: (a) the rate of
interest in effect for such day as publicly announced from time to time by BofA
at its United States headquarters as its "reference rate" and (b) 0.50% per
annum above the Federal Funds Rate for such day. BofA's reference rate is a rate
set by BofA based upon various factors, including BofA's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" shall mean (i) each Swingline Loan and (ii) any Loan
designated or deemed designated as such by any Borrower at the time of the
incurrence of such Loan or conversion to such Loan.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association, or any successor thereto.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
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<PAGE> 10
"Borrower Bankruptcy Default" shall mean any Default or Event of
Default existing with respect to any Borrower pursuant to Section 11.5.
"Borrowing" shall mean the borrowing, on any given day, of one Type of
Loan (having, in the case of Eurodollar Loans, the same Interest Period) from
the Banks pro rata (or of a Swingline Loan from the Swingline Lender) or the
conversion, on any given day, of all or any portion of one or more Loans into
one Type of Loan (having, in the case of Eurodollar Loans, the same Interest
Period) on a pro rata basis among the Banks; provided that Base Rate Loans
incurred pursuant to Section 2.10(b) shall be considered part of the related
Borrowing of Eurodollar Loans.
"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be in Dallas, Texas, San Francisco, California or New York, New
York, a legal holiday or a day on which banking institutions are authorized or
required by law or other government action to close, and with respect to all
notices and determinations in connection with, and payments of principal of and
interest on, Eurodollar Loans, any day which is a day for trading by and between
banks in the London interbank Eurodollar market.
"Calculation Period" shall have the meaning provided in Section
9.13(a)(vi).
"Capital Expenditures" shall mean, for any period of four consecutive
fiscal quarters, the sum of (without duplication) (i) all expenditures of Apria
and its Subsidiaries during such period (a) for the acquisition, maintenance or
repair of fixed or capital assets (which should be capitalized in accordance
with GAAP) and (b) for Rental Equipment or for the maintenance or repair of
Rental Equipment (which should be capitalized in accordance with GAAP) and (ii)
all Capitalized Lease Obligations of Apria and its Subsidiaries incurred during
such period; provided that Capital Expenditures shall not include expenditures
made in connection with Permitted Transactions made in compliance with Section
9.13.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount accounted for as
indebtedness on a balance sheet of such Person in accordance with GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
or directly and fully guaranteed or insured by the United States or any of its
agencies or instrumentalities (with the full faith and credit of the United
States) having maturities of not more than six months from the date of
acquisition by such Person, (ii) time deposits and certificates of deposit of
any commercial bank having, or which is the principal banking subsidiary of a
bank holding company having, a long-term unsecured debt rating of at least "A"
or the equivalent from Standard & Poor's Corporation or "A2" or the equivalent
from Moody's Investors Service, Inc. with maturities of not more than six months
from the date of acquisition by such Person, (iii) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
any Person incorporated in the United States rated at least A-1 or the
equivalent by Standard & Poor's Ratings Group or at least P-1 or the equivalent
by Moody's Investors Service, Inc. and in each case maturing not more than
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<PAGE> 11
six months after the date of acquisition by such Person and (v) investments in
money market funds substantially all of whose assets are comprised of securities
of the types described in clauses (i) through (iv) above.
"Change of Control" means the occurrence of one or all of the
following: (x) any Person, entity, or "group" (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act) (A) shall have acquired
beneficial ownership of 15% or more of any outstanding class of capital stock of
Apria having ordinary voting power in the election of directors of Apria, or (B)
shall obtain the power (whether or not exercised) to elect a majority of Apria's
directors, (y) the Board of Directors of Apria shall cease to consist of a
majority of Continuing Directors, or (z) a "change of control" as defined in the
Indenture or as defined in the Senior Subordinated Convertible Debentures shall
have occurred.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986 and the regulations
promulgated and the rulings issued under that code.
"Confidentiality Agreement" shall mean a Confidentiality Agreement
substantially in the form of Exhibit J.
"Confirmation of Security Agreement" shall mean the Confirmation of
Security Agreement, dated as of March 13, 1998, by Apria and filed with the
Patent and Trademark Office.
"Consolidated EBITDA" shall mean, for the four-quarter period preceding
any date of determination, the sum of Consolidated Net Income (before
consolidated interest income, Consolidated Interest Expense and provisions for
taxes, and extraordinary gains or losses or gains or losses from sales of assets
other than inventory or Rental Equipment sold in the Ordinary Course of
Business) for such period, plus (a) (to the extent deducted in arriving at
Consolidated Net Income for such period) (i) the amount of amortization of
intangibles, (ii) depreciation, (iii) the 1997 Fourth Quarter Charges and
Reserves and the 1998 Third Quarter Charges and Reserves, (iv) the Borrowers'
Unusual Cash Expenses, if applicable, up to a maximum of $17,500,000, plus (b)
the EBITDA allocable to any Permitted Acquired Business acquired in such period
for such period, minus (c) the EBITDA allocable to any assets, capital stock,
division or business group divested by Apria or any of its Consolidated
Subsidiaries in such period; provided that with respect to clauses (b) and (c),
such EBITDA shall only be added or subtracted, as applicable, for the period
commencing at the beginning of such four-quarter period through the date of such
acquisition or divestiture.
"Consolidated Funded Indebtedness" shall mean Indebtedness of Apria and
its Subsidiaries excluding Indebtedness of the type and nature described in
clauses (ii), (v), (vi) and (vii) of the definition of Indebtedness.
"Consolidated Funded Indebtedness to Consolidated EBITDA Ratio" shall
mean, at any date of determination, the ratio of Consolidated Funded
Indebtedness of Apria as at such date to the Consolidated EBITDA of Apria for
the four consecutive fiscal quarters preceding such date.
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<PAGE> 12
"Consolidated Interest Expense" shall mean, for any period, the
Interest Expense of Apria and its consolidated Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.
"Consolidated Liabilities" shall mean, at any time, all liabilities and
obligations of Apria and its Subsidiaries which would be included in determining
total liabilities as shown on the liabilities portion of a balance sheet
(including, without limitation, the principal component of Capitalized Lease
Obligations).
"Consolidated Net Income" shall mean, for any period, the net income of
Apria and its consolidated Subsidiaries for such period after provision for
taxes during such period; provided, however, that the net income of any
Subsidiary of Apria, which is not a Wholly-Owned Subsidiary and for which the
investment of Apria therein is accounted for by the equity method of accounting,
shall have its net income included in the Consolidated Net Income of Apria and
its Subsidiaries only to the extent of the amount of cash dividends or
distributions paid by such Subsidiary to Apria.
"Consolidated Net Worth" shall mean the net worth of Apria and its
Subsidiaries determined on a consolidated basis.
"Consolidated Rent Expense" shall mean, for any period, all payments
(including, without limitation, any property taxes paid as additional rent or
lease payments) made by Apria and its Subsidiaries on a consolidated basis under
any agreement to rent or lease any Real Property or personal property.
"Contingent Obligation" shall mean, as to any Person, any obligation of
such Person guaranteeing or intending to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security for such primary obligation, (ii) to advance or supply
funds (x) for the purchase or payment of any such primary obligation or (y) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the holder of such primary obligation against loss in respect of such primary
obligation; provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the Ordinary
Course of Business. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
of such primary obligation (assuming such Person is required to perform under
such primary obligation) as determined by such Person in good faith.
"Continuing Director" at any date, shall mean an individual who was a
member of the Board of Directors of Apria on the Effective Date or who shall
have become a member of such Board of Directors subsequent to such date after
having been nominated or otherwise approved
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<PAGE> 13
in writing by at least a majority of the Continuing Directors then members of
the Board of Directors of Apria.
"Credit Documents" shall mean this Agreement, each Note, each of the
Security Documents, each Notice of Borrowing, each Notice of Conversion, each
Letter of Credit, each Letter of Credit Request, the Guaranty, the Fee Letters
and any documents executed in connection with the foregoing.
"Credit Event" shall mean (i) the Effective Date of this Agreement and
(ii) the making of any Loan or the issuance of any Letter of Credit.
"Credit Party" shall mean each Borrower and each Material Subsidiary of
any Borrower party to any Credit Document.
"Default" shall mean any event, act or condition which with the giving
of notice or lapse of time, or both, specified in Section 11, would constitute
an Event of Default.
"Dividend" shall mean with respect to any Person that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
or authorized or made any other distribution, payment or delivery of property
(in each case other than common stock of such Person) or cash to its
stockholders in their capacity as stockholders, or redeemed, retired, purchased
or otherwise acquired, directly or indirectly, for a consideration any shares of
any class of its capital stock outstanding on or after the Effective Date (or
any options or warrants issued by such Person with respect to its capital
stock), or set aside any funds for any of the foregoing purposes, or shall have
permitted any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock of such Person
outstanding on or after the Effective Date (or any options or warrants issued by
such Person with respect to its capital stock). Without limiting the foregoing,
"Dividends" with respect to any Person shall also include all cash payments made
or required to be made by such Person with respect to any stock appreciation
rights, plans, equity incentive or achievement plans or any similar plans or
setting aside of any funds for the foregoing purposes.
"Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.
"Drawing" shall have the meaning provided in Section 3.5(b).
"EBITDA" shall mean, for any period for any Person, the net income of
such Person (before interest income, Interest Expense and provisions for taxes
and extraordinary gains or losses or gains or losses from sales of assets other
than inventory or Rental Equipment sold in the Ordinary Course of Business) for
such period plus (to the extent deducted in arriving at net income for such
period) (i) the amount of amortization of intangibles and (ii) depreciation.
"Effective Date" shall have the meaning provided in Section 13.11.
"Eligible Transferee" shall mean a commercial bank, financial
institution, other "accredited investor" (as defined in Regulation D of the
Securities Act) or a "qualified institutional buyer" as defined in Rule 144A of
the Securities Act.
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<PAGE> 14
"Employment Agreements" shall have the meaning provided in Section 6.5.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by Apria or any of its Subsidiaries solely in the ordinary
course of such Person's business and not in response to any third party action
or request of any kind) or proceedings relating in any way to any Environmental
Law or any permit issued, or any approval given, under any such Environmental
Law ("Claims"), including, without limitation, (a) any and all Claims by
Governmental Authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(b) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials arising from alleged injury or threat of injury to health,
safety or the environment.
"Environmental Law" shall mean any applicable Governmental Rule now or
hereafter in effect relating to the environment, health, safety or Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 7401 et seq.; the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803
et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq. and any
applicable state and local or foreign counterparts or equivalents.
"Equity Issuance" shall mean (a) any issuance or sale by Apria or by
any of its Subsidiaries after April 15, 1998 of (i) any capital stock, (ii) any
warrants or options exercisable in respect of capital stock (other than any
warrants or options issued to directors, officers, employees of Apria or to
consultants and other parties providing services to Apria or of any of its
Subsidiaries and any capital stock of Apria issued upon the exercise of such
warrants) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the issuing or selling
Person or (b), without duplication of clause (a) above, the receipt by Apria or
by any of its Subsidiaries after April 15, 1998 of any capital contribution
(whether or not evidenced by any equity security issued by the recipient of such
contribution); provided that the term "Equity Issuance" shall not include (x)
any such issuance or sale of capital stock by any Subsidiary of Apria to Apria
or to any Wholly Owned Subsidiary of Apria, (y) any capital contribution by
Apria or by any Wholly Owned Subsidiary of Apria to any Wholly Owned Subsidiary
of Apria or (z) an issuance or sale of capital stock which issuance or sale
constitutes the consideration paid by Apria or any of its Subsidiaries for any
entity or assets acquired in a Permitted Transaction.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the regulations promulgated and rulings issued under that act.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with Apria or any Subsidiary of Apria would be deemed to
be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of
the Code.
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<PAGE> 15
"Eurodollar Base Rate" shall mean, for any Eurodollar Loan for any
Interest Period for such Loan, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/16 of 1%), as determined by the Administrative and
Collateral Agent of the respective rates per annum quoted by each Reference Bank
at approximately 11:00 a.m. London time (or as soon thereafter as practicable)
on the date two Business Days prior to the first day of such Interest Period for
the offering by such Reference Bank to leading banks in the London interbank
market of Dollar deposits having a term comparable to such Interest Period and
in an amount comparable to the principal amount of the Eurodollar Loan to be
made by such Reference Bank for such Interest Period.
If any Reference Bank is not participating in any Eurodollar Loan
during any Interest Period for such Loan, the Eurodollar Base Rate for such Loan
for such Interest Period shall be determined by reference to the amount of the
Loan that such Reference Bank would have made or had outstanding had it been
participating in such Loan during such Interest Period. If any Reference Bank
does not timely furnish such information for determination of any Eurodollar
Base Rate, the Administrative and Collateral Agent shall determine such
Eurodollar Base Rate on the basis of the information timely furnished by the
remaining Reference Banks.
"Eurodollar Loan" shall mean each Loan designated by any Borrower at
the time of the incurrence, continuation or conversion of such Loan to bear
interest at a rate determined on the basis of the definition of Eurodollar Base
Rate in this Section 1.1.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest
Period for such Eurodollar Loan, a rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Administrative and
Collateral Agent to be equal to the Eurodollar Base Rate for such Loan for such
Interest Period divided by one minus the Eurodollar Reserve Requirement for such
Loan for such Interest Period.
"Eurodollar Reserve Requirement" shall mean, for any Interest Period
for any Eurodollar Loan, the average maximum rate at which reserves (including
any marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Eurodollar Reserve Requirement
shall include any other reserves required to be maintained by such member banks
by reason of any Regulatory Change with respect to (i) any category of
liabilities that includes deposits by reference to which the Eurodollar Rate for
Eurodollar Loans is to be determined as provided in the definition of
"Eurodollar Base Rate" in this Section 1.1 or (ii) any category of extensions of
credit or other assets that includes Eurodollar Loans.
"Event of Default" shall have the meaning provided in Section 11.
"Excess Cash Flow" shall mean for any calendar month, the amount
determined in accordance with GAAP, without duplication, which is equal to the
amount of Borrowers' Consolidated Net Income (excluding any non-cash
extraordinary gains or losses and other non-cash or non-recurring charges),
plus, the aggregate of the following amounts: (i) Interest Expense; (ii) all
depreciation and amortization of assets (including goodwill and other intangible
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<PAGE> 16
assets) of Apria and its Subsidiaries deducted in determining Consolidated Net
Income for such calendar month; (iii) all federal, state, local or foreign
income taxes (whether paid or deferred) of Apria and its Consolidated
Subsidiaries deducted in determining Consolidated Net Income, less the aggregate
of the following amounts paid during the calendar month in question: (i)
interest expenses; (ii) federal, state, local or foreign income tax expenses;
(iii) all payments of principal which are made by Borrowers on indebtedness of
Borrowers for borrowed money; and (iv) the amount of all Capital Expenditures
permitted pursuant to Section 10.8.
"Existing Indebtedness" shall have the meaning provided in Section
8.20.
"Existing Credit Agreement" shall have the meaning provided in the
Recitals to this Agreement.
"Federal Funds Rate" means, for any period, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate." If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day
will be the arithmetic mean as determined by the Administrative and Collateral
Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York time) on that day by each of three leading brokers
of Federal funds transactions in New York City selected by the Administrative
and Collateral Agent.
"Fee Letters" shall mean (i) the letter between Apria and NationsBank
dated May 30, 1996 and (ii) the letters between the Borrowers and BofA dated May
30, 1996, June 3, 1996, January 26, 1998, January 29, 1998, and October 20,
1998, respectively.
"Fees" shall mean all amounts payable pursuant to or referred to in
Section 4.1.
"Final Maturity Date" shall mean August 9, 2001.
"Financial Covenant Default" shall have the meaning provided in the
Recitals to this Agreement.
"Fixed Charge Coverage Ratio" for any period of four consecutive fiscal
quarters shall mean the ratio of (x) Consolidated EBITDA plus Consolidated Rent
Expense less taxes paid in cash during such period to (y) Fixed Charges for such
period.
"Fixed Charges" for any period of four consecutive fiscal quarters
shall mean the sum (without duplication) of (i) Consolidated Interest Expense
and amortization of debt discounts in respect of all Indebtedness for such
period, (ii) the aggregate principal amount of all scheduled payments of
Indebtedness (including the principal portion of rentals under Capitalized Lease
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<PAGE> 17
Obligations) required to be made during such period and (iii) Consolidated Rent
Expense during such period.
"GAAP" shall mean generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
accounting profession), or in such other statements by such other entity as may
be in general use by significant segments of the U.S. accounting profession,
which are applicable to the circumstances as of the date of determination.
"Governmental Authority" shall mean any national (Federal or foreign),
state or local government, any political subdivision or any governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority,
agency, body or entity, including any HMO regulator or insurance regulator, the
PBGC, the Federal Deposit Insurance Corporation, the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System, any central bank
or any comparable authority.
"Governmental Rules" shall mean any law, rule, regulation, ordinance,
order, code, judgment, decree, directive, guideline, policy, or any similar form
of decision of, or any interpretation or administration of any of the foregoing
by, any Governmental Authority.
"Guaranty" shall mean the amended and restated guaranty substantially
in the form of Exhibit F to be executed by each of the Guarantors.
"Guarantors" shall mean (x) Apria and (y) each Material Subsidiary of
Apria.
"Hazardous Materials" shall mean (a) ethylene oxide, any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain, dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants,"
or words of similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any Governmental Authority.
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, which purchase price is due more than 90 days
from the date of incurrence of the obligations in respect thereof, but excluding
in any event accrued expenses and current trade accounts payable incurred in the
Ordinary Course of Business, (ii) the maximum amount available to be drawn under
all letters of credit issued for the account of such Person and all unpaid
drawings in respect of such letters of credit, (iii) all Indebtedness of the
types described in clause (i), (ii), (iv), (v), (vi) or (vii) secured by any
Lien on any property owned by such Person, whether or not such Indebtedness has
been assumed by such Person, (iv) all Capitalized Lease Obligations, (v) all
obligations of such Person to pay a specified purchase price for goods or
services, whether or not
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delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all
Contingent Obligations of such Person, and (vii) all obligations under any
Interest Rate Protection Agreement or under any similar type of agreement
entered into with a Person not a Bank.
"Indemnified Matters" shall have the meaning provided in Section 13.1.
"Indenture" shall mean the Indenture dated as of November 1, 1993,
among, inter alia, Apria and U.S. Trust Company of California, N.A., as trustee,
pursuant to which the Senior Subordinated Notes were issued, as amended as of
the date of this Agreement and as amended, modified or supplemented in
accordance with Section 10.11.
"Ineligible Securities" shall have the meaning provided in Section 8.8.
"Initial Acquisition Cap" shall have the meaning provided in Section
9.13.
"Intellectual Property" shall have the meaning provided in Section
8.19(a).
"Interest Determination Date" shall mean, for any Eurodollar Loan and
for any Interest Period for such Eurodollar Loan, the second Business Day prior
to the commencement of such Interest Period.
"Interest Expense" shall mean, for any period for any Person, the total
interest expense of such Person for such period (calculated without regard to
any limitations on the payment of such interest expense) payable during such
period in respect of all Indebtedness of such Person for such period plus,
without duplication, that portion of Capitalized Lease Obligations of such
Person representing the interest factor for such period.
"Interest Period" shall have the meaning provided in Section 2.9.
"Interest Rate Protection Agreements" shall mean (i) interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements), (ii) foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values, and (iii) other types of
hedging agreements from time to time.
"Issuing Bank" shall mean BofA and, with the consent of any Borrower,
any other Bank, to the extent such Bank agrees, in its sole discretion, to
become an Issuing Bank for the purposes of issuing Letters of Credit pursuant to
Section 3.
"Joinder Agreement" shall mean a Joinder Agreement substantially in the
form of Exhibit I.
"L/C Supportable Indebtedness" shall mean (i) obligations of any
Borrower incurred in the Ordinary Course of Business with respect to vehicle
insurance and workers compensation, surety bonds and other similar statutory
obligations, and (ii) such other obligations of any Borrower as are reasonably
acceptable to the Administrative and Collateral Agent and otherwise permitted to
exist pursuant to the terms of this Agreement.
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"Leaseholds" of any Person means all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements or fixtures.
"Letter of Credit" shall have the meaning provided in Section 3.1(a).
"Letter of Credit Fee" shall have the meaning provided in Section
4.1(c).
"Letter of Credit Outstandings" shall mean, at any time, (x) the sum of
(i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings, (y) less the amount of cash or Cash
Equivalents collateralizing outstanding Letters of Credit pursuant to Section
5.2(a)(A).
"Letter of Credit Request" shall have the meaning provided in Section
3.3(a).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Revolving Loan, each Swingline Loan and each
Term Loan.
"Loan Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the Total
Revolving Loan Commitment at such time; provided that if the Loan Percentage of
any Bank is to be determined after the Total Revolving Loan Commitment has been
terminated, then the Loan Percentages of the Banks shall be determined
immediately prior (and without giving effect) to such termination.
"Management Agreements" shall have the meaning provided in Section 6.6.
"Mandatory Borrowings" shall have the meaning provided in Section
2.1(c).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean any circumstance or event that
constitutes (a) a material adverse change in, or a material adverse effect upon,
any of the operations, business, properties or condition (financial or
otherwise) of Apria or Apria and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of Apria to perform under any Credit
Document; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability of any Credit Document; provided, that neither the 1997
Fourth Quarter Charges and Reserves nor the 1998 Third Quarter Charges and
Reserves shall constitute a Material Adverse Effect for purposes of this
Agreement.
"Material Contract" shall mean any contract of any Borrower that either
(i) evidences Indebtedness for borrowed money or evidences a Capitalized Lease
Obligation of such Borrower in excess of $1,000,000, (ii) evidences
Indebtedness, other than Indebtedness covered by clause
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<PAGE> 20
(i), of such Borrower in excess of $10,000,000 or (iii) requires a payment by or
to a Borrower of more than $10,000,000 in any year.
"Material Subsidiary" shall mean, at any time, each of the Subsidiaries
of Apria other than (i) the Subsidiaries set forth on Schedule XI, and (ii) any
Subsidiary of Apria whose net income or net assets, as applicable, at such time
constitutes less than 5% of the Consolidated Net Income of Apria and its
Subsidiaries for the most recently ended fiscal year or the consolidated assets
of Apria and its consolidated Subsidiaries as of the most recently ended fiscal
quarter.
"Maximum Swingline Amount" shall mean $5,000,000.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans,
$2,000,000, (ii) for Eurodollar Loans, $3,000,000, and (iii) for Swingline
Loans, $100,000.
"NationsBank" shall mean NationsBank, N.A.
"Net Indebtedness Proceeds" shall mean the aggregate amount of all cash
received by Apria and its Subsidiaries in respect of the issuance of any
Additional Permitted Subordinated Indebtedness, net of reasonable fees and
expenses incurred by Apria and its Subsidiaries in connection with such issuance
of Additional Permitted Subordinated Indebtedness.
"Net Sale Proceeds" shall mean for any sale of assets or stock of any
of Apria's Subsidiaries, the gross cash proceeds (including any cash received by
way of deferred payment pursuant to a promissory note, receivable or otherwise,
but only as and when received) received from any sale of assets or stock of
Subsidiaries, net of reasonable transaction costs, the amount of such gross cash
proceeds required to be used to repay any Indebtedness which is secured by the
respective assets which were sold, and the estimated marginal increase in income
taxes which will be payable by the Borrowers' consolidated group as a result of
such sale.
"1997 Fourth Quarter Charges and Reserves" shall mean the reserves,
charges and adjustments made or taken by Apria in the fourth quarter of its 1997
fiscal year in the aggregate amount of approximately $216,000,000, of which
approximately $134,000,000 is associated with goodwill.
"1998 Third Quarter Charges and Reserves" shall mean the reserves,
charges and adjustments made or taken by Apria in the third quarter of its 1998
fiscal year in the amount of $185,000,000, as generally described in Schedule
XIV.
"Non-Consenting Bank" shall have the meaning provided in Section 2.13.
"Note" shall mean each Amended and Restated Revolving Note, each Term
Note and each Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
2.3(a).
"Notice of Conversion" shall have the meaning provided in Section 2.6.
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"Notice Office" shall mean the office of the Administrative and
Collateral Agent located at 1455 Market Street, 12th Floor, Unit 10831, San
Francisco, California, 94103, Attention: Ms. Christine Cordi, or such other
office as the Administrative and Collateral Agent may hereafter designate in
writing as such to the other parties to this Agreement.
"Obligations" shall mean all amounts owing to the Administrative and
Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Ordinary Course of Business" shall mean any commercial transaction
that is normal and incidental for Apria or its Subsidiaries in connection with
the transaction of business in the home health care industry, substantially all
of which business shall be carried on in the United States; provided, that sales
of Rental Equipment in bulk or other than to patients shall not be considered in
the Ordinary Course of Business; and provided, further, that the current
operations of Abbey Health Services Limited shall be considered to be in the
Ordinary Course of Business.
"Participant" shall have the meaning provided in Section 3.4(a).
"Payment Office" shall mean the office of the Administrative and
Collateral Agent located at 1850 Gateway Boulevard, Unit 5596, Concord,
California, 94520, Attention: Ms. Kathy Eddy or such other office as the
Administrative and Collateral Agent may hereafter designate in writing as such
to the other parties to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor to the PBGC.
"Permitted Acquired Business" shall mean the business, division or
product line of any Person acquired in connection with a Permitted Acquisition.
"Permitted Acquisition" shall mean the acquisition by any Credit Party
of assets constituting an entire business, division or product line of any
Person not already a Subsidiary of such Borrower or 100% of the capital stock of
any such Person, although any such acquisition shall only be a Permitted
Acquisition so long as (a) the consideration consists solely of cash, Permitted
Debt or Apria Common Stock, (b) the assets acquired or the business of the
Person whose stock is acquired, shall be within the Ordinary Course of Business,
(c) such acquisition is approved by the Board of Directors of such Person, and
(d) those acquisitions that are structured as asset acquisitions shall be for
all or substantially all of an entire business, division or product line of such
Person. Notwithstanding anything to the contrary contained in the immediately
preceding sentence, an acquisition shall be a Permitted Acquisition only if all
requirements of Section 9.13 with respect to Permitted Acquisitions are met with
respect to such acquisition.
"Permitted Debt" shall mean Indebtedness assumed, acquired or incurred
in connection with a Permitted Acquisition and in accordance with Section 9.13,
all of the terms of which Permitted Debt shall be in form and substance
reasonably satisfactory to the Administrative and Collateral Agent.
"Permitted Investment" shall mean the acquisition by any Credit Party
of common equity interests (or similar equity interests), constituting less than
100% of the outstanding common equity interests (or similar equity interests),
of any Person not already a Subsidiary of such
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Borrower, although such acquisition shall only be a Permitted Investment so long
as (A) the consideration for such acquisition consists solely of cash, Permitted
Debt or Apria Common Stock and (B) such investments shall be for less than 100%
of the common equity interests (or similar equity interests) of such Person,
with all equity interests so acquired to be directly acquired and owned by such
Borrower. Notwithstanding anything to the contrary contained in the immediately
preceding sentence, an investment shall be a Permitted Investment only if all
requirements of Section 9.13 applicable to Permitted Investments are met with
respect to such investment.
"Permitted Liens" shall have the meaning provided in Section 10.1.
"Permitted Transaction" shall mean each Permitted Acquisition, each
Permitted Investment and any Subsidiary Reorganization.
"Person" shall mean any individual, partnership, limited liability
company, joint venture, firm, corporation, association, trust or other
enterprise or any Governmental Authority.
"Plan" shall mean any multiemployer or single-employer plan, as defined
in Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of), or at any time during the five
calendar years preceding the date of any Credit Event was maintained or
contributed to by (or to which there was an obligation to contribute of) Apria,
any Subsidiary of Apria or an ERISA Affiliate.
"Pre-Approved Acquisitions" shall mean those Permitted Acquisitions
described on Schedule XII to this Agreement.
"Projections" shall have the meaning provided in Section 8.5.
"Quarterly Payment Date" shall mean the last Business Day of each of
March, June, September and December.
"Real Property" shall mean as to any Person all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Reference Banks" shall mean BofA and NationsBank.
"Regulatory Change" shall mean, with respect to any Bank (or its
Applicable Lending Office), the occurrence after the Effective Date of any of
the following events: (a) the adoption of any applicable Governmental Rule, (b)
any change in any applicable Governmental Rule (including Regulation D) or in
the interpretation or administration of any Governmental Rule (including
Regulation D) by any Governmental Authority charged with its interpretation or
administration or (c) the adoption or making of any interpretation, directive,
guideline, policy or request applying to a class of banks, including such Bank,
of or under any Governmental Rule or in the interpretation or administration of
any Governmental Rule (including Regulation D) (whether or not having the force
of law and whether or not failure to comply would be unlawful) by any
Governmental Authority charged with its interpretation or administration.
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"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Rental Equipment" shall mean all medical equipment rented to patients
for use in their homes or held by Apria and its Subsidiaries for such use and
any other rental equipment required in accordance with GAAP to be stated as such
on the consolidated balance sheet of Apria.
"Replaced Bank" shall have the meaning provided in Section 2.13.
"Replacement Bank" shall have the meaning provided in Section 2.13.
"Required Banks" shall mean, subject to Section 13.13(b), Banks having
in excess of 50% of the aggregate amount of the Revolving Loan Commitments or,
if the Revolving Loan Commitment shall have terminated, Banks holding in excess
of 50% of the sum of (a) the aggregate unpaid principal amount of the Loans plus
(b) the aggregate amount of all Letter of Credit Outstandings.
"Returns" shall have the meaning provided in Section 8.9.
"Revolving Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I directly below the column entitled
"Revolver Commitment," as the same may be (x) reduced from time to time pursuant
to Sections 4.2, 4.3, 5.2 or 11 or (y) adjusted from time to time as a result of
assignments to or from such Bank pursuant to Section 2.13 or 13.4.
"Revolving Loan Commitment Fee" shall have the meaning provided in
Section 4.1(a).
"Revolving Loan" shall mean each Loan that is to be made on or after
the Effective Date pursuant to Section 2.1(a).
"SEC" shall have the meaning provided in Section 9.1(f).
"Securities Account Agreement" shall having the meaning assigned to
such term in Section 6.12.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated under the Securities Act.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated under the Securities
Exchange Act.
"Security Agreement" shall mean the Security Agreement, dated as of
March 13, 1998, among the Borrowers and the Administrative and Collateral Agent,
as amended by the First Amendment to Security Agreement, dated April 15, 1998,
and the Second Amendment to Security Agreement, dated as of even date herewith
and as it may hereinafter be amended, modified, or supplemented from time to
time.
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"Security Documents" shall mean, collectively, the Security Agreement,
Securities Account Agreement, the Confirmation of Security Agreement, all
Uniform Commercial Code financing statements and all other filings or recordings
with any Governmental Authority required by the Administrative and Collateral
Agent in connection with this Agreement or the Security Agreement.
"Senior Subordinated Convertible Debentures" shall mean the Senior
Subordinated Convertible Debentures in the aggregate principal amount of at
least $50,000,000 to be issued by Apria on terms and conditions reasonably
satisfactory to the Administrative and Collateral Agent and the Required Banks.
"Senior Subordinated Notes" shall mean the $200,000,000 9-1/2% Senior
Subordinated Notes of Apria, due November 1, 2002, as amended, modified or
supplemented in accordance with Section 10.11.
"Shareholders' Agreements" shall have the meaning provided in Section
6.6.
"Stated Amount" of each Letter of Credit shall mean, at any time, the
maximum amount available to be drawn under such Letter of Credit at such time
(in each case determined without regard to whether any conditions to drawing
could then be met).
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person or one or more
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person or one or more Subsidiaries of such Person
has more than a 50% equity interest at the time.
"Subsidiary Reorganization" shall mean (i) the transfer to any Borrower
of assets constituting substantially all the assets of any other Borrower, (ii)
the transfer to any Borrower of 100% of the capital stock of any other Borrower,
(iii) the merger of any Borrower with and into any other Borrower, (iv) the
merger of any Subsidiary of Apria with and into any Borrower or (v) the merger
of any Subsidiary of Apria with and into any other Subsidiary of Apria; provided
that the surviving Subsidiary shall have assumed all of the obligations of the
non-surviving Subsidiary under any Credit Document and provided further that if
the surviving Subsidiary is not a Material Subsidiary, it shall be deemed a
Material Subsidiary as of the date of any such merger if such non-surviving
Subsidiary was a Material Subsidiary.
"Swingline Expiry Date" shall mean the date which is two Business Days
prior to the Final Maturity Date.
"Swingline Lender" shall mean BofA, or any successor to BofA.
"Swingline Loan" shall mean each Loan that is to be made on or after
the Effective Date pursuant to Section 2.1(b).
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"Swingline Note" shall have the meaning provided in Section 2.5(a).
"Syndication Agent" shall mean NationsBank, as syndication agent for
the Banks under this Agreement, and each successor syndication agent. Except as
otherwise set forth in this Agreement, the Syndication Agent, having arranged
for the syndication of this Agreement through and including the Effective Date,
shall have no other duties or responsibilities beyond those of a Bank under this
Agreement.
"Taxes" shall have the meaning provided in Section 5.4(a).
"Tax Sharing Agreements" shall have the meaning provided in Section
6.6.
"Term Loan" shall mean the loans provided for by Section 2.1(d).
"Term Loan Commitments" shall mean, for each Bank, the amount set forth
opposite such Bank's name in Schedule I directly below the column entitled "Term
Commitment" (as the same may be reduced from time to time pursuant to Section
5.1, 5.2 or 11 or adjusted from time to time as a result of assignments to or
from such Bank pursuant to Section 2.13 or 13.4).
"Term Notes" shall have the meaning provided in Section 2.5(a).
"Total Commitments" shall mean the sum of the aggregate Revolving Loan
Commitments and the Term Loan Commitments.
"Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Banks. The principal amount of the
Total Revolving Loan Commitment as of the Effective Date of this Agreement is
$30,000,000.
"Total Term Loan Commitment" shall mean the sum of the Term Loan
Commitments of each of the Banks. The aggregate principal amount of the Term
Loan Commitments as of the Effective Date of this Agreement is $288,000,000.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of the aggregate principal amount of Revolving
Loans and Swingline Loans then outstanding plus the then aggregate amount of
Letter of Credit Outstandings.
"Tranche" shall mean the respective facility and commitments utilized
in making Loans under this Agreement, with there being three separate Tranches,
i.e., whether Term Loans, Revolving Loans or Swingline Loans.
"Transaction Documents" shall mean this Agreement, the Amended and
Restated Revolving Notes, the Term Notes, the Swingline Note, the Guaranty, and
each of the Security Documents.
"Trigger Date" shall have the meaning provided in Section 5.2(a)(E).
"Type" shall mean the designation of a Loan as a Base Rate Loan or a
Eurodollar Loan.
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"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in any relevant jurisdiction.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided in Section 3.5(a).
"Unusual Cash Expenses" shall mean unusual, nonrecurring cash expenses
of Apria and its Subsidiaries, on a consolidated basis, determined in accordance
with GAAP incurred in fiscal year 1999.
"Unutilized Revolving Loan Commitment" shall mean, for any Bank, at any
time, the Revolving Loan Commitment of such Bank at such time less the sum of
the aggregate principal amount of Revolving Loans made by such Bank then
outstanding and such Bank's Loan Percentage of the Letter of Credit
Outstandings.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock is at the time owned by such Person or
one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person or one or more
Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
1.2 Accounting Terms and Determinations
(a) Except as otherwise expressly provided in this Agreement, all
accounting terms used in this Agreement shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Banks under this Agreement shall (unless otherwise disclosed to
the Banks in writing at the time of delivery in the manner described in
subsection (b) below) be prepared, in accordance with GAAP applied on a basis
consistent with those used in the preparation of the latest financial statements
furnished to the Banks under this Agreement (which, prior to the delivery of the
first financial statements under Section 9.1, shall mean the audited financial
statements as at December 31, 1997 referred to in Section 8.5). All calculations
made for the purposes of determining compliance with this Agreement shall
(except as otherwise expressly provided in this Agreement) be made by
application of GAAP applied on a basis consistent with those used in the
preparation of the latest annual or quarterly financial statements furnished to
the Banks pursuant to Section 9.1 (or, prior to the delivery of the first
financial statements under Section 9.1, used in the preparation of the audited
financial statements as at December 31, 1997 referred to in Section 8.5) unless
(i) Apria shall have objected to determining such compliance on such basis at
the time of delivery of such financial statements or (ii) the Required Banks
shall so object in writing within 30 days after delivery of such financial
statements, in either of which events such calculations shall be made on a basis
consistent with those used in the preparation of the latest financial statements
as to which such objection shall not have been made (which, if objection is made
in respect of the first financial statements delivered under Section 9.1, shall
mean the financial statements referred to in Section 8.5); provided that if such
resolution results in burdensome duplication in Apria's preparation of the
financial reports necessary to make such calculations, Apria and the
Administrative and Collateral Agent, with the consent of the Required Banks,
shall use reasonable efforts to reach a
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<PAGE> 27
method for determining such compliance that would eliminate or reduce such
burdensome duplication.
(b) Apria shall deliver to the Banks at the same time as the delivery
of any annual or quarterly financial statement under Section 9.1 (i) a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence of any such difference.
(c) To enable the ready and consistent determination of compliance with
the covenants set forth in Sections 9 and 10, Apria will not change the last day
of its fiscal year from December 31 of each year, or the last days of the first
three fiscal quarters in each of its fiscal years from March 31, June 30 and
September 30 of each year, respectively.
1.3 Interpretation. In this Agreement, unless otherwise indicated, the
singular includes the plural and plural the singular; words importing any gender
include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions and other
modifications by the terms of this Agreement); and references to Persons include
their respective permitted successors and assigns and, in the case of
Governmental Authorities, Persons succeeding to their respective functions and
capacities.
Section 2. Amount and Terms of Credit.
2.1 Loans.
(a) Revolving Loans. Subject to and upon the terms and conditions set
forth in this Agreement, each Bank severally agrees at any time and from time to
time on and after the Effective Date but prior to the Final Maturity Date, to
make a loan or loans (each, a "Revolving Loan," and collectively, the "Revolving
Loans") to the Borrowers, which Revolving Loans:
(i) shall, at the option of a Borrower, be Base Rate Loans
or Eurodollar Loans; provided that except as otherwise specifically
provided in Section 2.10(b), all Revolving Loans composing the same
Borrowing shall at all times be of the same Type;
(ii) may be repaid and reborrowed in accordance with the
provisions of this Agreement; and
(iii) when added to the product of (x) such Bank's Loan
Percentage and (y) the sum of (I) the aggregate amount of all Letter of
Credit Outstandings (exclusive of Unpaid
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Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) at
such time and (II) the aggregate principal amount of all Swingline
Loans then outstanding (exclusive of Swingline Loans which are repaid
with the proceeds of, and simultaneously with the incurrence of,
Revolving Loans), shall not exceed for any Bank at any time the
Revolving Loan Commitment of such Bank at such time;
(b) Swingline Loans. Subject to and upon the terms and conditions set
forth in this Agreement, the Swingline Lender, in its individual capacity,
agrees at any time and from time to time on and after the Effective Date and
prior to the Swingline Expiry Date, to make a loan or loans to the Borrowers
(each, a "Swingline Loan," and collectively, the "Swingline Loans"), which
Swingline Loans:
(i) shall be made and maintained as Base Rate Loans;
(ii) may be repaid and reborrowed in accordance with the
provisions of this Agreement;
(iii) when combined with the aggregate principal amount of all
Revolving Loans then outstanding and Letter of Credit Outstandings at
such time shall not exceed in aggregate principal amount at any time
outstanding, an amount equal to the Total Revolving Loan Commitment at
such time; and
(iv) shall not exceed the Maximum Swingline Amount.
(c) On any Business Day, the Swingline Lender may, in its sole
discretion, give notice to the Banks that its outstanding Swingline Loans shall
be funded with a Borrowing of Revolving Loans (provided that such notice shall
be deemed to have been automatically given upon the occurrence of an Event of
Default under Section 11.5 or upon the exercise of any of the remedies provided
in the last paragraph of Section 11), in which case a Borrowing of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day from all
Banks (without giving effect to any reductions in the Revolving Loan Commitments
pursuant to the last paragraph of Section 11) pro rata on the basis of their
respective Loan Percentages (determined before giving effect to any termination
of the Revolving Loan Commitments pursuant to the last paragraph of Section 11)
and the proceeds of such Mandatory Borrowing shall be applied directly to the
Swingline Lender to repay the Swingline Lender for such outstanding Swingline
Loans. Subject to Section 2.14, each such Bank hereby irrevocably agrees to make
Revolving Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding sentence
and on the date specified in writing by the Swingline Lender notwithstanding (i)
the amount of the Mandatory Borrowing may not comply with the minimum amount for
Borrowings otherwise required under this Agreement, (ii) whether any conditions
specified in Section 6 or Section 7 are then satisfied, (iii) whether a Default
or an Event of Default then exists, (iv) the date of such Mandatory Borrowing,
and (v) any reduction in the Total Revolving Loan Commitment after any such
Swingline Loans were made. In the event that any Mandatory Borrowing cannot for
any reason be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the Bankruptcy
Code
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with respect to any Borrower), then each such Bank hereby agrees that it
shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise
have occurred, but adjusted for any payments received from any Borrower on or
after such date and prior to such purchase) from the Swingline Lender such
participations in the outstanding Swingline Loans as shall be necessary to cause
such Banks to share in such Swingline Loans ratably based upon their respective
Loan Percentages (determined before giving effect to any termination of the
Revolving Loan Commitments pursuant to the last paragraph of Section 11);
provided that (x) all interest payable on the Swingline Loans shall be for the
account of the Swingline Lender until the date as of which the respective
participation is required to be purchased and, to the extent attributable to the
purchased participation, shall be payable to the participant from and after such
date and (y) at the time any purchase of participations pursuant to this
sentence is actually made, the purchasing Bank shall be required to pay the
Swingline Lender interest on the principal amount of the participation purchased
for each day from and including the day upon which such mandatory purchase was
required to be made to but excluding the date of payment for such participation,
at the rate otherwise applicable to Revolving Loans maintained as Base Rate
Loans under this Agreement.
(d) Term Loans. Each Bank shall be deemed to have made as of the date
of this Agreement, on the terms and conditions of this Agreement, Term Loans to
the Borrowers in Dollars in an aggregate amount equal to the amount of the Term
Loan Commitment of such Bank which Term Loans shall represent the conversion of
$288,000,000 of Revolving Loans under the Existing Credit Agreement into
$288,000,000 of Term Loans under this Agreement. The amount of any payment or
pre-payment of any Term Loan by the Borrowers may not be reborrowed.
2.2 Minimum Amount of Each Borrowing.
(a) The aggregate principal amount of each Borrowing under this
Agreement shall not be less than the Minimum Borrowing Amount and, if greater,
shall be in a multiple of $500,000 ($50,000 in the case of Swingline Loans).
More than one Borrowing may occur on the same date, but at no time shall there
be outstanding more than ten Borrowings of Eurodollar Loans.
2.3 Notice of Borrowing.
(a) Whenever any Borrower desires to make a Borrowing under this
Agreement (excluding Borrowings of Swingline Loans and Mandatory Borrowings), it
shall give the Administrative and Collateral Agent at its Notice Office, prior
to 11:00 a.m. (San Francisco time) at least one Business Day's prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing of
Base Rate Loans and at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar
Loans to be made under this Agreement. Each such notice (each a "Notice of
Borrowing"), except as otherwise expressly provided in Section 2.10, shall be
irrevocable and shall be given by a Borrower in the form of Exhibit A-1,
appropriately completed to specify: (i) the aggregate principal amount of the
Loans to be made pursuant to such Borrowing; (ii) the date of such Borrowing
(which shall be a Business Day); (iii) whether the Loans being made pursuant to
such Borrowing are to be initially maintained as Base Rate Loans or Eurodollar
Loans and, if Eurodollar Loans, the initial Interest Period to be applicable
thereto; and (iv) the amount of each
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Borrowing attributable to each Borrower. The Administrative and Collateral Agent
shall promptly give each Bank which is required to make Loans of the Tranche
specified in the respective Notice of Borrowing notice of such proposed
Borrowing, of such Bank's proportionate share thereof and of the other matters
specified in the Notice of Borrowing. Unless the Required Banks shall otherwise
agree, during the existence of a Default or an Event of Default, the Borrowers
may not elect to have a Loan be made as, or converted into or continued as, a
Eurodollar Loan.
(b) (i) Whenever any Borrower desires to make a Borrowing of Swingline
Loans under this Agreement, it shall give the Swingline Lender not later than
12:00 Noon (San Francisco time) on the date that the Swingline Loan is to be
made, written notice (or telephonic notice confirmed in writing) of each
Swingline Loan to be made under this Agreement. Each such notice shall be
irrevocable and specify in each case (A) the date of Borrowing (which shall be a
Business Day); (B) the aggregate principal amount of Swingline Loans to be made
pursuant to such Borrowing; and (C) the amount of each Borrowing attributable to
each Borrower.
(ii) Without in any way limiting the obligation of each Borrower
to confirm in writing any telephonic notice of such Borrowing of Swingline
Loans, the Swingline Lender may act without liability upon the basis of
telephonic notice of such Borrowing, believed by the Swingline Lender in
good faith to be from one of the individuals identified on Schedule II
prior to receipt of written confirmation. In the event any Borrower wishes
to modify Schedule II, it shall so notify the Swingline Lender in writing,
and following the actual receipt by the Swingline Lender of such
modification, the Swingline Lender shall be fully protected in acting on
such modified Schedule. In each such case, each Borrower hereby waives the
right to dispute the Swingline Lender's record of the terms of such
telephonic notice of such Borrowing of Swingline Loans.
(iii) Mandatory Borrowings shall be made upon the notice specified
in Section 2.1(c), with each Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of the Mandatory Borrowings
as set forth in Section 2.1(c).
2.4 Disbursement of Funds. No later than 12:00 Noon (San Francisco time)
on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, no later than the close of business on the date specified
pursuant to Section 2.3(b)(i) or (y) in the case of Mandatory Borrowings, not
later than 11:00 a.m. (San Francisco time) on the date specified in Section
2.1(c)), each Bank with a Revolving Loan Commitment will make available its pro
rata portion (determined in accordance with Section 2.7) of each such Borrowing
requested to be made on such date (or in the case of Swingline Loans, the
Swingline Lender shall make available the full amount thereof). All such amounts
shall be made available in Dollars and in immediately available funds at the
Payment Office of the Administrative and Collateral Agent, and the
Administrative and Collateral Agent will make available to the applicable
Borrower at the Payment Office the aggregate of the amounts so made available by
the Banks. Unless the Administrative and Collateral Agent shall have been
notified by any Bank prior to the date of Borrowing that such Bank does not
intend to make available to the Administrative and Collateral Agent such Bank's
portion of any Borrowing to be made on such date, the Administrative and
Collateral Agent may assume that such Bank has made such amount available to the
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Administrative and Collateral Agent on such date of Borrowing and the
Administrative and Collateral Agent may, in reliance upon such assumption, make
available to the applicable Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative and
Collateral Agent by such Bank, the Administrative and Collateral Agent shall be
entitled to recover such corresponding amount on demand from such Bank. If such
Bank does not pay such corresponding amount forthwith upon the Administrative
and Collateral Agent's demand therefor, the Administrative and Collateral Agent
shall promptly notify the applicable Borrower and the applicable Borrower shall
immediately pay such corresponding amount to the Administrative and Collateral
Agent. The Administrative and Collateral Agent shall also be entitled to recover
on demand from such Bank or the applicable Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative and Collateral
Agent to the applicable Borrower until and excluding the date such corresponding
amount is recovered by the Administrative and Collateral Agent, at a rate per
annum equal to (i) if recovered from such Bank, the cost to the Administrative
and Collateral Agent of acquiring overnight federal funds and (ii) if recovered
from the applicable Borrower, the rate of interest applicable to the respective
Borrowing, as determined pursuant to Section 2.8. Nothing in this Section 2.4
shall be deemed to relieve any Bank from its obligation to make Loans under this
Agreement or to prejudice any rights which the applicable Borrower may have
against any Bank as a result of any failure by such Bank to make Loans under
this Agreement. No Bank shall be responsible for the failure of any other Bank
to make available such other Bank's portion of any Borrowing to be made pursuant
to this Section 2.4.
2.5 Notes.
(a) Each Borrower's obligation to pay the principal of, and interest
on, the Loans made by each Bank shall be evidenced: (i) if Revolving Loans, by
an amended and restated promissory note duly executed and delivered by each
Borrower substantially in the form of Exhibit B-1, with blanks appropriately
completed in conformity with this Agreement, as amended from time to time in
accordance with the provisions of this Agreement (each, an "Amended and Restated
Revolving Note," and collectively, the "Amended and Restated Revolving Notes");
(ii) if Term Loans, by a promissory note duly executed and delivered by each
Borrower substantially in the form of Exhibit B-2, with blanks appropriately
completed in conformity with this Agreement, as amended from time to time in
accordance with the provisions of this Agreement (each, a "Term Note," and
collectively, the "Term Notes") and (iii) if Swingline Loans, by an amended and
restated promissory note duly executed and delivered by each Borrower
substantially in the form of Exhibit B-3, with blanks appropriately completed in
conformity with this Agreement (the "Swingline Note").
(b) The Amended and Restated Revolving Note issued to each Bank shall:
(i) be executed by each Borrower, (ii) be payable to the order of such Bank and
be dated the Effective Date; (iii) be in a stated principal amount equal to the
Revolving Loan Commitment of such Bank and be payable in the principal amount of
the Revolving Loans evidenced by such Amended and Restated Revolving Note from
time to time; (iv) mature on the Final Maturity Date; (v) bear interest as
provided in the appropriate clause of Section 2.8 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby; (vi) be
subject to
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mandatory repayment as provided in Section 5.2; and (vii) be entitled to the
benefits of this Agreement, the Security Documents and the Guaranty.
(c) The Swingline Note issued to the Swingline Lender shall: (i) be
executed by each Borrower; (ii) be payable to the order of the Swingline Lender
and be dated the Effective Date; (iii) be in a stated principal amount equal to
the Maximum Swingline Amount and be payable in the principal amount of the
outstanding Swingline Loans evidenced thereby from time to time; (iv) mature on
the Swingline Expiry Date; (v) bear interest as provided in the appropriate
clause of Section 2.8 in respect of the Base Rate Loans evidenced thereby; and
(vi) be entitled to the benefits of this Agreement, the Security Documents and
the Guaranty.
(d) The Term Note issued to each Bank shall: (i) be executed by each
Borrower, (ii) be payable to the order of such Bank and be dated the Effective
Date; (iii) be in a stated principal amount equal to the Term Loan Commitment of
such Bank and be payable in the principal amount of the Term Loan evidenced by
such Term Note; (iv) mature on the Final Maturity Date; (v) bear interest as
provided in the appropriate clause of Section 2.8 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby; (vi) be
subject to mandatory repayment as provided in Section 5.2; and (vii) be entitled
to the benefits of this Agreement, the Security Documents and the Guaranty.
(e) Each Bank will note on its internal records the amount of each Loan
made by it and each payment in respect thereof and will prior to any transfer of
any of its Notes endorse on the reverse side thereof the outstanding principal
amount of Loans evidenced thereby. Failure to make any such notation shall not
affect each Borrower's obligations in respect of such Loans.
2.6 Conversions. The Borrowers shall have the option to convert on any
Business Day all or a portion at least equal to the Minimum Borrowing Amount of
the outstanding principal amount of the Loans (other than Swingline Loans, which
may not be converted pursuant to this Section 2.6) made pursuant to one or more
Borrowings of one Type of Loan into a Borrowing or Borrowings of the other Type
of Loan; provided that: (i) except as otherwise provided in Section 2.10(b),
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
an Interest Period applicable to the Loans being converted and no such partial
conversion of Eurodollar Loans shall reduce the outstanding principal amount of
such Eurodollar Loans made pursuant to a single Borrowing to less than the
Minimum Borrowing Amount applicable thereto; (ii) unless the Required Banks
shall otherwise agree, Base Rate Loans may only be converted into Eurodollar
Loans if no Default or Event of Default is in existence on the date of the
conversion; and (iii) no conversion pursuant to this Section 2.6 shall result in
a greater number of Borrowings than is permitted under Section 2.2. Each such
conversion shall be effected by any Borrower by giving the Administrative and
Collateral Agent at its Notice Office prior to 11:00 a.m. (San Francisco time)
at least three Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) (each, a "Notice of Conversion") which notice
shall be in the form of Exhibit A-2, appropriately completed to specify the
Loans to be so converted, the Borrowing or Borrowings pursuant to which such
Loans were made and, if to be converted into Eurodollar Loans, the Interest
Period to be initially applicable thereto. The Administrative and Collateral
Agent shall give each Bank prompt notice of any such proposed conversion
affecting any of its Loans. Upon any such conversion the proceeds thereof will
be deemed to be applied directly on the day of such conversion to prepay the
outstanding principal amount of the Loans
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being converted; provided, however, that no such conversion shall be deemed to
be a Credit Event for the purposes of Section 7.
2.7 Pro Rata Borrowings. All Borrowings of Revolving Loans and Term
Loans under this Agreement shall be incurred from the Banks pro rata on the
basis of their respective Revolving Loan Commitments and Term Loan Commitments.
It is understood that no Bank shall be responsible for any default by any other
Bank of its obligation to make Loans under this Agreement and that each Bank
shall be obligated to make the Loans provided to be made by it under this
Agreement regardless of the failure of any other Bank to make its Loans under
this Agreement.
2.8 Interest.
(a) The Borrowers agree to pay interest in respect of the unpaid
principal amount of each Base Rate Loan from the date of the Borrowing thereof
until the maturity thereof (whether by acceleration or otherwise) at a rate per
annum which shall at all times be equal to the Base Rate in effect from time to
time plus the Applicable Margin.
(b) The Borrowers agree to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date of the Borrowing of such
Eurodollar Loan until the maturity of such Eurodollar Loan (whether by
acceleration or otherwise) at a rate per annum which shall, during each Interest
Period applicable to such Eurodollar Loan, be equal to the sum of the Applicable
Margin plus the Eurodollar Rate for such Interest Period, it being understood
that the Applicable Margin is subject to change within such Interest Period.
(c) Upon the occurrence and during the continuance of an Event of
Default, all Obligations shall bear interest at a rate per annum equal to 2% in
excess of the rate of interest then applicable to such Obligation, with such
interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, monthly in arrears on the last Business Day of
each calendar month; (ii) in respect of each Eurodollar Loan, on the last day of
each Interest Period applicable thereto and, in the case of an Interest Period
in excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period; and (iii) in respect of each Loan, on any
repayment or prepayment (on the amount repaid or prepaid), at or before maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Administrative and
Collateral Agent shall determine the Eurodollar Rate for the Interest Period
applicable to Eurodollar Loans and shall promptly notify the Borrowers and the
Banks thereof. Each such determination shall, absent manifest error, be final
and conclusive and binding on all parties to this Agreement.
2.9 Interest Periods. At the time it gives any Notice of Borrowing or
Notice of Conversion in respect of the making of, or conversion into, a
Eurodollar Loan (in the case of the initial Interest Period applicable thereto)
or prior to 11:00 a.m. (San Francisco time) on the third Business Day prior to
the expiration of an Interest Period applicable to such Eurodollar Loan (in the
case of any subsequent Interest Period), the Borrowers shall have the right to
elect, by giving the Administrative and Collateral Agent notice thereof, the
interest period (each an "Interest
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<PAGE> 34
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of the Borrowers, be a one, three, six or, with the approval of all of
the Banks, nine or twelve-month period; provided, that:
(i) all Eurodollar Loans composing a single Borrowing shall
at all times have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan
shall commence on the date of Borrowing of such Loan (including the
date of any conversion thereto from a Borrowing of Base Rate Loans) and
each Interest Period occurring thereafter in respect of such Loan shall
commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan
begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided, however, that if any Interest
Period for a Eurodollar Loan would otherwise expire on a day which is
not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on
the next preceding Business Day; and
(v) no Interest Period shall be selected which extends
beyond the Final Maturity Date.
If upon the expiration of any Interest Period applicable to a Borrowing
of Eurodollar Loans, the Borrowers have failed to elect a new Interest Period to
be applicable to such Eurodollar Loans as provided above, the Borrowers shall be
deemed to have elected to convert such Eurodollar Loans into Base Rate Loans
effective as of the expiration date of such current Interest Period.
2.10 Increased Costs, Illegality, etc.
(a) In the event that any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties to this Agreement but, with respect to clause (i) below, may be
made only by the Administrative and Collateral Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the Effective Date affecting the interbank
Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable under this
Agreement with respect to any Eurodollar Loan because of (x) any
Regulatory Change since the Effective Date such as, for
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example, but not limited to: (A) a change in the basis of taxation of
payments to any Bank of the principal of or interest on the Notes or
any other amounts payable under this Agreement (except for changes in
the rate of tax on, or determined by reference to, the net income or
profits of such Bank imposed by the jurisdiction in which its principal
office or Applicable Lending Office is located) or (B) a change in
official reserve requirements (but, in all events, excluding reserves
required under Regulation D to the extent included in the computation
of the Eurodollar Rate) or (y) other circumstances since the Effective
Date affecting such Bank or the interbank Eurodollar market or the
position of such Bank in such market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has been made (x) unlawful by any Governmental Rule,
(y) impossible by compliance by any Bank in good faith with any request
by any Governmental Authority (whether or not having the force of law)
or (z) impracticable as a result of a contingency occurring after the
Effective Date which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, such Bank (or the Administrative and Collateral
Agent, in the case of clause (i) above) shall promptly give notice (by telephone
confirmed in writing) to the Borrowers and, except in the case of clause (i)
above, to the Administrative and Collateral Agent of such determination (which
notice the Administrative and Collateral Agent shall promptly transmit to each
of the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar
Loans shall no longer be available until such time as the Administrative and
Collateral Agent notifies the Borrowers and the Banks that the circumstances
giving rise to such notice by the Administrative and Collateral Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by the
Borrowers with respect to Eurodollar Loans which have not yet been incurred
(including by way of conversion) shall be deemed rescinded by the Borrowers, (y)
in the case of clause (ii) above, the Borrowers shall pay to such Bank, within
two Business Days following written demand therefor, such additional amounts (in
the form of an increased rate of, or a different method of calculating, interest
or otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable under this Agreement (a written notice as to the
additional amounts owed to such Bank, showing in reasonable detail the basis for
the calculation thereof, submitted to the Borrowers by such Bank shall, absent
manifest error, be final and conclusive and binding on all the parties to this
Agreement) and (z) in the case of clause (iii) above, the Borrowers shall take
one of the actions specified in Section 2.10(b) as promptly as possible and, in
any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 2.10(a)(ii) or (iii), the Borrowers may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 2.10(a)(iii) shall) either (i) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, by giving the Administrative
and Collateral Agent telephonic notice (confirmed in writing) on the same date
that the Borrowers were notified by the affected Bank or the Administrative and
Collateral Agent pursuant to Section 2.10(a)(ii) or (iii), cancel the respective
Borrowing, or (ii) if the affected Eurodollar Loan is then outstanding, upon at
least three Business Days' written notice to the Administrative and Collateral
Agent, require the affected Bank to convert such Eurodollar Loan into a Base
Rate
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<PAGE> 36
Loan; provided that if more than one Bank is affected at any time, then all
affected Banks must be treated the same pursuant to this Section 2.10(b).
(c) If at any time after the Effective Date, any Bank determines that
the introduction of or any change in applicable law or Governmental Rule
(whether or not having the force of law and including any phasing in of those
announced or published prior to the Effective Date) concerning capital adequacy,
or any change in interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency, will have the effect of increasing
the amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank based on the existence of such Bank's
Revolving Loan Commitment under this Agreement or its obligations under this
Agreement, then the Borrowers shall pay to such Bank, within five Business Days
following such Bank's written demand therefor, such additional amounts as shall
be required to compensate such Bank or any corporation controlling such Bank for
the increased cost to such Bank or such corporation or the reduction in the rate
of return to such Bank or such corporation as a result of such increase of
capital. In determining such additional amounts, each Bank will act reasonably
and in good faith and will use averaging and attribution methods which are
reasonable; provided that such Bank's determination of compensation owing under
this Section 2.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties to this Agreement. Each Bank, upon determining that
any additional amounts will be payable pursuant to this Section 2.10(c), will
give prompt written notice thereof to the Borrowers, which notice shall show in
reasonable detail the basis for calculation of such additional amounts, although
the failure to give any such notice shall not release or diminish any of the
Borrowers' obligations to pay additional amounts pursuant to this Section
2.10(c).
(d) Each Bank agrees that upon the occurrence of any event giving rise
to the operation of Section 2.10 with respect to such Bank, it will, if
requested by the Borrowers, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office for any Loans
affected by such event; provided that such designation is made on such terms
that such Bank and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding or minimizing the consequence of the
event giving rise to the operation of any provisions of such Section. The
Borrowers agree to pay all costs and expenses determined by such Bank to have
been incurred in utilizing such other lending office. In determining such
additional amounts, each Bank will act reasonably and in good faith and will use
averaging and attribution methods which are reasonable; provided that each
determination by a Bank pursuant to this Section 2.10(d) shall, absent manifest
error, be final and conclusive and binding on all the parties to this Agreement.
Nothing in this Section 2.10(d) shall affect or postpone any of the obligations
of the Borrowers or the right of any Bank provided in Section 2.10.
2.11 Compensation. The Borrowers shall compensate each Bank, upon its
written request (which request shall set forth in reasonable detail the basis
for requesting such compensation), for all losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Bank to fund its Eurodollar Loans) which such Bank may sustain: (i) if for
any reason (other than a default by such Bank or the Administrative and
Collateral Agent) a Borrowing of, or conversion from or into, Eurodollar Loans
does not occur on a date specified therefor in a Notice of Borrowing or Notice
of Conversion (whether or not withdrawn by the Borrowers or deemed withdrawn
pursuant to Section 2.10(b)); (ii) if any repayment (including
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<PAGE> 37
any repayment made pursuant to Section 5.2) or conversion of any of its
Eurodollar Loans occurs on a date which is not the last day of an Interest
Period with respect thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrowers; or (iv) as a consequence of (w) any other default by the Borrowers to
repay their Loans when required by the terms of this Agreement or any Note held
by such Bank, or (x) any election made pursuant to Section 2.10(b). A Bank's
basis for requesting compensation pursuant to this Section, and a Bank's
calculations of the amount thereof, shall, absent manifest error, be final and
conclusive and binding on all the parties to this Agreement.
2.12 Reserved.
2.13 Replacement of Banks. Upon (a) (i) the receipt of notice from a
Bank pursuant to Section 2.10 or (ii) any Bank failing to fulfill its
obligations to make a Loan at a time when the conditions precedent set forth in
Sections 6 and 7 shall have been satisfied in the opinion of the Required Banks,
as set forth in Section 13.13(b) (in each case, an "Affected Bank") or (b) any
Bank or Banks (other than the Administrative and Collateral Agent or any Issuing
Bank) failing to consent to any proposed amendment, modification or waiver as
contemplated by Section 13.13(a), but Banks holding at least 85% of the Total
Revolving Loan Commitments having consented to such an amendment, modification
or waiver (in each case, a "Non-Consenting Bank"), the Borrowers shall have the
right, if no Event of Default then exists, to replace any such Affected Bank or
Non-Consenting Bank (the "Replaced Bank") with one or more Eligible Transferee
or Transferees, (collectively, the "Replacement Bank") reasonably acceptable to
the Agents and the Issuing Banks; provided that:
(i) at the time of any replacement pursuant to this Section 2.13,
the Replacement Bank shall enter into one or more Assignment and
Assumption Agreements, pursuant to which the Replacement Bank shall
acquire all of the Revolving Loan Commitments and outstanding Loans of,
and participations in Letters of Credit by, the Replaced Bank and, in
connection with such acquisition, shall pay to (x) the Replaced Bank in
respect of such acquisition an amount equal to the sum of (A) an amount
equal to the principal of, and all accrued interest on, all outstanding
Loans of the Replaced Bank, (B) an amount equal to such Replaced Bank's
Loan Percentage of all Unpaid Drawings that have been funded by (and
not reimbursed to) such Replaced Bank, together with all then unpaid
interest with respect to such Unpaid Drawings at such time and (C) an
amount equal to all accrued, but theretofore unpaid, Fees owing to the
Replaced Bank pursuant to Section 4.1 and (y) the appropriate Issuing
Bank an amount equal to such Replaced Bank's Loan Percentage of any
Unpaid Drawing (which at such time remains an Unpaid Drawing) to the
extent such amount was not theretofore funded by such Replaced Bank;
and
(ii) all Obligations of the Borrowers owing to the Replaced Bank
(other than those specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Bank concurrently
with such replacement, including, without limitation, in the case of an
Affected Bank or a Non-Consenting Bank, the costs associated with any
such replacement of such Bank.
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Upon the execution of the respective Assignment and Assumption Agreement, the
payment of amounts referred to in clauses (i) and (ii) above, the payment of the
$3,000 assignment fee payable to the Administrative and Collateral Agent
pursuant to Section 13.5(b); provided that, in the case of the replacement of a
Non-Consenting Bank, such fee shall be paid by the Borrowers rather than by the
assigning Bank and, if so requested by the Replacement Bank, delivery to the
Replacement Bank of the appropriate Notes and, if applicable, replacement Notes
to any Replacement Bank that is already a Bank to reflect the increased
Commitment of such Bank, executed by the Borrowers, the Replacement Bank shall
become a Bank under this Agreement and the Replaced Bank shall cease to
constitute a Bank under this Agreement, except with respect to indemnification
provisions under this Agreement, which shall survive as to such Replaced Bank.
2.14 Certain Limitation. No Bank shall at any time be obligated to
make any Loan or to participate in any Swingline Loan or Letter of Credit in a
principal amount which exceeds such Bank's Revolving Loan Commitment.
2.15 Notices of Borrowing; Notices of Conversion; Authorized Employees.
Notices of Borrowing and Notices of Conversion shall only be executed by
officers of Apria or Authorized Employees.
Section 3. Letters of Credit.
3.1 Letters of Credit.
(a) Subject to and upon the terms and conditions set forth in this
Agreement, any Borrower may request the Issuing Bank at any time and from time
to time after the Effective Date and prior to the Final Maturity Date to issue,
for account of such Borrower and for the benefit of any holder (or any trustee,
agent or other similar representative for any such holders) of L/C Supportable
Indebtedness of such Borrower, an irrevocable standby letter of credit in a form
customarily used by the Issuing Bank or in such other form as has been approved
by the Administrative and Collateral Agent in support of such L/C Supportable
Indebtedness (each such letter of credit, a "Letter of Credit," and
collectively, the "Letters of Credit"). All Letters of Credit shall be
denominated in Dollars. It is hereby acknowledged and agreed that each of the
Letters of Credit described on Schedule III (the "Existing Letters of Credit"),
the aggregate Stated Amount of which shall not exceed $10,275,771, which were
issued under the Existing Credit Agreement, shall be permitted to remain
outstanding on the Effective Date and shall constitute a Letter of Credit for
all purposes of this Agreement.
(b) The Issuing Bank hereby agrees that it will (subject to the terms
and conditions contained in this Agreement), at any time and from time to time
after the Effective Date and prior to the Final Maturity Date, following its
receipt of the respective Letter of Credit Request, issue for the account of the
Borrowers one or more Letters of Credit in support of such L/C Supportable
Indebtedness of the Borrowers as is permitted to remain outstanding without
giving rise to a Default or Event of Default under this Agreement; provided that
the Issuing Bank shall be under no obligation to issue any Letter of Credit of
the types described above if at the time of such issuance:
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<PAGE> 39
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Bank from issuing such Letter of Credit or any
requirement of law applicable to such Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit, or request that such Issuing Bank refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated) not in effect on the date of
this Agreement, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to the Issuing Bank as of the date of
this Agreement and which the Issuing Bank in good faith deems material
to it; or
(ii) the Issuing Bank shall have received notice from the
Administrative and Collateral Agent prior to the issuance of such
Letter of Credit of the type described in the penultimate sentence of
Section 3.3(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued
on or after the Effective Date, the Stated Amount of which, when added to the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on
the date of, or prior to the issuance of, the respective Letter of Credit) at
such time, would exceed (x) $15,000,000, or (y) when added to the aggregate
principal amount of all Revolving Loans then outstanding and all Swingline Loans
then outstanding, an amount equal to the Total Revolving Loan Commitment then in
effect and (ii) each Letter of Credit shall by its terms terminate on or before
the earlier of (x) the date which occurs 12 months after the date of the
issuance thereof (which in the case of the Existing Letters of Credit shall be
the date of actual issuance thereof and not the Effective Date, although any
such Letter of Credit may be renewable for successive periods of up to 12
months, but not beyond the Final Maturity Date, on terms acceptable to the
Issuing Bank) and (y) the Final Maturity Date.
3.2 Minimum Stated Amount. The Stated Amount of each Letter of Credit
shall be not less than $500,000 or such lesser amount as is acceptable to the
Issuing Bank.
3.3 Letter of Credit Requests.
(a) Whenever any Borrower desires that a Letter of Credit be issued for its
account, such Borrower shall give the Administrative and Collateral Agent and
the Issuing Bank at least ten days' (or such shorter period as is acceptable to
the Issuing Bank in any given case) written notice prior to the proposed date of
issuance (which shall be a Business Day). Each notice shall be in the form of
Exhibit C (each, a "Letter of Credit Request"). The Administrative and
Collateral Agent shall promptly transmit copies of each Letter of Credit Request
to each Bank.
(b) The making of each Letter of Credit Request (and in the case of
Existing Letters of Credit, the occurrence of the Effective Date) shall be
deemed to be a representation and warranty by the Borrowers that such Letter of
Credit may be issued in accordance with, and will not violate the requirements
of, Section 3.1(c). Unless the Issuing Bank has received notice from the
Administrative and Collateral Agent before it issues a Letter of Credit that one
or more of the conditions specified in Section 7 are not then satisfied, or that
the issuance of such Letter of
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Credit would violate Section 3.1(c), then the Issuing Bank may issue the
requested Letter of Credit for account of any Borrower in accordance with the
Issuing Bank's usual and customary practices. Upon its issuance of any Letter of
Credit, the Issuing Bank shall promptly notify each Bank and the Administrative
and Collateral Agent of such issuance, which notice shall be accompanied by a
copy of the Letter of Credit actually issued.
3.4 Letter of Credit Participations.
(a) Immediately upon the issuance by the Issuing Bank of any Letter of
Credit (and on the Effective Date with respect to the Existing Letters of
Credit), the Issuing Bank shall be deemed to have sold and transferred to each
Bank other than the Issuing Bank (each such Bank, in its capacity under this
Section 3.4, a "Participant"), and each such Participant shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such Participant's Loan Percentage in such Letter of Credit, each
substitute letter of credit, each drawing made under such Letter of Credit and
the obligations of the Borrowers under this Agreement with respect to such
Letter of Credit, and any guaranty pertaining to such Letter of Credit.
(b) In determining whether to pay under any Letter of Credit, the
Issuing Bank shall not have any obligation relative to the other Banks other
than to confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or omitted
to be taken by the Issuing Bank under or in connection with any Letter of Credit
if taken or omitted in the absence of gross negligence or willful misconduct,
shall not create for such Issuing Bank any resulting liability to the Borrowers
or any Bank.
(c) In the event that the Issuing Bank makes any payment under any
Letter of Credit and the Borrowers shall not have reimbursed such amount in full
to the Issuing Bank pursuant to Section 3.5(a), the Issuing Bank shall promptly
notify the Administrative and Collateral Agent, which shall promptly notify each
Participant of such failure, and each Participant shall promptly and
unconditionally pay to the Administrative and Collateral Agent for account of
the Issuing Bank the amount of such Participant's Loan Percentage of such
unreimbursed payment in Dollars and in same day funds. If the Administrative and
Collateral Agent so notifies, prior to 11:00 A.M. (San Francisco time) on any
Business Day, any Participant required to fund a payment under a Letter of
Credit, such Participant shall make available to the Administrative and
Collateral Agent at the Payment Office of the Administrative and Collateral
Agent for account of the Issuing Bank in Dollars such Participant's Loan
Percentage of the amount of such payment on such Business Day in same day funds.
If and to the extent such Participant shall not have so made its Loan Percentage
of the amount of such payment available to the Administrative and Collateral
Agent for account of the Issuing Bank, such Participant agrees to pay to the
Administrative and Collateral Agent for account of the Issuing Bank, forthwith
on demand such amount, together with interest thereon, for each day from such
date until the date such amount is paid to the Administrative and Collateral
Agent for account of such Issuing Bank at the overnight Federal Funds Rate. The
failure of any Participant to make available to the Administrative and
Collateral Agent for account of the Issuing Bank its Loan Percentage of any
payment under any Letter of Credit shall not relieve any other Participant of
its obligation under this Agreement to make available to the Administrative and
Collateral Agent for account of the
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<PAGE> 41
Issuing Bank its Loan Percentage of any Letter of Credit on the date required,
as specified above, but no Participant shall be responsible for the failure of
any other Participant to make available to the Administrative and Collateral
Agent for account of the Issuing Bank such other Participant's Loan Percentage
of any such payment.
(d) Whenever the Issuing Bank receives a payment of a reimbursement
obligation as to which the Administrative and Collateral Agent has received for
account of the Issuing Bank any payments from the Participants pursuant to
clause (c) above, the Issuing Bank shall pay to the Administrative and
Collateral Agent and the Administrative and Collateral Agent shall promptly pay
each Participant which has paid its Loan Percentage thereof, in Dollars and in
same day funds, an amount equal to such Participant's share (based on the
proportionate aggregate amount funded by such Participant to the aggregate
amount funded by all Participants) of the principal amount of such reimbursement
obligation and interest thereon accruing after the purchase of the respective
participations.
(e) Upon the request of any Participant, the Issuing Bank shall furnish
to such Participant copies of any Letter of Credit issued by the Issuing Bank
and such other documentation as may reasonably be requested by such Participant.
(f) Subject to Section 2.14, the obligations of the Participants to
make payments to the Administrative and Collateral Agent for account of the
Issuing Bank with respect to Letters of Credit issued shall be irrevocable and
not subject to any qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents or any of the Credit Documents
referred to in the Existing Credit Agreement;
(ii) the existence of any claim, set-off, defense or other right
which any Borrower may have at any time against a beneficiary named in
a Letter of Credit, any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), the Administrative
and Collateral Agent, any Participant, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated in this Agreement or any unrelated transactions (including
any underlying transaction between any Borrower and the beneficiary
named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under any
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;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default; provided,
however, that no Bank shall be obligated to reimburse the Issuing Bank
for any wrongful payment
35
<PAGE> 42
made by the Issuing Bank under a Letter of Credit as a result of acts
or omissions constituting willful misconduct or gross negligence on the
part of the Issuing Bank.
3.5 Agreement to Repay Letter of Credit Drawings.
(a) The Borrowers hereby agree to reimburse the Issuing Bank, by making
payment to the Administrative and Collateral Agent in immediately available
funds at the Payment Office (or by making the payment directly to the Issuing
Bank at such location as may otherwise have been agreed upon by the Borrowers
and the Issuing Bank), for any payment or disbursement made by the Issuing Bank
under any Letter of Credit (each such amount so paid until reimbursed, an
"Unpaid Drawing"), immediately after, and in any event on the date of, such
payment or disbursement, with interest on the amount so paid or disbursed by the
Issuing Bank, to the extent not reimbursed prior to 11:00 a.m. (San Francisco
time) on the date of such payment or disbursement, from and including the date
paid or disbursed to but excluding the date the Issuing Bank is reimbursed by
the Borrowers therefor at a rate per annum which shall be (x) unless a Borrower
Bankruptcy Default exists on the date of the respective payment or disbursement,
for the period from and including the date of the respective payment or
disbursement until the earlier to occur of a Borrower Bankruptcy Default or the
date of receipt by the Borrowers from the Issuing Bank or the Administrative and
Collateral Agent of written or telephonic notice of such payment or
disbursement, the Base Rate in effect from time to time, and (y) from and
including the date of the respective payment or disbursement if a Borrower
Bankruptcy Default then exists or, if a Borrower Bankruptcy Default does not
exist on the date of the respective payment or disbursement, from and including
the earlier to occur of the date upon which a Borrower Bankruptcy Default
subsequently occurs or the date of receipt by the Borrowers from the Issuing
Bank or the Administrative and Collateral Agent of written or telephonic notice
of such payment or disbursement to but excluding the date the Issuing Bank was
reimbursed by the Borrowers therefor, the Base Rate in effect from time to time
plus 3-1/4%, in each case with such interest to be payable on demand. The
Issuing Bank shall provide the Borrowers and the Administrative and Collateral
Agent prompt notice of any payment or disbursement made under the Letter of
Credit, although the failure of, or the delay in, giving any such notice shall
not release or diminish the obligations of the Borrowers under this Section
3.5(a) or under any other Section of this Agreement.
(b) The obligations of the Borrowers under this Section 3.5 to
reimburse the Issuing Bank with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances, including the circumstances set forth in Section 3.4(f), and
irrespective of any set-off, counterclaim or defense to payment which the
Borrowers may have or have had against any Bank (including in its capacity as
Issuing Bank or as Participant), including, without limitation, any defense
based upon the failure of any drawing under a Letter of Credit (each, a
"Drawing") to conform to the terms of the Letter of Credit or any nonapplication
or misapplication by the beneficiary of the proceeds of such Drawing; provided,
however, that the Borrowers shall not be obligated to reimburse the Issuing Bank
for any wrongful payment made by the Issuing Bank under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross negligence
on the part of the Issuing Bank.
3.6 Increased Costs. If at any time after the Effective Date the
Issuing Bank or any Participant determines that the introduction of or any
change in any applicable Governmental
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<PAGE> 43
Rule (including, without limitation, any phasing in of those announced or
published prior to the Effective Date) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Issuing Bank or
any Participant with any request or directive by any such authority (whether or
not having the force of law), shall either (i) impose, modify or make applicable
any reserve, deposit, capital adequacy or similar requirement against letters of
credit issued by the Issuing Bank or participated in by any Participant, or (ii)
impose on the Issuing Bank or any Participant, or any corporation controlling
the Issuing Bank or any Participant, any other conditions relating, directly or
indirectly, to this Agreement or any Letter of Credit; and the result of any of
the foregoing is to increase the cost to the Issuing Bank or any Participant of
issuing, maintaining or participating in any Letter of Credit, or reduce the
amount of any sum received or receivable by the Issuing Bank or any Participant
under this Agreement or reduce the rate of return on its capital with respect to
Letters of Credit, then, within two Business Days following demand to the
Borrowers by the Issuing Bank or any Participant (a copy of which demand shall
be sent by the Issuing Bank or such Participant to the Administrative and
Collateral Agent), the Borrowers shall pay to the Issuing Bank or such
Participant such additional amount or amounts as will compensate such Bank for
such increased cost or reduction in the amount receivable or reduction in the
rate of return on its capital. The Issuing Bank or any Participant, upon
determining that any additional amounts will be payable pursuant to this Section
3.6, will give prompt written notice thereof to the Borrowers, which notice
shall include a certificate submitted to the Borrowers by the Issuing Bank or
such Participant (a copy of which certificate shall be sent by the Issuing Bank
or such Participant to the Administrative and Collateral Agent), setting forth
in reasonable detail the basis for the calculation of such additional amount or
amounts necessary to compensate the Issuing Bank or such Participant, although
failure to give any such notice shall not release or diminish the Borrowers'
obligations to pay additional amounts pursuant to this Section 3.6. The
certificate required to be delivered pursuant to this Section 3.6 shall, absent
manifest error, be final, conclusive and binding on the Borrowers. For the
purposes of this Section 3.6, each reference to a Participant shall additionally
be deemed to be a reference to any corporation controlling such Participant.
Section 4. Revolving Loan Commitment Fee; Fees; Reductions of
Commitment.
4.1 Fees.
(a) The Borrowers agree to pay to the Administrative and Collateral
Agent for distribution to each Bank a commitment commission (the "Revolving Loan
Commitment Fee") for the period from and including the Effective Date to and
excluding the Final Maturity Date (or such earlier date as the Total Revolving
Loan Commitment shall have been terminated) computed at a rate for each day
equal to (i) the Applicable Margin for Revolving Loan Commitment Fees multiplied
by (ii) the daily average Unutilized Revolving Loan Commitment of such Bank.
Accrued and unpaid Revolving Loan Commitment Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date and on the Final Maturity
Date or such earlier date upon which the Total Revolving Loan Commitment is
terminated.
(b) The Borrowers agree to pay to the Issuing Bank, for its own
account, an issuing fee in respect of each Letter of Credit issued under this
Agreement, for the period from and including the date of issuance of such Letter
of Credit (which date of issuance with respect to Existing
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Letters of Credit shall be deemed to be the Effective Date) to and including the
termination of such Letter of Credit, equal to the greater of $500 and an amount
equal to 1/8 of 1% per annum of the daily average Stated Amount of such Letter
of Credit. Accrued and unpaid issuing fees shall be due and payable quarterly in
arrears to the Issuing Bank in respect of the Letters of Credit issued by it on
each Quarterly Payment Date (and in the case of Existing Letters of Credit, on
the Effective Date) and the first day after the termination of the Total
Revolving Loan Commitment on which no Letters of Credit remain outstanding. The
Borrowers shall also pay each Issuing Bank's customary opening, amendment,
presentation and wire charges.
(c) The Borrowers agree to pay to the Administrative and Collateral
Agent for distribution to each Bank a fee in respect of each Letter of Credit
issued under this Agreement (the "Letter of Credit Fee"), for the period from
and including the date of issuance of such Letter of Credit (which date of
issuance with respect to Existing Letters of Credit shall be deemed to be the
Effective Date) to and excluding the termination of such Letter of Credit,
computed at a rate per annum (but calculated on each date on which the
Applicable Margin for Eurodollar Loans changes) equal to the product of (x) the
Applicable Margin for Eurodollar Loans on each date on which such Letter of
Credit is outstanding and (y) the daily average Stated Amount of such Letter of
Credit (with each renewal of such Letter of Credit, for purposes of this Section
4.1(c), being deemed to be the issuance of a new Letter of Credit). Letter of
Credit Fees shall be distributed by the Administrative and Collateral Agent to
the Banks on the basis of their respective Loan Percentages as in effect from
time to time. Accrued and unpaid Letter of Credit Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date (and in the case of Existing
Letters of Credit, on the Effective Date) and on the first day after the
termination of the Total Revolving Loan Commitment on which no Letters of Credit
remain outstanding.
(d) The Borrowers shall pay to the Agents and the Issuing Bank for
their respective accounts such other fees as have been agreed to in writing by
such parties, including pursuant to the Fee Letters.
4.2 Voluntary Termination of Unutilized Commitments. Upon at least
three Business Days' prior written notice (or telephonic notice confirmed in
writing) to the Administrative and Collateral Agent at its Notice Office (which
notice the Administrative and Collateral Agent shall promptly transmit to each
of the Banks), the Borrowers shall have the right, without premium or penalty,
to terminate the Total Unutilized Revolving Loan Commitment in whole or in part;
provided that (a) each such reduction shall apply proportionately to reduce the
Revolving Loan Commitment of each Bank and (b) any partial reduction pursuant to
this Section 4.2 shall be in multiples of at least $1,000,000, and (c) the
reduction to the Total Unutilized Revolving Loan Commitment shall in no case be
in an amount which would cause the Revolving Loan Commitment of any Bank to be
reduced (as required by preceding subsection (b)) by an amount which exceeds the
remainder of (x) the Unutilized Revolving Loan Commitment of such Bank as in
effect immediately before giving effect to such reduction, minus (y) such Bank's
Loan Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
4.3 Mandatory Reduction of Commitments.
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(a) In addition to any other mandatory commitment reductions pursuant
to this Section 4.3, the Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate on the date immediately preceding the
Final Maturity Date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 4.3, the Total Revolving Loan Commitment shall be reduced at the
time any payment is required to be made on the principal amount of any Revolving
Loans (or would be required to be made if any Revolving Loans were then
outstanding) pursuant to Section 5.2(a), by an amount equal to the maximum
amount of Loans that would be required to be repaid pursuant to such sections
assuming that Loans were outstanding in an aggregate principal amount equal to
the Total Revolving Loan Commitment.
(c) Upon any reduction in the Total Revolving Loan Commitment, the
Revolving Loan Commitment of each Bank shall be reduced on a pro rata basis.
Section 5. Prepayments; Payments; Taxes.
5.1 Voluntary Prepayments. The Borrowers shall have the right to
prepay Loans, without premium or penalty, in whole or in part from time to time
on the following terms and conditions: (i) the Borrowers shall give the
Administrative and Collateral Agent prior to 11:00 a.m. (San Francisco time) at
its Notice Office at least three Business Days' prior written notice in the case
of Eurodollar Loans and one Business Day's prior written notice in the case of
Base Rate Loans of its intent to prepay the Loans, whether Term Loans, Revolving
Loans or Swingline Loans shall be prepaid, the amount of such prepayment and the
Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made, which notice the Administrative
and Collateral Agent shall promptly transmit to each of the Banks; (ii) each
prepayment shall be in an aggregate principal amount of at least the Minimum
Borrowing Amount and, if greater, in multiples of $500,000 ($50,000 in the case
of Swingline Loans); provided that no partial prepayment of Eurodollar Loans
made pursuant to any Borrowing shall reduce the outstanding Loans made pursuant
to such Borrowing to an amount less than the Minimum Borrowing Amount; (iii)
prepayments of Eurodollar Loans made pursuant to this Section 5.1 may only be
made so long as at the time of such prepayment there shall be no outstanding
Base Rate Loans and any compensation required to be paid to each Bank pursuant
to Section 2.11 for all losses, expenses and liabilities (including, without
limitation, any loss, expense or liability incurred by reason of the liquidation
or reemployment of deposits or other funds required by such Bank to fund its
Eurodollar Loans) which such Bank may sustain as a result of such prepayment is
made at the time of any such prepayment of Eurodollar Loans; and (iv) each
prepayment in respect of any Loans made pursuant to a Borrowing shall be applied
pro rata among such Loans.
5.2 Mandatory Repayments.
(a) Requirements:
(A) On any day on which the sum of the aggregate outstanding principal
amount of the Revolving Loans, Swingline Loans and Letter of Credit Outstandings
exceeds the Total Revolving Loan Commitment as then in effect, the Borrowers
shall prepay the principal of
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Swingline Loans and, after the Swingline Loans have been repaid in full, the
principal of Revolving Loans in an amount equal to such excess. If, after giving
effect to the prepayment of all outstanding Swingline Loans and Revolving Loans,
the Letter of Credit Outstandings exceed the Total Revolving Loan Commitment as
then in effect, the Borrowers shall provide to the Administrative and Collateral
Agent at its Payment Office on such date an amount of cash or Cash Equivalents
equal to the amount of such excess, such cash or Cash Equivalents to be held as
security for all Obligations of the Borrowers to the Agents and the Banks and
the Issuing Bank under the Credit Documents in a cash collateral account to be
established by the Administrative and Collateral Agent, and each of the
Borrowers hereby grants to the Administrative and Collateral Agent a security
interest in such cash collateral and such cash collateral account. Promptly upon
the reduction of such excess to zero, if no Event of Default then exists, the
Administrative and Collateral Agent shall return to the Borrowers all amounts in
such cash collateral account.
(B) Subject to and in accordance with Section 5.2(b), on the date of
the receipt thereof by Apria or any of its Subsidiaries, an amount equal to 100%
of the proceeds (net of underwriting discounts and commissions and other
reasonable costs associated therewith) from any incurrence of any Indebtedness
by Apria or any of its Subsidiaries shall be applied as a mandatory repayment of
principal of the then outstanding Loans; provided, that this Section 5.2(a)(B)
shall exclude Indebtedness permitted by Section 10.5 other than the Senior
Subordinated Convertible Debentures.
(C) Subject to and in accordance with Section 5.2(b), on each date
after the Effective Date on which Apria or any of its Subsidiaries receives
proceeds from any sale of assets or stock of Subsidiaries (excluding (i) sales
of inventory and Rental Equipment in the Ordinary Course of Business, (ii) sales
of equipment which, in the reasonable judgment of Apria have become obsolete,
worn out or uneconomic, in the Ordinary Course of Business, the proceeds of
which are used, or irrevocably committed, to purchase replacement equipment
within 60 days from the date of sale so long as (w) the aggregate amount of Net
Sale Proceeds excluded pursuant to this clause (ii) does not exceed $20,000,000
in the aggregate in any fiscal year of Apria and (x) any Net Sale Proceeds less
than the amount specified in the immediately preceding clause (w) are not
applied to the prepayment of the Senior Subordinated Notes, (iii) sales of
assets outside the Ordinary Course of Business, so long as (y) the amount of Net
Sale Proceeds excluded pursuant to this clause (iii) does not exceed $15,000,000
in the aggregate in any fiscal year of Apria and (z) any Net Sale Proceeds less
than the amount specified in the immediately preceding clause (y) are not
applied to the prepayment of the Senior Subordinated Notes, and (iv) Apria
Common Stock) an amount equal to 100% of the Net Sale Proceeds thereof shall be
applied as a mandatory repayment of principal of the then outstanding Loans.
(D) The Borrowers shall make the following payments of principal of the
Term Loans (including accrued interest thereon) or in the event that the Term
Loans have been paid in full of principal of the Revolving Loans (including
accrued interest thereon) on the following dates:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 1999 $4,000,000
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
June 30, 1999 $4,000,000
September 30, 1999 $4,000,000
December 31, 1999 $4,000,000
March 31, 2000 $5,000,000
June 30, 2000 $5,000,000
September 30, 2000 $5,000,000
December 31, 2000 $5,000,000
March 31, 2001 $10,000,000
June 30, 2001 $10,000,000
</TABLE>
(E) Subject to and in accordance with Section 5.2(b), commencing on the
Effective Date and continuing until the earlier of (a) the issuance of the
Senior Subordinated Convertible Debentures and (b) February 28, 1999 (the
"Trigger Date"), the Borrowers shall prepay the principal of the Term Loans by
an amount equal to fifty percent (50%) of Excess Cash Flow; provided, that,
notwithstanding anything to the contrary contained in Section 5.2(b), for the
period from January 1, 1999 through the Trigger Date, prepayments from Excess
Cash Flow shall be limited to $4,000,000 in the aggregate and shall reduce on a
dollar-for-dollar pro tanto basis the March 31, 1999 amortization payment
required pursuant to Section 5.2(a)(D). Prepayments due pursuant to this Section
5.2(a)(E) shall be made on the thirtieth day of each month for the prior month,
commencing with December 30, 1998.
(b) Application:
(A) Each mandatory repayment of Loans pursuant to Section 5.2(a)(B),
(C) and (E) shall be applied first to permanently prepay the principal on the
outstanding Term Loans in the inverse order of maturity (except as set forth in
Section 5.2(a)(E)), and, after the Term Loans have been paid in full, as
follows:
(i) first, to prepay the principal of outstanding Swingline
Loans (with a corresponding reduction being made to the Total Revolving
Loan Commitment);
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(ii) second, to permanently prepay the principal of
outstanding Revolving Loans (with a corresponding reduction to the
Total Revolving Loan Commitment);
(iii) third, to repay Unpaid Drawings (with a corresponding
reduction being made to the Total Revolving Loan Commitment);
(iv) fourth, to provide cash collateral for the Stated Amount
of outstanding Letters of Credit by delivering cash and Cash
Equivalents to the Administrative and Collateral Agent in an amount
equal to such Stated Amount (with a corresponding reduction being made
to the Total Revolving Loan Commitment upon such deposit, it being
agreed that, unless any Default or Event of Default shall have occurred
and be continuing, upon the expiration of each such Letter of Credit
and upon such Default or Event of Default being cured, collateral equal
to the Stated Amount of such expired Letter of Credit shall be released
to the Borrowers and if not released shall secure the remaining
Obligations, and it being agreed further that if the Stated Amount of
such outstanding Letter of Credit is reduced, such cash collateral
shall be reduced correspondingly and be released to the Borrowers or as
required pursuant to applicable law); and
(v) fifth, to permanently reduce the remaining Total Revolving
Loan Commitment (it being agreed that the amount of such reduction
shall be deemed to be an application of proceeds for purposes of this
clause (v) even though cash is not actually applied).
(B) (i) With respect to each repayment of Loans required by this Section
5.2, the Borrowers may designate the Types of Loans which are to be repaid and,
in the case of Eurodollar Loans, the specific Borrowing or Borrowings of the
respective Tranche pursuant to which made; provided that:
(w) repayments of Eurodollar Loans pursuant to this Section
5.2 may only be made on the last day of an Interest Period applicable
to such Loans unless all Eurodollar Loans of the respective Tranche
with Interest Periods ending on such date of required repayment and all
Base Rate Loans of the respective Tranche have been paid in full;
(x) if any repayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Eurodollar Loans made
pursuant to such Borrowing to an amount less than the applicable
Minimum Borrowing Amount, such Borrowing shall immediately be converted
into Base Rate Loans; and
(y) each repayment of any Loans made pursuant to a single
Borrowing shall be applied pro rata among such Loans.
In the absence of a designation by the Borrowers as described in the preceding
sentence, the Administrative and Collateral Agent shall, subject to the above,
make such designation in its sole discretion.
(ii) Notwithstanding the foregoing provisions of this Section
5.2, if at any time the mandatory prepayment of Loans pursuant to Section
5.2(a)(B) or (C) would result, after
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giving effect to the first sentence of the preceding clause (B)(i), in the
Borrowers incurring breakage costs under Section 2.11 as a result of having
Eurodollar Loans being repaid other than on the last day of an Interest Period
applicable thereto (the "Affected Eurodollar Loans"), then the Borrowers may
initially deposit (but not for more than 60 days) a portion (up to 100%) of the
amounts that otherwise would have been paid in respect of the Affected
Eurodollar Loans with the Administrative and Collateral Agent to be held in a
cash collateral account as security for the obligations of the Borrowers under
this Agreement with such cash collateral to be released from such cash
collateral account upon the earlier of (x) the first occurrence (or occurrences)
thereafter of the last day of an Interest Period applicable to Loans that are
Eurodollar Loans, to repay an aggregate principal amount of such Loans equal to
the Affected Eurodollar Loans not initially repaid pursuant to this sentence and
(y) the 60th day following the date of such deposit, to repay an aggregate
principal amount of Loans equal to the Affected Eurodollar Loans not initially
repaid pursuant to this sentence.
(C) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Term Loans and Revolving Loans of each
Bank shall be repaid on the Final Maturity Date, and (ii) all then outstanding
Swingline Loans shall be repaid on the Swingline Expiry Date.
5.3 Method and Place of Payment. Except as otherwise specifically
provided in this Agreement, all payments under this Agreement or any Note shall
be made to the Administrative and Collateral Agent for account of the Banks not
later than 11:00 a.m. (San Francisco time) on the date when due and shall be
made in Dollars in immediately available funds at the Payment Office of the
Administrative and Collateral Agent. Subject to the provisions of subsection
2.9(iv), whenever any payment to be made under this Agreement or under any Note
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable at the applicable rate
during such extension.
5.4 Net Payments.
(a) All payments made by the Borrowers under this Agreement, or by the
Borrowers under any Note, will be made without set-off, counterclaim or other
defense. Except as provided in Section 5.4(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein (but excluding, except as
provided in the immediately succeeding sentence, any tax imposed on or measured
by the net income of a Bank pursuant to the laws of the jurisdiction or any
political subdivision or taxing authority thereof or therein in which the
principal office or Applicable Lending Office of such Bank is located) and all
interest, penalties or similar liabilities with respect thereto (collectively,
"Taxes"). The Borrowers shall reimburse each Bank, upon the written request of
such Bank, for taxes imposed on or measured by the net income of such Bank
pursuant to the laws of the jurisdiction or any political subdivision or taxing
authority thereof or therein in which the principal office or Applicable Lending
Office of such Bank is located as such Bank shall determine are payable by such
Bank in respect of such amounts so paid to or on behalf of such Bank pursuant to
the preceding sentence. If any Taxes are so levied or imposed, the Borrowers
agree to pay the full
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amount of such Taxes and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for in this Agreement or in such Note. The Borrowers will
furnish to the Administrative and Collateral Agent within 45 days after the date
the payment of any Taxes due pursuant to applicable law certified copies of tax
receipts evidencing such payment by the Borrowers. The Borrowers agree to
indemnify and hold harmless each Bank, and reimburse such Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for Federal income tax purposes
(i) has provided to the Borrowers on or prior to the Effective Date with two
original signed copies of Internal Revenue Service Form 4224 or Form 1001
certifying to such Bank's entitlement to an exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note and (ii) agrees that, to the extent legally entitled to do so,
upon written request by the Borrowers it will provide to the Borrowers two
original signed copies of Internal Revenue Service Form 4224 or Form 1001 (or
any successor forms) certifying to such Bank's entitlement to an exemption from,
or reduction in, United States withholding tax with respect to payments to be
made under this Agreement and under any Note. In the event that a Bank which is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for Federal income tax purposes has previously provided the Borrowers
with Internal Revenue Service Form 4224 or Form 1001 certifying as to such
Bank's entitlement to an exemption and, as a result of any changes after the
Effective Date in any applicable Governmental Rule or in the interpretation of
such Governmental Rule, relating to the deducting or withholding of income or
similar Taxes, such Bank is no longer legally entitled to an exemption from, or
reduction in, United States withholding tax with respect to payments to be made
under this Agreement and under any Note, such Bank shall notify the Borrowers of
such change; provided, however, in no event shall the failure to provide any
such notice release or diminish any of the obligations of the Borrowers pursuant
to this Section 5.4. Notwithstanding anything to the contrary contained in
Section 5.4(a), but subject to the immediately succeeding sentence, the
Borrowers shall be entitled, to the extent they are required to do so by law, to
deduct or withhold income or other similar taxes imposed by the United States
(or any political subdivision or taxing authority thereof or therein) from
interest, fees or other amounts payable under this Agreement (without any
obligation to pay the respective Bank additional amounts with respect thereto)
for the account of any Bank which has not provided to the Borrowers such forms
required to be provided to the Borrowers by a Bank pursuant to the first
sentence of this Section 5.4(b). Notwithstanding anything to the contrary
contained in the preceding sentence, the Borrowers agree to indemnify each Bank
referred to in the previous sentence in the manner set forth in Section 5.4(a)
in respect of any amounts deducted or withheld by it as described in the
previous sentence as a result of any changes after the Effective Date in any
applicable Governmental Rule, or in the interpretation of such Governmental
Rule, relating to the deducting or withholding of income or similar Taxes.
Section 6. Conditions Precedent to the Effective Date. The obligations
of each Bank hereunder and the obligations of the Issuing Bank hereunder are
subject to the satisfaction of the following conditions:
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6.1 Execution of Agreement; Notes. On the Effective Date the Borrowers
shall have delivered to the Administrative and Collateral Agent (a) this
Agreement, executed by the Borrowers, the Required Banks and the Agents and (b)
for the account of each Bank, a Term Note, an Amended and Restated Revolving
Note, and for the account of the Swingline Lender, the Swingline Note, in each
case duly executed and completed by the Borrowers.
6.2 Officer's Certificate. On the Effective Date the Administrative and
Collateral Agent shall have received a certificate dated the Effective Date,
signed on behalf of Apria by the President, any Executive Vice President or any
Vice President of Apria stating that all of the conditions in Sections 6.8, 6.9,
7.1, 7.2 and 7.3 have been satisfied on such date.
6.3 Compliance Certificate. On the Effective Date the Administrative
and Collateral Agent shall have received a certificate dated the Effective Date
relating to the financial condition of Apria and its Subsidiaries as of the
fiscal quarter ended September 30, 1998, signed on behalf of Apria by the vice
president and controller of Apria substantially in the form of Exhibit G.
6.4 Opinions of Counsel. On the Effective Date, the Administrative and
Collateral Agent shall have received from (i) O'Melveny & Myers, counsel to
Apria and its Subsidiaries, an opinion addressed to the Administrative and
Collateral Agent and each of the Banks and dated the Effective Date, covering
the matters set forth in Exhibit D-1 and (ii) in-house counsel to Apria and its
Subsidiaries, opinions addressed to the Administrative and Collateral Agent and
each of the Banks and dated the Effective Date, covering the matters set forth
in Exhibit D-2, with each of the foregoing opinions to cover such other matters
incident to the transaction contemplated by this Agreement as the Agents or the
Required Banks may reasonably request.
6.5 Corporate Documents; Proceedings.
(a) On the Effective Date, the Administrative and Collateral Agent
shall have received a certificate, dated the Effective Date, signed by the
President, any Executive Vice President or any Vice President of each Credit
Party, and attested to by the Secretary or any Assistant Secretary of such
Credit Party, in the form of Exhibit E with appropriate insertions, together
with copies of the Certificate of Incorporation and By-Laws of such Credit Party
and the resolutions of such Credit Party referred to in such certificate, and
the foregoing shall be acceptable to the Administrative and Collateral Agent and
the Required Banks in their sole discretion.
(b) All corporate and legal proceedings and all instruments and
agreements relating to the transactions contemplated by this Agreement and the
Credit Documents shall be satisfactory in form and substance to the
Administrative and Collateral Agent and the Required Banks, and the
Administrative and Collateral Agent shall have received all information and
copies of all documents and papers, including records of corporate proceedings,
approvals by any Governmental Authorities, good standing certificates and bring-
down telegrams, if any, which the Administrative and Collateral Agent or the
Required Banks reasonably may have requested in connection therewith, such
documents and papers where appropriate to be certified by proper corporate or
Governmental Authorities.
6.6 Employee Benefit Plans: Shareholders' Agreements; Management
Agreements; Employment Agreements; Tax Sharing Agreements. On or prior to the
Effective Date, there
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shall have been delivered to the Administrative and Collateral Agent true and
correct copies, certified as true and complete by an appropriate officer of
Apria, of:
(i) all Plans;
(ii) summaries of all material agreements entered into by
Apria or any Subsidiary of Apria governing the terms and relative
rights of its capital stock and any material agreements entered into by
shareholders relating to any such Person with respect to their capital
stock (collectively, the "Shareholders' Agreements");
(iii) all material agreements with members of, or with respect
to the, corporate officers of Apria or any Subsidiary of Apria other
than Employment Agreements (collectively, the "Management Agreements");
(iv) any material employment agreements entered into by Apria
or any Subsidiary of Apria with any of its corporate officers
(collectively, the "Employment Agreements"); and
(v) All material tax sharing, tax allocation and other similar
agreements entered into by Apria or any Subsidiary of Apria
(collectively, the "Tax Sharing Agreements");
all of which Plans, Shareholders' Agreements, Management Agreements, Employment
Agreements, and Tax Sharing Agreements shall be in form and substance
satisfactory to the Agents and shall be in full force and effect on the
Effective Date.
6.7 Guaranty. On the Effective Date each Guarantor shall have delivered
to the Administrative and Collateral Agent the duly authorized and executed
Guaranty.
6.8 Adverse Change, etc. On the Effective Date, nothing shall have
occurred (other than the 1998 Third Quarter Charges and Reserves) (and the Banks
shall have become aware of no facts or conditions not previously known) which
the Administrative and Collateral Agent or the Required Banks shall determine
(a) could reasonably be expected to have a material adverse effect on the rights
or remedies of the Banks or the Administrative and Collateral Agent, or on the
ability of Apria or any of its Subsidiaries, taken as a whole, to perform their
obligations to the Administrative and Collateral Agent and the Banks under this
Agreement or any other Credit Document, (b) could reasonably be expected to have
a Material Adverse Effect or (c) indicates the inaccuracy in any material
respect of the information (taken as a whole) previously provided in writing to
the Administrative and Collateral Agent or the Banks or indicates that the
information previously provided in writing (taken as a whole) omitted to
disclose any material information.
6.9 Litigation. On the Effective Date, no litigation by any Person or
Governmental Authority shall be pending or threatened with respect to this
Agreement, any Credit Document or any documentation executed in connection with
this Agreement or with respect to the transactions contemplated hereby or,
except as set forth on Schedule XIII, which the Administrative and Collateral
Agent or Required Banks shall determine could reasonably be expected to have a
Material Adverse Effect.
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6.10 Fees, etc. On the Effective Date, the Borrowers shall have paid in
full to the Agents and the Banks all costs, fees and expenses (including,
without limitation, all legal fees and expenses) payable to the Agents and the
Banks, including, without limitation, (a) an amendment fee to each Bank
consenting to the terms and conditions of this Agreement on or before October
23, 1998 equal to .125% of the Revolving Loan Commitments and Term Loan
Commitments of the consenting Banks, (b) an additional fee to those Banks whose
consent represents the first 51% of the aggregate amount of the Total
Commitments equal to .125% of the Revolving Loan Commitments and Term Loan
Commitments of the consenting Banks, and (c) any additional fees due and payable
pursuant to any Fee Letters.
6.11 Existing Indebtedness. On the Effective Date, after giving effect
to the Loans incurred pursuant to this Agreement, neither Apria nor any of its
Subsidiaries shall have any Indebtedness outstanding except for the Loans and
the Existing Indebtedness.
6.12 Securities Account Agreement. On or prior to the Effective Date
(i) the Borrowers shall have provided the Administrative and Collateral Agent
with a true and complete list of all of the Borrowers' operating accounts,
investment accounts, deposit accounts and other accounts similar in nature, (ii)
the Borrowers shall have transferred 100% of their investment accounts and those
accounts listed on Schedule XV to accounts maintained with the Administrative
and Collateral Agent and shall have delivered to the Administrative and
Collateral Agent a duly executed Securities Control Account Agreement on terms
and conditions satisfactory to the Administrative and Collateral Agent pursuant
to which the Borrowers shall have granted a Lien on all accounts holding
investment property and the investment property contained therein to the
Administrative and Collateral Agent for the benefit of the Banks (the
"Securities Account Agreement"), (iii) the Borrowers shall have taken all steps
necessary to perfect the security interest of the Administrative and Collateral
Agent in such investment property, including causing the securities intermediary
to be listed as the owner of any such investment property, and (iv) the
Borrowers shall have provided the Administrative and Collateral Agent with
documentation reasonably satisfactory to the Administrative and Collateral Agent
that all other accounts of the Borrowers not maintained with the Administrative
and Collateral Agent or subject to the Securities Account Agreement are subject
to a daily cash sweep which transfers all collected amounts in excess of $250
deposited into each such account to a centralized account with a national or
regionally prominent bank, with the proceeds in such centralized account being
transferred to an account maintained with and subject to the lien of the
Administrative and Collateral Agent the next Business Day. In addition, prior to
the Trigger Date, the aggregate balance of accounts maintained with and subject
to the lien of the Administrative and Collateral Agent shall be in an amount of
not less than $35,000,000.
6.13 Pre-Payment. On or before the Effective Date, the Borrowers shall
have delivered to the Administrative and Collateral Agent $50,000,000 in
immediately available funds to be applied in accordance with the terms of the
Existing Credit Agreement as a pre-payment of the Loans existing immediately
prior to the effectiveness of this Agreement.
6.14 1998 Third Quarter Charges and Reserves. The 1998 Third Quarter
Charges and Reserves shall not exceed $185,000,000, the cash portion of which
shall not exceed $30,000,000.
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6.15 Second Amendment to Security Agreement. On the Effective Date, the
Borrowers shall have delivered the duly executed Second Amendment to Security
Agreement, dated of even date herewith.
6.16 Other Information. The Administrative and Collateral Agent shall
have received such other information and documents as the Administrative and
Collateral Agent shall reasonably have requested.
All of the Notes, certificates, legal opinions and other documents and papers
referred to in this Section 6, unless otherwise specified, shall be delivered to
the Administrative and Collateral Agent at the Notice Office for the account of
each of the Banks and, except for the Notes, in sufficient counterparts for each
of the Banks and, unless otherwise specified, shall be in form and substance
satisfactory to the Required Banks. By its execution of this Agreement, each
Bank is deemed to have consented to the satisfaction of the foregoing
conditions.
Section 7. Conditions Precedent to All Credit Events. The obligation of
each Bank to make Loans and the obligation of the Issuing Bank to issue any
Letter of Credit is subject, at the time of each such Credit Event (except as
hereinafter indicated), to the satisfaction of the following conditions:
7.1 No Default; Representations and Warranties. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained in this Agreement and in the other Credit Documents shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on the date of the making of such
Credit Event.
7.2 Adverse Change, etc. Nothing shall have occurred (and the Banks
shall have become aware of no facts or conditions not previously known) which
the Administrative and Collateral Agent or the Required Banks shall determine
could reasonably be expected to have a material adverse effect on the rights or
remedies of the Banks or the Administrative and Collateral Agent, or on the
ability of Apria or any of its Subsidiaries, taken as a whole, to perform their
obligations to the Banks or which could reasonably be expected to have a
Material Adverse Effect.
7.3 Litigation. At the time of each such Credit Event and also after
giving effect thereto, no litigation by any Person or Governmental Authority
shall be pending or threatened with respect to this Agreement or any other
Credit Document executed in connection with this Agreement or the transactions
contemplated hereby or, except as set forth on Schedule XIII, which the Required
Banks shall determine could reasonably be expected to have a Material Adverse
Effect.
7.4 Notice of Borrowing; Letter of Credit Request.
(a) Prior to any Credit Event (other than Swingline Loans), the
Administrative and Collateral Agent shall have received a Notice of Borrowing
meeting the requirements of Section 2.3(a). Prior to the making of any Swingline
Loan, the Swingline Lender shall have received the notice required by Section
2.3(b)(i).
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(b) Prior to the issuance of each Letter of Credit (other than Existing
Letters of Credit), the Issuing Bank shall have received a Letter of Credit
Request meeting the requirements of Section 3.3.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrowers to each of the Banks that all the
conditions specified in Section 6 and in this Section 7 and applicable to such
Credit Event have been satisfied as of that time. All of the Notices of
Borrowing and Letter of Credit Requests referred to in this Section 7, unless
otherwise specified, shall be delivered to the Administrative and Collateral
Agent at the Notice Office for the account of each of the Banks and in
sufficient counterparts for each of the Banks and, unless otherwise specified,
shall be in form and substance satisfactory to the Required Banks.
7.5 Certificate of Chief Financial Officer; Opinion of Counsel. Prior
to the making of each Loan or the issuance of any Letter of Credit, the
Administrative and Collateral Agent shall have received either (i) a certificate
from the Chief Financial Officer of Apria that Apria is entitled under Section
4.12(b) of the Indenture to incur Indebtedness in the amount to be borrowed or
(ii) an opinion of outside counsel to the Borrower addressed to the
Administrative and Collateral Agent and each of the Banks and acceptable in form
and substance to the Administrative and Collateral Agent, that the incurrence of
such additional Indebtedness is otherwise permitted under the Indenture.
Section 8. Representations, Warranties and Agreements. In order to
induce the Banks to enter into this Agreement and to make the Loans, and issue
(or participate in) the Letters of Credit as provided in this Agreement, the
Borrowers make the following representations, warranties and agreements, all of
which shall survive the execution and delivery of this Agreement and the Notes
and the making of the Loans and the issuance of the Letters of Credit, with the
occurrence of each Credit Event being deemed to constitute a representation and
warranty that the matters specified in this Section 8 are true and correct,
except for changes resulting from Permitted Transactions or other events
permitted under this Agreement, on and as of the date of each such Credit Event:
8.1 Corporate Status. Each of Apria and its Material Subsidiaries (i)
is a duly organized and validly existing corporation or partnership in good
standing under the laws of the jurisdiction of its organization, (ii) has the
power and authority to own its property and assets and to transact the business
in which it is engaged and presently proposes to engage and (iii) is duly
qualified and is authorized to do business and is in good standing in each
jurisdiction where the ownership, leasing or operation of property or the
conduct of its business requires such qualification except for failures to be so
qualified which, in the aggregate, would not have a Material Adverse Effect.
8.2 Corporate Power and Authority. Each of Apria and its Material
Subsidiaries has the corporate or partnership power to execute, deliver and
perform the terms and provisions of each of the Transaction Documents to which
it is party and has taken all necessary corporate or partnership action to
authorize the execution, delivery and performance by it of each of such
Transaction Documents. Each of Apria and its Material Subsidiaries has duly
executed and delivered each of the Transaction Documents to which it is party,
and each of such Transaction
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Documents constitutes its legal, valid and binding obligation enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability.
8.3 No Violation. Neither the execution, delivery or performance by
Apria or any of its Material Subsidiaries of the Transaction Documents to which
it is a party, nor compliance by it with the terms and provisions thereof, (i)
will contravene any provision of any material applicable Governmental Rule or
any order, writ, injunction or decree of any court or Governmental Authority,
(ii) will conflict with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except for the Liens created pursuant to the Security Documents) upon any of
the property or assets of Apria or any of its Material Subsidiaries pursuant to
the terms of any indenture, mortgage, deed of trust, credit agreement or loan
agreement, or any other Material Contract to which Apria or its Material
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject or (iii) will violate any provision of the
Certificate of Incorporation, By-Laws or partnership agreements (or similar
organizational documents) of Apria or any of its Material Subsidiaries.
8.4 Governmental Approvals. Other than filings and recordings required
to be made in respect of the Liens created pursuant to the Security Documents,
no material order, consent, approval, license, authorization or validation of,
or filing, recording or registration with (except as have been obtained or made
prior to the Effective Date), or exemption by, any Governmental Authority is
required (i) to authorize the execution, delivery and performance of any
Transaction Document by any Credit Party or (ii) to establish the legality,
validity, binding effect or enforceability of any such Transaction Document
against such Credit Party.
8.5 Financial Statements; Financial Condition; Undisclosed Liabilities;
Projections; etc.
(a) Apria has previously furnished to each of the Banks consolidated
balance sheets of Apria and its consolidated Subsidiaries as at December 31,
1997 and the related consolidated statements of income, retained earnings and
cash flow of Apria and its consolidated Subsidiaries for the fiscal year ended
on that date, with the opinion (in the case of the consolidated balance sheet
and statements) of Ernst & Young, and the unaudited consolidated and
consolidating balance sheets of Apria and its consolidated Subsidiaries as at
June 30, 1998 and the related consolidated statements of income, retained
earnings and cash flow of Apria and its consolidated Subsidiaries for the
three-month period ended on such date.
All such financial statements fairly present in all material respects
the consolidated financial condition of Apria and its consolidated Subsidiaries,
as at those dates and the consolidated results of their operations for the
fiscal year and three-month period ended on those dates (subject, in the case of
such financial statements as at June 30, 1998, to normal year-end audit
adjustments), all in accordance with GAAP. Neither Apria nor any of its Material
Subsidiaries has on the Effective Date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except (i) as referred to
or reflected or provided for in the most recent
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balance sheet referred to above, and (ii) those that are permitted by this
Agreement. Since June 30, 1998, there has been no material adverse change in the
consolidated financial condition, operations, business or prospects taken as a
whole of Apria and its consolidated Subsidiaries from that set forth in the
financial statements as at June 30, 1998 for the period ending on that date,
excluding the 1998 Third Quarter Charges and Reserves.
(b) On and as of the Effective Date, on a pro forma basis after giving
effect to the incurrence of the Indebtedness under this Agreement: (i) the sum
of the assets, at a fair valuation, of each Credit Party will exceed its debts;
(ii) no Credit Party has incurred or intends to, or believes that it will, incur
debts beyond its ability to pay such debts as such debts mature; and (iii) each
Credit Party will have sufficient capital with which to conduct its business.
For purposes of this Section 8.5(b) "debt" means any liability on a claim, and
"claim" means (i) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully reflected in the financial statements and the notes
related thereto described in Section 8.5(a) and as otherwise noted in the
Projections, dated October 15, 1998, there were as of the Effective Date no
liabilities or obligations with respect to Apria or any of its Material
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in aggregate,
reasonably could be expected to have a Material Adverse Effect. As of the
Effective Date, none of Apria or any of its Material Subsidiaries will have any
outstanding Indebtedness other than (i) the Loans and (ii) the Existing
Indebtedness.
8.6 Litigation. Except as set forth on Schedule XIII, there are no
actions, suits or proceedings pending or, to the best knowledge of any Borrower,
threatened (i) with respect to any Credit Document, (ii) with respect to any
Indebtedness of Apria or any of its Material Subsidiaries, or (iii) that are
reasonably likely to have a Material Adverse Effect.
8.7 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of Apria or any
of its Material Subsidiaries in writing to any Bank (including all information
contained in the Credit Documents) for purposes of or in connection with this
Agreement (but excluding information provided previously for purposes of or in
connection with the Existing Credit Agreement) or any transaction contemplated
in this Agreement is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of Apria or any of its Material Subsidiaries
in writing to any Bank will be, true and accurate in all material respects on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (taken as a
whole) not misleading at such time in light of the circumstances under which
such information was provided.
8.8 Use of Proceeds; Margin Regulations.
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(a) The proceeds of all Revolving Loans incurred on or after the
Effective Date shall be used by the Borrowers to repay certain Indebtedness and
to fund Permitted Acquisitions and for general corporate and working capital
purposes.
(b) No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor the use of the
proceeds thereof nor the occurrence of any other Credit Event will violate or be
inconsistent with the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
(c) Margin Stock constitutes less than 25% of the assets of each
Borrower.
(d) The Borrowers shall not, directly or indirectly, use any portion of
the Loan proceeds (i) knowingly to purchase Ineligible Securities from the
Arranger during any period in which the Arranger makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed by
the Arranger, or (iii) to make payments of principal or interest on Ineligible
Securities underwritten or privately placed by the Arranger and issued by or for
the benefit of the Borrowers or any Affiliate of the Borrowers. "Ineligible
Securities" means securities which may not be underwritten or dealt in by member
banks of the Federal Reserve System under Section 16 of the Banking Act of 1933
(12 U.S.C. Section 24, Seventh), as amended.
8.9 Tax Returns and Payments. Except as set forth on Schedule IV or as
described below, (i) each of Apria and its Material Subsidiaries has timely
filed or caused to be timely filed with the appropriate taxing authority all
returns, statements, forms and reports for taxes (the "Returns") required to be
filed by or with respect to the income, properties or operations of Apria or any
of its Material Subsidiaries, (ii) the Returns accurately reflect all liability
for taxes of Apria and its Material Subsidiaries for the periods covered
thereby, (iii) each of Apria and each of its Material Subsidiaries has paid all
taxes payable by it which have become due other than those contested in good
faith and for which adequate reserves have been established, (iv) there is no
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of Apria or any of its Material Subsidiaries, threatened by any
authority regarding any taxes relating to Apria or any of its Material
Subsidiaries, (v) neither Apria nor any of its Material Subsidiaries has entered
into an agreement or waiver or been requested to enter into an agreement or
waiver extending any statute of limitations relating to the payment or
collection of taxes of Apria or any of its Material Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of
Apria or any of its Material Subsidiaries not to be subject to the normally
applicable statute of limitations, and (vi) neither Apria nor any of its
Material Subsidiaries has provided with respect to themselves or property held
by them, any consent under Section 341 of the Code.
8.10 Compliance with ERISA. Each Plan is in substantial compliance with
ERISA and the Code; neither Apria nor any of its Subsidiaries nor any ERISA
Affiliate has any Employee Stock Ownership Plan (as defined in Section
4975(e)(7) of the Code), nor have any of them incurred nor do they expect to
incur any material liability to or on account of any Plan pursuant to Section
409, 502(i), 502(1), 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code;
and no condition exists which presents a material risk to Apria or any of its
Subsidiaries or any
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ERISA Affiliate of incurring any material liability to or on account of any
Plan, other than for the benefits or contributions contemplated under the Plans.
Neither Apria nor any of its Subsidiaries sponsors any Plan which has an "amount
of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA)
that exceeds $5,000,000. There has not occurred with respect to any Plan a
"reportable event" (as defined in Section 4043 of ERISA) for which the
requirement of 30 days notice has not been waived.
8.11 Properties. Each of Apria and its Material Subsidiaries has good
and marketable title to all material properties owned by it, including all
property reflected in the consolidated balance sheet dated June 30, 1998
referred to in Section 8.5(a) (except as sold or otherwise disposed of since the
date of such balance sheet in the Ordinary Course of Business or as permitted by
Section 10.2), free and clear of all Liens, other than (i) as referred to in the
consolidated balance sheet or in the notes thereto or in the pro forma balance
sheet or (ii) otherwise permitted by Section 10.1.
8.12 Capitalization. On the Effective Date Apria is the direct or
indirect owner of all of the issued and outstanding shares of capital stock of
each other Borrower. All such outstanding shares have been duly and validly
issued, are fully paid and nonassessable and are free of preemptive rights. None
of such Borrowers has outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
8.13 Subsidiaries. On the Effective Date, the corporations listed on
Schedule VI are the only Material Subsidiaries of Apria. Schedule VI correctly
sets forth, as of the Effective Date, the percentage ownership (direct and
indirect) of Apria in each class of capital stock of each of its Material
Subsidiaries and also identifies the direct owner thereof.
8.14 Compliance with Statutes, etc. Each of Apria and its Material
Subsidiaries is in compliance with all applicable Governmental Rules and orders
of, and all applicable restrictions imposed by, all Governmental Authorities,
domestic or foreign, in respect of (a) the conduct of its business, including,
without limitation, (i) the Social Security Act and the amendments thereto,
including the so-called "Medicare/Medicaid Anti-Kickback Statute," and the
provisions of 42 U.S.C. Section 1320(a)(7b) and 42 U.S.C. Section 1395nn and
related regulations, (ii) applicable Medicare program regulations, including the
Health Care Financing Administration's carrier directives prohibiting home
health care providers from completing Certificates of Medical Necessity on
behalf of physicians, (iii) the federal Food, Drug and Cosmetic Act and the
so-called "pharmacy exemption" contained therein and the U.S. Food and Drug
Administration's Compliance Policy Guide Number 7132.16 entitled "Manufacture,
Distribution, and Promotion of Adulterated, Misbranded, or Unapproved New Drugs
for Human Use by State-Licensed Pharmacies" and (iv) the Food and Drug
Administration guidelines and all OSHA regulations including those in connection
with any oxygen filling stations maintained or operated by Apria or any of its
Material Subsidiaries and 29 C.F.R. 1910, 1030 Occupational Exposure to
Bloodborne Pathogens and (b) the ownership of its property (including applicable
statutes, regulations, orders and restrictions relating to environmental
standards and controls), except with
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respect to each of the foregoing such noncompliance as would not, in the
aggregate, have a Material Adverse Effect.
8.15 Investment Company Act. None of Apria or any of its Subsidiaries
is an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
8.16 Public Utility Holding Company Act. None of Apria or any of its
Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
8.17 Environmental Matters.
(a) Apria and each of its Material Subsidiaries have complied in all
material respects with, and on the Effective Date and on the date of such Credit
Event are in compliance in all material respects with, all applicable
Environmental Laws and the requirements of any permits issued under such
Environmental Laws. There are no past, pending or, to the best knowledge of
Apria or the Borrowers, threatened Environmental Claims against Apria or any of
its Material Subsidiaries or any Real Property owned or at any time operated by
Apria or any of its Material Subsidiaries which would, in the aggregate, have a
Material Adverse Effect. There are no facts, circumstances, conditions or
occurrences on any Real Property owned or at any time operated by Apria or any
of its Material Subsidiaries or, to the knowledge of any Borrower, on any
property adjoining or in the vicinity of any such Real Property that could
reasonably be expected (i) to form the basis of an Environmental Claim against
Apria or any of its Material Subsidiaries or any such Real Property, or (ii) to
cause such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property under any Environmental
Law, which Environmental Claim or restriction, as the case may be, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or at
any time operated by Apria or any of its Material Subsidiaries where such
generation, use, treatment or storage has violated or could reasonably be
expected to violate any Environmental Law except for such violations which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Hazardous Materials have not at any time been Released
on or from any Real Property owned or at any time operated by Apria or any of
its Material Subsidiaries where such Release has violated or could reasonably be
expected to violate any Environmental Law, except for such violations, which
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
8.18 Labor Relations. None of Apria nor any of its Material
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no significant unfair
labor practice complaint pending against Apria or any of its Material
Subsidiaries or, to the best knowledge of any Borrower, threatened against Apria
or any of its Material Subsidiaries, the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is
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so pending against Apria or any of its Material Subsidiaries or, to the best
knowledge of any Borrower, threatened against any of them, (ii) no significant
strike, labor dispute, slowdown or stoppage pending against Apria or any of its
Material Subsidiaries or, to the best knowledge of any Borrower, threatened
against Apria or any of its Material Subsidiaries and (iii) to the best
knowledge of any Borrower, no union representation question existing with
respect to the employees of Apria or any of its Material Subsidiaries, except
(with respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as could not reasonably be expected to
have a Material Adverse Effect.
8.19 Patents, Licenses, Franchises and Formulas.
(a) Apria, together with its Material Subsidiaries owns, has a license
to use or otherwise has the right to use, free and clear of pending or
threatened Liens, all the patents, patent applications, trademarks, service
marks, trade names, trade secrets, copyrights, proprietary information, computer
programs, data bases, licenses, franchises and formulas, or rights with respect
to the foregoing (collectively, "Intellectual Property"), and has obtained all
licenses and other rights of whatever nature, necessary for the present conduct
of its business, without any known conflict with the rights of others which, or
the failure to obtain which, as the case may be, would result in a Material
Adverse Effect.
(b) Except as set forth on Schedule VII, as of the Effective Date,
neither Apria nor any of its Material Subsidiaries has knowledge of any claim by
any third party contesting the validity, enforceability, use or ownership of any
material, necessary Intellectual Property, or of any existing state of facts
that would support a claim that use by Apria or any of its Material Subsidiaries
of any such Intellectual Property has infringed or otherwise violated any
Intellectual Property right of any other Person and to the knowledge of Apria
and its Material Subsidiaries no claim is threatened, other than claims (or
potential claims if based on any such state of facts), which could not
reasonably be expected to result in a Material Adverse Effect.
8.20 Indebtedness. Schedule VIII sets forth, as of the Effective Date,
a true and complete list showing the aggregate amount of, and the name of the
obligor and any other Person which directly or indirectly provides a guaranty
of, any Indebtedness, the aggregate amount outstanding of which is in excess of
$1,000,000 and is of the type described in clauses (i) or (iv) of the definition
of Indebtedness (other than the Loans under this Agreement), and the aggregate
amount of all other Indebtedness of such type of Apria and each of its Material
Subsidiaries as of the Effective Date does not exceed $10,000,000 (collectively,
the "Existing Indebtedness").
8.21 Restrictions on or Relating to Subsidiaries. There does not exist
any encumbrance or restriction on the ability of (a) any Subsidiary of Apria to
pay dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Apria or any Subsidiary of
Apria, or to pay any Indebtedness owed to Apria or a Subsidiary of Apria, (b)
any Subsidiary of Apria to make loans or advances to Apria or any of Apria's
Subsidiaries or (c) Apria or any Subsidiary of Apria to transfer any of its
properties or assets to Apria or any Subsidiary of Apria, except for such
encumbrances or restrictions existing under or by reason of (i) applicable law,
(ii) this Agreement and the other Credit Documents, (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold
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interest of Apria or a Subsidiary of Apria or (iv) customary provisions of
documents evidencing Indebtedness secured by Liens permitted pursuant to Section
10.1(a)(vii).
8.22 JCAHO Accreditation. Immediately prior to the Effective Date, the
Joint Commission on Accreditation of Healthcare Organizations ("JCAHO") has
accredited not less than 75% of the branches collectively operated by the
Borrowers and such accreditation is in full force and effect on the Effective
Date.
8.23 Material Contracts. All Material Contracts and material licenses
of Apria and each of its Material Subsidiaries as of the Effective Date are
listed on Schedule IX, and no violations as to such material licenses, or
default under such Material Contracts, exist which could reasonably be expected
to result in a Material Adverse Effect.
8.24 Indenture Treatment. For purposes of the Indenture, (i) all
Obligations under this Agreement are "Senior Debt" or "Guarantor Senior Debt" as
such terms are defined in the Indenture and (ii) this Agreement is a "Senior
Credit Facility" as such term is defined in the Indenture.
8.25 Year 2000 Compliance. Each of the Borrowers have (i) initiated a
review and assessment of all areas within such Borrowers' and its Subsidiaries'
business and operations that could be adversely affected by the "Year 2000
Problem" (this is the risk that computer applications used by such Borrower or
any of its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999, and (ii) developed a plan for addressing the Year 2000
Problem on a timely basis, and such the plan is currently on schedule and each
of the Borrowers anticipate all phases of the plan, including the testing and
implementation phases, to be completed by December 31, 1998. Further, the
Borrowers' systems underwent two external assessments of the Year 2000 Problem
and have received a "low" risk rating. Additionally, a formal process has been
instituted to assess other potential risks each of the Borrowers may face in
light of the Year 2000 Problem. Examples of such issues include, but are not
limited to, electronic interfaces with external agents such as payors (including
Medicare and Medicaid), banks and suppliers. In the event of failure on the part
of an external agent, the exchange of data and payments can continue via paper
documents and other more-traditional methods. Potential internal operational
issues include date-sensitive security systems and elevators. Another area of
potential risk is with certain patient service equipment items that have
microprocessors with date functionality that could malfunction in the year 2000.
Among other steps, the Company has initiated formal communications with all of
its significant suppliers of patient service equipment to ensure those third
parties are also working to remediate their own year 2000 issues, if applicable.
Each of the Borrowers believes that it will be able to resolve these issues and
any others it may identify by the year 2000.
Section 9. Affirmative Covenants. The Borrowers covenant and agree that
on and after the Effective Date and until the Total Revolving Loan Commitment
and all Letters of Credit have terminated and the Loans, Notes and Unpaid
Drawings, together with interest, Fees and all other Obligations are paid in
full:
9.1 Information Covenants. The Borrowers will furnish to each Bank:
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(a) Quarterly Financial Statements. Within 45 days after the close of
the first three quarterly accounting periods in each fiscal year of Apria, the
consolidated balance sheet of Apria and its Subsidiaries as at the end of such
quarterly period and the related consolidated statements of income, retained
earnings and cash flow, in each case for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of such quarterly
period, in each case setting forth comparative figures for the related periods
in the prior fiscal year and comparable budgeted figures for such period, all of
which shall be certified by the chief financial officer of Apria, subject to
normal year-end audit adjustments.
(b) Annual Financial Statements. Within 120 days after the close of
each fiscal year of Apria, the consolidated balance sheet of Apria and its
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income, retained earnings and cash flow for such fiscal year and
setting forth comparative figures for the preceding fiscal year and comparable
budgeted figures for such period and certified, by Deloitte & Touche LLP or
other independent certified public accountants of recognized national standing
reasonably acceptable to the Required Banks, together with a signed opinion of
such accounting firm (which opinion shall not be qualified in any respect)
stating that in the course of its regular audit of the financial statements of
Apria which audit was conducted in accordance with generally accepted auditing
standards, such accounting firm obtained no knowledge of any Default or Event of
Default which has occurred or, if in the opinion of such accounting firm such a
Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof.
(c) Budgets. No later than 90 days following the first day of each
fiscal year, a budget for Apria and its Subsidiaries in form satisfactory to the
Administrative and Collateral Agent and the Required Banks (including budgeted
statements of income and cash flow and balance sheets) prepared by Apria for (x)
such fiscal year and (y) the fiscal year immediately following such fiscal year,
in each case prepared in reasonable detail with appropriate presentation and
discussion of the principal assumptions upon which such budgets are based,
accompanied by the statement of the chief financial officer of Apria to the
effect that, to the best of his knowledge, the budget is a reasonable estimate
for the period covered thereby.
(d) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 9.1(a) and (b), a compliance
certificate signed by the chief financial officer of Apria on behalf of Apria
substantially in the form of Exhibit G.
(e) Notice of Default or Litigation. Promptly, and in any event within
five Business Days after an officer of Apria or any of its Material Subsidiaries
obtains knowledge thereof, notice of (i) the occurrence of any event which
constitutes a Default or Event of Default, (ii) any litigation or governmental
investigation or proceeding pending (x) against Apria or any of its Material
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or (y) with respect to any Credit Document and (iii) any other event
which is likely to have a Material Adverse Effect.
(f) Other Reports and Filings. Promptly upon transmission thereof,
copies of any financial information, proxy materials and other information and
reports, if any, which Apria or any of its Material Subsidiaries (x) has filed
with the Securities and Exchange Commission or any successor thereto (the "SEC")
or (y) has delivered to holders of, or any agent or trustee with
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respect to, Indebtedness of Apria or any of its Material Subsidiaries in its
capacity as such a holder, agent, or trustee.
(g) Environmental Matters. Promptly upon, and in any event within five
Business Days after an officer of Apria or of any of its Material Subsidiaries
obtains knowledge thereof, notice of any of the following environmental matters:
(i) any pending or threatened Environmental Claim against Apria or any of its
Material Subsidiaries that could reasonably be expected to result in material
liability to Apria and its Material Subsidiaries, taken as a whole; (ii) any
condition, occurrence or circumstance that could reasonably be anticipated to
form the basis of an Environmental Claim against Apria or any of its Material
Subsidiaries that could reasonably be expected to result in material liability
to Apria and its Material Subsidiaries, taken as a whole; or (iii) the
performance of any remedial action in response to the actual or alleged Release
of a Hazardous Material on any Real Property owned or operated by Apria or any
of its Material Subsidiaries as required by any Environmental Law or any
Governmental Authority that could reasonably be expected to result in material
liability to Apria and its Material Subsidiaries, taken as a whole. All such
notices shall describe in reasonable detail the nature of the Claim,
investigation, condition, occurrence, circumstance, or remedial action and
Apria's or such Material Subsidiary's response thereto. In addition, Apria will
provide the Banks with copies of all communications with any Governmental
Authority relating to Environmental Claims, all communications with any Person
relating to Environmental Claims, and such detailed reports of any Environmental
Claim as may be reasonably requested by the Required Banks.
(h) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to any Credit Party or any of
its Subsidiaries as the Administrative and Collateral Agent or the Required
Banks may reasonably request.
(i) Monthly Financial Statements. Within 20 days after the close of
each fiscal month in each fiscal year of Apria, (i) the consolidated balance
sheet of Apria and its Subsidiaries as at the end of such monthly period and the
related consolidated statements of income, retained earnings and cash flow, (ii)
pro forma statements of cash flow, including sources and uses of cash, for Apria
and its Subsidiaries for the next succeeding three month period, in form and
substance reasonably satisfactory to the Administrative and Collateral Agent and
the Required Banks, (iii) statements showing Apria and its Subsidiaries' Excess
Cash Flow and (iv) an accounts receivable aging report with aging detail and bad
debt exposure analysis. Within thirty (30) days after the close of each monthly
accounting period in each fiscal year of Apria, a business overview narrative,
including without limitation, the number of oxygen starts placed during the
period.
9.2 Books, Records and Inspections. Apria will, and will cause each of
its Material Subsidiaries to, keep proper books of record and account in which
full, true and correct entries in conformity with GAAP and all requirements of
law shall be made of all dealings and transactions in relation to its business
and activities. Apria will, and will cause each of its Subsidiaries to, permit
officers and designated representatives of the Administrative and Collateral
Agent or any Bank to visit and inspect, under guidance of officers of Apria or
of such Subsidiary, any of the properties of Apria or such Subsidiary, and to
examine the books of account of Apria or such Subsidiary and discuss the
affairs, finances and accounts of Apria or such Subsidiary with, and be advised
as to the same by, its and their officers, all at such
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reasonable times and intervals and to such reasonable extent as the
Administrative and Collateral Agent or such Bank may request.
9.3 Maintenance of Property Insurance. Apria will, and will cause each
of its Material Subsidiaries to, (i) keep all material property useful and
necessary in its business in good working order and condition (ordinary wear and
tear excepted), (ii) maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and against at
least such risks as are consistent with industry practice, and (iii) furnish to
each Bank, upon written request, full information as to the insurance carried.
9.4 Corporate Franchises. Apria will do, and will cause each of its
Material Subsidiaries to do or cause to be done, all things necessary to
preserve and keep in full force and effect its corporate existence and its
material rights, franchises, licenses and patents, including, but not limited
to, maintaining or obtaining, as the case may be, the certification and
accreditation by JCAHO of at least 75% of Apria's branches.
9.5 Compliance with Statutes, etc. Apria will, and will cause each of
its Material Subsidiaries to, comply with all applicable Governmental Rules of,
and all applicable restrictions imposed by, all Governmental Authorities,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property, including without limitation the Governmental Rules referred to
in Section 8.14, except such noncompliances as could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.6 Compliance with Environmental Laws.
(a) Apria shall, and shall cause each of its Material Subsidiaries to,
conduct their respective business operations (i) in compliance in all material
respects with all Environmental Laws and all permits issued thereunder, except
that nothing contained in this Agreement shall prevent Apria or any of its
Material Subsidiaries from contesting any Environmental Law in good faith by
appropriate legal proceedings; (ii) so as to comply in all material respects
with the orders of any court or other Governmental Authority relating to any
Environmental Law, unless Apria or any of its Material Subsidiaries is currently
appealing the same and has secured a stay of enforcement or other arrangement
postponing enforcement pending that appeal; (iii) so as not to generate, use,
treat, store, transport or Release Hazardous Materials in violation of any
Environmental Law that could reasonably be expected to result in a material
liability to Apria and its Material Subsidiaries, taken as a whole; and (iv) so
as not to become subject to any Environmental Claim which it is not contesting
in good faith and by appropriate legal proceedings.
(b) From time to time at the reasonable request of the Required Banks,
following the discovery of a fact or occurrence of an event relating to the
operation of a Borrower's business, which fact or event reasonably causes the
Banks to be concerned about the operation of such business, Apria will provide,
at its sole cost and expense (or will cause another Borrower to provide at its
sole cost and expense), a compliance report assessing the operations compliance
with Environmental Laws of Apria or its Material Subsidiaries. Such compliance
report is to be prepared by an environmental consulting firm reasonably
acceptable to the Administrative and Collateral Agent. If any such report is not
provided within 60 days of its request, the
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Administrative and Collateral Agent may order the same, and Apria hereby grants
to the Administrative and Collateral Agent and the Banks and their agents such
access to such Real Property as necessary, and specifically grants the
Administrative and Collateral Agent and the Banks an irrevocable, non-exclusive
license, to undertake such an assessment all at the Borrowers' expense.
9.7 ERISA. As soon as possible and, in any event, within ten Business
Days after Apria or any of its Subsidiaries or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following, Apria will deliver to
each of the Banks a certificate of the chief financial officer of Apria setting
forth details as to such occurrence and the action, if any, which Apria, such
Subsidiary or such ERISA Affiliate is required or proposes to take, together
with any notices required or proposed to be given to or filed with or by Apria,
the Subsidiary, the ERISA Affiliate, the PBGC or the Plan administrator with
respect thereto: that Apria, any of its Subsidiaries or any ERISA Affiliate will
or may incur any liability (including any contingent or secondary liability) to
or on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with respect to a Plan under
Section 412(n), 4971 or 4975 of the Code or Section 409 or 502(i) or 502(1) of
ERISA. Notwithstanding the foregoing, Apria will give the Banks at least ten
days' prior written notice of any contribution failure with respect to any Plan
that is sufficient to give rise to a Lien under Section 412(n) of the Code.
Apria will deliver to each of the Banks a complete copy of the annual report
(Form 5500) of each Plan required to be filed with the Internal Revenue Service.
In addition to any certificates or notices delivered to the Banks pursuant to
the first sentence of this Section 9.7, copies of annual reports and any notices
received by Apria or any of its Subsidiaries or any ERISA Affiliate from any
Governmental Authority with respect to any Plan shall be delivered to the Banks
no later than ten Business Days after the later of the date such report or
notice has been filed with the Internal Revenue Service or received by Apria or
the Subsidiary or the ERISA Affiliate. Apria shall not nor shall any of its
Subsidiaries sponsor any defined benefit plan (as defined in Section 3(35) of
ERISA) which has an "amount of unfunded benefit liabilities" (as defined in
Section 4001(a)(18) of ERISA) that exceeds $5,000,000.
9.8 End of Fiscal Years; Fiscal Quarters. Apria will cause its, and
each of its Subsidiaries', fiscal years to end on December 31, and each of its,
and each of its Subsidiaries', first three fiscal quarters to end on March 31,
June 30 and September 30.
9.9 Performance of Obligations. Apria will, and will cause each of its
Material Subsidiaries to, perform all of its obligations under the terms of each
mortgage, indenture, security agreement and other debt instrument by which it is
bound, except such non-performances as could not reasonably be expected to in
the aggregate have a Material Adverse Effect.
9.10 Payment of Taxes. Apria will pay and discharge, and will cause
each of its Material Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
lien or charge upon any properties of Apria or any of its Material Subsidiaries;
provided that neither Apria nor any of its Material Subsidiaries shall be
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper
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proceedings if it has maintained adequate reserves with respect thereto in
accordance with GAAP.
9.11 Use of Proceeds. All proceeds of the Loans shall be used as
provided in Section 8.8.
9.12 Intellectual Property Rights. Apria will, and will cause each of
its Material Subsidiaries to, maintain in full force and effect all Intellectual
Property rights necessary or appropriate to the business of Apria or any
Material Subsidiary of Apria and take no action (including, without limitation,
the licensing of Intellectual Property), or fail to take an action as the case
may be, in connection with such Intellectual Property rights which would result
in a Material Adverse Effect. Apria will, and will cause each of its Material
Subsidiaries to, diligently prosecute all material pending applications filed in
connection with seeking or seeking to perfect the Intellectual Property rights
and take all other reasonable actions necessary for the protection and
maintenance of the Intellectual Property rights necessary or appropriate to the
business of Apria or any Material Subsidiary of Apria at all times from and
after the Effective Date.
9.13 Permitted Transactions.
(a) So long as no Default or Event of Default has occurred and is
continuing or would result therefrom and Apria has given the Agents and the
Banks at least ten days' prior notice thereof, Apria may from time to time after
the Effective Date (x) effect Subsidiary Reorganizations and (y), subject to the
remaining provisions of this Section 9.13 and the requirements contained in the
definition of Permitted Acquisition or Permitted Investment, as the case may be,
Apria may from time to time after the Effective Date, effect Permitted
Transactions; provided that:
(i) with respect to all Permitted Transactions (other than
Subsidiary Reorganizations) agreed to (whether by letter of intent or
the execution of definitive documentation) prior to the issuance of the
Senior Subordinated Convertible Debentures, the sum (without
duplication) of (I) cash paid by Apria in connection with such
Permitted Transactions, (II) the Fair Market Value of Apria Common
Stock issued in connection with such Permitted Transactions and (III)
the amount (determined by using the face amount of the debt or the
amount payable at maturity, whichever is greater) of all Permitted Debt
incurred, assumed or acquired in all such Permitted Transactions, shall
not exceed the sum of $6,000,000 (the "Initial Acquisition Cap") and
the aggregate amount of the Pre-Approved Acquisitions consummated by
the Borrowers; provided, that the sum of the Initial Acquisition Cap
and the consummated Pre-Approved Acquisitions shall not exceed
$12,000,000 and in the event that the consummated Pre-Approved
Acquisitions exceed $6,000,000, such amounts shall be applied against
the Initial Acquisition Cap;
(ii) with respect to all Permitted Transactions (other than
Subsidiary Reorganizations) after the issuance of the Senior
Subordinated Convertible Debentures, the sum (without duplication) of
(I) cash paid by Apria in connection with such Permitted Transactions,
(II) the Fair Market Value of Apria Common Stock issued in connection
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with such Permitted Transactions and (III) the amount (determined by
using the face amount of the debt or the amount payable at maturity,
whichever is greater) of all Permitted Debt incurred, assumed or
acquired in all such Permitted Transactions, shall not exceed the sum
of $50,000,000 in the aggregate, plus, any amounts not utilized in the
Initial Acquisition Cap (the "Acquisition Cap"); provided, that (x) for
the fiscal year 1999, the Acquisition Cap shall be reduced on a dollar
for dollar basis by the amount of any Unusual Cash Expenses incurred by
the Borrowers and paid in fiscal year 1999;
(iii) if as of the end of any four consecutive fiscal quarters
the Borrowers' Consolidated Funded Indebtedness to Consolidated EBITDA
Ratio falls below 3.0 to 1 then, with respect to Permitted Transactions
consummated over the twelve month period (the "Bonus Period")
immediately following such four fiscal quarter period, the Borrowers
shall be entitled to engage in Permitted Transactions in addition to
the Acquisition Cap provided that (I) cash paid by Apria in connection
with such additional Permitted Transactions, (II) the Fair Market Value
of Apria Common Stock issued in connection with such additional
Permitted Transactions and (III) the amount (determined by using the
face amount of the debt or the amount payable at maturity, whichever is
greater) of all Permitted Debt incurred, assumed or acquired in all
such additional Permitted Transactions, shall not exceed the sum of
$15,000,000 over such twelve month period (the "Bonus Acquisition
Basket"), with an additional Bonus Period and Bonus Acquisition Basket
of $15,000,000 to commence and apply on each anniversary of the
commencement of the initial Bonus Period if the Borrowers' Consolidated
Funded Indebtedness to Consolidated EBITDA Ratio for the four fiscal
quarters prior to such anniversary, remains below 3.0 to 1; provided,
that (i) if at any time during a Bonus Period the Borrowers' Funded
Indebtedness to Consolidated EBITDA Ratio equals or exceeds 3.0 to 1
any portion of the Bonus Acquisition Basket for such Bonus Period not
used by such date shall be suspended and shall only be reinstated if
the Consolidated Funded Indebtedness to Consolidated EBITDA Ratio falls
below 3.0 to 1 within such Bonus Period; (ii) any portion of the Bonus
Acquisition Basket which is not utilized during the applicable Bonus
Period shall cease to be available to the Borrowers and shall not apply
to any subsequent period and (iii) any Permitted Transactions
consummated during a Bonus Period shall be applied first to the Bonus
Acquisition Basket, if available, and second to the Acquisition Cap;
(iv) with respect to all Permitted Transactions (other than
Subsidiary Reorganizations), the aggregate amount (determined by using
the face amount of the debt or the amount payable at maturity,
whichever is greater) of Permitted Debt incurred, assumed or acquired
in connection with all Permitted Transactions shall not exceed
$30,000,000;
(v) with respect to each Permitted Transaction (other than
Subsidiary Reorganizations), the sum (without duplication) of (I) cash
paid by Apria in connection with such Permitted Transactions, (II) the
Fair Market Value of Apria Common Stock issued in connection with such
Permitted Transactions and (III) the amount (determined by using the
face amount of the debt or the amount payable at maturity, whichever is
greater) of all Permitted Debt incurred, assumed or acquired in all
such Permitted Transactions, shall not exceed $25,000,000;
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(vi) with respect to each Permitted Acquisition, the EBITDA of
the Permitted Acquired Business for the period of four consecutive
fiscal quarters (taken as one accounting period) last ended prior to
the date of such Permitted Acquisition (the "Calculation Period") on a
pro forma basis shall be greater than zero; and
(vii) with respect to each Permitted Transaction (other than
Subsidiary Reorganizations), (I) no Event of Default is in existence at
the proposed time of the consummation of such Permitted Transaction or
would exist after giving effect thereto and (II) Apria shall have given
the Administrative and Collateral Agent and the Banks at least ten
days' prior notice of such Permitted Transaction; provided, however,
that in the event the aggregate consideration of such Permitted
Transaction (calculated pursuant to Section 9.13(a)(i)) (i) is less
than $5,000,000, Apria shall only be required to provide the notice
referred to above promptly upon completion of such Permitted
Transaction, rather than in advance thereof, and (ii) is less than
$250,000, Apria shall not be required to provide the notice referred to
above.
(b) At the time of each Permitted Transaction (other than a Subsidiary
Reorganization) involving the creation or acquisition of a Subsidiary, or the
acquisition of capital stock or other equity interest of any Person, all capital
stock or other interest thereof created or acquired in connection with such
Permitted Transaction shall be directly or indirectly owned by Apria.
(c) Within five (5) Business Days following each such respective
Permitted Acquisition, Apria shall cause each Material Subsidiary which is
formed to effect such Permitted Acquisition, or is acquired pursuant to a
Permitted Acquisition, to execute and deliver a Joinder Agreement and the
Guaranty (by an amendment thereto pursuant to which it becomes a party thereto)
or a substantially similar guaranty, in either case with the documentation to be
in form and substance satisfactory to, the Administrative and Collateral Agent;
provided that in the case of foreign Subsidiaries, such joinder shall require
the consent of the Administrative and Collateral Agent.
(d) Notwithstanding anything to the contrary contained above, no
Permitted Transaction (other than Subsidiary Reorganizations) may be effected
unless:
(w) recalculations are made by Apria of compliance with the
covenants contained in Sections 10.9 through 10.10, inclusive, for the
period of four consecutive fiscal quarters most recently ended prior to
the date of such Permitted Transaction, on a pro forma basis as if the
respective Permitted Transaction had occurred on the first day of such
period, and shall show that all such covenants would have been complied
with if the Permitted Transaction had occurred on the first day of such
period and in the case of such Permitted Transaction (calculated
pursuant to Section 9.13(a)(i)) is in excess of $5,000,000, such
recalculations shall be subject to the reasonable satisfaction of the
Administrative and Collateral Agent prior to the consummation of such
Permitted Acquisition;
(x) Apria in good faith believes that the financial covenants
contained in such Sections 10.9 through 10.10, inclusive, will continue
to be met for the one year period following the date of the
consummation of the respective Permitted Transaction;
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(y) all amounts reasonably expected by Apria to come due
within ten years after the date of the respective Permitted Transaction
in respect of all contingent liabilities being assumed or acquired as a
result of the respective Permitted Transaction shall not exceed the
amount of cash and, in the case of a Permitted Acquisition, the face
amount of all Permitted Debt assumed, incurred or acquired, in
connection with the respective Permitted Transaction; and
(z) prior to the consummation of the respective Permitted
Transaction, Apria shall furnish the Administrative and Collateral
Agent and the Banks with an officer's certificate executed by the chief
financial officer of Apria, certifying to the best of his or her
knowledge as to compliance with the requirements of preceding clauses
(w), (x) and (y) and Section 9.13(a), and containing the pro forma
calculations required by preceding clause (w) in the case of a
Permitted Transaction where the aggregate consideration of such
Permitted Transaction (calculated pursuant to Section 9.13(a)(i) is in
excess of $5,000,000.
(e) The consummation of each Permitted Transaction shall be deemed to be a
representation and warranty by Apria that all conditions thereto have been
satisfied and that same is permitted in accordance with the terms of this
Agreement, which representation and warranty shall be deemed to be a
representation and warranty for all purposes under this Agreement, including,
without limitation, Sections 7 and 11.
9.14 Agent for Service of Process. Apria hereby irrevocably accepts its
appointment as agent for all of the Credit Parties and agrees that it (i) shall
inform the Administrative and Collateral Agent promptly in writing of any change
of its address in the State of California; (ii) shall notify the Administrative
and Collateral Agent of any termination of any of the agency relationships
created by Section 13.9 and (iii) shall perform its obligations as such agent in
accordance with the provisions of Section 13.9. Apria, as process agent, and its
successor or successors agrees to discharge the above-mentioned obligations and
will not refuse fulfillment of such obligations under Section 13.9. Apria agrees
that it will maintain an office in the State of California.
9.15 Senior Subordinated Convertible Debentures. The Borrowers shall
diligently pursue the issuance of the Senior Subordinated Convertible Debentures
and on or prior to February 28, 1999, the Borrowers shall issue the Senior
Subordinated Convertible Debentures in an aggregate principal amount of at least
$50,000,000, with no original issue discount thereon, on terms and conditions,
including subordination provisions, satisfactory to the Required Banks and the
Administrative and Collateral Agent and 100% of the Net Indebtedness Proceeds of
such issuance shall be used contemporaneously to permanently repay the Term
Loans pursuant to Section 5.2(a).
9.16 Deposit Accounts. The Borrowers shall (i) maintain 100% of their
investment accounts with the Administrative and Collateral Agent, the minimum
balance of which prior to the Trigger Date shall not be less than $35,000,000,
(ii) transfer the accounts listed on Schedule XV to accounts maintained with the
Administrative and Collateral Agent, (iii) take such steps as reasonably
requested by the Administrative and Collateral Agent to perfect the
Administrative and Collateral Agent's security interest in all of the Borrowers'
material deposit accounts,
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material operating accounts and other material accounts of similar nature not
maintained with the Administrative and Collateral Agent and (iv) take all
actions necessary to cause all material accounts of the Borrowers (including but
not limited to any deposit accounts and operating accounts) not maintained with
the Administrative and Collateral Agent to be subject to mandatory daily cash
sweeps transferring all collected amounts in excess of $250 held in each such
account to a centralized account with a national or regionally prominent bank,
with the proceeds in such centralized account transferred to an account
maintained with and subject to the lien of the Administrative and Collateral
Agent on the next Business Day.
9.17 Year 2000 Compliance. Each of the Borrowers will promptly notify
the Administrative and Collateral Agent in the event such Borrower is made aware
of or determines that any computer application that is material to the business
or operation of the Borrowers and its Subsidiaries taken as a whole will not be
able to resolve the Year 2000 Problem on a timely basis, except to the extent
that such failure could not reasonably be expected to have a Material Adverse
Effect.
Section 10. Negative Covenants. The Borrowers hereby covenant that on
and after the Effective Date and until the Total Revolving Loan Commitment and
all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings,
together with interest, Fees and all other Obligations incurred under this
Agreement and thereunder, are paid in full:
10.1 Liens.
(a) Apria will not, and will not permit any of its Material
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible,
including the stock of any Material Subsidiaries) of Apria or any of its
Material Subsidiaries, whether now owned or hereafter acquired, or sell, assign,
transfer or otherwise dispose of any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable with recourse to Apria or any
of its Material Subsidiaries), or assign any right to receive income or permit
the filing of any financing statement under the UCC or any other similar notice
of Lien under any similar recording or notice statute; provided that the
provisions of this Section 10.1 shall not prevent Apria or any of its Material
Subsidiaries from creating, incurring, assuming or permitting the existence of
the following (liens described below are in this Agreement referred to as
"Permitted Liens"):
(i) inchoate Liens with respect to Apria or any of its Material
Subsidiaries for taxes not yet due or Liens for taxes being contested
in good faith and by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP;
(ii) Liens in respect of property or assets of Apria or any of its
Material Subsidiaries imposed by law, which were incurred in the
Ordinary Course of Business and do not secure Indebtedness for borrowed
money, such as carriers', warehousemen's, materialmen's, mechanics' and
landlords' liens and other similar liens arising in the Ordinary Course
of Business, and (x) which do not in the aggregate materially detract
from the value of Apria's or any of its Material Subsidiaries' property
or assets or
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materially impair the use thereof in the operation of the business of
Apria or its Material Subsidiaries taken as a whole or (y) which are
being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
property or assets subject to any such Lien;
(iii) Liens of Apria or its Material Subsidiaries in existence on
the Effective Date which are listed, and the property subject thereto
described, in Schedule X, but only to the respective date, if any, set
forth in such Schedule X for the removal and termination of any such
Liens;
(iv) easements, rights-of-way, restrictions, encroachments and
other similar charges or encumbrances on the property of Apria or any
of its Material Subsidiaries arising in the Ordinary Course of Business
and not materially interfering with the conduct of the business of
Apria or any of its Material Subsidiaries taken as a whole;
(v) Liens on property of Apria and its Material Subsidiaries
subject to Capitalized Lease Obligations to the extent such Capitalized
Lease Obligations are permitted by Section 10.5(c); provided that such
Liens only serve to secure the payment of Indebtedness arising under
such Capitalized Lease Obligation and the Lien encumbering the asset
giving rise to the Capitalized Lease Obligation does not encumber any
other asset of Apria or any of its Material Subsidiaries;
(vi) Liens (other than any Lien imposed by ERISA) on property of
Apria or any of its Material Subsidiaries incurred or deposits made in
the Ordinary Course of Business in connection with (x) workers'
compensation, unemployment insurance and other types of social security
or (y) to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money); provided that the aggregate amount of cash and the fair market
value of the property encumbered by Liens described in this clause (vi)
shall not exceed $3,000,000;
(vii) Liens placed upon equipment, machinery or Real Property used
in the Ordinary Course of Business of Apria or any of its Material
Subsidiaries at the time of purchase thereof by Apria or any of its
Material Subsidiaries to secure Indebtedness incurred to pay all or a
portion of the purchase price thereof, provided that (x) the aggregate
principal amount of all Indebtedness secured by Liens permitted by this
clause (vii) does not exceed at any one time outstanding $30,000,000
and (y) in all events, the Lien encumbering the equipment, machinery or
Real Property so acquired does not encumber any other asset of Apria or
any of its Material Subsidiaries;
(viii) any interest or title of a lessor or sublessor under any
lease of Apria or its Material Subsidiaries permitted by this
Agreement;
(ix) any attachment or judgment Lien not constituting an Event of
Default under Section 11.8;
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(x) Liens arising from precautionary UCC-1 financing statement
filings regarding operating leases;
(xi) Liens encumbering property or assets of any Subsidiary (but
not on the capital stock of such Subsidiary) acquired pursuant to, or
newly formed by Apria in order to make, a Permitted Acquisition and
securing Permitted Debt related thereto; provided that such Lien does
not encumber any assets or properties of Apria or any Material
Subsidiary other than the assets or properties of such Material
Subsidiary acquired pursuant to the Permitted Acquisition; and
(xii) Liens created pursuant to the Security Documents.
10.2 Consolidation, Merger, Purchase or Sale of Assets, etc. Apria will
not, and will not permit any of its Material Subsidiaries to, wind up, liquidate
or dissolve its affairs or merge or consolidate, or convey, sell, lease or
otherwise dispose of all or any part of its property or assets, or enter into
any partnerships, joint ventures or sale-leaseback transactions, or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets (other than purchases or other acquisitions by Apria or any
of its Material Subsidiaries of inventory, materials and equipment in the
Ordinary Course of Business) of any Person, except that:
(i) Capital Expenditures by Apria and its Subsidiaries shall
be permitted to the extent not in violation of Section 10.8;
(ii) each of Apria and its Subsidiaries may (A) in the
Ordinary Course of Business, sell assets which, in the reasonable
judgment of Apria have become obsolete, worn out or uneconomic, the
proceeds of which are applied in accordance with Section 5.2(a)(C), or
are used, or irrevocably committed, to purchase replacement equipment
within 60 days from the date of such sale so long as the aggregate
amount of Net Sale Proceeds from all such sales in the Ordinary Course
of Business in any one fiscal year do not exceed $20,000,000, and (B)
outside the Ordinary Course of Business sell assets, so long as the
aggregate amount of Net Sale Proceeds from all such sales outside the
Ordinary Course of Business in any one fiscal year do not exceed
$15,000,000;
(iii) each of Apria and its Subsidiaries may lease (as lessee)
real or personal property to the extent permitted by Section 10.8;
(iv) each of Apria and its Subsidiaries may make sales of
inventory and Rental Equipment in the Ordinary Course of Business;
(v) any Subsidiary of Apria may transfer inventory and Rental
Equipment to Apria or to another Material Subsidiary of Apria;
(vi) investments may be made to the extent permitted by
Section 10.6;
(vii) Apria may effect Permitted Transactions in accordance
with the requirements of Section 9.13; and
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(viii) the Borrowers may transfer assets to each other.
10.3 Dividends. Apria will not, nor permit any of its Subsidiaries to,
declare or pay any Dividends except that any Subsidiary of Apria may pay
Dividends to Apria or any Wholly-Owned Subsidiary of Apria.
10.4 Limitation on Creation of Subsidiaries. Apria will not, and will
not permit any of its Subsidiaries to, establish, create or acquire any new
Subsidiary, except Apria and its Subsidiaries may acquire or form Subsidiaries
in connection with Permitted Acquisitions or a Subsidiary Reorganization to the
extent otherwise permitted by this Agreement.
10.5 Indebtedness. Apria will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Indebtedness of Apria under any Interest Rate Protection Agreement,
in a notional amount for all such agreements not to exceed the Total
Commitments;
(c) Indebtedness of Apria and its Subsidiaries evidenced by Capitalized
Lease Obligations to the extent permitted pursuant to Section 10.8; provided
that the aggregate amount of Indebtedness evidenced by Capitalized Lease
Obligations under all Capital Leases outstanding under this clause (d) shall not
at any time exceed $40,000,000;
(d) Existing Indebtedness of Apria listed on Schedule VIII, provided
that no refinancings or renewals of such Indebtedness shall be permitted;
(e) Indebtedness of Apria which constitutes Permitted Debt in
accordance with the requirements of Section 9.13;
(f) Indebtedness in amounts, and subject to Liens, permitted under
Section 10.1(a)(vii);
(g) purchase price adjustments and customary indemnification by Apria
and its Subsidiaries incurred in connection with Permitted Transactions in
accordance with the requirements of Section 9.13;
(h) Indebtedness of Apria in respect of Additional Permitted
Subordinated Indebtedness; provided that notwithstanding anything to the
contrary contained in Section 5.2 of the Credit Agreement, 100% of the Net
Indebtedness Proceeds from any incurrence of Additional Permitted Subordinated
Indebtedness shall be applied as a mandatory repayment of principal of the then
outstanding Loans pursuant to Section 5.2(a)(B) and shall reduce the Total
Revolving Commitment in accordance with the provisions of Section 4.3(b);
(i) the Senior Subordinated Notes and any refinancing of the Senior
Subordinated Notes having a maturity of not less than five years and no
scheduled amortization and containing other terms, including subordination
provisions, acceptable to the Agents;
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(j) any Borrower may incur Indebtedness to any other Borrower, provided
that any such Indebtedness is subordinated in right of payment to the
Obligations pursuant to terms and documentation reasonably acceptable to the
Agents; and
(k) Apria and its Subsidiaries may incur Indebtedness consisting of
guaranties of Indebtedness permitted under this Agreement.
In addition, Apria will not, and will not permit any of its Subsidiaries to,
enter into any agreement evidencing Indebtedness, the terms of which are more
restrictive, in any material respect, as determined by the Administrative and
Collateral Agent, than the terms and conditions of the Credit Documents.
10.6 Advances, Investments and Loans. Apria will not, and will not
permit any of its Subsidiaries to, directly or indirectly lend money or credit
or make advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any other Person, except that the following shall be permitted:
(i) Apria and its Material Subsidiaries may acquire and hold
receivables owing to any of them, if created or acquired in the
Ordinary Course of Business and payable or dischargeable in accordance
with customary terms;
(ii) Apria and its Subsidiaries may hold cash and Cash Equivalents
in any amount for any purpose;
(iii) Apria or any of its Subsidiaries may make or maintain
travel, relocation and other expense advances to employees for business
related activities of Apria or any of its Subsidiaries in the Ordinary
Course of Business and consistent with past practice and not exceeding
$3,000,000 in aggregate principal amount at any one time outstanding;
(iv) Apria and its Subsidiaries may effect Permitted Transactions
in accordance with the requirements of Section 9.13;
(v) Apria and its Subsidiaries may enter into Interest Rate
Protection Agreements, in a notional amount for all such agreements not
to exceed the Total Commitments;
(vi) Apria and its Subsidiaries may make Capital Expenditures to
the extent permitted by Section 10.8;
(vii) Apria and its Subsidiaries may extend credit to management
of Apria or its Material Subsidiaries to permit such management to
exercise options issued or granted pursuant to stock option plans
relating to Apria's common stock; provided that no cash or other asset
may be disbursed, except for cash disbursed for the purpose of paying
taxes of such Persons incurred in connection with the exercise of such
stock options;
(viii) Apria and its Subsidiaries may (x) make cash investments in
Persons (other than individuals and Governmental Authorities) which
cash investments shall not exceed in the aggregate in any period of
four consecutive fiscal quarters, when added to
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any other Capital Expenditures made during such period and any advances
or loans made pursuant to Section 10.6(viii)(y), the aggregate amount
of Capital Expenditures permitted for such period pursuant to Section
10.8, so long as Apria or one of its Material Subsidiaries shall have
entered into management agreements or similar agreements with such
Person providing for the management of such Person by Apria or such
Material Subsidiary and so long as Apria or such Material Subsidiary
shall always have at least a 50% interest in such Person, and (y) make
advances or loans to individuals to finance the development of new
technology which advances and loans shall not exceed $20,000,000 in the
aggregate at any one time outstanding and shall not exceed in the
aggregate, in any period of four consecutive fiscal quarters, when
added to any other Capital Expenditures made during such period and any
cash investments made pursuant to Section 10.6(viii)(x), the aggregate
amount of Capital Expenditures permitted for such period pursuant to
Section 10.8;
(ix) the Borrowers may effect Subsidiary Reorganizations; and
(x) any Borrower may invest in Indebtedness of any other
Borrower, provided that any such Indebtedness is subordinated in right
of payment to the Obligations pursuant to terms and documentation
reasonably acceptable to the Agents.
10.7 Transactions with Affiliates. Apria will not, and will not permit
any of its Subsidiaries to, enter into any transaction or series of related
transactions, whether or not in the Ordinary Course of Business, with any
Affiliate, other than (i) the Registration Rights Agreement, dated as of
November 3, 1998 between Apria Healthcare Group Inc., and each of the
"Investors" signatory thereto, and the Standby Purchase Agreement, dated as of
November 3, 1998 between Relational Investors, LLC (on behalf of the entities
named therein) and Apria and (ii) a Subsidiary Reorganization, transactions
among Apria and the Guarantors, and transactions by Apria or any of its
Subsidiaries in the Ordinary Course of Business and on terms and conditions
substantially as favorable to Apria or such Subsidiary, as the case may be, as
would be obtainable by Apria or such Subsidiary, as the case may be, at that
time in a comparable arm's-length transaction with a Person other than an
Affiliate, except that (i) Apria may pay customary fees to its directors and
(ii) the transfers of Rental Equipment and inventory by Subsidiaries of Apria to
Apria and other Subsidiaries of Apria shall be permitted in accordance with
Section 10.2(v). Without limiting the foregoing, in no event shall any
management or similar fees (other than investment banking fees) be paid by Apria
or any of its Subsidiaries to any Person other than Apria.
10.8 Capital Expenditures. Commencing with the Effective Date and
continuing through December 31, 1998, Apria will not make or permit its
Subsidiaries to make any Capital Expenditures in excess of $25,000,000 in the
aggregate. Thereafter, Apria will not, for any period of four consecutive fiscal
quarters, make or permit its Subsidiaries to make any Capital Expenditures in an
amount such that the fraction (expressed as a percentage), the numerator of
which is the amount of such Capital Expenditures for such period plus any
investments permitted under Section 10.6(viii) during such period, but excluding
expenditures made in connection with Permitted Transactions made in compliance
with Section 9.13 during such period, and the denominator of which is the amount
of consolidated net revenues for Apria and its Subsidiaries for such period,
would be greater than 8%.
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10.9 Fixed Charge Coverage Ratio. Apria will not permit the Fixed
Charge Coverage Ratio as of the end of any fiscal quarter set forth below to be
less than the corresponding ratio set forth below opposite such date:
<TABLE>
<CAPTION>
Periods Ratio
- ------- -----
<S> <C>
September 30, 1998 through December 31, 1998 1.50 to 1
March 31, 1999 through December 31, 1999 1.45 to 1
Thereafter 1.55 to 1
</TABLE>
; provided that, solely for the purpose of determining compliance with this
Section 10.9, the calculation of the Fixed Charge Coverage Ratio shall be made
without giving effect to the 1997 Fourth Quarter Charges and Reserves, the 1998
Third Quarter Charges and Reserves and up to $17,500,00 of the Borrowers'
Unusual Cash Expenses, if applicable.
10.10 Consolidated Funded Indebtedness to Consolidated EBITDA. Apria
will not permit the Consolidated Funded Indebtedness to Consolidated EBITDA
Ratio at the end of any fiscal quarter set forth below to be greater than the
corresponding ratio set forth below, opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter End Ratio
- ------------------ -----
<S> <C>
September 30, 1998 4.00 to 1
December 31, 1998 4.15 to 1
March 31, 1999 4.60 to 1
June 30, 1999 4.60 to 1
September 30, 1999 4.60 to 1
December 31, 1999 4.20 to 1
March 31, 2000 3.90 to 1
June 30, 2000 3.70 to 1
September 30, 2000 3.50 to 1
December 31, 2000 3.40 to 1
March 31, 2001 3.25 to 1
June 30, 2001 3.00 to 1
</TABLE>
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; provided that, solely for the purpose of determining compliance with this
Section 10.10, the calculation of the Consolidated Funded Indebtedness to
Consolidated EBITDA Ratio shall be made without giving effect to the 1997 Fourth
Quarter Charges and Reserves, the 1998 Third Quarter Charges and Reserves and up
to $17,500,000 of the Borrowers' Unusual Cash Expenses, if applicable.
10.11 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
Other Agreements; etc. Apria will not, and will not permit any of its
Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment of or redemption (including pursuant to
any change of control provision) or acquisition for value of
(including, without limitation, by way of depositing with the trustee
with respect thereto money or securities before due for the purpose of
paying when due) (i) any Additional Permitted Subordinated
Indebtedness, (ii) any Existing Indebtedness the aggregate amount
outstanding of which exceeded $100,000 on the Effective Date
(including, without limitation, the Senior Subordinated Notes;
provided, however, that so long as no Default or Event of Default shall
have occurred and be continuing or would result therefrom, Apria may
refinance the Senior Subordinated Notes in their entirety pursuant to
Section 10.5(i) and (iii) any Indebtedness incurred to refinance the
Senior Subordinated Notes;
(ii) amend or modify, or permit the amendment or modification of,
any provision of Existing Indebtedness (including, without limitation,
the Senior Subordinated Notes) the aggregate amount outstanding of
which exceeded $100,000 on the Effective Date; provided, however, that
Apria may, and may permit its Subsidiaries to, agree to immaterial
amendments or modifications to Existing Indebtedness which do not (x)
increase the amount of, or change (other than defer) the date for
payment of, or increase any rate with respect to, any payment or
sinking fund provisions, (y) change (other than defer or reduce) any
redemption, interest rate or amortization thereunder or (z) change any
remedial, default or subordination provisions thereof;
(iii) amend, modify or change its Certificate of Incorporation,
Bylaws or any other agreement entered into by it with respect to its
capital stock in any manner that would materially adversely affect any
Bank;
(iv) enter into any new agreement with respect to its capital
stock (other than as part of a Subsidiary Reorganization and other than
a new Employee Benefit Plan or Employment Agreement to the extent
permitted pursuant to clause (vi) below);
(v) amend, modify or change in any material respect, or enter into
any new, Shareholders' Agreement, Management Agreement or Tax Sharing
Agreement;
(vi) amend, modify or change, or enter into any new Employee
Benefit Plan or Employment Agreement except in the case of this clause
(vi) if the aggregate cost to Apria and its Subsidiaries as a result of
such amendments, modifications, changes and new agreements are not
reasonably likely to have a Material Adverse Effect; or
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(vii) after the Effective Date, enter into any agreement, other
than this Agreement, which prohibits Apria or any of its Subsidiaries
from encumbering any of their respective assets.
10.12 Limitation on Certain Restrictions on Subsidiaries. Apria will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Subsidiary of Apria to (a) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profits owned by Apria or any Material Subsidiary of Apria,
or pay any Indebtedness owed to Apria or a Material Subsidiary of Apria, (b)
make loans or advances to Apria or any of Apria's Subsidiaries or (c) transfer
any of its properties or assets to Apria, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement and the other Credit Documents and (iii) customary provisions
restricting subletting or assignments of any lease governing a leasehold
interest of Apria or a Subsidiary of Apria.
10.13 Business. Apria will not, and will not permit any of its Material
Subsidiaries, to engage (directly or indirectly) in any business other than in
the Ordinary Course of Business.
Section 11. Events of Default. Upon the occurrence of any of the
following specified events (each, an "Event of Default"):
11.1 Payments. Any Borrower shall (i) default in the payment when due
of any principal of any Loan or any Note or any Unpaid Drawing or (ii) default,
and such default shall continue unremedied for two or more Business Days, in the
payment when due of any interest on any Loan or Note or Unpaid Drawing, or any
Fees or any other amounts owing by it under this Agreement or under such Loan or
Note or in connection with any Unpaid Drawing; or
11.2 Representations, etc. Any representation, warranty or statement
made by Apria or any of its Material Subsidiaries in this Agreement or in any
other Credit Document or in any certificate delivered pursuant to this Agreement
or to any other Credit Document shall prove to be untrue in any material respect
on the date as of which made or deemed made; or
11.3 Covenants. Any Credit Party shall (i) default in the due
performance or observance of any term, covenant or agreement contained in
Section 9.1(e)(i), 9.8, 9.11, 9.13, 9.14, 9.16, 10 or 13.8 or (ii) default in
the due performance or observance of any other term, covenant or agreement
contained in this Agreement or any other Credit Document and such default shall
continue unremedied for a period of 30 days after written notice to the
Borrowers by the Administrative and Collateral Agent or any Bank; or
11.4 Default Under Other Agreements. Apria or any of its Material
Subsidiaries shall (i) default in any payment of any Indebtedness (other than
the Indebtedness referred to in Section 11.1) beyond the period of grace (not to
exceed ten days), if any, provided in the instrument or agreement under which
such Indebtedness was created, (ii) default in the observance or performance of
any agreement or condition relating to any Indebtedness (other than the
Indebtedness referred to in Section 11.1) or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders
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of such Indebtedness (or a trustee or agent on behalf of such holder or holders)
to cause (determined without regard to whether any notice is required), any
Indebtedness to become due prior to its stated maturity, or (iii) any
Indebtedness (other than the Indebtedness referred to in Section 11.1) of Apria
or any of its Material Subsidiaries shall be declared to be due and payable, or
required to be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof, provided that it shall not be a Default or
Event of Default under this Section 11.4 unless the aggregate principal amount
of all Indebtedness as to which a default described in the preceding clauses (i)
through (iii) inclusive exists is at least $2,500,000; or
11.5 Bankruptcy, etc. Apria or any of its Material Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against
Apria or any of its Material Subsidiaries and the petition is not controverted
within ten days, or is not dismissed or discharged, within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
Apria or any of its Material Subsidiaries, or Apria or any of its Material
Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction, whether now or hereafter in
effect relating to Apria or any of its Material Subsidiaries, or there is
commenced against Apria or any of its Material Subsidiaries any such proceeding
which remains undismissed or undischarged for a period of 60 days, or Apria or
any of its Material Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or Apria or any of its Material Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or Apria or any of its
Material Subsidiaries makes a general assignment for the benefit of creditors,
or any corporate action is taken by Apria or any of its Material Subsidiaries
for the purpose of effecting any of the foregoing; or
11.6 ERISA. The following conditions described in (a), (b) and (c)
shall all occur: (a) Apria or any Subsidiary of Apria has incurred or is likely
to incur liabilities pursuant to one or more employee welfare benefit plans (as
defined in Section 3(1) of ERISA) which provide benefits to retired employees
(other than as required by Section 601 of ERISA) or employee pension benefit
plans (as defined in Section 3(2) of ERISA); and (b) there shall result from any
such event or events the imposition of a Lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and (c)
which Lien, security interest or liability, in the opinion of the Required
Banks, could reasonably be expected to have a Material Adverse Effect; or
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11.7 Guaranty. At any time after the execution and delivery of the
Guaranty, the Guaranty or any provision thereof shall cease to be in full force
or effect as to any Guarantor, or any Guarantor or any Person acting by or on
behalf of any Guarantor shall attempt to deny or disaffirm such Guarantor's
obligations under the Guaranty, or any Guarantor shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Guaranty; or
11.8 Judgments. One or more judgments or decrees shall be entered
against Apria or any of its Material Subsidiaries involving in the aggregate for
Apria and its Subsidiaries a liability (not paid or fully covered by a reputable
insurance company which has accepted full liability in writing) of $2,500,000 or
more and all such judgments or decrees shall not be vacated, discharged or
stayed or bonded pending appeal for any period of 30 consecutive days; or
11.9 Ownership. There shall be a Change in Control or Apria shall
cease, directly or indirectly, to own free and clear of all Liens 100% of the
outstanding capital stock of each other Borrower, unless any such Person ceases
to exist in accordance with clause (iii) of the definition of Subsidiary
Reorganization; or
11.10 Security Documents. Except for an expiration in accordance with
its terms, any Security Document shall be terminated or shall cease to be in
full force and effect, for whatever reason, or any of the Credit Parties shall
attempt to revoke any Security Document; or
11.11 Senior Subordinated Convertible Debentures. Any Credit Party
shall default in the due performance or observance of Section 9.15 or the
issuance of the Senior Subordinated Convertible Debentures shall otherwise be
suspended or terminated (other than a temporary suspension as a result of
fluctuating market conditions; provided, that any such suspensions do not in
exceed 14 days in the aggregate and do not extend past February 28, 1999).
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative and Collateral Agent, upon the
written request of the Required Banks, shall by written notice to the Borrowers,
take any or all of the following actions, without prejudice to the rights of the
Administrative and Collateral Agent, any Bank or the holder of any Note to
enforce its claims against any Credit Party (provided that, if an Event of
Default specified in Section 11.5 shall occur with respect to any Borrower, the
result which would occur upon the giving of written notice by the Administrative
and Collateral Agent to the Borrowers as specified in clauses (i) and (ii) below
shall occur, automatically without the giving of any such notice): (i) declare
the Total Revolving Loan Commitment terminated, whereupon all Revolving Loan
Commitments of each Bank shall forthwith terminate immediately and any Revolving
Loan Commitment Fee and other Fees shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any
accrued interest in respect of all Loans and the Notes and all Obligations owing
under this Agreement and thereunder to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by each Credit Party; (iii)
terminate any Letter of Credit which may be terminated in accordance with its
terms; (iv) direct the Borrowers to pay (and the Borrowers agree that upon
receipt of such notice, or upon the occurrence of an Event of Default specified
in Section 11.5 with respect to the Borrowers they will pay) to the
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Administrative and Collateral Agent, as collateral agent, at the Payment Office,
such additional amount of cash, to be held as security by the Administrative and
Collateral Agent in a cash collateral account, as is equal to the aggregate
Stated Amount of all Letters of Credit issued for account of the Borrowers and
then outstanding; and (v) enforce, as collateral agent, any Liens pursuant to
any Security Document with respect to any Collateral or with respect to any cash
collateral account referenced in clause (iv).
Section 12. The Agents.
12.1 Appointment and Authorization. Each Bank hereby irrevocably
appoints, designates and authorizes each Agent to take such action on its behalf
under the provisions of this Agreement and each other Credit Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Credit Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Credit
Document, the Agents shall not have any duties or responsibilities, except those
expressly set forth in this Agreement, nor shall the Agents have or be deemed to
have any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Credit Document or otherwise exist against the
Agents. Without limiting the generality of the foregoing sentence, the use of
the term "agent" in this Agreement with reference to an Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
12.2 Delegation of Duties. Any Agent may execute any of its duties
under this Agreement or any other Credit Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Agent shall be responsible
for the negligence or misconduct of any agent or attorney-in-fact that it
selects in good faith.
12.3 Liabilities of Agents. None of the Agent-Related Persons shall (a)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Credit Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
(b) be responsible in any manner to any of the Banks for any recital, statement,
representation or warranty made by the Borrowers or any Subsidiaries or
Affiliates of the Borrowers or any officer thereof, contained in this Agreement
or in any other Credit Document, or in any certificate, report, statement or
other document referred to or provided for in, or received by any Agent under or
in connection with, this Agreement or any other Credit Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Credit Document, or for any failure of the Borrowers or
any other party to any Credit Document to perform its obligations under this
Agreement or under such Credit Document, (c) be required to initiate or conduct
any litigation or collection proceedings under any Credit Document (except to
the extent directed to do so by the Required Banks in accordance with Section
12.5), or (d) be responsible for any action taken or omitted to be taken by it
under any Credit Document or under any other document or instrument referred to
or provided for in any Credit Document or in connection with any Credit
Document, except for
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its own gross negligence or willful misconduct. No Agent-Related Person shall be
under any obligation to any Bank to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, this
Agreement or any other Credit Document, or to inspect the properties, books or
records of the Borrowers or any of the Borrowers' Subsidiaries or Affiliates.
12.4 Reliance by Agents. Any Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Borrowers), independent accountants and other experts selected by such Agent.
Except for action expressly required of such Agent under the Credit Documents,
each Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Credit Document unless it shall first receive
such advice or concurrence of the Required Banks as it deems appropriate and, if
it so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agents shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any other Credit Document in accordance with a request or consent of the
Required Banks and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks.
12.5 Notice of Default. The Administrative and Collateral Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Administrative and Collateral Agent
for the account of the Banks, unless the Administrative and Collateral Agent
shall have received written notice from a Bank or the Borrowers referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." The Syndication Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
unless it shall have received written notice from a Bank or the Borrowers
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." Each such Agent will notify
the Banks of its receipt of any such notice. The Administrative and Collateral
Agent shall take such action with respect to such Default or Event of Default as
may be requested by the Required Banks in accordance with Section 11; provided,
however, that unless and until such Agent has received any such request, such
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 or in the best interest of the Banks.
12.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by any Agent, including any review of the affairs of the Borrowers and their
Subsidiaries, shall be deemed to constitute any representation or warranty by
any Agent- Related Person to any Bank. Each Bank represents to the Agents that
it has, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrowers
and their Subsidiaries, and all applicable bank
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regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrowers
under this Agreement. Each Bank also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Credit Documents, and to make such investigations
as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrowers. Except for notices, reports and other documents expressly required in
this Agreement to be furnished to the Banks by the Agents, the Agents shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of the Borrowers which may come into the
possession of any of the Agent-Related Persons.
12.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrowers and
without limiting the obligation of the Borrowers to do so), pro rata, from and
against any and all Indemnified Matters; provided, however, that no Bank shall
be liable for the payment to the Agent-Related Persons of any portion of such
Indemnified Matters resulting from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse each
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including reasonable attorney's fees and disbursements) incurred by such Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Credit Document, or any
document contemplated by or referred to in this Agreement, to the extent that
such Agent is not reimbursed for such expenses by or on behalf of the Borrowers.
The undertaking in this Section 12.7 shall survive the payment of all
Obligations under this Agreement and the resignation or replacement of such
Agent.
12.8 Agents in Individual Capacity. BofA and its Affiliates (and any
successor acting as Administrative and Collateral Agent) and NationsBank and its
Affiliates (and any successor acting as Syndication Agent) may, without notice
to or consent from the Banks, make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with the Borrowers and their Subsidiaries and Affiliates as though BofA
or NationsBank, as applicable, were not an Agent under this Agreement and may
accept fees and other consideration from the Borrowers for services in
connection with this Agreement or otherwise without notice to or consent of the
Banks. The Banks acknowledge that, pursuant to such activities, BofA or its
Affiliates or NationsBank or its Affiliates may receive information regarding
the Borrowers or their Affiliates (including information that may be subject to
confidentiality obligations in favor of the Borrowers or such Affiliates) and
acknowledge that the Agents shall be under no obligation to provide such
information to them. With respect to its Commitments and Loans, BofA and
NationsBank shall have the same rights, privileges and powers under this
Agreement as any other Bank and may exercise the same as though each were not an
Agent, and the terms "Bank" and "Banks" include BofA and NationsBank in their
respective individual capacities.
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12.9 Successor Agents. Each Agent may, and at the request of the
Required Banks shall, resign as such Agent upon 30 days' notice to the Banks. If
any Agent resigns under this Agreement, the Required Banks shall appoint from
among the Banks a successor agent for the Banks. If no successor agent is
appointed prior to the effective date of the resignation of such Agent, such
Agent may appoint, on behalf of the Banks and after consulting with the Banks
and the Borrowers, a successor agent from among the Banks. Upon the acceptance
of its appointment as successor agent, such successor agent shall succeed to and
become vested with all the rights, powers, privileges, duties and obligations of
the retiring Agent (and the term "Administrative and Collateral Agent" or
"Syndication Agent," as applicable, shall mean such successor agent) and the
retiring Agent's appointment, powers, privileges, duties and obligations as such
Agent shall be terminated. After any retiring Agent's resignation under this
Agreement as such Agent, the provisions of this Section 12, including Sections
12.6 and 12.7 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was such Agent under this Agreement. If no successor
agent has accepted appointment as such Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks shall
perform all of the duties of such Agent until such time, if any, as the Required
Banks appoint a successor agent as provided for above.
12.10 The Co-Arrangers. The Co-Arrangers are so named for recognition
purposes only, and, except for their rights, duties and obligations as Banks,
shall, as a result of such recognition, incur no other rights, duties or
obligations with this Agreement.
12.11 The Co-Agents. Any Bank identified on the signature pages of this
Agreement as "co-agent" shall not have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Banks as such. Without limiting the foregoing, such Bank shall not have or be
deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges
that it has not relied, and will not rely, on such Bank so identified in
deciding to enter into this Agreement or in taking or not taking action under
this Agreement.
Section 13. Miscellaneous.
13.1 Payment of Expenses, etc. The Borrowers jointly and severally
agree to: (i) whether or not the transactions contemplated in this Agreement are
consummated but subject to the terms of the Fee Letters, pay all reasonable
out-of-pocket costs and expenses of the Agents (including, without limitation,
the reasonable fees and disbursements of counsel, consultants and financial
advisors to the Agents), in connection with the preparation, execution and
delivery of this Agreement and the other Credit Documents and the documents and
instruments referred to in this Agreement and in such Credit Documents and any
amendment, waiver or consent relating to this Agreement or to such Credit
Document, of the Agents in connection with their syndication efforts with
respect to this Agreement and of the Agents and each of the Banks in connection
with the enforcement (including, without limitation, any fees incurred in
connection with a workout or bankruptcy proceeding), of this Agreement and the
other Credit Documents and the documents and instruments referred to in this
Agreement and in such Credit Documents (including the reasonable fees and
disbursements of counsel, including the reasonable allocated cost of internal
counsel for the Administrative and Collateral Agent as well as consultant and
financial advisor fees); (ii) pay and hold each of the Banks harmless from and
against any and all
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present and future recording, stamp, excise and other similar taxes with respect
to the foregoing matters and save each of the Banks harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to such Bank) to pay such taxes; and
(iii) defend, protect, indemnify and hold harmless the Agents and each Bank, and
each of their respective officers, directors, employees, representatives and
agents (collectively called the "Indemnitees") from and against any and all
liabilities, obligations (including removal or remedial actions), losses,
damages (including foreseeable and unforeseeable consequential damages and
punitive damages), penalties, claims, actions, judgments, suits, costs, expenses
and disbursements (including reasonable attorneys' and consultants fees and
disbursements) of any kind or nature whatsoever that may at any time be incurred
by, imposed on or assessed against the Indemnitees directly or indirectly based
on, or arising or resulting from, (a) any investigation, litigation or other
proceeding (whether or not any Agent or any Bank is a party thereto) related to
the entering into or performance of this Agreement or any other Credit Document
or the use of any Letter of Credit or the proceeds of any Loans under this
Agreement or the consummation of any transactions contemplated in this Agreement
or in any other Credit Document; (b) the generation, use, treatment, storage,
transport or Release of any Hazardous Materials in violation of any
Environmental Law relating to Apria or any of its Subsidiaries; (c) any
Environmental Claim relating to Apria or any of its Subsidiaries; (d) the
exercise of the rights of the Administrative and Collateral Agent and of any
Bank under any of the provisions of this Agreement or any other Credit Document
or any Letter of Credit or any Loans under this Agreement; or (e) the
consummation of any transaction contemplated in this Agreement or in any other
Credit Document (the "Indemnified Matters") regardless of when such Indemnified
Matter arises, but excluding any such Indemnified Matter based solely on the
gross negligence or willful misconduct of any Indemnitee.
13.2 Right of Set-off. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever located) or
any Affiliate thereof to or for the credit or the account of each Credit Party
against and on account of the Obligations and liabilities of such Credit Party
to such Bank under this Agreement or under any of the other Credit Documents,
including, without limitation, all interests in Obligations purchased by such
Bank pursuant to Section 13.6(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other Credit
Document, irrespective of whether or not such Bank shall have made any demand
under this Agreement and although said Obligations, liabilities or claims, or
any of them, shall be contingent or unmatured, and any such Affiliate is hereby
irrevocably authorized to permit such application or appropriation.
13.3 Notices. Except as otherwise expressly provided in this Agreement,
all notices and other communications provided for under this Agreement shall be
in writing (including telegraphic, telex, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered: if to any
Borrower, at its address specified opposite its signature below; if to any Bank,
at its address specified opposite its name below; and if to the
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Administrative and Collateral Agent, at such other address as shall be
designated by such party in a written notice to the other parties to this
Agreement and, as to each Bank, at such other address as shall be designated by
such Bank in a written notice to Apria and the Administrative and Collateral
Agent. All such notices and communications shall, when mailed, telegraphed,
telexed, facsimilied, or cabled or sent by overnight courier, be effective when
deposited in the mails, delivered to the telegraph company, cable company or
overnight courier, as the case may be, or sent by telex or facsimile device,
except that notices and communications to the Administrative and Collateral
Agent shall not be effective until received by the Administrative and Collateral
Agent.
13.4 Benefit of Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties to this
Agreement; provided, however, no Borrower may assign or transfer any of its
rights, obligations or interest under this Agreement or under any other Credit
Document without the prior written consent of the Banks; and provided, further,
that although any Bank may transfer, assign or grant participations in its
rights under this Agreement, such Bank shall remain a "Bank" for all purposes
under this Agreement (and may not transfer or assign all or any portion of its
Revolving Loan Commitments or its Term Loans under this Agreement except as
provided in Section 13.4(b)) and the transferee, assignee or participant, as the
case may be, shall not constitute a "Bank" under this Agreement; and provided,
further, that no Bank shall transfer or grant any participation under which the
participant shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such amendment or
waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter
of Credit (unless such Letter of Credit is not extended beyond the Final
Maturity Date) in which such participant is participating, or reduce the rate or
extend the time of payment of interest or Fees thereon (except in connection
with a waiver of applicability of any post-default increase in interest rates)
or reduce the principal amount thereof, or increase the Revolving Loan
Commitments or Term Loan Commitments in which such participant is participating
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Revolving
Loan Commitment or Term Loans shall not constitute a change in the terms of any
Revolving Loan Commitment or Term Loans, and that an increase in any Revolving
Loan Commitment or Term Loan Commitment shall be permitted without the consent
of any participant if the participant's participation is not increased as a
result thereof) or (ii) consent to the assignment or transfer by any Borrower of
any of its rights and obligations under this Agreement. In the case of any such
participation, the participant shall not have any rights under this Agreement or
any of the other Credit Documents (the participant's rights against such Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto) and all amounts payable
by any Borrower under this Agreement shall be determined as if such Bank had not
sold such participation.
(b) Notwithstanding the foregoing, any Bank may (x) assign all or a portion
of its Loans and Revolving Loan Commitments and related outstanding Obligations
under this Agreement to one or more Banks or Affiliates of such Banks or (y)
assign a portion equal to at least the lesser of (I) the remaining portion of
its Loans and the Revolving Loan Commitments under this
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Agreement and (II) $5,000,000 of such Loans and Revolving Loan Commitments and
related outstanding Obligations under this Agreement to one or more Eligible
Transferees, each of which assignees shall become a party to this Agreement as a
Bank by execution of an Assignment and Assumption Agreement (appropriately
completed); provided that: (i) any such assignment shall be for an equal
percentage of its Term Loans, Revolving Loans and Revolving Loan Commitments,
(ii) at such time Schedule I shall be deemed modified to reflect the Revolving
Loan Commitments and Term Loans of such new Bank and of the existing Banks;
(iii) new Notes will be issued to such new Bank and to the assigning Bank upon
the request of such new Bank or assigning Bank, such new Notes to be in
conformity with the requirements of Section 2.5 to the extent needed to reflect
the revised Loans and Revolving Loan Commitments; (iv) the consent of the
Administrative and Collateral Agent and the Issuing Bank shall be required in
connection with any assignment (such consent not to be unreasonably withheld);
and (v) the Administrative and Collateral Agent shall receive at the time of
each such assignment, from the assigning Bank, the payment of a non-refundable
assignment fee of $3,000; provided that such fee shall not be required in the
case of an assignment from any Bank to any of its Affiliates. To the extent of
any assignment pursuant to this Section 13.4(b), the assigning Bank shall be
relieved of its obligations under this Agreement with respect to its assigned
Loans and Revolving Loan Commitments but shall retain the benefit of all
indemnities of the Borrowers with respect to matters arising prior to the date
of such assignment which shall survive and inure to the benefit of the assigning
Bank.
(c) Notwithstanding any other provisions of this Agreement, any Bank may
assign any of its rights under this Agreement and under the Notes (including the
right to payment of principal and interest under this Agreement or under such
Notes) to any Federal Reserve Bank.
(d) Each Bank and each Agent agrees to take normal and reasonable
precautions and exercise due care (in the same manner as it exercises for its
own affairs) to maintain the confidentiality of all information identified as
"confidential" by Apria or any of its Subsidiaries and provided to it by Apria
or any of its Subsidiaries, or by the Agents on Apria's or such Subsidiary's
behalf, in connection with this Agreement or any other Credit Document; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of a disclosure in violation of this Section
13.4(d) by such Bank or Agent, or (ii) was or becomes available on a
non-confidential basis from a source other than Apria, provided that such source
is not bound by a confidentiality agreement with Apria known to such Bank or
Agent as the case may be; provided, however, that any Bank or Agent may disclose
such information: (A) at the request or pursuant to any requirement of any
Governmental Authority to which such Bank or Agent is subject or in connection
with an examination of such Bank or Agent by any such authority; (B) pursuant to
subpoena or other court process; (C) when required to do so in accordance with
the provisions of any applicable Governmental Rule; (D) in connection with any
litigation or proceeding to which any Agent, any Bank or their respective
Affiliates may be party; provided that in the case of clause (B), clause (C), in
cases other than in connection with an examination of the financial condition of
such Bank or Agent, and clause (D), unless such litigation or proceeding is
between any Bank or Agent and any Borrower or Guarantor, unless specifically
prohibited by applicable law or order, such Bank shall use reasonable efforts to
notify Apria or such Subsidiary of any requirement for disclosure; (E) in
connection with the exercise of any remedy under this Agreement or under any
other Credit Document; and (F) to such Bank's, Agent's or Affiliate's
independent auditors, counsel and other professional advisors;
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provided that such Person shall acknowledge and agree to be bound by the
provisions of this Section 13.4(d). Notwithstanding the foregoing, Apria
authorizes each Bank to disclose information to (a) any Affiliate of such Bank
or (b) any participant or assignee and to any prospective participant or
assignee, such financial and other information in such Bank's possession
concerning Apria or its Subsidiaries which has been delivered to the Agents or
the Banks pursuant to this Agreement or which has been delivered to the Agents
or the Banks by Apria in connection with the Banks' credit evaluation of Apria
prior to entering into this Agreement; provided that such participant or
assignee or prospective participant or assignee shall acknowledge and agree in
writing to be bound by the provisions of this Section 13.4(d) by executing and
delivering to such Bank a Confidentiality Agreement substantially in the form of
Exhibit J.
13.5 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Administrative and Collateral Agent or any Bank or any holder of any Note in
exercising any right, power or privilege under this Agreement or under any other
Credit Document and no course of dealing between any Borrower and the
Administrative and Collateral Agent or any Bank or the holder of any Note shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege under this Agreement or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege under this Agreement or under such Credit
Document. The rights, powers and remedies in this Agreement or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which the Administrative and Collateral Agent or any
Bank or the holder of any Note would otherwise have. No notice to or demand on
any Borrower in any case shall entitle any Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Administrative and Collateral Agent or any Bank or the holder of
any Note to any other or further action in any circumstances without notice or
demand.
13.6 Payments Pro Rata.
(a) The Administrative and Collateral Agent agrees that promptly after its
receipt of each payment from or on behalf of any Borrower in respect of any
Obligations under this Agreement, it shall distribute such payment to the Banks
pro rata based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount under
this Agreement (whether by voluntary payment, by realization upon security, by
the exercise of the right of set-off or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Revolving Loan Commitment or Fees, of a sum
which with respect to the related sum or sums received by other Banks is in a
greater proportion than the total of such Obligation then owed and due to such
Bank bears to the total of such Obligation then owed and due to all of the Banks
immediately prior to such receipt, then such Bank receiving such excess payment
shall purchase for cash without recourse or warranty from the other Banks an
interest in the Obligations of the respective Credit Party to such Banks in such
amount as shall result in a proportional participation by all the Banks in such
amount; provided that if all or any portion of such excess amount is thereafter
recovered from such Bank, such
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purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Except to the extent otherwise provided in this Agreement: (i) the
making, conversion and continuation of Loans of a particular Type shall be made
pro rata among the relevant Banks according to the amounts of their respective
Loan Percentage (in the case of making of Loans) or their respective Loans (in
the case of conversions and continuations of Loans) and the then current
Interest Period for each Loan of such Type shall be coterminous; and (ii) each
payment on account of any Obligations to or for the account of one or more of
the Banks in respect of any Obligations due on a particular day (or, if such day
is not a Business Day, the next succeeding Business Day) shall be entitled to
priority over payments in respect of Obligations not then due and shall be
allocated among the Banks entitled to such payments pro rata in accordance with
the respective amounts due and payable to such Banks on such day (or next
succeeding Business Day) and shall be distributed accordingly; provided that if
immediately prior to giving effect to any such payment in respect of any Loan
the outstanding principal amount of the Loans shall not be held by the Banks pro
rata in accordance with their respective Loan Percentages in effect at the time
such Loans were made (by reason of a failure of a Bank to make a Loan under this
Agreement or to fund its portion of any unreimbursed payment under Section
3.4(c) in the circumstances described in the last paragraph of Section
13.13(b)), then such payment shall be applied to the Loans in such manner as
shall result, as nearly as is practicable, in the outstanding principal amount
of the Loans being held by the Banks pro rata in accordance with their
respective Loan Percentages. Nothing in this Section 13.6(c) shall be deemed to
prevent, except in the case of shortfall, the differential payments of indemnity
and other amounts owing to or for the account of a particular Bank or Banks
pursuant to any provisions of any Credit Document which, by their terms, require
differential payments.
13.7 Calculations; Computations.
(a) The financial statements to be furnished to the Banks pursuant to this
Agreement (other than the Projections and pro forma financial statements) shall
be made and prepared in accordance with GAAP consistently applied throughout the
periods involved (except as set forth in the notes thereto or as otherwise
disclosed in writing by Apria to the Banks); provided that, except as otherwise
specifically provided in this Agreement, all computations determining compliance
with Sections 10.8 through 10.10, inclusive, shall utilize accounting principles
and policies in conformity with those used to prepare the historical financial
statements delivered to the Banks pursuant to Section 8.5.
(b) All computations of interest and Fees under this Agreement shall be
made on the basis of a year of 360 days (except for Revolving Loan Commitment
Fees, the computations for which shall be made on the basis of a year of 365
days) for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or Fees are payable.
13.8 Joint and Several. Each Borrower shall be obligated for all of the
Obligations on a joint and several basis, notwithstanding which Borrower may
have directly received the proceeds of any particular Loan or the benefit of a
particular Letter of Credit. Each Borrower acknowledges and agrees that, for
purposes of the Credit Documents, Borrowers constitute a
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single integrated financial enterprise and that each receives a benefit from the
availability of credit under this Agreement to all Borrowers. Each Borrower
waives all defenses arising under the laws of suretyship, to the extent such
laws are applicable, in connection with its joint and several obligations under
this Agreement. If all of the stock of any Borrower (other than Apria) shall be
sold or otherwise disposed of (including by merger or consolidation) in a
transaction not prohibited by this Agreement, such Borrower shall automatically
be discharged and released without any further action by any Agent, any Bank or
any other Person effective as of the date the Administrative and Collateral
Agent receives evidence reasonably satisfactory to it that such transaction is
permitted under this Agreement. Apria will give notice to the Administrative and
Collateral Agent of any such proposed sale or disposition not less than ten days
prior to the consummation thereof.
13.9 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF
CALIFORNIA. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR
OF THE UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH BORROWER HEREBY IRREVOCABLY
DESIGNATES, APPOINTS AND EMPOWERS APRIA AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH
DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH
BORROWER AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT FOR THE
PURPOSES OF THIS PROVISION ON TERMS SATISFACTORY TO THE ADMINISTRATIVE AND
COLLATERAL AGENT UNDER THIS AGREEMENT. EACH BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH BORROWER AT ITS ADDRESS SET FORTH
OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER
SUCH MAILING. NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE AND COLLATERAL AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER
OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWER IN ANY OTHER
JURISDICTION.
(b) EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
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THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.10 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties to this Agreement on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties to this Agreement shall be lodged with
Apria and the Administrative and Collateral Agent.
13.11 Effectiveness. This Agreement shall become effective on the date (the
"Effective Date") on which each Borrower, the Administrative and Collateral
Agent, the Syndication Agent and each of the Required Banks shall have signed a
copy of this Agreement (whether the same or different copies) and shall have
delivered the same to the Administrative and Collateral Agent at its Notice
Office or, in the case of the Banks, the Administrative and Collateral Agent
shall have received a faxed signature page at such office and the conditions
precedent set forth in Section 6 of this Agreement have been satisfied in the
Administrative and Collateral Agent's sole discretion.
13.12 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
13.13 Amendment or Waiver.
(a) Neither this Agreement nor any other Credit Document nor any terms of
this Agreement or of such other Credit Document may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party to such Credit Document
and the Required Banks, or by such Credit Party and the Administrative and
Collateral Agent acting with the consent of the Required Banks; provided that no
such change, waiver, discharge or termination shall, without the consent of each
Bank: (i) extend the Final Maturity Date, extend the stated maturity of any
Letter of Credit beyond the Final Maturity Date, extend the date of payment for
any reimbursement following any draw upon any Letter of Credit or reduce the
rate or extend the time of payment of interest or Fees, payments, or Letter of
Credit reimbursement thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates), or reduce the
principal amount thereof, or increase the Revolving Loan Commitments of any Bank
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Revolving
Loan Commitment shall not constitute an increase of the Revolving Loan
Commitment of any Bank, and that an increase in the available portion of any
Revolving Loan Commitment of any Bank shall not constitute an increase in the
Revolving Loan Commitment of such Bank); (ii) amend, modify or waive any
provision of this Section 13.13; (iii) reduce the percentage specified in, or
otherwise modify, the definition of Required Banks; or (iv) consent to the
assignment, release or transfer by any Borrower or Guarantor of any of its
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rights and obligations under any Credit Document other than in accordance with
the terms thereof or release any material portion of the Collateral (as defined
in the Security Agreement) other than the release of Collateral in connection
with any sale expressly permitted by the terms of any Credit Document; provided,
further, that no such change, waiver, discharge or termination shall: (x)
without the consent of the Swingline Lender, amend, modify or waive any
provision of Section 2.1(b) or (c) or alter its rights or obligations with
respect to Swingline Loans; (y) without the consent of the applicable Issuing
Bank, amend, modify or waive any provision of Section 3 or alter its rights or
obligations with respect to any Letters of Credit; or (z) without the consent of
any Agent, amend, modify or waive any provision of Section 12 or any other
provision relating to the rights or obligations of such Agent.
(b) Notwithstanding any other provision of this Agreement, if (i) at a time
when the conditions precedent set forth in Section 6 and Section 7 to any Loan
are, in the opinion of the Required Banks, satisfied, any Bank shall fail to
fulfill its obligations to make such Loan or (ii) any Bank shall fail to fund
its portion of any unreimbursed payment under Section 3.4(c), then, for so long
as such failure shall continue, such Bank shall (unless the Required Banks,
determined as if such Bank were not a "Bank" under the Credit Documents, shall
otherwise consent in writing) be deemed for all purposes relating to amendments,
modifications, waivers or consents under any of the Credit Documents (including
under this Section 13.13) to have no Loans or Commitments, shall not be treated
as a "Bank" under the Credit Documents when performing the computation of
Required Banks, and shall have no rights under the preceding paragraph of this
Section 13.13; provided that any action taken by the other Banks with respect to
the matters referred to in clauses (i) through (iv) of the preceding paragraph
shall not be effective as against such Bank.
(c) Notwithstanding anything to the contrary contained above in this
Section 13.13, the Administrative and Collateral Agent may enter into amendments
to the Guaranty for the purpose of adding additional Subsidiaries of any
Borrower (or other Credit Parties) as parties thereto.
13.14 Survival. All indemnities set forth in this Agreement, including,
without limitation, in Sections 2.10, 2.11, 3.6, 5.4, 12.7 and 13.1 shall
survive the execution and delivery of this Agreement and the Notes and the
making and repayment of the Loans.
13.15 Domicile of Loans. Each Bank may transfer and carry its Loans at, to
or for the account of any office, Subsidiary or Affiliate of such Bank.
13.16 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE AGENTS, THE BANKS AND THE BORROWERS HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE NOTES OR ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER OF THIS
AGREEMENT OR OF SUCH OTHER CREDIT DOCUMENT, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING OR WHETHER IN CONTRACT, IN TORT OR OTHERWISE. THE BORROWERS
ACKNOWLEDGE THAT THEY HAVE BEEN INFORMED BY THE AGENTS AND THE BANKS THAT THE
PROVISIONS OF THIS SECTION 13.16
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CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE AGENTS AND THE BANKS ARE RELYING
IN ENTERING INTO THIS AGREEMENT AND EACH OTHER CREDIT DOCUMENT. ANY BORROWER,
THE ADMINISTRATIVE AND COLLATERAL AGENT OR ANY BANK MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 13.16 WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF EACH BORROWER, EACH AGENT AND EACH BANK TO THE WAIVER OF ITS
RIGHTS TO TRIAL BY JURY.
13.17 Entire Agreement. This Agreement, together with the other Credit
Documents and the Fee Letters, embodies the entire agreement and understanding
among the Borrowers, the Banks and the Agents and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter of this Agreement and of such
agreements.
13.18 Severability. Any provision of this Agreement, the Note or any other
Credit Document that is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, the Note or such other Credit Document, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13.19 Waiver. The undersigned Banks, constituting the Required Banks under
the Existing Credit Agreement, hereby waive compliance with the provisions of
Sections 10.9, 10.10 and 10.11 of the Existing Credit Agreement from the time
period from September 30, 1998, to and including the Effective Date. Without
limiting the generality of the provisions of Section 13.13 hereof, the waiver
set forth herein shall be limited precisely as written and relates solely to the
past and present noncompliance by the Borrowers with the provisions of Sections
10.9, 10.10 and 10.11 of the Existing Credit Agreement, and nothing in this
Section 13.19 shall be deemed to (a) constitute a waiver of compliance by the
Borrowers with respect to (i) Section 10 of the Existing Credit Agreement in any
other instance or (ii) any other term, provision or condition of the Existing
Credit Agreement or any other instrument or agreement referred to therein or (b)
prejudice any right or remedy that the Administrative and Collateral Agent or
any Bank may now have (except to the extent such right or remedy was based upon
existing defaults under the Existing Credit Agreement that will not exist after
giving effect to this waiver) or may have in the future under or in connection
with this Agreement, the Existing Credit Agreement or any other instrument or
agreement referred to herein or therein.
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IN WITNESS WHEREOF, the parties to this Agreement have caused their
duly authorized officers to execute and deliver this Agreement as of the date
first above written.
Address for all Borrowers:
3560 Hyland Avenue APRIA HEALTHCARE GROUP INC.
Costa Mesa, California 92626 APRIA HEALTHCARE, INC.
Attn: Chief Financial Officer APRIA NUMBER TWO, INC.
Telephone: (714) 427-2000 APRIACARE MANAGEMENT SYSTEMS, INC.
Facsimile: (714) 427-4332 APRIA HEALTHCARE OF NEW YORK
STATE, INC.
By: _______________________________
Name: Philip L. Carter
Title: Chief Executive Officer
89
<PAGE> 96
11th Floor BANK OF AMERICA NATIONAL TRUST AND
555 South Flower Street SAVINGS ASSOCIATION, as a Bank
Los Angeles, California 90071-2202
Attn: Gregory Seibly
Telephone: (213) 228-2953 By: _______________________________
Facsimile: (213) 228-2756 Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative
1455 Market Street and Collateral Agent
San Francisco, California 94103
Attn: Christine Cordi By: _______________________________
Agency Management Name:
10831 Title:
Telephone: (415) 436-2790
Facsimile: (415) 436-3425
90
<PAGE> 97
10990 Wilshire Boulevard THE BANK OF NEW YORK
Suite 1125
Los Angeles, California 90024
Attn: Rebecca Levine By: _______________________________
Telephone: (310) 996-8659 Name:
Facsimile: (310) 996-8667 Title:
91
<PAGE> 98
Suite 2100 THE BANK OF NOVA SCOTIA,
580 California Street as a Bank and as a Co-Agent
San Francisco, California 94104
Attn: Rob Reynolds
Telephone: (415) 986-1100 By: ______________________________
Facsimile: (415) 397-0791 Name:
Title:
92
<PAGE> 99
725 South Figueroa Street Suite 2090 BANQUE NATIONALE DE PARIS,
Los Angeles, California 90017 as a Bank and as a Co-Agent
Attn: Tjalling Terpstra
Telephone: (213) 688-6425
Facsimile: (213) 488-9602 By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
93
<PAGE> 100
787 Seventh Avenue PARIBAS,
32nd Floor as a Bank and as a Co-Agent
New York, New York 10019
Attn: Todd Madjidzadeh
Telephone: (212) 841-2931 By: _____________________________
Facsimile: (212) 841-2292 Name:
Title:
By: _____________________________
Name:
Title:
94
<PAGE> 101
c/o Bear Stearns & Co., Inc. BEAR STEARNS INVESTMENT PRODUCTS, INC.
245 Park Avenue
4th Floor
New York, New York 10167 By: _____________________________
Attn: Mark Sorensen Name:
Telephone: (212) 272-7959 Title:
Facsimile: (212) 272-4844
95
<PAGE> 102
1301 Avenue of the Americas CREDIT LYONNAIS
New York, New York 10019 New York Branch
Attn: Martin Golden
Telephone: (212) 261-7791
Facsimile: (212) 261-3440 By: ____________________________
Name:
Title:
96
<PAGE> 103
24th Floor DEUTSCHE BANK AG, New York Branch
31 West 52nd Street
New York, New York 10019-2601
Attn: Sue Pearson By: ____________________________
Telephone: (212) 469-7140 Name:
Facsimile: (212) 469-8701 Title:
By: ____________________________
Name:
Title:
97
<PAGE> 104
277 Park Avenue DLJ CAPITAL FUNDING, INC.
New York, New York 10172
Attn: Howard Shams
Telephone: (212) 892-2963 By: ____________________________
Facsimile: (212) 892-6012 Name:
Title:
98
<PAGE> 105
Mail Suite 0091, 8th Floor THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Chicago, Illinois 60670
Attn: Erik C. Back By: ____________________________
Telephone: (312) 732-4406 Name:
Facsimile: (312) 732-2016 Title:
99
<PAGE> 106
301 South College Street FIRST UNION NATIONAL BANK
Charlotte, North Carolina 28288-0735
Attn: Terry Moore
Telephone: (704) 383-5212 By: ____________________________
Facsimile: (704) 383-9144 Name:
Title:
100
<PAGE> 107
11111 Santa Monica Boulevard FOOTHILL INCOME TRUST L.P.
Suite 1500
Los Angeles, California 90025
Attn: Ed Stearns By: ____________________________
Telephone: (310) 996-7158 Name:
Facsimile: (310) 479-0461 Title:
101
<PAGE> 108
Los Angeles Agency, 39th Floor FUJI BANK LIMITED
333 South Hope Street
Los Angeles, California 90071
Attn: Richard Bushman By: _____________________________
Telephone: (213) 253-4182 Name:
Facsimile: (213) 253-4178 Title:
102
<PAGE> 109
Los Angeles Agency THE LONG-TERM CREDIT BANK OF JAPAN,
350 South Grand Avenue LTD., as a Bank and as a Co-Agent
Suite 3000
Los Angeles, California 90071
Attn: Koji Toriumi By: _____________________________
Telephone: (213) 689-6367 Name:
Facsimile: (213) 622-6908 Title:
103
<PAGE> 110
One Mellon Bank Center MELLON BANK, N.A.
Room 1525
Pittsburgh, Pennsylvania 15258
Attn: Kurt L. Hewett By: ____________________________
Telephone: (412) 234-7355 Name:
Facsimile: (412) 236-1174 Title:
104
<PAGE> 111
Suite 500 MITSUBISHI TRUST & BANKING
801 South Figueroa Street CORPORATION
Los Angeles, California 90017
Attn: Dean Kawai By: ___________________________
Telephone: (213) 896-4666 Name:
Facsimile: (213) 687-4631 Title:
105
<PAGE> 112
110 East 59th Street MURRAY CAPITAL MANAGEMENT
New York, New York 10022 INC., as Agent for
Attn: Jim Hoffman Recap International (BVI) Ltd.
Telephone: (212) 588-1511
Facsimile: (212) 588-9874 By: ____________________________
Name:
Title
106
<PAGE> 113
110 East 59th Street MURRAY CAPITAL MANAGEMENT
New York, New York 10022 INC., as Agent for
Attn: Jim Hoffman Recap Partners, L.P.
Telephone: (212) 588-1511
Facsimile: (212) 588-9874 By: _____________________________
Name:
Title:
107
<PAGE> 114
700 Louisiana Street NATIONSBANK, N.A.
Houston, Texas 77002
Attn: Larry Gordon
Telephone: (713) 247-6619 By: _____________________________
Facsimile: (713) 247-6719 Name:
Title:
108
<PAGE> 115
c/o Pacific Investment Management Co. PIMCO HIGH YIELD FUND
840 Newport Center Drive
Newport Beach, California 92658
Attn: Melissa Fejdasz By: ____________________________
Telephone: (949) 721-5169 Name:
Facsimile: (949) 721-2623 Title:
109
<PAGE> 116
Suite 2600 SUMITOMO BANK LIMITED
777 South Figueroa Street
Los Angeles, California 90017-3138
Attn: Al Galuzzo By: ____________________________
Telephone: (213) 955-0855 Name:
Facsimile: (213) 623-6832 Title:
110
<PAGE> 117
Houston Agency TORONTO DOMINION (TEXAS), INC.
909 Fannin Street
17th Floor
Houston, Texas 77581 By: ___________________________
Attn: Sonja Jordan Name:
Telephone: (713) 653-8244 Title:
Facsimile: (713) 951-9921
111
<PAGE> 118
31 West 52nd Street TORONTO DOMINION BANK
New York, New York 10019
Attn: Sonja Jordon
Telephone: (212) 827-7754 By: ___________________________
Facsimile: (212) 827-7250 Name:
Title:
112
<PAGE> 119
550 South Hope Street UNION BANK OF CALIFORNIA, N.A.,
3rd Floor as a Bank and as a Co-Agent
Los Angeles, California 90071
Attn: Jennifer L. Banks
Telephone: (213) 243-3517
Facsimile: (213) 243-3552 By: ___________________________
Name:
Title:
113
<PAGE> 120
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
TERM REVOLVER PRO RATA
BANK COMMITMENT COMMITMENT SHARE
---- ---------- ---------- -----
<S> <C> <C> <C>
Bank of America $27,000,000.00 $2,812,500.00 9.375000000%
National Trust and
Savings Association
Banque Nationale de Paris $10,800,000.00 $1,125,000.00 3.750000000%
Paribas $16,200,000.00 $1,687,500.00 5.625000000%
Bear Stearns Investment $9,000,000.00 $937,500.00 3.125000000%
Credit Lyonnais $12,600,000.00 $1,312,500.00 4.375000000%
Deutsche Bank $7,200,000.00 $750,000.00 2.500000000%
DLJ Capital Funding $15,660,000.00 $1,631,250.00 5.437500000%
First National Bank of Chicago $9,000,000.00 $937,500.00 3.125000000%
First Union National Bank $9,000,000.00 $937,500.00 3.125000000%
Foothill Income Trust $23,400,000.00 $2,437,500.00 8.125000000%
Long Term Credit Bank $19,800,000.00 $2,062,500.00 6.875000000%
Mellon Bank $9,000,000.00 $937,500.000 3.125000000%
Mitsubishi Trust & Banking $5,400,000.00 $562,500.00 1.875000000%
Nations Bank, N.A. $32,040,000.00 $3,337,500.00 11.125000000%
PIMCO High Yield Fund $6,300,000.00 $656,250.00 2.187500000%
Recap Int. (BVI) Ltd. $3,600,000.00 $375,000.00 1.250000000%
Recap Partners L.P. $1,800,000.00 $187,500.00 0.625000000%
Sumitomo Bank, Ltd. $5,400,000.00 $562,500.00 1.875000000%
Bank of New York $12,600,000.00 $1,312,500.00 4.375000000%
Bank of Nova Scotia $14,400,000.00 $1,500,000.00 5.000000000%
Fuji Bank Ltd. $5,400,000.00 $562,500.00 1.875000000%
Toronto Dominion $16,200,000.00 $1,687,500.00 5.625000000%
Union Bank of Calif. $16,200,000.00 $1,687,500.00 5.625000000%
$288,000,000.00 $30,000,000.000 100.00%
</TABLE>
<PAGE> 121
SCHEDULE II
AUTHORIZED INDIVIDUALS
<PAGE> 122
SCHEDULE III
EXISTING LETTERS OF CREDIT
<PAGE> 123
SCHEDULE IV
TAX RETURNS
<PAGE> 124
SCHEDULE V
CONVERTIBLE SECURITIES
<PAGE> 125
SCHEDULE VI
MATERIAL SUBSIDIARIES
<PAGE> 126
SCHEDULE VII
INTELLECTUAL PROPERTY RESTRICTIONS
<PAGE> 127
SCHEDULE VIII
EXISTING INDEBTEDNESS
<PAGE> 128
SCHEDULE IX
MATERIAL CONTRACTS
<PAGE> 129
SCHEDULE X
EXISTING LIENS
<PAGE> 130
SCHEDULE XI
IMMATERIAL SUBSIDIARIES
<PAGE> 131
SCHEDULE XII
INTENTIONALLY LEFT BLANK
<PAGE> 132
SCHEDULE XIII
LITIGATION
<PAGE> 133
SCHEDULE XIV
1998 THIRD QUARTER CHARGES AND RESERVES
- 2 -
<PAGE> 134
SCHEDULE XV
BANK ACCOUNTS
- 3 -
<PAGE> 135
EXHIBIT A-1
NOTICE OF BORROWING
Bank of America National Trust and Savings Association,
as Administrative and Collateral Agent for the Banks Party to the
Credit Agreement referred to below
Agency Administrative Services #5596
1850 Gateway Boulevard
Concord, California 94520
Attention: Kathy Eddy
Re: Amended and Restated Credit Agreement dated as of October ___, 1998
("Credit Agreement") between Apria Healthcare Group Inc. ("Apria") and the
Subsidiaries of Apria identified on the signature pages of the Credit
Agreement and any Subsidiary of Apria that shall have executed a Joinder
Agreement (Apria and such Subsidiaries are referred to individually as a
"Borrower" and collectively as the "Borrowers"), each of the financial
institutions listed on Schedule I to the Credit Agreement or that, pursuant
to Section 13.4 of the Credit Agreement, shall become a "Bank" under the
Credit Agreement (individually, a "Bank" and collectively the "Banks"),
NationsBank, N.A., as the Syndication Agent, and Bank of America National
Trust and Savings Association, as the Administrative and Collateral Agent.
(All capitalized terms used but not defined in this Notice of Borrowing
shall have the meanings assigned to them in the Credit Agreement.)
Ladies and Gentlemen:
The undersigned, Apria [and ] (the "Borrower[s]"), hereby give[s] you
notice, irrevocably, pursuant to Section 2.3 of the Credit Agreement, that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by Section 2.3 of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is 19____.(1)
(ii) Such principal amount is attributable to the following Borrowers
in the following respective amounts:
- --------
(1) Shall be a Business Day at least one Business Day in the case of Base Rate
Loans and three Business Days in the case of Eurodollar Loans, in each case,
after the date of this Notice of Borrowing.
<PAGE> 136
Borrower Amount
$
$
(iii) The Proposed Borrowing is to consist of [Revolving
Loans/Swingline Loans].
(iv) The Loans to be made pursuant to the Proposed Borrowing shall be
initially maintained as [Base Rate Loans] [Eurodollar Loans].
(v) [The initial Interest Period for the Proposed Borrowing is
month(s)](2)
The undersigned hereby certifies[y] that the following statements are true
on the date of this Notice of Borrowing, and will be true on the date of the
Proposed Borrowing:
(A) the representations and warranties contained in the Credit
Agreement and the other Credit Documents are and will be true and
correct in all material respects, before and after giving effect
to the Proposed Borrowing and to the application of the proceeds
of such Proposed Borrowing, as though made on such date, except
for changes resulting from Permitted Transactions or other events
permitted under the Credit Agreement;
(B) without limiting the generality of the foregoing, the additional
indebtedness to be incurred under this Notice of Borrowing is
permitted under Section 4.12(b) of the Indenture and Apria
Healthcare Group Inc.'s fixed charge coverage ratio (as defined
in the Indenture) exceeds 3.00 to 1.00; and
(C) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Borrowing or from the application
of the proceeds thereof.
Very truly yours,
APRIA HEALTHCARE GROUP INC.
By: ______________________________
Name:
Title:
[OTHER BORROWER[S]]
By: ______________________________
Name:
Title:
- --------
(2) To be included for a Proposed Borrowing of Eurodollar Loans.
- 2 -
<PAGE> 137
EXHIBIT A-2
NOTICE OF CONTINUATION/CONVERSION
Bank of America National Trust and Savings Association,
as Administrative and Collateral Agent for the Banks Party to the
Credit Agreement referred to below
Agency Administrative Services #5596
1850 Gateway Boulevard
Concord, California 94520
Attention: Kathy Eddy
Re: Amended and Restated Credit Agreement dated as of October ____, 1998
("Credit Agreement") between Apria Healthcare Group Inc. ("Apria") and the
Subsidiaries of Apria identified on the signature pages of the Credit
Agreement and any Subsidiary of Apria that shall have executed a Joinder
Agreement (Apria and such Subsidiaries are referred to individually as a
"Borrower" and collectively as the "Borrowers"), each of the financial
institutions listed on Schedule I to the Credit Agreement or that, pursuant
to Section 13.4 of the Credit Agreement, shall become a "Bank" under the
Credit Agreement (individually, a "Bank" and collectively the "Banks"),
NationsBank, N.A., as the Syndication Agent, and Bank of America National
Trust and Savings Association, as the Administrative and Collateral Agent.
(All capitalized terms used but not defined in this Notice of Conversion
shall have the meanings assigned to them in the Credit Agreement.)
Ladies and Gentlemen:
The undersigned, Apria [and ] (the "Borrower[s]"), and hereby give[s]
you notice, irrevocably, pursuant to Section 2.6 of the Credit Agreement, that
the undersigned hereby requests a conversion of a Loan under the Credit
Agreement, and in that connection sets forth below the information relating to
such Conversion (the "Proposed Conversion") as required by Section 2.6 of the
Credit Agreement:
1. The Loan[s] to be converted [is/are] .
2. The Borrowing[s] pursuant to which the Loan[s] in clause (i) were made
[is/are] . The principal amount of such Borrowing[s] is attributable to
the following Borrowers in the following respective amounts:
Borrower Amount
$
$
3. [The Loan to be converted into Eurodollar Loans shall initially have
an Interest Period of ___________ .
<PAGE> 138
The undersigned hereby certifies[y] that the following statements are true
on the date of this Notice of Conversion, and will be true on the date of the
Proposed Conversion:
(A) no Default or Event of Default has occurred and is continuing, or would
result from such Proposed Conversion or from the application of the proceeds
thereof.](3)
Very truly yours,
APRIA HEALTHCARE GROUP INC.
By: ______________________________
Name:
Title:
[OTHER BORROWER[S]]
By: ______________________________
Name:
Title:
--------
(3) Insert clause (iii) and the certification following in the event the
Loan is to be converted into a Eurodollar Loan.
- 2 -
<PAGE> 139
EXHIBIT B-1
AMENDED AND RESTATED REVOLVING NOTE
$ _________ October __, 1998
FOR VALUE RECEIVED, APRIA HEALTHCARE GROUP INC., a corporation organized
and existing under the laws of the State of Delaware ("Apria") and the
Subsidiaries of Apria identified on the signature pages of this Note
(individually a "Borrower" and collectively the "Borrowers") hereby jointly and
severally promise to pay to the order of (the "Bank"), in lawful money of
the United States of America in immediately available funds, at the office of
Bank of America National Trust and Savings Association (the "Administrative and
Collateral Agent") located at 1455 Market Street, 12th Floor, San Francisco,
California 94103, on the Final Maturity Date (as defined in the Credit Agreement
referred to below) the principal sum of DOLLARS or, if less, the then
unpaid principal amount of all Revolving Loans (as defined in the Credit
Agreement) made by the Bank pursuant to the Credit Agreement.
The Borrowers jointly and severally promise also to pay interest on the
unpaid principal amount hereof in like money at said office from the date of
this Amended and Restated Note until paid at the rates and at the times provided
in Section 2.8 of the Credit Agreement referred to below.
This Amended and Restated Note is one of the Revolving Notes referred to in
the Amended and Restated Credit Agreement, dated as of October __, 1998 ("Credit
Agreement") between the Borrowers, each of the financial institutions listed on
Schedule I to the Credit Agreement (including the Bank) or that, pursuant to
Section 13.4 of the Credit Agreement, shall become a "Bank" under the Credit
Agreement, NationsBank, N.A., as the Syndication Agent, and the Administrative
and Collateral Agent and is entitled to the benefits of the Credit Agreement.
This Amended and Restated Note is also entitled to the benefits of the Guaranty
and the Security Documents (each, as defined in the Credit Agreement). As
provided in the Credit Agreement, this Amended and Restated Note is subject to
voluntary prepayment and mandatory repayment prior to the Final Maturity Date,
in whole or in part.
In case an Event of Default (as defined in the Credit Agreement) shall
occur and be continuing, the principal of and accrued interest on this Amended
and Restated Note may be declared to be due and payable in the manner and with
the effect provided in the Credit Agreement.
The Borrowers hereby waive presentment, demand, protest or notice of any
kind in connection with this Amended and Restated Note.
Each Borrower shall be obligated for all of the Obligations on a joint and
several basis, notwithstanding which Borrower may have directly received the
proceeds of any particular Loan or the benefit of a particular Letter of Credit.
<PAGE> 140
THIS AMENDED AND RESTATED NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA.
APRIA HEALTHCARE GROUP INC.
APRIA HEALTHCARE, INC.
APRIA NUMBER TWO, INC.
APRIA MANAGEMENT SYSTEMS, INC.
APRIA HEALTHCARE OF NEW YORK
STATE, INC.
By: ______________________________
Name:
Title:
EXHIBIT B-2
TERM NOTE
$ ___________ October __, 1998
FOR VALUE RECEIVED, APRIA HEALTHCARE GROUP INC., a corporation organized
and existing under the laws of the State of Delaware ("Apria") and the
Subsidiaries of Apria identified on the signature pages of this Note
(individually a "Borrower" and collectively the "Borrowers") hereby jointly and
severally promise to pay to the order of (the "Bank"), in lawful money
of the United States of America in immediately available funds, at the office of
Bank of America National Trust and Savings Association (the "Administrative and
Collateral Agent") located at 1455 Market Street, 12th Floor, San Francisco,
California 94103, on the Final Maturity Date (as defined in the Credit Agreement
referred to below) the principal sum of DOLLARS (or such lesser amount
as shall equal the aggregate unpaid principal amount of the Term Loans made by
the Bank to the Borrowers).
The Borrowers jointly and severally promise also to pay interest on the
unpaid principal amount hereof in like money at said office from the date of
this Term Note until paid at the rates and at the times provided in Section 2.8
of the Credit Agreement referred to below.
This Term Note is one of the Term Notes referred to in the Amended and
Restated Credit Agreement, dated as of October __, 1998 ("Credit Agreement")
between the Borrowers, each of the financial institutions listed on Schedule I
to the Credit Agreement (including the Bank) or that, pursuant to Section 13.4
of the Credit Agreement, shall become a "Bank" under the Credit Agreement,
NationsBank, N.A., as the Syndication Agent, and the Administrative and
Collateral Agent and is entitled to the benefits of the Credit Agreement. This
Term Note is also entitled to
- 2 -
<PAGE> 141
the benefits of the Guaranty and the Security Documents (each, as defined in the
Credit Agreement). As provided in the Credit Agreement, this Term Note is
subject to voluntary prepayment and mandatory repayment prior to the Final
Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Credit Agreement) shall
occur and be continuing, the principal of and accrued interest on this Term Note
may be declared to be due and payable in the manner and with the effect provided
in the Credit Agreement.
The Borrowers hereby waive presentment, demand, protest or notice of any
kind in connection with this Term Note.
Each Borrower shall be obligated for all of the Obligations on a joint and
several basis, notwithstanding which Borrower may have directly received the
proceeds of any particular Loan.
THIS TERM NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF CALIFORNIA.
APRIA HEALTHCARE GROUP INC.
APRIA HEALTHCARE, INC.
APRIA NUMBER TWO, INC.
APRIA MANAGEMENT SYSTEMS, INC.
APRIA HEALTHCARE OF NEW YORK
STATE, INC.
By: _____________________________
Name:
Title:
- 3 -
<PAGE> 142
EXHIBIT B-3
AMENDED AND RESTATED SWINGLINE NOTE
$3,000,000 October __, 1998
FOR VALUE RECEIVED, APRIA HEALTHCARE GROUP INC., a corporation organized
and existing under the laws of the State of Delaware ("Apria") and the
Subsidiaries of Apria identified on the signature pages of this Note
(individually a "Borrower" and collectively the "Borrowers") hereby jointly and
severally promise to pay to the order of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (the "Bank"), in lawful money of the United States of
America in immediately available funds, at the office of Bank of America
National Trust and Savings Association (the "Administrative and Collateral
Agent") located at 1455 Market Street, 12th Floor, San Francisco, California
94103, on the Swingline Expiry Date (as defined in the Credit Agreement referred
to below) the principal sum of THREE MILLION DOLLARS or, if less, the then
unpaid principal amount of all Swingline Loans (as defined in the Credit
Agreement) made by the Bank pursuant to the Credit Agreement.
The Borrowers jointly and severally promise also to pay interest on the
unpaid principal amount hereof in like money at said office from the date of
this Amended and Restated Swingline Note until paid at the rates and at the
times provided in Section 2.8 of the Credit Agreement referred to below.
This Amended and Restated Swingline Note is the Swingline Note referred to
in the Amended and Restated Credit Agreement, dated as of October __, 1998
("Credit Agreement") between the Borrowers, each of the financial institutions
listed on Schedule I to the Credit Agreement (including the Bank) or that,
pursuant to Section 13.4 of the Credit Agreement, shall become a "Bank" under
the Credit Agreement, NationsBank, as the Syndication Agent, and the
Administrative and Collateral Agent and is entitled to the benefits of the
Credit Agreement. This Amended and Restated Swingline Note is also entitled to
the benefits of the Guaranty (as defined in the Credit Agreement). As provided
in the Credit Agreement, this Note is subject to voluntary prepayment and
mandatory repayment prior to the Swingline Expiry Date, in whole or in part.
In case an Event of Default (as defined in the Credit Agreement) shall
occur and be continuing, the principal of and accrued interest on this Amended
and Restated Swingline Note may be declared to be due and payable in the manner
and with the effect provided in the Credit Agreement.
The Borrowers hereby waive presentment, demand, protest or notice of any
kind in connection with this Amended and Restated Swingline Note.
Each Borrower shall be obligated for all of the Obligations on a joint and
several basis, notwithstanding which Borrower may have directly received the
proceeds of any particular Loan or the benefit of a particular Letter of Credit.
<PAGE> 143
THIS AMENDED AND RESTATED SWINGLINE NOTE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA.
APRIA HEALTHCARE GROUP INC.
APRIA HEALTHCARE, INC.
APRIA NUMBER TWO, INC.
APRIA MANAGEMENT SYSTEMS, INC.
APRIA HEALTHCARE OF NEW YORK
STATE, INC.
By: ______________________________
Name:
Title:
- 2 -
<PAGE> 144
EXHIBIT C
LETTER OF CREDIT REQUEST
No.:__________ (4) Dated __________ (5)
Bank of America National Trust and Savings Association,
as Administrative and Collateral Agent and [_______________,] as
Issuing Bank, under the Amended and Restated Credit Agreement dated as
of October __, 1998 ("Credit Agreement") between Apria Healthcare Group
Inc. ("Apria") and the Subsidiaries of Apria identified on the
signature pages of the Credit Agreement and any Subsidiary of Apria
that shall have executed a Joinder Agreement (Apria and such
Subsidiaries are referred to individually as a "Borrower" and
collectively as the "Borrowers"), each of the financial institutions
listed on Schedule I to the Credit Agreement or that, pursuant to
Section 13.4 of the Credit Agreement, shall become a "Bank" under the
Credit Agreement (individually, a "Bank" and collectively the "Banks"),
NationsBank, N.A., as the Syndication Agent, and the Administrative and
Collateral Agent
Agency Administrative Services #5596
1850 Gateway Boulevard
Concord, California 94520
Attention: Kathy Eddy
[Address of Issuing Bank, if different]
Ladies and Gentlemen:
We hereby request that the Issuing Bank referred to above issue a standby
Letter of Credit for the account of the undersigned on __________ (6) (the "Date
of Issuance") in the aggregate stated amount of $__________ (7).
For purposes of this Letter of Credit Request, all capitalized terms used
but not defined in this Letter of Credit Request shall have the respective
meaning provided in the Credit Agreement.
The beneficiary of the requested Letter of Credit will be
______________________ (8) and such Letter of Credit will be in support of
________________ (9) and will have a stated expiration date of _______________
(10).
- --------
(4) Letter of Credit Request Number.
(5) Date of Letter of Credit Request.
(6) Date of Issuance at least ten days from the date indicated in (2)
above (or such shorter period as is acceptable to the Issuing Bank in any given
case).
(7) Aggregate initial stated amount of Letter of Credit.
(8) Insert name and address of beneficiary.
(9) Insert description of L/C Supportable Indebtedness and describe
obligation to which it relates.
<PAGE> 145
We hereby certify that:
(1) the representations and warranties contained in the Credit
Agreement and the other Credit Documents are and will be true and
correct in all material respects, before and after giving effect to
the issuance of the Letter of Credit requested by this Letter of
Credit Request, on the Date of Issuance, as though made on such date,
except for changes resulting from Permitted Transactions or other
events permitted under the Credit Agreement; and
(2) without limiting the generality of the foregoing, the
additional indebtedness to be incurred under this Notice of Borrowing
is permitted under Section 4.12(b) of the Indenture and Apria
Healthcare Group Inc.'s fixed charge coverage ratio (as defined in the
Indenture) exceeds 3.00 to 1.00; and
(3) no Default or Event of Default has occurred and is continuing
nor, after giving effect to the issuance of the Letter of Credit
requested by this Letter of Credit Request, would such a Default or
Event of Default occur.
Copies of all documentation with respect to the supported transaction
are attached to this Letter of Credit Request.
APRIA HEALTHCARE GROUP INC.
APRIA HEALTHCARE, INC.
APRIA NUMBER TWO, INC.
APRIA MANAGEMENT SYSTEMS, INC.
APRIA HEALTHCARE OF NEW YORK
STATE, INC.
By: ______________________________
Name:
Title:
- ----------
(continued)
(10) Insert last date upon which drafts may be presented which may not be
later than the earlier of 12 months after the Date of Issuance and the Final
Maturity Date.
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<PAGE> 146
EXHIBIT D-1
FORM OF OPINION OF O'MELVENY & MYERS
<PAGE> 147
EXHIBIT D-2
FORM OF OPINION OF IN-HOUSE COUNSEL TO THE BORROWER
<PAGE> 148
EXHIBIT E
OFFICERS' CERTIFICATE OF CREDIT PARTIES
<PAGE> 149
EXHIBIT F
AMENDED AND RESTATED GUARANTY
This AMENDED AND RESTATED GUARANTY ("Guaranty"), dated as of October __,
1998, is made by each of the undersigned (each a "Guarantor" and collectively,
the "Guarantors") in favor of the Administrative and Collateral Agent under the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Guarantors are a party to the Credit Agreement dated as of
August 9, 1996 ("Credit Agreement") between the Guarantors, each of the
financial institutions listed on Schedule I to the Credit Agreement or that,
pursuant to Section 13.4 of the Credit Agreement, shall become a "Bank" under
the Credit Agreement (individually, a "Bank" and collectively the "Banks"),
NationsBank, N.A., as the Syndication Agent, and Bank of America National Trust
and Savings Association, as the Administrative and Collateral Agent (the
"Administrative and Collateral Agent" and, collectively with the Banks, the
"Creditors"), as amended by the First Amendment to Credit Agreement, dated as of
April 22, 1997 (the "First Amendment"), the Second Amendment to Credit
Agreement, dated as of August 8, 1997 (the "Second Amendment"), the Third
Amendment to Credit Agreement and Waiver, dated as of January 30, 1998 (the
"Third Amendment"), the Fourth Amendment to Credit Agreement and Waiver, dated
as of March 13, 1998 (the "Fourth Amendment"), and the Fifth Amendment to Credit
Agreement and Waiver, dated as of April 15, 1998 (the "Fifth Amendment",
collectively with the First Amendment, the Second Amendment, the Third Amendment
and the Fourth Amendment, the "Amendments") (as amended, the "Existing Credit
Agreement");
WHEREAS, the Guarantors and the Administrative and Collateral Agent are
parties to the Guaranty, dated as of August 9, 1996 (the "Existing Guaranty");
WHEREAS, the Borrowers previously provided notice to the Administrative and
Collateral Agent that certain Events of Default under Sections 10.9, 10.10 and
10.11 of the Existing Credit Facility will occur on September 30, 1998 due to
the 1998 Third Quarter Charges and Reserves ("Financial Covenant Defaults");
WHEREAS, the Borrowers desire to issue at least $50,000,000 of Senior
Subordinated Convertible Debentures, the Net Available Proceeds of which will be
used to repay a portion of the Loans;
WHEREAS, the Borrowers have requested that the Banks amend and restate the
Existing Credit Facility to avoid the occurrence of such Event of Default and to
consent to the Borrowers issuance of the Senior Subordinated Convertible
Debentures;
WHEREAS, the Borrowers, the Banks and the Administrative and Collateral
Agent are parties to that certain Amended and Restated Credit Agreement dated as
of October __, 1998 (the "Credit Agreement");
<PAGE> 150
WHEREAS, each Guarantor will obtain benefits from the Credit Agreement and,
accordingly, desires to execute this Guaranty in order to satisfy the conditions
described in the preceding paragraph.
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees with each Creditor
as follows:
1. Capitalized terms used but not defined in this Guaranty shall have the
meanings assigned to them in the Credit Agreement and the rules of
interpretation set forth in Section 1.3 of the Credit Agreement shall apply to
this Guaranty. In addition, the following terms shall have the following
meanings:
"Guaranteed Obligations" shall have the meaning assigned to such term in
Section 2.
"Immaterial Subsidiaries" shall mean the Subsidiaries of Apria set forth on
Schedule XI to the Credit Agreement.
"Other Parties" shall have the meaning assigned to such term in Section
11(c).
2. Each Guarantor irrevocably and unconditionally, and jointly and
severally, guarantees the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of (x) the principal of and
interest on the Notes issued by, and Loans made to, the Borrowers under the
Credit Agreement and all reimbursement obligations and Unpaid Drawings with
respect to Letters of Credit issued under the Credit Agreement and (y) all other
obligations and indebtedness (including, without limitation, indemnities, Fees
and interest on such obligations and indebtedness) of the Borrowers now existing
or hereafter incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents and the due performance and compliance
by the Borrowers with the terms, conditions and agreements contained in the
Credit Documents (all such principal, interest, obligations and liabilities
being collectively referred to in this Guaranty as the "Guaranteed
Obligations"); provided, that notwithstanding any provision to the contrary
contained in this Guaranty or in any other Credit Document, the obligations of
each Guarantor under this Guaranty shall be limited to an aggregate amount equal
to the largest amount that would not render the Guaranteed Obligations of such
Guarantor under this Guaranty subject to avoidance under Section 548 of the
Bankruptcy Code or any comparable provisions of any applicable state law.
Subject to the proviso in the preceding sentence, each Guarantor understands,
agrees and confirms that the Creditors may enforce this Guaranty up to the full
amount of the Guaranteed Obligations against any such Guarantor without
proceeding against any Borrower, against any security for the Guaranteed
Obligations, against any other Guarantor, or against any other guarantor under
any other guaranty covering the Guaranteed Obligations. All payments by each
Guarantor under this Guaranty shall be made on the same basis as payments by the
Borrowers under Sections 5.3 and 5.4 of the Credit Agreement.
3. Additionally, each Guarantor, jointly and severally, unconditionally and
irrevocably, guarantees the payment of any and all Guaranteed Obligations of the
Borrowers to the Creditors
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<PAGE> 151
whether or not due or payable by the Borrowers upon the occurrence of the events
specified in Section 11.5 of the Credit Agreement, and unconditionally and
irrevocably, jointly and severally, promises to pay such Guaranteed Obligations
to the Creditors, or order, on demand, in lawful money of the United States.
4. The liability of each Guarantor under this Guaranty is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrowers whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of such Guarantor under this
Guaranty shall not be affected or impaired by (a) any direction as to
application of payment by the Borrowers, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the indebtedness of the Borrowers, (c) any payment on or in reduction of
any such other guaranty or undertaking, (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrowers or (e) any payment
made to any Creditor on the indebtedness which any Creditor repays the Borrowers
pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and each Guarantor waives any
right to the deferral or modification of its obligations under this Guaranty by
reason of any such proceeding.
5. The obligations of each Guarantor under this Guaranty are independent of
the obligations of any other Guarantor, any other guarantor or the Borrowers,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrowers, and whether or not any other Guarantor, any
other guarantor or the Borrowers be joined in any such action or actions. Each
Guarantor waives, to the fullest extent permitted by law, the benefit of any
statute of limitations affecting its liability under this Guaranty or the
enforcement thereof. Any payment by the Borrowers or other circumstance which
operates to toll any statute of limitations as to the Borrowers shall operate to
toll the statute of limitations as to each Guarantor.
6. Each Guarantor hereby waives notice of acceptance of this Guaranty and
notice of any liability to which it may apply, and waives promptness, diligence,
presentment, demand of payment, protest, notice of dishonor or nonpayment of any
such liabilities, suit or taking of other action taken by the Administrative and
Collateral Agent or any other Creditors against, and any other notice to, any
party liable thereon (including such Guarantor or any other Guarantor or
guarantor).
7. Any Creditor may at any time and from time to time without the consent
of, or notice to, any Guarantor, without incurring responsibility to any
Guarantor, without impairing or releasing the obligations of any Guarantor under
this Guaranty, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, or change or
extend the time of payment of, renew or alter, any of the Guaranteed
Obligations, any security for such Guaranteed Obligations, or any liability
incurred directly or indirectly in respect of such Guaranteed Obligations,
and the guaranty made in this Guaranty shall apply to the Guaranteed
Obligations as so changed, extended, renewed or altered;
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<PAGE> 152
(b) sell, exchange, release, surrender, realize upon or otherwise deal
with in any manner and in any order any property by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those under this Guaranty)
incurred directly or indirectly in respect thereof or in respect of this
Guaranty, or any offset there-against;
(c) exercise or refrain from exercising any rights against the
Borrowers, any Guarantor or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security for such Guaranteed Obligations or any liability (including any of
those under this Guaranty) incurred directly or indirectly in respect
thereof or hereof, and may subordinate the payment of all or any part
thereof to the payment of any liability (whether due or not) of the
Borrowers to creditors of the Borrowers;
(e) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrowers to the Creditors regardless of
what liabilities of the Borrowers remain unpaid;
(f) consent to or waive any breach of, or any act, omission or default
under, any of the Credit Documents or any of the instruments or agreements
referred to in such Credit Documents, or otherwise amend, modify or
supplement any Credit Document or any of such other instruments or
agreements; and
(g) act or fail to act in any manner referred to in this Guaranty
which may deprive any Guarantor of its right to subrogation against the
Borrowers to recover full indemnity for any payments made pursuant to this
Guaranty.
8. No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations or of any security for such Guaranteed Obligations
shall affect, impair or be a defense to this Guaranty, and this Guaranty shall
be primary, absolute and unconditional notwithstanding the occurrence of any
event or the existence of any other circumstances which might constitute a legal
or equitable discharge of a surety or guarantor except payment in full of the
Guaranteed Obligations.
9. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms of this Guaranty shall be conclusively
presumed to have been created in reliance on this Guaranty. No failure or delay
on the part of any Creditor in exercising any right, power or privilege under
this Guaranty and no course of dealing between any Guarantor and any Creditor
shall operate as a waiver such right, power or privilege; nor shall any single
or partial exercise of any right, power or privilege under this Guaranty
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. The rights and remedies
expressly specified in this Guaranty are cumulative and not exclusive of any
rights or remedies which any Creditor would otherwise have. No notice to or
demand on any Guarantor in any case shall entitle such Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Creditor to any other or further action in any
circumstances without notice or demand.
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<PAGE> 153
10. Any indebtedness of the Borrowers now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrowers to the
Creditors; and such indebtedness of the Borrowers to any Guarantor, if the
Administrative and Collateral Agent, after an Event of Default has occurred, so
requests, shall be collected, enforced and received by such Guarantor as trustee
for the Creditors and be paid over to the Creditors on account of the
indebtedness of the Borrowers to the Creditors, but without affecting or
impairing in any manner the liability of such Guarantor under the other
provisions of this Guaranty. Prior to the transfer by such Guarantor of any note
or negotiable instrument evidencing any indebtedness of the Borrowers to such
Guarantor, such Guarantor shall mark such note or negotiable instrument with a
legend that the same is subject to this subordination.
11. (a) Each Guarantor waives any right (except as shall be required by
applicable statute and cannot be waived) to require the Creditors to (i) proceed
against the Borrowers, any other Guarantor, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrowers, any
other Guarantor, any other guarantor or any other party or (iii) pursue any
other remedy in the Creditors' power whatsoever. Each Guarantor waives any
defense based on or arising out of any defense of the Borrowers, any other
Guarantor, any other guarantor or any other party other than payment in full of
the Guaranteed Obligations, including without limitation any defense based on or
arising out of the disability of the Borrowers, any other Guarantor, any other
guarantor or any other party, or the unenforceability of the Guaranteed
Obligations or any part of the Guaranteed Obligations from any cause, or the
cessation from any cause of the liability of the Borrowers other than payment in
full of the Guaranteed Obligations. The Creditors may, at their election,
foreclose on any security held by the Administrative and Collateral Agent or the
other Creditors by one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or remedy the
Creditors may have against the Borrowers or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor under
this Guaranty except to the extent the Guaranteed Obligations have been paid in
full. Each Guarantor waives any defense arising out of any such election by the
Creditors, even though such election operates to impair or extinguish any right
of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrowers or any other party or any security.
(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of the Borrowers' financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs under this Guaranty, and agrees that the Creditors shall have
no duty to advise any Guarantor of information known to them regarding such
circumstances or risks.
(c) Until the Guaranteed Obligations have been indefeasibly paid and
performed in full, (i) each Guarantor hereby waives all rights of subrogation
which it may at any time otherwise have as a result of this Guaranty (whether
contractual, under Section 509 of the Bankruptcy Code, or otherwise) to the
claims of the Creditors against the Borrowers or any other
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<PAGE> 154
guarantor of the Guaranteed Obligations (collectively, the "Other Parties") and
all contractual, statutory or common law rights of reimbursement, contribution
or indemnity from any Other Party which it may at any time otherwise have as a
result of this Guaranty; (ii) each Guarantor hereby further waives any right to
enforce any other remedy which the Creditors now have or may hereafter have
against any Other Party, any endorser or any other guarantor of all or any part
of the indebtedness of the Borrowers and any benefit of, and any right to
participate in, any security or collateral given to or for the benefit of the
Creditors to secure payment of the indebtedness of the Borrowers; and (iii) each
Guarantor also waives all claims (as such term is defined in the Bankruptcy
Code) it may at any time otherwise have against any Other Party arising from any
transaction whatsoever, including without limitation its right to assert or
enforce any such claims.
12. The Creditors agree that this Guaranty may be enforced only by the
action of the Administrative and Collateral Agent in each case acting upon the
instructions of the Required Banks, and that no Creditor shall have any right
individually to seek to enforce or to enforce this Guaranty, it being understood
and agreed that such rights and remedies may be exercised by the Administrative
and Collateral Agent for the benefit of the Creditors upon the terms of this
Guaranty.
13. In order to induce the Banks to make Loans to the Borrowers, and to
issue, and participate in, Letters of Credit for the account of the Borrowers
pursuant to the Credit Agreement, each Guarantor hereby represents, warrants and
covenants that:
(a) Such Guarantor and each of its Subsidiaries (other than Immaterial
Subsidiaries) (i) is a duly organized and validly existing corporation in
good standing under the laws of the jurisdiction of its incorporation, (ii)
has the corporate power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to
engage and (iii) is duly qualified and is authorized to do business and is
in good standing in each jurisdiction where the ownership, leasing or
operation of property or the conduct of its business requires such
qualification except for failures to be so qualified which, in the
aggregate, would not have a Material Adverse Effect.
(b) Such Guarantor has the corporate power to execute, deliver and
perform the terms and provisions of this Guaranty and has taken all
necessary corporate action to authorize the execution, delivery and
performance by it of this Guaranty. Such Guarantor has duly executed and
delivered this Guaranty, and this Guaranty constitutes its legal, valid and
binding obligation enforceable in accordance with its terms, except as the
enforceability of this Guaranty may be limited by bankruptcy,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
(c) Neither the execution, delivery or performance by such Guarantor
of this Guaranty, nor compliance by it with the terms and provisions of
this Guaranty, (i) will contravene any provision of any material applicable
Governmental Rule or any order, writ, injunction or decree of any court or
Governmental Authority (ii) will conflict with or result in any breach of
any of the terms, covenants, conditions or provisions of, or
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<PAGE> 155
constitute a default under, or result in the creation or imposition of (or
the obligation to create or impose) any Lien upon any of the property or
assets of such Guarantor pursuant to the terms of any indenture,
instrument, mortgage, deed of trust, credit agreement or loan agreement, or
any other Material Contract, to which such Guarantor is a party or by which
it or any of its property or assets is bound or to which it may be subject
or (iii) will violate any provision of the Certificate of Incorporation or
By-Laws of such Guarantor or any of its Subsidiaries (other than Immaterial
Subsidiaries).
(d) No material order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as have
been obtained or made prior to the Initial Borrowing Date), or exemption
by, any Governmental Authority is required (i) to authorize the execution,
delivery and performance of this Guaranty or (ii) to establish the
legality, validity, binding effect or enforceability of this Guaranty.
(e) There are no actions, suits or proceedings pending or, to the best
knowledge of the Guarantor, threatened (i) with respect to this Guaranty,
(ii) with respect to any Indebtedness of the Guarantor or any of its
Subsidiaries (other than Immaterial Subsidiaries) or (iii) that are
reasonably likely to have a Material Adverse Effect.
(f) On the date of this Guaranty and after giving effect to the
incurrence by such Guarantor of the Contingent Obligations evidenced by
this Guaranty (as limited by Section 2 of this Guaranty), (i) the assets of
such Guarantor, at a fair valuation, will exceed its debts, (ii) the
Guarantor will have sufficient capital to conduct its business and (iii)
such Guarantor will not have incurred debts, and does not intend to incur
debts, beyond its ability to pay such debts as they mature. For purposes of
this clause (f), "debt" means any liability on a claim, and "claim" means
(i) right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured; or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, or unsecured.
14. Each Guarantor covenants and agrees that on and after the date of this
Guaranty and until the Total Commitments and all Letters of Credit have
terminated and all Guaranteed Obligations have been paid in full, such Guarantor
shall take, or will refrain from taking, as the case may be, all actions that
are necessary to be taken or not taken so that no violation of any provision,
covenant or agreement contained in Section 9 or 10 of the Credit Agreement, and
so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
15. Each Guarantor hereby jointly and severally agrees to pay all
reasonable out-of-pocket costs and expenses of (x) each Creditor in connection
with the enforcement of this Guaranty and, after an Event of Default shall have
occurred and be continuing, the protection of such Creditor's rights under this
Guaranty, and (y) of the Administrative and Collateral Agent in connection with
any amendment, waiver or consent relating to this Guaranty (including, without
limitation, the reasonable fees and disbursements of counsel (including in-house
counsel) employed by the Administrative and Collateral Agent).
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<PAGE> 156
16. This Guaranty shall be binding upon each Guarantor and its successors
and assigns and shall inure to the benefit of the Creditors and their successors
and assigns.
17. Neither this Guaranty nor any provision of this Guaranty may be
changed, waived, discharged or terminated in any manner whatsoever unless in
writing duly signed by the Administrative and Collateral Agent (with the consent
of the Required Banks) and each Guarantor directly affected by such change,
waiver, discharge or termination (it being understood that the release or
addition of any Guarantor under this Guaranty shall not constitute a change or
waiver affecting any Guarantor other than the Guarantor so released or added).
18. Each Guarantor acknowledges that an executed (or conformed) copy of the
Credit Agreement has been made available to its principal executive officers and
such officers are familiar with its contents.
19. (a) In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence and
during the continuance of an Event of Default, each Creditor is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to any Guarantor or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by such Creditor (including, without limitation, by
branches and agencies of such Creditor wherever located) to or for the credit or
the account of such Guarantor, against and on account of the obligations and
liabilities of such Guarantor to such Creditor under this Guaranty, irrespective
of whether or not such Creditor shall have made any demand under this Guaranty
and although said obligations, liabilities, deposits or claims, or any of them,
shall be contingent or unmatured.
(b) Each Guarantor understands that if all or any part of the
Obligations is secured by real property, such Guarantor shall be liable for the
full amount of its liability under this Guaranty notwithstanding foreclosure on
such real property by trustee sale or any other reason impairing such
Guarantor's or any Creditor's right to proceed against any Guarantor or any
Subsidiary of such Guarantor. Each Guarantor hereby waives, to the fullest
extent permitted by law, all rights and benefits under Section 2809 of the
California Civil Code (or any similar law in any other jurisdiction) purporting
to reduce a guarantor's obligation in proportion to the principal obligation.
Each Guarantor hereby waives all rights and benefits under Section 580a of the
California Code of Civil Procedure (or any similar law in any other
jurisdiction) purporting to limit the amount of any deficiency judgment which
might be recoverable following the occurrence of a trustee's sale under a deed
of trust, all rights and benefits under Section 580b of the California Code of
Civil Procedure (or any similar law in any other jurisdiction) stating that no
deficiency may be recovered on a real property purchase money obligation and all
rights and benefits under Section 580d of the California Code of Civil Procedure
(or any similar law in any other jurisdiction) stating that no deficiency may be
recovered on a note secured by a deed of trust on real property in case such
real property is sold under the power of sale contained in such deed of trust,
if such sections, or any of them, have any application to this Guaranty or any
application to such Guarantor. In addition, each Guarantor hereby waives, to the
fullest extent permitted by law, without limiting the generality of the
foregoing or any other provision of this Guaranty, all rights, defenses and
benefits which might otherwise be available to such Guarantor
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<PAGE> 157
under California Civil Code Sections 2809, 2810, 2819, 2821, 2839, 2845, 2846,
2847, 2848, 2849, 2850, 2855, 2899, 3275 and 3433 (or any similar law in any
other jurisdiction).
20. All notices, requests, demands or other communications pursuant to this
Guaranty shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Creditor, as provided in the Credit Agreement and (ii) in
the case of any Guarantor, at its address set forth opposite its signature
below; or in any case at such other address as any of the Persons listed above
may hereafter notify the others in writing.
21. If claim is ever made upon any Creditor for repayment or recovery of
any amount or amounts received in payment or on account of any of the Guaranteed
Obligations and any of the aforesaid payees repays all or part of said amount by
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property or (b) any settlement
or compromise of any such claim effected by such payee with any such claimant
(including the Borrowers), then and in such event each Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon it,
notwithstanding any revocation of this Guaranty or the cancellation of any Note
or other instrument evidencing any liability of the Borrower, and such Guarantor
shall be and remain liable to the aforesaid payees under this Guaranty for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
22. Any acknowledgment or new promise, whether by payment of principal or
interest or otherwise and whether by the Borrower or other Persons liable in
respect of the Guaranteed Obligations (including any Guarantor), with respect to
any of the Guaranteed Obligations shall, if the statute of limitations in favor
of any Guarantor against any Creditor shall have commenced to run, toll the
running of such statute of limitations, and if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.
23. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF CALIFORNIA. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE
UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA AND, BY EXECUTION AND
DELIVERY OF THIS GUARANTY, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH GUARANTOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS
AND EMPOWERS APRIA AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND
ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF
ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH GUARANTOR AGREES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT FOR THE PURPOSES OF THIS PROVISION
ON
- 9 -
<PAGE> 158
TERMS SATISFACTORY TO THE ADMINISTRATIVE AND COLLATERAL AGENT. EACH GUARANTOR
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR AT
ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING IN THIS GUARANTY SHALL AFFECT THE
RIGHT OF ANY OF THE CREDITORS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY GUARANTOR
IN ANY OTHER JURISDICTION.
(b) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT IN THE
COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY OR THE SUBJECT MATTER OF THIS GUARANTY, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT, IN TORT OR OTHERWISE. THE
GUARANTORS ACKNOWLEDGE THAT THEY HAVE BEEN INFORMED BY THE AGENTS AND THE BANKS
THAT THE PROVISIONS OF THIS SECTION 23(c) CONSTITUTE A MATERIAL INDUCEMENT UPON
WHICH THE AGENTS AND THE BANKS ARE RELYING IN ENTERING INTO THE CREDIT AGREEMENT
AND EACH OTHER CREDIT DOCUMENT. ANY GUARANTOR, THE ADMINISTRATIVE AND COLLATERAL
AGENT OR ANY BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
23(c) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH GUARANTOR, EACH
AGENT AND EACH BANK TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
24. (a) It is the desire and intent of each Guarantor and the Creditors
that this Guaranty shall be enforced against each Guarantor to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. In furtherance of the foregoing, it
is noted that the obligations of each Guarantor has been limited as provided in
Section 2 of this Guaranty.
(b) If, however, and to the extent, that the obligations of any
Guarantor under this Guaranty shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers), then the amount of the Guaranteed Obligations of such Guarantor (but
- 10 -
<PAGE> 159
not the Guaranteed Obligations of any other Guarantor unless such other
Guarantor or Guarantors are individually subject to the circumstances covered by
this Section 24) shall be deemed to be reduced and the affected Guarantor shall
pay the maximum amount of the Guaranteed Obligations which would be permissible
under applicable law.
25. This Guaranty may be executed in any number of counterparts and by the
different parties to this Guaranty on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties to this Guaranty shall be lodged with Apria and the Administrative
and Collateral Agent.
26. In the event that all of the capital stock of one or more Guarantors is
sold in connection with a sale permitted by Section 10.2 of the Credit Agreement
and the proceeds of such sale or sales are applied in accordance with the
provisions of Section 5.2 of the Credit Agreement, to the extent applicable,
each Guarantor (x) all of the capital stock of which is so sold or (y) which is
a Subsidiary of a Guarantor all of the capital stock of which is so sold, shall
be released from this Guaranty and this Guaranty shall, as to each Guarantor or
Guarantors, terminate, and have no further force or effect.
27. All payments made by any Guarantor under this Guaranty will be made
without set-off, counterclaim or other defense.
28. Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Guaranty, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
Address for all Guarantors:
3560 Hyland Avenue APRIA HEALTHCARE GROUP INC.
Costa Mesa, California 92626 APRIA HEALTHCARE, INC.
Attn: Philip Carter APRIA NUMBER TWO, INC.
Telephone: (714) 755-5600 APRIA MANAGEMENT SYSTEMS, INC.
Facsimile: (714) 755-5617 APRIA HEALTHCARE OF NEW YORK
STATE, INC.
By: ____________________________
Name:
Title:
- 11 -
<PAGE> 160
Accepted and Agreed to:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative and Collateral Agent for the Banks
By: ________________________________
Name:
Title:
- 12 -
<PAGE> 161
EXHIBIT G
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
APRIA HEALTHCARE GROUP INC.
COVENANT COMPUTATIONS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION REPORTING FORMAT
________ __, 19__
SECTION 10.8 CAPITAL EXPENDITURES
(trailing four quarters calculation)
CAPITAL EXPENDITURES:
Expenditures for Fixed or Capital Assets
and Rental Equipment _______
PLUS: Capital Lease Obligations _______
PLUS: Investments permitted pursuant
to Section 10.6(viii) _______
MINUS: Expenditures made in connection
with Permitted Transactions made
in compliance with Section 9.13 _______
TOTAL CAPITAL EXPENDITURES: (a) _______
CONSOLIDATED NET REVENUE: (b) _______
CAPITAL EXPENDITURES AS % REVENUE (a)/(b) ______ %
CAPITAL EXPENDITURES CANNOT EXCEED: ______ %
VARIANCE - Favorable (Unfavorable) ______ %
<PAGE> 162
SECTION 10.9 FIXED CHARGE COVERAGE RATIO
(trailing four quarters calculation)
CONSOLIDATED EBITDA:
Consolidated Net Income (before consolidated
interest income, Consolidated Interest
Expense, provisions for taxes, and exclusive
of extraordinary gains or losses or gains and
losses from sales of assets other than
inventory or Rental Equipment sold
in the Ordinary Course of Business) _______
PLUS: Amortization _______
PLUS: Depreciation _______
PLUS: 1997 Fourth Quarter Charges and Reserves _______
PLUS: 1998 Third Quarter Charges and Reserves _______
PLUS: Unusual Cash Expenses up to $17,500,000
(added only to the extent actually paid in fiscal
year 1999)
PLUS: EBITDA allocable to Permitted
Acquired Businesses (added only
for the period commencing at the
beginning of the four-quarter period
through the date of the acquisition) _______
MINUS: EBITDA allocable to divestitures
(subtracted only for the period
commencing at the beginning of
the four-quarter period through
the date of the divestiture) _______
TOTAL CONSOLIDATED EBITDA: _______
PLUS: CONSOLIDATED RENT EXPENSE _______
MINUS: TAXES PAID IN CASH _______
TOTAL: Consolidated EBITDA +
Consolidated Rent Expense
- Taxes paid in cash (a) _______
- 2 -
<PAGE> 163
FIXED CHARGES:
Consolidated Interest Expense and
amortization of debt discounts in
respect of all Indebtedness _______
PLUS: Aggregate principal amount of all
scheduled payments of Indebtedness
(including principal portion of rentals
under Capitalized Lease Obligations) _______
PLUS: Consolidated Rent Expense _______
TOTAL FIXED CHARGES: (b) _______
FIXED CHARGE COVERAGE RATIO (a)/(b) _______
FIXED CHARGE COVERAGE RATIO
CANNOT BE LESS THAN: _______
VARIANCE - Favorable (Unfavorable) _______
SECTION 10.10 CONSOLIDATED FUNDED INDEBTEDNESS TO CONSOLIDATED EBITDA
(trailing four quarters calculation)
Consolidated Funded Indebtedness (a) _______
Consolidated EBITDA (b) _______
CONSOLIDATED FUNDED INDEBTEDNESS
TO CONSOLIDATED EBITDA (a)/(b) _______
RATIO CANNOT EXCEED: _______
VARIANCE - Favorable (Unfavorable) _______
EXCESS CASH FLOW _______
- 3 -
<PAGE> 164
EXHIBIT H
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") dated as of
________ __, ____, is between _______________ (the "Assignor") and
________________ (the "Assignee").
RECITALS
A. The Assignor is a party to the Amended and Restated Credit Agreement
dated as of October ___, 1998 ("Credit Agreement") between Apria Healthcare
Group Inc. ("Apria") and the Subsidiaries of Apria identified on the signature
pages of the Credit Agreement and any Subsidiary of Apria that shall have
executed a Joinder Agreement (Apria and such Subsidiaries are referred to
individually as a "Borrower" and collectively as the "Borrowers"), each of the
financial institutions listed on Schedule I to the Credit Agreement or that,
pursuant to Section 13.4 of the Credit Agreement, shall become a "Bank" under
the Credit Agreement (individually, a "Bank" and collectively the "Banks"),
NationsBank, N.A., as the Syndication Agent, and Bank of America National Trust
and Savings Association, as the Administrative and Collateral Agent. (All
capitalized terms used but not defined in this Agreement shall have the meanings
assigned to them in the Credit Agreement.)
B. The Assignor wishes to assign to the Assignee and the Assignee wishes to
purchase and assume from the Assignor, all of the interest in all of the
Assignor's rights and obligations under the Credit Agreement as more fully set
forth below.
C. It is a condition to such assignment and assumption that the Assignor
and the Assignee shall have executed this Agreement.
AGREEMENT
Accordingly, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Assignor and the Assignee agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without recourse
and without representation or warranty (other than as expressly provided in this
Agreement), and the Assignee hereby purchases and assumes from the Assignor,
[___]% of all of the Assignor's rights and obligations under the Credit
Agreement as of the date of this Agreement (the "Assigned Share"), including all
rights and obligations with respect to the Assigned Share of the Revolving Loan
Commitment, Term Loan Commitment and Loans in the amount of $__________. After
giving effect to such sale and assignment, the Assignee's Revolving Loan
Commitment will be $[_________] and the Assignee's Term Loan Commitment will be
$[_________], the amount of
<PAGE> 165
the outstanding Loans owing to the Assignee will be $[_________] and the
Assignee's Pro Rata Share will be [___]%.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it under this Agreement and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant to the Credit Agreement or the other Credit Documents; and
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Credit Party or the performance or
observance by the Credit Parties of any of their obligations under the Credit
Agreement or the other Credit Documents to which they are a party or any other
instrument or document furnished pursuant to the Credit Agreement or the other
Credit Documents.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement and the other Credit Documents, together with copies of the financial
statements referred to in the Credit Agreement and the other Credit Documents
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Agreement; (ii) agrees
that it will, independently and without reliance upon the Administrative and
Collateral Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that it is an Eligible Transferee under the Credit Agreement;
(iv) appoints and authorizes the Administrative and Collateral Agent to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement and the other Credit Documents as are delegated to the Administrative
and Collateral Agent by the terms of the Credit Agreement and the other Credit
Documents, together with such powers as are reasonably incidental to such
powers; and (v) agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; and (vi) to the extent legally entitled to do so,
attaches the forms described in Section 5.4(b)(ii) of the Credit Agreement. (11)
4. Following the execution of this Agreement by the Assignor and the
Assignee, an executed original of this Agreement (together with all attachments)
will be delivered to the Administrative and Collateral Agent. The effective date
of this Agreement shall be the date of execution of this Agreement by the
Assignor and the Assignee and the receipt of any consent of the Administrative
and Collateral Agent, Apria and the Issuing Bank to the extent required by
Section 13.4(b) of the Credit Agreement and receipt by the Administrative and
Collateral Agent of the assignment fee referred to in such Section 13.4(b), if
applicable (the "Settlement Date ").
5. Upon the delivery of a fully executed original of this Agreement to the
Agent, as of the Settlement Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Agreement, have the rights
and obligations of a Bank under the Credit
- --------
(11) If the Assignee is organized under the laws of a jurisdiction outside
the United States.
- 2 -
<PAGE> 166
Agreement and under the other Credit Documents and (ii) the Assignor shall, to
the extent provided in this Agreement, relinquish its rights and be released
from its obligations under the Credit Agreement and the other Credit Documents.
6. It is agreed that the Assignee shall be entitled to (w) all interest on
the Assigned Share of the Loans at the applicable rates specified in the Credit
Agreement; (x) all Revolving Loan Commitment Fees (if applicable) on the
Assigned Share of the Revolving Loan Commitment at the applicable rate specified
in the Credit Agreement; and (y) all Letter of Credit Fees (if applicable) on
the Assignee's participation in all Letters of Credit at the applicable rate
specified in the Credit Agreement, which, in each case, accrue on and after the
Settlement Date, such interest and, if applicable, Revolving Loan Commitment
Fees and Letter of Credit Fees, to be paid by the Administrative and Collateral
Agent directly to the Assignee. It is further agreed that all payments of
principal made on the Assigned Share of the Loans which occur on and after the
Settlement Date will be paid directly by the Administrative and Collateral Agent
to the Assignee. Upon the Settlement Date, the Assignee shall pay to the
Assignor an amount specified by the Assignor in writing which represents the
Assigned Share of the principal amount of the respective Loans made by the
Assignor pursuant to the Credit Agreement which are outstanding on the
Settlement Date, net of any closing costs, and which are being assigned under
this Agreement. The Assignor and the Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Settlement Date directly between themselves on the Settlement Date.
This Assignment and Assumption Agreement shall be governed by and construed
in accordance with the laws of the State of _________________.
IN WITNESS WHEREOF, the parties to this Agreement have caused their duly
authorized officers to execute and deliver this Bank Assignment and Assumption
Agreement, as of the date first above written.
Accepted this _______ day of _______________, _____.
[NAME OF ASSIGNOR],
as Assignor
By: ______________________________
Name:
Title:
[NAME OF ASSIGNEE],
as Assignee
By: ______________________________
Name:
Title:
- 3 -
<PAGE> 167
Acknowledged and Agreed:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative and Collateral Agent
By: ______________________________
Name:
Title:
Bank of America NT&SA, as Issuing Bank
By: ______________________________
Name:
Title:
- 4 -
<PAGE> 168
EXHIBIT I
FORM OF JOINDER AGREEMENT
JOINDER AGREEMENT
This JOINDER AGREEMENT (this "Joinder") is executed as of ________ __,
____, by _________________________, a _______________________ (the "Joining
Party"), and delivered to Bank of America National Trust and Savings
Association, as Administrative and Collateral Agent (the "Administrative and
Collateral Agent"), pursuant to the Amended and Restated Credit Agreement dated
as of October _____, 1998 ("Credit Agreement") between Apria Healthcare Group
Inc. ("Apria") and the Subsidiaries of Apria identified on the signature pages
of the Credit Agreement and any Subsidiary of Apria that shall have executed a
Joinder Agreement (Apria and such Subsidiaries are referred to individually as a
"Borrower" and collectively as the "Borrowers"), each of the financial
institutions listed on Schedule I to the Credit Agreement or that, pursuant to
Section 13.4 of the Credit Agreement, shall become a "Bank" under the Credit
Agreement (individually, a "Bank" and collectively the "Banks"), NationsBank,
N.A., as the Syndication Agent, and the Administrative and Collateral Agent.
(All capitalized terms used but not defined in this Joinder shall have the
meanings assigned to them in the Credit Agreement.)
RECITALS
A. The Joining Party is a Subsidiary of Apria and desires to become a
Borrower under the Credit Agreement.
B. The Joining Party expects to realize direct and indirect benefits as a
result of the availability to it of the credit facilities under the Credit
Agreement.
AGREEMENT
Accordingly, the Joining Party agrees as follows:
(i) By this Joinder, the Joining Party becomes a "Borrower" under and
pursuant to the Credit Agreement. The Joining Party agrees that, upon its
execution of this Joinder, it will become a Borrower under the Credit Agreement
with respect to all Obligations of Borrowers heretofore or hereafter incurred
under the Credit Documents and it shall cease to be an Immaterial Subsidiary
therein. The Joining Party hereby ratifies, as of the date of this Joinder, and
agrees to be bound by, all of the terms, provisions and conditions contained in
the Credit Agreement, including without limitation (a) all of the
representations and warranties set forth in Section 8 of the Credit Agreement as
they relate to such Joining Party and (b) all of the affirmative and negative
covenants set forth in Sections 9 and 10 of the Credit Agreement. The Schedules
to the Credit Agreement are revised as attached to this Joinder to reflect the
addition of the Joining Party to the Credit Agreement.
<PAGE> 169
(ii) The effective date of this Joinder is ________ __, ____.
IN WITNESS WHEREOF, the Joining Party has caused this Joinder Agreement to
be duly executed by its authorized officers and the Administrative and
Collateral Agent, for the benefit of the Banks, has caused the same to be
accepted by its authorized officer, as of the day and year first above written.
"Joining Party"
_________________________________
a _______________________________
By: _____________________________
Title: ______________________
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative and Collateral Agent
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
<PAGE> 170
EXHIBIT J
FORM OF CONFIDENTIALITY AGREEMENT
CONFIDENTIALITY AGREEMENT
[Date]
[Name and Address of
prospective participant
or assignee]
Re: Amended and Restated Credit Agreement dated as of October _____, 1998
("Credit Agreement") between Apria Healthcare Group Inc. ("Apria") and the
Subsidiaries of Apria identified on the signature pages of the Credit
Agreement and any Subsidiary of Apria that shall have executed a Joinder
Agreement (Apria and such Subsidiaries are referred to individually as a
"Borrower" and collectively as the "Borrowers"), each of the financial
institutions listed on Schedule I to the Credit Agreement or that, pursuant
to Section 13.4 of the Credit Agreement, shall become a "Bank" under the
Credit Agreement (individually, a "Bank" and collectively the "Banks"),
NationsBank, N.A., as the Syndication Agent, and Bank of America National
Trust and Savings Association, as the Administrative and Collateral Agent.
(All capitalized terms used but not defined in this Confidentiality
Agreement shall have the meanings assigned to them in the Credit
Agreement.)
Ladies and Gentlemen:
We have agreed with Apria pursuant to Section 13.4(d) of the Credit
Agreement to use normal and reasonable precautions and exercise due care to keep
confidential, except as otherwise provided in the Credit Agreement, all
nonpublic information identified by Apria as being confidential at the time the
same is delivered to us pursuant to the Credit Agreement.
As provided in that Section 13.4(d), we are permitted to provide you, as a
prospective [participant] [assignee], with certain of such nonpublic information
subject to the execution and delivery by you, prior to receiving such nonpublic
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree to take normal
and reasonable precautions and exercise due care (in the same manner as you
exercise for your own affairs) to maintain the confidentiality of all
information identified as "confidential" by Apria or any of its Subsidiaries and
provided to you by Apria or any such Subsidiary or by the Agents on Apria's or
such Subsidiary's behalf, in connection with the proposed [participation]
[assignment] mentioned above; except to the extent such information (i) was or
becomes generally available to the public other than as a result of a disclosure
in violation of this Confidentiality Agreement by you, or (ii) was or becomes
available on a non-confidential basis from a source other than Apria; provided
that such source is not bound by a confidentiality agreement with Apria known to
you.
<PAGE> 171
Notwithstanding the foregoing paragraph, you may disclose such information
(A) at the request or pursuant to any requirement of any Governmental Authority
to which you are subject or in connection with an examination of you by any such
Governmental Authority; (B) pursuant to subpoena or other court process; (C)
when required to do so in accordance with the provisions of any applicable
Governmental Rule; (D) in connection with any litigation or proceeding to which
you may be party; and (E) to your Affiliates, independent auditors, counsel and
other professional advisors; provided that such Person shall acknowledge and
agree to be bound by the provisions of this Confidentiality Agreement; provided
that prior to any disclosure permitted under clause (B), clause (C), in cases
other than in connection with an examination of your financial condition, and
clause (D), unless such litigation or proceeding is between any Bank or any
Agent and any Borrower or Guarantor, you shall, if permitted by applicable
Governmental Rules or judicial order, notify Apria of such pending disclosure.
Very truly yours,
[Name of Bank]
The foregoing is agreed to
as of the date of this letter.
[NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By: _____________________________
Name:
Title:
- 2 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 (UNAUDITED) AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 95,686
<SECURITIES> 0
<RECEIVABLES> 203,418
<ALLOWANCES> 45,738
<INVENTORY> 16,227
<CURRENT-ASSETS> 275,296
<PP&E> 516,906
<DEPRECIATION> 326,209
<TOTAL-ASSETS> 552,695
<CURRENT-LIABILITIES> 263,130
<BONDS> 423,619
0
0
<COMMON> 52
<OTHER-SE> (134,106)
<TOTAL-LIABILITY-AND-EQUITY> 552,695
<SALES> 710,532
<TOTAL-REVENUES> 710,532
<CGS> 263,651
<TOTAL-COSTS> 263,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 63,471
<INTEREST-EXPENSE> 35,870
<INCOME-PRETAX> (207,764)
<INCOME-TAX> 2,500
<INCOME-CONTINUING> (210,264)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210,264)
<EPS-PRIMARY> (4.07)
<EPS-DILUTED> (4.07)
</TABLE>
