<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission file number 1-11343
CORAM HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 33-0615337
---------------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1125 Seventeenth Street
Suite 1500
Denver, CO 80202
---------------------------------- ---------------
(Address of principal executive office) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (303) 292-4973
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
--- ---
The number of shares outstanding of the Registrant's Common Stock, $.001 par
value, as of September 30, 1994 was 38,640,574.
Page 1 of 96 pages
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
CORAM HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, including shares)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,028 $ 22,971
Accounts receivable, net 109,558 113,022
Short term investments 22,105 33,082
Inventory 11,601 11,194
Prepaid expenses 3,709 4,412
Other current assets 2,207 2,896
Deferred income taxes 25,157 864
-------- --------
Total current assets 192,365 188,441
Equipment, furniture & fixtures, net 27,040 39,838
Land and buildings 1,679 3,079
Joint ventures & other assets 9,360 25,837
Deferred income taxes non-current 2,547 -
Goodwill, net 329,861 294,118
-------- --------
Total assets $562,852 $551,313
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,290 $ 23,782
Accrued compensation 3,331 4,149
Current maturities of debt 7,212 13,760
Other accrued liabilities 9,711 6,629
Reserve for litigation (note 5) 22,720 -
Accrued merger & restructuring (note 3) 52,807 -
-------- --------
Total current liabilities 112,071 48,320
Revolving line of credit (note 4) 110,335 37,166
Long-term debt 13,308 17,990
Minority interest in consolidated joint ventures 7,541 6,299
Deferred taxes non-current - 2,667
-------- --------
Total liabilities 243,255 112,442
-------- --------
Stockholders' equity:
Preferred stock, par value $.001, authorized
10,000 shares, none issued or outstanding - -
Common stock par value $.001, authorized
75,000 shares; issued 38,641 in
1994 and 38,000 in 1993 39 38
Additional paid-in capital 338,641 328,395
Less: Treasury stock (5) (5)
Stock purchase note (860) (860)
Unrealized holding loss on available-for-sale
securities (498) -
Retained earnings (deficit) (17,720) 111,303
-------- ---------
Total stockholders' equity 319,597 438,871
-------- ---------
Total liabilities & stockholders' equity $562,852 $551,313
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
Page 2 of 96 pages
<PAGE> 3
CORAM HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $ 110,206 $119,260 $ 336,918 $350,560
Cost of service 79,037 71,378 233,470 206,915
Selling, general and
administrative expenses 20,855 19,537 59,466 54,584
Provision for estimated
uncollectibles (note 3) 21,461 5,909 32,170 22,021
Amortization of goodwill 2,204 2,089 6,620 5,724
Provision for litigation
settlements (note 5) 6,020 - 23,220 -
Merger expenses (note 3) 28,500 - 28,500 2,827
Restructuring charges (note 3) 95,500 - 95,500 1,600
--------- -------- --------- --------
Operating income(loss) (143,371) 20,347 (142,028) 56,889
Interest income 500 1,028 2,039 3,041
Interest expense (2,068) (1,173) (4,710) (3,080)
Minority interest in net
income of consolidated
joint ventures (3,477) (2,834) (9,005) (6,680)
Equity in net income of
unconsolidated joint
ventures 225 489 728 912
Gain(loss) on sales of assets (86) (410) (259) 5,358
Other income 253 308 834 764
--------- -------- --------- --------
Income(loss) before income taxes (148,024) 17,755 (152,401) 57,204
Provision(benefit) for
income taxes(note 6) (26,847) 7,520 (25,436) 24,072
--------- -------- --------- --------
Net income(loss) $(121,177) $ 10,235 $(126,965) $ 33,132
========= ======== ========= ========
Net income(loss) per common
share: (note 1)
Primary $ (3.14) $ 0.27 $ (3.30) $ 0.88
========= ======== ========= ========
Fully Diluted $ (3.14) $ 0.26 $ (3.30) $ 0.86
========= ======== ========= ========
Weighted average common
shares outstanding
Primary 38,636 38,021 38,462 37,764
========= ======== ========= ========
Fully Diluted 38,636 38,648 38,462 38,414
========= ======== ========= ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
Page 3 of 96 pages
<PAGE> 4
Coram Healthcare Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income(loss) $(126,965) $ 33,132
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Provision for estimated uncollectible
accounts receivable 14,870 22,021
Depreciation and amortization 16,391 13,808
Provision for additional uncollectible accounts 17,300 -
Merger/restructuring charges not requiring cash 50,100 -
Litigation settlement not requiring cash 5,520 -
Deferred tax asset, net (29,506) (14)
Minority interest in net income of
consolidated joint ventures 9,005 6,680
(Gain)loss on sale of property and equipment 259 (5,358)
Gain on sales of equity in joint ventures (177) -
Equity in net income of unconsolidated
joint ventures (728) (912)
Other, net 13 32
Change in assets and liabilities,
net of acquisitions:
Increase in accounts and notes receivable (14,648) (19,336)
Increase in prepaid expenses and
other assets (6,639) (8,416)
Increase in accrued merger and restructuring 47,800 -
Increase in accrued litigation 17,200 -
Decrease in current and other liabilities (9,971) (4,103)
--------- ---------
Net cash provided(used) by operating
activities (10,176) 37,534
--------- ---------
Cash flows from investing activities:
Proceeds from sale of short-term investments 10,429 19,918
Proceeds from sale of property and equipment 505 5,402
Proceeds from sale of equity in
joint ventures 1,012 -
Purchase of equipment, furniture and fixtures (7,187) (7,471)
Payments for acquisition of businesses (58,090) (48,402)
Capital contribution to unconsolidated
joint ventures (3,309) (11,226)
Distributions of S corporation earnings - (4,273)
Distribution of earnings from unconsolidated
joint ventures 941 1,510
Distributions to minority interest
in consolidated joint ventures (9,028) (5,333)
--------- ---------
Net cash used by investing activities (64,727) (49,875)
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 4 of 96 pages
<PAGE> 5
CORAM Healthcare Corporation
Consolidated Statements of Cash Flows (continued)
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Sales of common stock, net of
repurchases and issuance costs $ 1,616 $ 1,044
Debt borrowings - 7,885
Dividends (2,059) (3,952)
Exercise of stock options 4,558 293
Net change in revolving line of credit 73,169 32,233
Repayment of debt (7,324) (18,831)
-------- --------
Net cash provided by financing activities 69,960 18,672
-------- --------
Net increase(decrease) in cash (4,943) 6,331
Cash at beginning of period 22,971 16,332
-------- --------
Cash at end of period $ 18,028 $ 22,663
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,133 $ 2,782
Income taxes $ 14,933 $ 29,128
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 5 of 96 pages
<PAGE> 6
CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(1) Significant Accounting Policies
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial
statements have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such regulations. The condensed consolidated financial
statements reflect all adjustments and disclosures which are, in the opinion of
management, necessary for a fair presentation. All such adjustments, other
than those relating to the merger, restructuring, special accounts receivable
reserve and litigation settlements, are of a normal recurring nature. The
interim consolidated financial statements should be read in conjunction with
the Company's Registration Statement on Form S-4 filed on June 6, 1994. The
results of operations for the interim periods are not necessarily indicative of
the results of the full fiscal year.
On July 8, 1994 the Company completed its merger transaction with T2
Medical, Inc. ("T2"), Curaflex Health Services, Inc. ("Curaflex"), Medisys,
Inc. ("Medisys"), and HealthInfusion, Inc. ("HealthInfusion"). The transaction
was accounted for as a pooling of interests. Accordingly, the accompanying
financial information was restated to include the accounts of T2, Curaflex,
Medisys and HealthInfusion for all periods presented. Certain
reclassifications of prior year amounts have been made in order to reflect a
consistent presentation.
Earnings per Share
Earnings per share are computed by dividing net income or loss by the
weighted average number of common and dilutive common equivalent shares
outstanding.
(2) Business Combinations
On July 8, 1994 the Company consummated the merger of T2, Curaflex,
Medisys and HealthInfusion. The transaction was accounted for as a pooling of
interests. Accordingly, the accompanying financial information was restated to
include the accounts of T2, Curaflex, Medisys and HealthInfusion for all
periods presented.
The results of operations previously reported by the separate
enterprises and the combined amounts presented in the accompanying condensed
consolidated financial statements are summarized below (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED
JUNE 30, 1994 SEPTEMBER 30, 1993 SEPTEMBER 30, 1993
------------- ------------------ ------------------
<S> <C> <C> <C>
Net Revenue
- - -----------
T2 $115,770 $ 67,205 $201,426
Curaflex 48,989 24,839 70,130
Medisys 27,438 12,759 37,221
HealthInfusion 34,515 14,457 41,783
-------- -------- --------
Combined $226,712 $119,260 $350,560
======== ======== ========
</TABLE>
Page 6 of 96 pages
<PAGE> 7
CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED
JUNE 30, 1994 SEPTEMBER 30, 1993 SEPTEMBER 30, 1993
------------- ------------------ ------------------
<S> <C> <C> <C>
Net Income(Loss)
- - ----------------
T2 $(3,386) $ 6,761 $27,358
Curaflex (4,400) 1,768 1,438
Medisys 599 476 417
HealthInfusion 1,703 1,230 3,919
Coram Holding (304) - -
------- ------- -------
Combined $(5,788) $10,235 $33,132
======= ======= =======
</TABLE>
On September 12, 1994, the Company acquired all of the outstanding
capital stock of H.M.S.S., Inc. ("HMSS"), an alternate site infusion therapy
provider. The acquisition was accounted for by the purchase method of
accounting, and accordingly, the results of operations of HMSS have been
included in the accompanying consolidated financial statements subsequent to
the date of acquisition. The acquisition was not material to the Company's
financial position or results of operations
(3) Merger and Restructuring
During September 1994, the Company developed and initiated its merger
and restructuring plan ("the Plan"). The Plan was developed to reduce future
operating costs, improve productivity and gain efficiencies through
consolidation of redundant infusion centers and corporate offices, reductions
in workforce, and elimination of or discontinuance of investment in certain
joint venture and other non-infusion facilities. Following the development of
the Plan, the Company recorded charges of $28.5 million for merger costs and
$92.3 million in estimated restructuring costs. In connection with the
acquisition of HMSS (see note 2), the Company extended the Plan to include the
consolidation of HMSS operations with those of the Company and, accordingly,
recorded additional restructuring costs of $3.2 million.
As a result of the Company's decision to implement standardized
policies for recognition of contractual and other allowances, deemphasize
certain businesses and provide for the disruptions experienced during the
merger and post-merger transition process, the Company recorded a special
charge of $17.3 million for anticipated uncollectible accounts and other
receivables. In establishing this reserve, the Company evaluated the aging of
trade receivables since the merger process began and evaluated the impact of
ending relationships with certain centers.
(4) Revolving Credit
On July 15, 1994, the Company entered into an $80 million revolving
credit facility replacing the lines of credit maintained previously by each of
the Company's subsidiaries. The credit facility was increased to $120 million
on September 12, 1994.
At September 30, 1994, borrowings on the revolving credit were $110.3
million of which $25 million was at LIBOR borrowing rate of 6.9375%, $60
million at LIBOR borrowing rate of 7% with the remaining $25.3 million at base
rate borrowing at a variable interest rate of 8.75%.
On October 17, 1994, the Company entered into a new $120 million
revolving credit facility to replace the above referenced facility with one of
the banks that participated in the prior agreement. This new agreement
provided
Page 7 of 96 pages
<PAGE> 8
CORAM Healthcare Corporation
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
September 30, 1994
for an extended maturity date of June 30, 1996, and adjusted LIBOR and base
borrowing rates. Base rate borrowings under this new agreement are zero to
1.125% over prime as it varies from time to time and LIBOR borrowings at a rate
of floating LIBOR plus .875% to 2.125%. The revolving credit is collateralized
by a pledge of the stock of the Company's subsidiaries, as well as accounts
receivable, short-term investments and all of the general assets of the
Company and its subsidiaries.
(5) Litigation
On October 10, 1994, the Company announced that it had entered into an
agreement in principle to settle the T2 Shareholder Litigation ("In Re T2
Shareholder Litigation"), which provides for the Company to pay to the
shareholder class $25 million in cash, of which $7.8 million will be contributed
by one of the Company's insurance carriers, and issue warrants to acquire an
aggregate of 2.52 million shares of the Company's common stock at an exercise
price of $20.25, subject to adjustment. The Company is currently in legal
proceedings against one of its other insurance carriers to obtain additional
coverage for a portion of the settlement. The Company has recorded a charge
against earnings of $19.72 million of which $17.2 million was recorded in the
second quarter, for the settlement of this matter. The agreement in principle
also provides that the defendants deny any wrongdoing and that the action will
be dismissed as to all defendants with prejudice. The settlement is
conditioned upon, among other things, confirmatory discovery and court
approval.
On September 26, 1994, the Company announced that T2 had agreed to
settle its OIG investigation of T2's financial arrangements with physicians.
T2, in expressly denying liability, agreed to a civil order which enjoins it
from violating federal anti-kickback and false claims laws related to
Medicare/Medicaid reimbursement. The order further requires T2 to comply with
certain standards when providing management or other services to physicians.
Under the terms of the settlement, T2 paid the federal government $.5 million
to reimburse the government for the costs of its investigation and settle its
claims. T2 will continue to participate in the Medicare/Medicaid program. On
September 30, 1994, the U.S. District Court for the Northern District of
Georgia (Atlanta Division) approved the settlement.
During September, 1994, the Company also settled a dispute with the
former principals of a company acquired by T2 in 1992 related to the valuation
of that acquisition transaction. The dispute was settled with the Company
issuing warrants to acquire 500,000 shares of the Company's common stock to the
former principals at an exercise price of $18, subject to adjustment. The
Company is obligated to make a cash payment of up to $4 million to the
warrantholders at the end of the five-year term of the warrants; provided,
however, that the payment will be reduced, dollar-for-dollar, to the extent of
the aggregate positive spread in excess of $16.00 per share on any warrants
exercised prior to, or exercisable at the end of, the five year term of the
warrants. The Company's obligation to make any cash payment terminates if the
Company's stock price exceeds $26.00 for any five consecutive business days
during the term of the warrants.
6) Income Taxes
The Company recorded an income tax benefit of $26.8 million and $25.4
million, respectively, for the three and nine month periods ended September 30,
1994, each of which is net of a valuation allowance of $20.1 million. The
resulting lower effective income tax benefit rate is primarily due to the
inability to carry back the Company's current operating loss, including the
charges for estimated merger, restructuring and litigation costs, and
anticipated uncollectible accounts receivable, to the prior year tax returns of
the predecessor companies, and the non-deductibility of certain merger costs.
Page 8 of 96 pages
<PAGE> 9
ITEM 2
CORAM HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
On July 8, 1994, the merger which formed Coram Healthcare Corporation
was consummated with the combination of T2 Medical, Inc., Curaflex Health
Services, Inc., HealthInfusion, Inc. and Medisys, Inc., each of which are now
wholly-owned subsidiaries of the Company. With the completion of the merger
Coram became a national provider of comprehensive alternate site healthcare
delivery services, including ambulatory and home infusion therapies,
lithotripsy and institutional pharmacy services.
On September 12, 1994, the Company acquired all of the capital stock
of H.M.S.S., Inc., a national provider of home health infusion therapy. The
acquisition was not material to the Company's results of operations or
financial position.
During the third quarter the Company announced the results of ongoing
operations together with financial impact of the merger and restructuring plan
formulated to combine the Coram entities. The Company also announced the
settlement of certain pre-existing litigation actions during the quarter.
RESULTS OF OPERATIONS
Net revenue for the three months and nine months ended September 30,
1994, declined by 8% and 4% respectively, compared to the same periods in the
prior year. The decline is primarily the result of pricing pressures on the
home infusion therapy market imposed by third-party indemnity and managed care
payors. During the second and third quarters of 1994, pricing declines within
certain payor groups appear to have stabilized, but no assurance can be given
that such trends will continue. The growth in managed care business throughout
the industry will, however, continue to apply pressure on prices.
Also affecting third quarter net revenues was the implementation of
the Company-wide policies for recognition of contractual and other allowances.
The Company does not believe it is possible to fully separate the impact
of this change from the routine quarter to quarter shifts in patient and
therapy mix but it is estimated that this change reduced recorded revenues by
approximately $2.6 million in the quarter.
In the Company's lithotripsy business, revenues were $13.5 million and
$38.3 million for the three and nine months of 1994, compared to $12.6 million
and $30.1 million for the corresponding periods in the prior year. These
increases are the result of both an increase in the number of patients served
and the acquisitions of majority interests in three lithotripsy companies since
June 30, 1993.
The price declines mentioned earlier have been related primarily to
the Company's infusion business. There can, however, be no assurance that
similar price concessions will not be applied to the Company's lithotripsy
operations. The Health Care Finance Administration has issued a proposed rule
that would, if implemented, significantly reduce the amount Medicare would
reimburse its beneficiaries for the cost of lithotripsy procedures performed in
an ambulatory surgery center or on an out-patient basis at a hospital.
Further, such a decrease might trigger demands for similar reductions by other
third-party payors.
Due to differences in reporting practices among Coram's component
companies, prior year comparisons of the main volume indicator, patient days,
are not meaningful. Current data, however, suggests that patient days are up
in the third quarter over the second quarter of this year by about 1%,
exclusive of HMSS, and 3% inclusive of HMSS.
Cost of service as a percent of net revenue increased to 71.7% in the
third quarter from 59.9% in the same quarter last year, while for the nine
months it increased to 69.3% from 59.1% in the nine months last year. These
increases are related primarily to the revenue decline and policy changes
noted above and the fact that branch consolidation directed at reducing fixed
cost have not yet been completed. Prospectively, the Company's restructuring
plans, as described below, are focused on reducing cost and improving margins.
The Company also implemented standardized reporting practices in the cost of
service area among the five previously separate companies
Page 9 of 96 pages
<PAGE> 10
CORAM HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
and recorded one-time charges such that gross margins in the quarter were
negatively impacted by approximately .8%.
Other factors that affected margins to a lesser extent, include
patient and therapy mix changes that occur quarter to quarter and short-term
costs necessary to facilitate the integration of the operating units of the
five combined businesses. These latter costs are described below.
Selling, general and administrative expense (SG&A) increased 6.7% for
the quarter compared to the prior year. Excluding the effect of HMSS from the
results for the quarter, and a one-time accrual for legal cost in settling
certain litigation, SG&A would have declined slightly between the quarterly
periods. Reductions in legal and executive payroll costs late in the third
quarter were offset by costs incurred in the third quarter to establish a new
corporate office prior to the realization of expense reductions through planned
downsizing of the corporate staffs at the five former companies. In addition,
certain personnel and professional fees, special incentive programs, travel,
recruiting, relocation and other administrative expenses charged to operations
but necessary and related to the merger and consolidation activities impacted
reported SG&A expenses. The Company estimates that the incremental expense
incurred in the third quarter related to these items was approximately $2.0
million. Over the short term and during the consolidation process management
anticipates some level of additional costs of this type to be incurred. As the
consolidation process is completed these additional costs will be eliminated
and, combined with the cost reductions anticipated from the restructuring
process, contribute to the profitability improvement discussed below. SG&A
increased 8.9% for the nine months compared to the corresponding period in the
prior year. Excluding the effect of HMSS and a one-time accrual for legal cost
for certain litigation, SG&A would have increased 6% between the nine month
periods. This increase is primarily attributed to the addition of three senior
executives at HealthInfusion during the latter half of 1993, and increased
legal costs associated with certain legal matters.
As a result of the merger of the companies forming Coram, management
developed and initiated a merger and restructuring plan ("the Plan") to reduce
future operating costs, improve productivity and gain efficiencies through
consolidation of redundant infusion centers and corporate offices, reductions
in personnel and elimination or discontinuance of investments in certain
joint venture and other non-infusion facilities. The Plan includes the costs
associated with consummation of the merger transaction ("Merger Costs"), and
severance and fringe benefits related to workforce reductions ("Personnel
Reduction Costs"), consolidation of existing operating and corporate office
facilities and disposition of redundant equipment and inventories ("Facility
Reduction Costs") and the impact of changes in strategic direction related to
certain non-core businesses ("Discontinuance Costs") (collectively
"Restructuring Cost"). Following development of the Plan in September, 1994,
the Company recorded charges of $28.5 million in estimated merger costs and
$92.3 million in estimated restructuring costs.
Upon the completion of the HMSS acquisition the Company extended the
Plan to include the HMSS operations. Accordingly, the Company recorded
estimated restructuring costs of $3.2 million during the quarter related to
this transaction.
Management believes these costs to be non-recurring; however, they are
subject to changes in estimates as the Plan moves toward completion. Also, in
the event the Company consummates additional acquisitions, further
restructuring of its operations may be required.
Page 10 of 96 pages
<PAGE> 11
CORAM HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table summarizes the components of the Plan for
restructuring cost and the related costs associated with each component,
segregated between those estimated costs requiring the use of cash and those
costs representing the writedown of existing assets to estimated net realizable
value (in millions):
<TABLE>
<CAPTION>
Cash Non-cash Total
----- -------- -----
<S> <C> <C> <C>
Personnel Reduction Costs $26.2 $ .6 $26.8
Facility Reduction Costs 15.6 16.3 31.9
Discontinuance Costs 4.2 32.6 36.8
----- ----- -----
$46.0 $49.5 $95.5
</TABLE>
Implementation of the Plan commenced in September, 1994. The Plan
contemplates the elimination of approximately 100 of the Company's home
infusion branch facilities, with a corresponding significant reduction of
branch professional and administrative employees, and the consolidation of
corporate administrative operations into one location with a corresponding
significant reduction of corporate executive, professional and administrative
employees. Management anticipates that the branch and corporate consolidation
portions of the Plan will be completed by mid-1995, including the disposition
or elimination of certain non-infusion joint ventures and facilities.
Management anticipates that cost savings in the range of $30-$40
million annually over the next 24 months will result from the implementation of
the Plan. The Company expects these savings will accrue from reductions in
personnel and related costs, facilities rent, operating and depreciation costs,
and corporate overhead and governance costs. Within the next three quarters
following initial implementation of the Plan, the savings noted above will be
partially offset by the costs of relocation, retention and retraining of
personnel, which the Company currently estimates will aggregate approximately
$6 million.
As a result of the Company's decision to implement standardized
policies for recognition of contractual and other allowances, deemphasize
certain businesses and provide for the disruptions experienced before and during
the merger and post-merger transition process, the Company recorded a special
charge of $17.3 million for anticipated uncollectible accounts and other
receivables. In establishing this reserve, the Company evaluated the aging of
trade receivables since the merger process began and evaluated the impact of
ending relationships with certain centers.
The provisions for litigation settlements in the nine months ended
September 30, 1994 represent the estimated costs of settling the three matters
discussed below:
On October 10, 1994, the Company announced that it had entered into an
agreement in principle to settle the T2 Medical shareholder litigation which
was originally initiated against T2 in 1992. The settlement agreement provides
for the Company to pay the shareholder class $25 million in cash, of which $7.8
million will be contributed by one of the Company's insurance carriers, and
issue warrants to acquire an aggregate of 2.52 million shares of the Company's
common stock at an exercise price of $20.25, subject to adjustment. The
Company is currently in legal proceedings against one of its other insurance
carriers to obtain additional coverage for a portion of the settlement. The
Company has recorded a charge against earnings of $19.72 million of which $17.2
million was recorded in the second quarter, for the settlement of this matter.
The agreement in principle also provides that the defendants have denied any
wrongdoing and that the action will be dismissed as to all defendants with
prejudice. The settlement is conditioned upon, among other things, confirmatory
discovery and court approval. There can be no assurance that the settlement
will be consumated.
Page 11 of 96 pages
<PAGE> 12
CORAM HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
If the settlement is not consummated and the shareholder claims
continue to be pressed, the resulting distraction of management, the costs of
defending these claims and the payment of any settlement or damage award could
have a material adverse effect on the Company's results of operations and
financial position.
During September 1994 the Company announced the settlement of an
investigation by the Office of Inspector General ("OIG") of the financial
arrangements that existed between certain physicians and T2 Medical. Under the
terms of the settlement, T2 paid the federal government $.5 million to
reimburse the government for the costs of its investigation and settle its
claim.
During September, 1994, the Company also settled a dispute with the
former principals of a company acquired by T2 in 1992, related to the valuation
of that acquisition transaction. The dispute was settled with the Company
issuing warrants to acquire 500,000 shares of common stock to the former
principals at an exercise price of $18, subject to adjustment. The Company is
obligated to make a cash payment of up to $4 million to the warrantholders at
the end of the five-year term of the warrants; provided, however, that the
payment will be reduced, dollar-for-dollar, to the extent of the aggregate
positive spread in excess of $16.00 per share on any warrants exercised prior
to, or exercisable at the end of, the five year term of the warrants.
The Company's obligation to make any cash payment terminates if the
Company's stock price exceeds $26.00 for any five consecutive business days
during the term of the warrants.
Interest income decreased 51% and 33% for the three months and nine
months ended September 30, 1994, respectively, compared to the corresponding
periods in the prior year. The decrease is primarily due to the reduction in
investable cash. Interest expense increased 76% and 53% in the three and nine
month periods compared to the corresponding periods in the prior year due
primarily to increased borrowings used to finance acquisitions, merger costs
and general working capital needs.
Minority interest in consolidated joint ventures increased by 23% and
35%, respectively, in the three and nine months ended September 30, 1994
compared to the same periods last year. The increase is due primarily to the
acquisition of majority interests in several lithotripsy companies during the
latter half of 1993.
Other income decreased during the nine month period ended September
30, 1994 compared to the prior period primarily due to the gain of $6.3 million
on the sale of T2's respiratory therapy business during the second quarter of
1993.
The Company's tax benefit rate for the nine month period ended
September 30, 1994 was approximately 17%, substantially below the expected
benefit at statutory rates. This was due primarily to the non-deductibility of
goodwill amortization, certain merger costs and the timing of recognition of
certain restructuring, litigation and receivable write-off expenses.
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter the Company entered into a $120 million
revolving credit agreement, with base rate borrowings at an interest rate of
zero to 1% over prime rate and Libor borrowings at a rate of Libor plus 1.25%
to 2%. The
Page 12 of 96 pages
<PAGE> 13
CORAM HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
credit agreement had a maturity date of December 31, 1995. In October, 1994
the Company entered into a new $120 million revolving credit facility to
replace the above referenced facility. The new facility's maturity date is
June 30, 1996. Base rate borrowings under the new facility are at a rate of
zero to 1.125% over prime as it varies from time to time and LIBOR borrowings
are at a rate of LIBOR plus .875% to 2.125% as it varies from time to time.
The revolving credit is secured by the stock of the Company's subsidiaries and
the receivables, short-term investments and all general assets of the Company
and its subsidiaries.
Significant uses of the credit line during the quarter have been to
repay all amounts outstanding under the credit lines of each of the former
individual entities, purchase businesses, including HMSS and certain minority
interests at T2, and fund the merger and restructuring expenses paid to date in
cash.
A significant portion of the restructuring, litigation and receivable
charges taken against earnings in the nine months ended September 30, 1994 did
not require the use of cash in that period. Of the non-recurring charges
taken, approximately $26.6 million had been paid in cash as of the end of the
period. The Company anticipates that over the next year the remainder of the
costs of these charges, totaling an estimated $70.0 million, will be made from
cash generated from operations, additional savings realized from the
restructuring process, the effects of lower effective tax rates on 1995 income
as these charges become deductible for tax purposes, and additional borrowing
capacity which the Company believes will be available if necessary. Should
the Company pursue other cash acquisition opportunities, additional sources of
cash may be required to support such activities.
FUTURE HEALTH CARE PROPOSALS AND LEGISLATION
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. The Company
anticipates that Congress and state legislatures will continue to review and
assess alternative health care delivery systems and payment methodologies and
public debate of these issues will likely continue in the future. Due to
uncertainties regarding the ultimate features of reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, of such
reform proposals will be adopted, when they may be adopted or what impact they
may have on the Company.
Page 13 of 96 pages
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
T2 Shareholder Litigation
The Annual Report on Commission Form 10-K of T2 for the fiscal year
ended September 30, 1993, the Quarterly Report of T2 on Commission Form 10-Q
for the period ended March 31, 1994 (the "T2 10-Q Report") and the Quarterly
Report of the Company on Commission Form 10-Q for the period ended June 30,
1994 (the "Company's 10-Q Report") disclosed certain lawsuits on behalf of
persons claiming to be stockholders of T2 ("T2 Shareholder Litigation").
The Company's 10-Q Report stated that although an amended complaint had been
filed in an attempt to expand the previously certified class to include
purchasers of T2 Common Stock for the period December 2, 1991, through August
12, 1993, the court had not ruled on the plaintiffs' motion to expand the
previously certified class. On August 24, 1994, the amended complaint was
certified as a class action.
On October 10, 1994, the Company announced that it had entered
into an agreement in principle to settle the T2 Shareholder Litigation, which
provides for the Company to pay to the shareholder class $25 million in cash
and to issue warrants to acquire an aggregate of 2,520,000 shares of the
Company's Common Stock at an initial per share exercise price of $20.25,
subject to adjustment. The Company further stated that one of its insurance
carriers has agreed to contribute approximately $7.8 million toward the
settlement and that the Company is engaged in legal proceedings to obtain
coverage for a portion of the settlement against one of its other insurance
carriers. The agreement in principle also provides that the defendants deny
any wrongdoing and that the action will be dismissed as to all defendants with
prejudice. The settlement, including the execution of definitive settlement
documents, the cash payment and the issuance of warrants, is conditioned upon,
among other things, confirmatory discovery and court approval. There can be no
assurances that the settlement will be consummated. If the settlement is not
consummated and the shareholder claims continue to be pressed, the resulting
distraction of management, the costs of defending these claims and the payment
of any settlement or damage award could have a material adverse effect on the
Company's results of operations and financial position.
OIG Investigation
In 1992, T2 received a request for documents from a grand jury sitting
in Atlanta, Georgia, at the request of the Office of Inspector General ("OIG")
of the U.S. Department of Health and Human Services, the focus of which
appeared to be the potential application of the federal anti-kickback law as it
relates to physician ownership. On September 26, 1994, the Company announced
that T2 had settled the OIG investigation. T2, in expressly denying
liability, agreed to a civil order which enjoins it from violating federal
anti-kickback and false claims laws related to Medicare/Medicaid reimbursement.
The order further requires T2 to comply with certain standards when providing
management or other services to physicians. Under the terms of the settlement,
T2 paid the federal government $500,000 to reimburse the government for the
costs of its investigation and settle its claims. T2 will continue to
participate in the Medicare/Medicaid program. On September 30, 1994, the U.S.
District Court for the Northern District of Georgia (Atlanta Division) approved
the settlement.
Page 14 of 96 pages
<PAGE> 15
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
A special meeting of stockholders of T2, Curaflex, Medisys and
HealthInfusion was held on July 8, 1994 to consider and vote
upon three proposals:
No. 1 - Approval of an Agreement and Plan of Merger
involving the Merger of all four companies pursuant to which
they each became wholly-owned subsidiaries of Coram
Healthcare Corporation.
No. 2 - Approval of the Coram Healthcare Corporation 1994
Stock Option/Stock Issuance Plan, and
No. 3 - Approval of the Coram Employee Stock Purchase Plan.
All three proposals were approved. The results of voting are
as follows:
Proposal No. 1
<TABLE>
<CAPTION>
For Against Abstain
---------- --------- -------
<S> <C> <C> <C>
T2 21,237,263 376,548 150,859
Curaflex 10,376,291 67,249 18,793
Medisys 8,733,819 214,326 175,895
HealthInfusion 6,963,391 144,235 98,617
Proposal No. 2
--------------
T2 18,131,251 3,197,082 438,337
Curaflex 8,224,412 2,184,797 44,528
Medisys 7,854,468 1,074,105 195,517
HealthInfusion 6,142,106 927,014 136,123
Proposal No. 3
--------------
T2 20,383,751 970,647 410,272
Curaflex 8,930,853 1,494,621 36,859
Medisys 8,218,741 693,228 212,121
HealthInfusion 6,295,423 760,542 150,278
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8K
<TABLE>
<S> <C>
July 15, 1994. Reported item 5
September 13, 1994. Reported item 5
</TABLE>
Page 15 of 96 pages
<PAGE> 16
PART II - OTHER INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Sequential
(b) Exhibit No. Description Page No.
----------- ----------- ----------
<S> <C> <C>
10.94 Credit Agreement dated as of 20
October 17, 1994, by and among
Coram Healthcare, Curaflex, T2,
HealthInfusion, Medisys, and HMSS
as Co-Borrowers, Toronto Dominion
(Texas), Inc., as Agent (the
"Credit Agreement"). The
exhibits and schedules to the
Credit Agreement as listed in
the Exhibit Index are omitted from
this Exhibit. The Company agrees
to furnish supplementally
any omitted exhibit or schedule
to the Securities and Exchange
Commission upon request.
Exhibit 2.1(c) Form of Loan
Request
Exhibit 2.1(d) Form of Note
Exhibit 2.2(b) Notice of
Conversion/
Extension
Exhibit 3.1 Form of Security
Agreement
Exhibit 3.2 Form of Guaranty
Exhibit 4.1(n) Notice of Authorized
Representatives
Exhibit 6.2(c)-1 Form of Certificate
of Compliance
Exhibit 6.2(c)-2 Form of Certificate
re Real Property
and New Locations
Exhibit 10.1 Form of Assignment
and Acceptance
Sched.2.3(c)(ii) Assets to be sold
Sched.4.1(b)(iii) Good Standing
Certificates
Schedule 4.1(j) List of Property
Subject to
Perfected Liens
</TABLE>
Page 16 of 96 pages
<PAGE> 17
PART II - OTHER INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Sequential
(b) Exhibit No. Description Page No.
----------- ----------- ----------
<S> <C> <C>
10.94 (continued)
Schedule 4.1(k) List of Existing
Indebtedness to be
Paid
Schedule 5.2 List of Subsidiaries
by States of Incor-
poration or Organiza-
tion and Qualification
Schedule 5.4 Exceptions to
Requisite
Corporate Power
Schedule 5.8 Exceptions to
"No Conflicts"
Schedule 5.10 List of
Financial State-
ments
Schedule 5.16 Litigation and
Contingent
Liabilities
Schedule 5.18(i) ERISA Title IV
Benefit Plans
Schedule 5.14 Key Contracts
Schedule 5.15 Intellectual
Property
Schedule 5.18(ii) Other Benefit
Plans
Schedule 5.19 Environmental
Matters
Schedule 5.20 List of Insurance
Policies
Schedule 5.21 Exceptions to
Compliance with
Laws
Schedule 5.27 Exceptions to
Compliance with
Physician Self-
Referral Laws
Schedule 7.6 List of Existing
Permitted
Encumbrances
Schedule 7.8 List of Existing
Interest-Bearing
Indebtedness
</TABLE>
Page 17 of 96 pages
<PAGE> 18
PART II - OTHER INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Sequential
(b) Exhibit No. Description Page No.
----------- ----------- ----------
<S> <C> <C>
10.94 (continued)
Schedule 7.12 Existing Trans-
actions with
Affiliates
Exhibit 27 Financial Data 96
Schedules
</TABLE>
Page 18 of 96 pages
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORAM HEALTHCARE CORPORATION
By: /s/ James M. Sweeney
-----------------------------
James M. Sweeney
Chairman and Chief
Executive Officer
(Duly Authorized Officer)
By: /s/ Sam R. Leno
-----------------------------
Sam R. Leno
Chief Financial Officer
November 14, 1994
Page 19 of 96 pages
<PAGE> 1
Exhibit 10.94
CREDIT AGREEMENT
By and Among
CORAM HEALTHCARE CORPORATION,
CURAFLEX HEALTH SERVICES, INC.,
HEALTHINFUSION, INC.,
MEDISYS, INC.,
H.M.S.S., INC.,
and
T2 MEDICAL, INC.,
as Co-Borrowers,
TORONTO DOMINION (TEXAS), INC.,
as Agent,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO
Dated as of October 17, 1994
____________________
$120,000,000
Page 20 of 96 pages
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.1 Revolving Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Commitment Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Borrowing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2 Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Extensions and Conversions . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Adjustment of Rate Spreads . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Computation of Interest and Commitment Fee . . . . . . . . . . . . . . . . 25
(f) Illegality, Taxation and Additional Interest Rate Provisions . . . . . . . 25
(g) Capital Adequacy Requirements . . . . . . . . . . . . . . . . . . . . . . . 26
(h) Substitution of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Payment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Payments Prior to Interest Period Expiration . . . . . . . . . . . . . . . 28
(e) Payments by the Co-Borrowers . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Payments by the Banks to the Agent . . . . . . . . . . . . . . . . . . . . 30
(g) Sharing of Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.4 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.1 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.2 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 4 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.1 Conditions to Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Reports, Certificates and Other Information . . . . . . . . . . . . . . . . 35
(c) Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(e) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(f) Representations and Warranties Correct . . . . . . . . . . . . . . . . . . 36
(g) Legality of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 36
(h) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(i) Perfection of Liens and Security Interests . . . . . . . . . . . . . . . . 36
(j) Payment of Existing Indebtedness . . . . . . . . . . . . . . . . . . . . . 37
(k) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(l) Written Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(m) Notice of Authorized Representatives . . . . . . . . . . . . . . . . . . . 37
(n) Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2 Conditions to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Initial Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(c) Representations and Warranties Correct . . . . . . . . . . . . . . . . . . 37
(d) Loan Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(e) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . 38
4.3 Conditions for the Benefit of the Agent and the Banks . . . . . . . . . . . . . . . . 38
4.4 Failure of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
Page 21 of 96 pages
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 5 Representations and Warranties of the Co-Borrowers . . . . . . . . . . . . . . . . . . 39
5.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.2 Organization, Standing and Qualification of Subsidiaries . . . . . . . . . . . . . . . 39
5.3 Absence of Certain Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.4 Requisite Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.6 Officer Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.7 Binding Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.8 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.9 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.11 Pro Forma Financial Statements and Projections . . . . . . . . . . . . . . . . . . . . 42
5.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.13 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.17 Tax Returns and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.18 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(a) Plans Maintained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(b) Reporting and Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Qualification of Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(d) Contributions and Premiums . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) Litigation and Extraordinary Claims . . . . . . . . . . . . . . . . . . . . 45
(f) Prohibited Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(g) COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.21 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.22 Statutory Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.23 Use of Proceeds; Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.24 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.25 Fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.26 Merger Agreement and HMSS Stock Purchase Agreement . . . . . . . . . . . . . . . . . . 47
5.27 Compliance With Physician Self-Referral Laws . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 6 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.1 Accounting Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Financial Statements and Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.3 Inspection of Property Books and Records . . . . . . . . . . . . . . . . . . . . . . . 51
6.4 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.6 Qualifications To Do Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.8 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.10 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.11 Taxes and Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.12 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.13 Compliance with Governmental Approvals and Governmental Requirements . . . . . . . . . 54
6.14 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.15 Prevent Contamination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.16 Tax Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.17 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.18 Financial Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.19 Concentration Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.20 Compliance Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 7 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
Page 22 of 96 pages
<PAGE> 4
<TABLE>
<S> <C> <C>
7.1 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.2 Change of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.3 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.4 Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.5 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.6 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.7 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.8 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.9 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.10 Sale-Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.11 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.13 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.14 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.15 Certain ERISA Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.16 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.17 Litigation Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.18 Adoption of "Rabbi Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 8 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(a) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(b) Certain Covenants in This Agreement . . . . . . . . . . . . . . . . . . . . 61
(c) Other Covenants and Agreements . . . . . . . . . . . . . . . . . . . . . . 61
(d) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 61
(e) Monetary Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(f) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(g) Liens for Pension Contributions . . . . . . . . . . . . . . . . . . . . . . 62
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(i) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(j) Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(k) Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(l) Invalidity of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 64
(m) Impairment of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 64
(n) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(o) Change of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.2 Termination of Commitment and Acceleration . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 9 The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 10 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.1 Successors and Assigns and Sale of Interests . . . . . . . . . . . . . . . . . . . . . 68
10.2 No Implied Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.4 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.6 Costs, Expenses and Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.7 General Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.8 Environmental Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
Page 23 of 96 pages
<PAGE> 5
<TABLE>
<S> <C> <C>
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.11 Governing Law and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 75
10.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
Page 24 of 96 pages
<PAGE> 6
EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
No. Description
- - --- -----------
<S> <C>
Exhibit 2.1(c) Form of Loan Request
Exhibit 2.1(d) Form of Note
Exhibit 2.2(b) Notice of Conversion/Extension
Exhibit 3.1 Form of Security Agreement
Exhibit 3.2 Form of Guaranty
Exhibit 4.1(n) Notice of Authorized Representatives
Exhibit 6.2(c)-1 Form of Certificate of Compliance
Exhibit 6.2(c)-2 Form of Certificate re Real Property and New Locations
Exhibit 10.1 Form of Assignment and Acceptance
Schedule 2.3(c)(ii) Assets to be Sold
Schedule 4.1(b)(iii) Good Standing Certificates
Schedule 4.1(j) List of Property Subject to Perfected Liens
Schedule 4.1(k) List of Existing Indebtedness to be Paid
Schedule 5.2 List of Subsidiaries by States of Incorporation or Organization and
Qualification
Schedule 5.4 Exceptions to Requisite Corporate Power
Schedule 5.8 Exceptions to "No Conflicts"
Schedule 5.10 List of Financial Statements
Schedule 5.14 Key Contracts
Schedule 5.15 Intellectual Property
Schedule 5.16 Litigation and Contingent Liabilities
Schedule 5.18(i) ERISA Title IV Benefit Plans
Schedule 5.18(ii) Other Benefit Plans
Schedule 5.19 Environmental Matters
Schedule 5.20 List of Insurance Policies
Schedule 5.21 Exceptions to Compliance with Laws
Schedule 5.27 Exceptions to Compliance with Physician Self-Referral Laws
Schedule 7.6 List of Existing Permitted Encumbrances
Schedule 7.8 List of Existing Interest-Bearing Indebtedness
</TABLE>
Page 25 of 96 pages
<PAGE> 7
<TABLE>
<S> <C>
Schedule 7.12 Existing Transactions with Affiliates
</TABLE>
Page 26 of 96 pages
<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of October 17, 1994, by and
among CORAM HEALTHCARE CORPORATION, a Delaware corporation ("Coram"), CURAFLEX
HEALTH SERVICES, INC., a Delaware corporation ("Curaflex"), HEALTHINFUSION,
INC., a Florida corporation ("HealthInfusion"), MEDISYS, INC., a Delaware
corporation ("Medisys"), H.M.S.S., INC., a Delaware corporation ("HMSS"), and
T2 MEDICAL, INC., a Delaware corporation ("T2"), TORONTO DOMINION (TEXAS),
INC., as agent for the financial institutions party hereto (in such capacity,
the "Agent"), and THE FINANCIAL INSTITUTIONS PARTY TO THIS AGREEMENT
(collectively, the "Banks"; individually, a "Bank").
W I T N E S S E T H:
In consideration of the premises and mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE 1
Definitions
In addition to any terms defined elsewhere in this Agreement, the
following terms have the meanings indicated for purposes of this Agreement
(such definitions being equally applicable to the singular and plural forms of
the defined term):
"Acceleration" means that the Loans (i) shall not have been paid at
the Final Maturity Date, or (ii) shall have become due and payable prior to
their stated maturity pursuant to Paragraph 8.2 hereof.
"Account" means any right to payment, whether or not it has been
earned by performance, for goods sold or leased or for services rendered in the
ordinary course of business which is not evidenced by an Instrument (except as
part of chattel paper).
"Account Debtor" means the Person obligated in respect of an Account.
"Affected Bank" has the meaning specified in Paragraph 2.2(h) hereof.
"Affiliate" means with respect to any Person (i) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the capital
stock having ordinary voting power in the election of directors of such Person,
(ii) each Person that controls, is controlled by or is under common control
with such Person or any Affiliate of such Person or (iii) each of such Person's
officers, directors, joint venturers and partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" has the meaning specified in the heading to this Agreement.
"Agent's Fee Letter" means that certain letter dated October 6, 1994
from the Agent to Coram, referred to therein as the Agent's Commitment Letter.
"Agent-Related Persons" has the meaning set forth in Paragraph 9.3
hereof.
"Agreement" or "Credit Agreement" means this Credit Agreement, as from
time to time amended, modified or supplemented.
"Applicable Spread" means
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<PAGE> 9
(i) with respect to Base Rate Loans, the Base Rate
Spread; and
(ii) with respect to LIBOR Loans, the LIBOR Spread.
"Assignment and Acceptance" has the meaning specified in Paragraph
10.1 hereof.
"Authorized Officer" means each officer or other designee of a
corporation authorized by the board of directors of that corporation to act on
behalf of that corporation under this Agreement or any of the other Loan
Documents.
"Authorized Representatives" shall mean those officers, employees or
other persons designated by Coram on the most current Notice of Authorized
Representatives delivered to the Agent as being authorized to request any
borrowing, to make any interest rate designation on behalf of any Co-Borrower
hereunder, or to give the Agent any other notice hereunder which is
contemplated by the terms hereof.
"Bank Indemnitees" has the meaning set forth in Paragraph 10.7 hereof.
"Bank" or "Banks" has the meaning specified in the heading of this
Agreement and any successors thereto.
"Banking Day" means a day other than a Saturday or a Sunday when
commercial banks are open for business in Denver, Colorado, Houston, Texas and
New York, New York and, with respect to LIBOR Loans, when commercial banks are
open for business in London, England.
"Base LIBOR" shall mean, for any Interest Period pertaining to a LIBOR
Loan, the rate per annum at which the Agent is offered dollar deposits in the
interbank Eurodollar market at approximately 11:00 a.m. (London time) two (2)
Banking Days prior to the beginning of the Interest Period for such Loan, for
delivery on the first day thereof for the number of months comprised therein
and in an amount equal to the amount of the LIBOR Loan to be outstanding during
such Interest Period.
"Base Rate" means on any day the greater of (a) the Prime Rate in
effect on that day, or (b) the Federal Funds Rate in effect on that day plus
0.5% per annum.
"Base Rate Loans" means all Loans bearing interest at a rate based on
the Base Rate.
"Base Rate Spread" means, for Base Rate Loans outstanding, the
percentage per annum calculated as set forth in Paragraph 2.2(c) hereof.
"Blocked Investment Account" has the meaning specified therefor in the
Security Agreement.
"Borrowing" means an extension of a Loan by the Banks to any
Co-Borrower pursuant to Article 2 hereof.
"Capital Expenditure" means any expenditure (including any portion of
any payment under any Capitalized Lease) that would be capitalized on the
balance sheet of Coram (consolidated with its Subsidiaries) as of the end of
that period, in conformity with GAAP, other than payment of the purchase price
of any fixed assets in connection with a Permitted Acquisition.
"Capitalized Lease" means any lease under which the obligation of the
lessee is required by GAAP to be shown as a liability on the financial
statements of the lessee.
Page 28 of 96 pages
<PAGE> 10
"Capitalized Lease Obligation" means any lease obligation that, in
accordance with GAAP, is required to be shown as a liability on the financial
statements of the lessee. The amount of a Capitalized Lease Obligation shall
be the amount required by GAAP so to be shown.
"Cash Flow" means, for any fiscal period, EBITDA for such period less
Consolidated Capital Expenditures actually made during such period less any
dividends or other distributions in respect of any capital stock of Coram or to
repurchase or redeem any capital stock of Coram.
"Cash Flow Coverage Ratio" means for any period the ratio of (a) Cash
Flow for such period, to (b) the sum of (i) Consolidated Interest Expense for
such period, plus (ii) scheduled principal payments during such period in
respect of long-term debt of Coram and its Subsidiaries on a consolidated
basis, plus (iii) scheduled principal payments during such period in respect of
Capitalized Lease Obligations of Coram and its Subsidiaries on a consolidated
basis.
"Cash Management Policy" the Cash Management Policy of Coram as in
effect on the Initial Closing Date.
"Change of Control" means the occurrence of any of the following
events: (a) all or substantially all of the assets of Coram are sold, leased,
exchanged or otherwise transferred to any Person or group of persons or
entities acting in concert as a partnership or other group; (b) Coram is merged
or consolidated with or into another corporation with the effect that the
common stockholders immediately prior to such merger or consolidation hold less
than seventy-five percent (75%) of the ordinary voting power of the outstanding
securities of the surviving corporation of such merger or the corporation
resulting from such consolidation; or (c) a Person or group (as such term is
used in rule 13d-5 under the Securities Exchange Act of 1934) of Persons shall,
as a result of a tender or exchange offer, open market purchases, merger,
privately negotiated purchases or otherwise, have become, directly or
indirectly, the beneficial owner (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) of securities having twenty-five percent (25%)
or more of the ordinary voting power of then outstanding securities of Coram.
"COBRA" means Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time.
"Co-Borrower" means any one of Coram, Curaflex, HealthInfusion, HMSS,
Medisys and T2, and "Co-Borrowers" means all such corporations collectively.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means, collectively, all of the assets and property
constituting collateral under the Security Agreement or any document or
instrument executed pursuant thereto or under any of the other Loan Documents.
"Collateral Agent" has the meaning specified in the Security Agreement.
"Collateral Documents" means the Security Agreement and any other
documents or instruments executed pursuant to the Security Agreement.
"Commitment" means the obligation of the Banks severally to extend
Loans to the Co-Borrowers pursuant to the terms and conditions of Paragraph 2.1
hereof.
"Commitment Amount" means, with respect to each Bank, an amount equal
to such Bank's Commitment Percentage multiplied by the Total Commitment Amount.
"Commitment Fee" has the meaning set forth in Paragraph 2.2(d) hereof.
"Commitment Letter" means the letter agreement dated October 6, 1994
from
Page 29 of 96 pages
<PAGE> 11
The Toronto-Dominion Bank to Coram, countersigned by Coram October 6, 1994.
"Commitment Percentage" means the percentage set forth after each
Bank's signature at the end of this Agreement, plus the aggregate of any
Commitment Percentages thereafter acquired by such Bank as the Assignee
pursuant to any Assignment and Acceptances to which such Bank is a party, less
the Aggregate of any Commitment Percentages assigned by such Bank pursuant to
any Assignment and Acceptances to which such Bank is a party, and, as to any
new Bank, the aggregate of any Commitment Percentages acquired by such new Bank
as the Assignee pursuant to any Assignment and Acceptances to which such new
Bank is a party, less the aggregate of any Commitment Percentages assigned by
such new Bank as the Assignor pursuant to any Assignment and Acceptances to
which such new Bank is a party.
"Concentration Account" means an account into which substantially all
cash receipts of Coram and its Wholly Owned Subsidiaries are deposited. On the
Initial Closing Date, the Concentration Account is Account Number 4896044377 in
the Rancho Cucamonga branch of Wells Fargo National Bank, N.A., in the name of
Coram Healthcare Corporation general account.
"Consolidated Capital Expenditures" means the aggregate Capital
Expenditures of Coram and its Subsidiaries.
"Consolidated Funded Debt" means, for Coram and its Subsidiaries on a
consolidated basis, all Obligations and all other interest-bearing
Indebtedness.
"Consolidated Liabilities" means all liabilities of Coram and its
Subsidiaries that would, in accordance with GAAP, be required to be included as
liabilities on a consolidated balance sheet of Coram and its Subsidiaries.
"Consolidated Net Income" means, for any period, the net income of
Coram and its Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP; provided, however, that in determining Consolidated
Net Income, there shall not be included in gross revenues any earnings of, and
dividends payable to, Coram or any of its Subsidiaries in a currency which at
the time may not be converted into Dollars under the laws of the nation issuing
such currency.
"Consolidated Interest Expense" means, for any period, gross
consolidated interest expense for the period (including all commissions,
discounts, fees and other charges in connection with standby letters of credit
and similar instruments such portion of payments under Capitalized Leases as
may be characterized as interest expense in accordance with GAAP) for Coram and
its Subsidiaries, plus the portion of the up-front costs and expenses for Rate
Contracts (to the extent not included in gross interest expense) fairly
allocated to such Rate Contracts as expenses for such period; as determined in
accordance with GAAP.
"Consolidated Net Revenue" means net revenue for Coram and its
Subsidiaries on a consolidated basis.
"Contingent Obligation" means, as applied to any Person, without
duplication, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend, letter of credit or
other obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including, without limitation, any such
obligation for which that Person is in effect liable through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital
Page 30 of 96 pages
<PAGE> 12
contributions or otherwise), or to maintain the solvency or any balance sheet
item, level of income or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation, services or lease regardless of the nondelivery or
nonfurnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof. The amount of any Contingent Obligation
(subject to any limitation set forth therein) shall be equal to the outstanding
principal amount of the debt, obligation or other liability guaranteed thereby
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform thereunder).
"Controlled Group" means any Co-Borrower and all Persons (whether or
not incorporated) under common control or treated as a single employer with any
Co-Borrower pursuant to section 414(b) or (c) of the Code.
"Coram" has the meaning specified in the heading to this Agreement.
"Curaflex" has the meaning specified in the heading to this Agreement.
"Dollars" and "$" mean United States Dollars.
"EBITDA" means, in respect of any fiscal period, all for such period
for Coram and its Subsidiaries on a consolidated basis, Consolidated Net
Income, increased by extraordinary charges (other than Special Charges),
decreased by extraordinary gains, and increased by depreciation, amortization,
interest (including the portion of payments under any Capitalized Lease that
may be characterized as interest), federal, state, local and foreign income
taxes, and Special Charges.
"Employee Benefit Plan" means any Pension Plan or any other employee
benefit plan (as defined in section 3(3) of ERISA) which any Co-Borrower or any
member of the Controlled Group maintains, or to which it makes or is obligated
to make contributions.
"Employee Loan" means a loan by Coram to one of its employees who had
moved more than fifty (50) miles to take or continue employment with Coram and
who has not sold his or her residence prior to such move, where the proceeds of
such loan are used by such employee for the purpose of purchasing a residence
and such loan becomes due and payable upon sale by such employee of his or her
residence prior to such move.
"Environmental Claim" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden
or non-sudden, accidental or non-accidental placement, spills, leaks,
discharges, emissions or releases) of any Hazardous Material at, in or from
property, whether or not owned by Coram or any Subsidiary of Coram, or (b) any
other circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.
"Environmental Laws" means any applicable Governmental Requirement
pertaining to land use, air, soil, surface water, groundwater (including the
Page 31 of 96 pages
<PAGE> 13
protection, cleanup, removal, remediation or damage thereof), public or
employee health or safety or any other environmental matter; including without
limitation, the following laws as the same may be amended from time to time:
(1) Clean Air Act (42 U.S.C. Section 7401, et seq.);
(2) Clean Water Act (33 U.S.C. Section 1251, et seq.;
(3) Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, et seq.);
(4) Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601, et seq.);
(5) Safe Drinking Water Act (42 U.S.C. Section 300f, et
seq.);
(6) Toxic Substances Control Act (15 U.S.C. Section
2601, et seq.);
(7) Rivers and Harbors Act (33 U.S.C. Section 401, et
seq.);
(8) Endangered Species Act (16 U.S.C. Section 1531, et
seq.); and
(9) Occupational Safety and Health Act (29 U.S.C. Section
651, et seq.);
together with any other applicable foreign or domestic laws (federal, state,
provincial or local) relating to emissions, discharges, releases or threatened
releases of any Hazardous Substance into ambient air, land, surface water,
groundwater, personal property or structures, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, discharge or handling of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliated Group" means any entity that, together with any
Co-Borrower or other member of the Controlled Group, is treated as a single
employer under section 414(m) of the Code.
"Event of Default" has the meaning set forth in Article 8 hereof.
"Federal Funds Rate" means, for any day, 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. Quotations") for such day under the caption "Federal Funds Effective
Rate." If on any relevant day the appropriate rate for such 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 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 Agent.
"Final Maturity Date" means June 30, 1996.
"Funded Debt Ratio" means, as of the last day of any fiscal quarter,
the ratio of Consolidated Funded Debt as of such day to EBITDA for the period
of four fiscal quarters ended on such day; provided, however that the Funded
Debt Ratio as of the last day of the fiscal quarter ending September 30, 1994,
shall be
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determined by using EBITDA for the period beginning January 1, 1994 and
adjusting EBITDA for the periods of two and three fiscal quarters ending
respectively on such dates proportionately so as to represent the four-quarter
equivalent of EBITDA for such periods of two and three fiscal quarters (as an
example, to determine the Funded Debt Ratio as of September 30, 1994, EBITDA
for the period of three fiscal quarters ending on such date shall be multiplied
by 1.33.
"GAAP" means generally accepted accounting principles set forth 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 in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Governmental Approvals" means any consent, right, exemption,
concession, permit, license, authorization, certificate, order, franchise,
determination or approval of any federal, state, provincial, municipal or
governmental department, commission, board, bureau, agency or instrumentality
required for the ownership of, or activities of Coram or any of its
Subsidiaries or any other Person in connection with the business of Coram or
any of its Subsidiaries.
"Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Requirements" means all legal requirements in effect
from time to time including all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
notices, demand letters, directions and requirements of all governments,
departments, commissions, boards, courts, authorities, agencies, officials and
officers, and all instruments of record, foreseen or unforeseen, ordinary or
extraordinary, including but not limited to any change in any law, regulation
or the interpretation thereof by any foreign or domestic governmental or other
authority (whether or not having the force of law), relating now or at any time
heretofore or hereafter to the business or operations of Coram or any of its
Subsidiaries or to any of the property owned, leased or used by Coram or any of
its Subsidiaries, including, without limitation, the development, design,
construction, acquisition, start-up, ownership and operation and maintenance of
property.
"Guaranty" has the meaning specified in Paragraph 3.2 hereof.
"Hazardous Substance" means any pollutant, contaminant, toxic or
hazardous substance, material, constituent or waste as such terms are defined
in or pursuant to any Environmental Law.
"Hazardous Waste Facility Permit" means any permit, license or other
governmental authorization relating to the storage, treatment or disposal of
any Hazardous Substance required pursuant to any Environmental Law.
"HMSS" has the meaning specified in the heading to this Agreement.
"HMSS Acquisition" means Coram's acquisition of all of the issued and
outstanding capital stock of HMSS pursuant to the HMSS Stock Purchase
Agreement.
"HMSS Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of August 2, 1994 by and among Coram, HMSS and Secomerica,
Inc., a Delaware corporation.
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"HealthInfusion" has the meaning specified in the heading to this
Agreement.
"Incipient Default" has the meaning set forth in Paragraph 4.1(e)
hereof.
"Indebtedness" of any Person means, without duplication (a) any
obligation for borrowed money; (b) any obligation evidenced by bonds,
debentures, notes or other similar instruments; (c) any obligation to pay the
deferred purchase price of property or for services (other than in the ordinary
course of business); (d) any Capitalized Lease Obligation; (e) any obligation
under any Rate Contract; (f) any obligation or liability of others secured by a
Lien on property owned by such Person, whether or not such obligation or
liability is assumed, (g) any Contingent Obligation (other than those incurred
in the ordinary Course of business); and (h) any other obligation or liability
which is required by GAAP to be shown as part of the Consolidated Liabilities
on a consolidated balance sheet of Coram and its Subsidiaries.
"Initial Closing Date" means the date on which all of the conditions
set forth in Paragraph 4.1 hereof have been satisfied or waived and the initial
Borrowing occurs.
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors; or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors or other, similar
arrangement.
"Intellectual Property Rights" has the meaning set forth in Paragraph
5.15 hereof.
"Interest Period" means, with respect to any LIBOR Loan, a period from
the borrowing date with respect to such Loan (or the date of the expiration of
the then current Interest Period with respect to such Loan) to a date up to one
(1), two (2), three (3) or six (6) months thereafter, subject to the following:
(a) if any Interest Period would otherwise end on a day
which is not a Banking Day, that Interest Period shall be extended to
the next succeeding Banking Day, unless the result of such extension
would be to extend such Interest Period into another calendar month,
in which event such Interest Period shall end on the immediately
preceding Banking Day;
(b) no Interest Period may be extended beyond a principal
payment date unless at the time of such extension the aggregate amount
of any Base Rate Loans plus the aggregate amount of all LIBOR Loans
having Interest Periods expiring on or before such principal payment
date is at least equal to the principal payment due on such date; and
(c) any Interest Period that would otherwise extend
beyond the Final Maturity Date shall end on the Final Maturity Date
or, if the Final Maturity Date shall not be a Banking Day, on the next
preceding Banking Day.
"Inventory" means all goods intended for sale or lease or furnished or
to be furnished under contracts of service or used or consumed in the business
of Coram or any of its Subsidiaries, including, without limitation, all raw
materials, work in process, and finished goods or materials, together with all
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertisement, sale or
finishing of such goods, and all documents of title or documents representing,
covering or evidencing any of the foregoing.
"Investment" as applied to any Person, means any direct or indirect
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ownership or purchase or other acquisition by that Person of any capital stock,
equity interest, obligations or other securities, or of a beneficial interest
in any capital stock, equity interest, obligations or other securities, or all
or substantially all of the assets of any other Person (including any
Subsidiary), or any direct or indirect loan, advance (other than advances to
officers and employees for moving and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital
contribution by that Person to any other Person, including all indebtedness and
accounts receivable from that other Person which are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
"Key Contracts" has the meaning set forth in Section 5.14 hereof.
"Leverage Ratio" means, for any fiscal period, the ratio of
Consolidated Funded Debt as of the end of such period to EBITDA for such
period; provided, however, that if the Leverage Ratio is determined for a
period of less than four (4) fiscal quarters, EBITDA for such period shall be
proportionately adjusted so as to represent the four-quarter equivalent of
EBITDA for such period of less than four fiscal quarters (as an example, to
determine a Leverage Ratio for a period of two fiscal quarters, EBITDA for such
period shall be multiplied by two (2)).
"LIBOR Loan" means any Loan bearing interest at a rate based upon Base
LIBOR.
"LIBOR Rate" means the rate (rounded upwards if necessary to the
nearest whole one-sixteenth of 1%) equal to the product of Base LIBOR times
Statutory Reserves.
"LIBOR Spread" means, for LIBOR Loans outstanding, the percentage per
annum, calculated as set forth in Paragraph 2.2(c) hereof.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or other security interest or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
those created by, arising under or evidenced by any conditional sale or other
title retention agreement, the interest of a lessor under a Capitalized Lease,
any financing lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the UCC or any comparable
law, but excluding therefrom any financing statement filed by a lessor under an
operating lease not intended as security) and any contingent or other agreement
to provide any of the foregoing.
"Loan" has the meaning set forth in Paragraph 2.1(a) hereof (including
any and all Base Rate Loans and LIBOR Loans), and "Loans" means all such Loans
(including any and all Base Rate Loans and LIBOR Loans) at any time
outstanding.
"Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Guaranty, Rate Contracts under which any of the Agent or the
Banks is the counter-party, and all agreements, instruments and documents
(including, without limitation, security agreements, loan agreements, notes,
fee agreements, guaranties, mortgages, deeds of trust, subordination
agreements, pledges, assignments of intellectual property, powers of attorney,
consents, assignments, contracts, notices, leases, financing statements,
certificates reports and notices and all other writings) heretofore, now or
hereafter executed by, on behalf of or for the benefit of Coram or any of its
Subsidiaries and delivered to the Agent or any of the Banks pursuant to or in
connection with this Agreement or the transactions contemplated hereby,
together with all amendments, modifications and supplements thereto.
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<PAGE> 17
"Loan Request" has the meaning set forth in Paragraph 2.1(c) hereof.
"Majority Banks" means at any time Banks holding at least sixty-six
and two-thirds percent (66-2/3%) of the then aggregate unpaid principal amount
of the Loans, or, if no such principal amount is then outstanding, Banks having
at least sixty-six and two-thirds percent (66-2/3%) of the Commitment
Percentages.
"Material Adverse Change" shall mean a material adverse change in (i)
the business, assets, operations, or financial condition of Coram and its
Subsidiaries considered as a whole, (ii) the collective ability of Coram and
its Subsidiaries to pay the Obligations in accordance with their terms, or
(iii) the security interests or liens of the Collateral Agent, the Agent and
the Banks on the Collateral or the priority of such security interests or
liens.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, operations, or financial condition of Coram and its
Subsidiaries considered as a whole, or (ii) the collective ability of Coram and
its Subsidiaries to pay the Obligations in accordance with their terms, and
(iii) the security interests or liens of the Collateral Agent, the Agent and
the Banks on the Collateral or the priority of such security interests or
liens.
"Maturity" means any date on which a Loan or any portion thereof
becomes due and payable whether as stated, by virtue of mandatory prepayment,
by acceleration or otherwise.
"Medisys" has the meaning specified in the heading to this Agreement.
"Merger" means the contemporaneous merger of Curaflex into a Wholly
Owned Subsidiary of Coram, HealthInfusion into a Wholly Owned Subsidiary of
Coram, Medisys into a Wholly Owned Subsidiary of Coram and T2 into a Wholly
Owned Subsidiary of Coram, all pursuant to the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger
dated as of February 6, 1994 by and among Coram (then known as CHM Holding
Corporation), Curaflex, CHS Acquisition Company, a Delaware corporation,
HealthInfusion, HII Acquisition Company, a Florida corporation, Medisys, MI
Acquisition Company, a Delaware corporation, T2 and T2 Acquisition Company, a
Delaware corporation, as amended by that certain First Amendment to Agreement
and Plan of Merger dated as of May 25, 1994 by and among the same parties, and
as further amended by that certain Second Amendment to Agreement and Plan of
Merger dated as of July 8, 1994 by and among the same parties.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto that is a nationally-recognized rating agency.
"Multiemployer Plan" means a "multiemployer plan" as defined in
section 4001(a)(3) of ERISA) and to which any Co- Borrower or any other member
of the Controlled Group makes, is obligated to make or at any time since
December 31, 1988 has made or been obligated to make contributions.
"Note" has the meaning set forth in Paragraph 2.1(d) hereof.
"Notice of Authorized Representative" has the meaning set forth in
Paragraph 4.1(n) hereof.
"Obligations" means all loans, advances, debts, liabilities,
obligations, covenants and duties owing to the Agent or the Banks by Coram or
any of its Subsidiaries of any kind or nature, present or future, whether or
not evidenced by any note, guaranty or other instrument, arising under this
Agreement, any of the Notes, the Security Agreement, the Guaranty, the Agent's
Fee Letter, Rate Contracts under which any of the Agent or the Banks is the
counter-party or any of the other Loan Documents, whether or not for the
payment of money, arising by
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reason of an extension of credit, absolute or contingent, due or to become due,
now existing or hereafter arising, including all principal, interest, charges,
expenses, fees, attorneys' fees and disbursements and any other sum chargeable
to Coram or any of its Subsidiaries under this Agreement or any other Loan
Document.
"Participant" has the meaning set forth in Paragraph 10.1(e) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor to all or any part of such corporation's functions under ERISA.
"Pension Plan" means any Multiemployer Plan or any other employee
pension benefit plan (as defined in section 3(2) of ERISA) that is subject to
Title IV of ERISA and which any Co-Borrower or any member of the Controlled
Group maintains, or to which it makes, is obligated to make or at any time
during the preceding five calendar years has made or has been obligated to make
contributions.
"Permitted Acquisitions" means any acquisition of all or substantially
all of the capital stock of a corporation, all or substantially all of the
ownership interests in any partnership or joint venture, all or substantially
all of the operating assets of any Person, or assets which constitute all or
substantially all of the assets of a division or a separate or separable line
of business, provided that:
(a) the corporation, partnership, operating assets or
line of business acquired is in a substantially similar line of
business as Coram or any of its Subsidiaries; and
(b) the Agent shall have received reasonably adequate
financial information regarding the assets or business to be acquired,
including the most recent audited financial statements, if available,
but in any case the most recently prepared balance sheet and statement
of income for the assets or business to be acquired and pro forma
projected financial statements showing the effect of the acquisition
of the assets or business, including a balance sheet for Coram and its
Subsidiaries on a consolidated basis as of the time of the acquisition
and projected statements of income for Coram and its Subsidiaries on a
consolidated basis through at least the end of eight (8) complete
fiscal quarters after the acquisition;
(c) no Event of Default or Incipient Default shall exist
at the time of such acquisition or would result on a pro forma basis
after completion of such acquisition;
(d) the Collateral Agent contemporaneously with the
closing of such acquisition shall have received such documents and
instruments as may be necessary to grant or confirm to the Collateral
Agent a lien on or security interest in all of the assets so acquired
and, if the acquisition is an acquisition of capital stock of a
corporation or an interest in a partnership, and to perfect a pledge
of such capital stock or security interest, and, in such case, the
Agent shall also have received a guaranty by the corporation or
partnership so acquired;
(e) if the acquisition is for cash or cash equivalents
and is not of a physician-owned business to which T2 provides
management services, then:
(i) the cash purchase price of any such single
acquisition (including the amount of all liabilities assumed
or, in the case of an acquisition of a corporation or
partnership, plus the amount of liabilities shown on a balance
sheet for such corporation or
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<PAGE> 19
partnership at the time of acquisition) shall not exceed forty
million Dollars ($40,000,000); and
(ii) the aggregate cash purchase price of all such
acquisitions which occur after October 17, 1994 (determined on
the same basis as in clause (i) above) shall not exceed one
hundred million Dollars ($100,000,000);
(f) if the acquisition is an acquisition of a
physician-owned business to which T2 provides management services,
then the aggregate purchase price of all such acquisitions which occur
after October 17, 1994 (including the amount of all liabilities
assumed or, in the case of an acquisition of a corporation or
partnership, plus the amount of liabilities shown on a balance sheet
for such corporation or partnership at the time of acquisition) shall
not exceed twenty-seven million Dollars ($27,000,000); and
(g) the Agent shall have received a certificate of an
Authorized Signatory setting forth in reasonable detail the
calculations necessary to show that the Leverage Ratio for the four
(4) fiscal quarters immediately preceding the date of the acquisition
is less than 3.00 to 1.00 both before and after giving effect to the
proposed acquisition. For purposes hereof, EBITDA shall mean the
actual historical EBITDA of Coram and the Person acquired on a
combined basis, provided, however, that Coram may, with the prior
consent of the Agent (which consent shall not be unreasonably
withheld), exclude from calculation of EBITDA any expenses (and other
items) that will be immediately realized upon consummation of the
acquisition (or immediately thereafter).
"Permitted Encumbrances" means: (a) carriers', warehousemen's,
mechanics', landlords', materialmen's, suppliers', tax, assessment,
governmental and other like liens and charges arising in the ordinary course of
business securing obligations that are not incurred in connection with the
obtaining of any advance or credit and which are not more than thirty (30) days
overdue, or are being contested in good faith by appropriate proceedings,
provided that, in accordance with GAAP, adequate reserves have been
established; (b) liens arising in connection with worker's compensation,
unemployment insurance, appeal and release bonds and progress payments under
government contracts; (c) judgment liens in existence less than forty-five (45)
days after the entry of the judgment, or with respect to which execution has
been stayed, or the payment of which is covered in full by insurance; (d)
zoning restrictions, easements, licenses or other restrictions on the use of
real property, so long as the same do not materially impair the use of such
real property by Coram or any of its Subsidiaries or the value thereof to the
owner of such real property; (e) any lien existing or arising by operation of
law in the ordinary course of business, such as a "banker's lien" or similar
right of offset; (f) liens on the property of Coram or any of its Subsidiaries
securing (i) the performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) obligations on surety and appeal
bonds, and (iii) other obligations of a like nature incurred in the ordinary
course of business provided all such Liens in the aggregate have no reasonable
likelihood of causing a Material Adverse Effect; (g) liens covering equipment
(including liens in favor of a lessor under a Capitalized Lease), which liens
secure purchase money financing for such equipment, provided that (A) any such
lien covers only the equipment so acquired, and (B) the indebtedness secured
thereby is permitted pursuant to Paragraph 7.8 hereof; (h) liens identified on
Schedule 7.6 attached hereto; (i) liens and security interests securing payment
of the Obligations granted pursuant to any of the Loan Documents; (j) liens
encumbering assets acquired (whether directly or by acquisition of the stock of
a corporation or ownership interests in a partnership or joint venture) in a
Permitted Acquisition which were not incurred or created in connection with or
in contemplation of such Permitted Acquisition; (k) any renewals or extensions
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of any of the liens referred to in any of the foregoing clauses (g), (h), (i),
or (j), provided that by any such renewal or extension no lien is extended to
additional property and that no monetary amount secured by any such lien is
increased; and (1) any other lien or security interest securing payment of a
determinable amount which is not overdue and which, when added to all other
liens covered by this clause (l), does not exceed one million Dollars
($1,000,000).
"Person" means any individual, corporation, partnership, trust,
association or other entity or organization, including any government,
political subdivision, agency or instrumentality thereof.
"Physician Self-Referral Laws" means all of the following, as from
time to time amended, modified or supplemented:
(a) 42 U.S.C. Section 1395nn;
(b) California Labor Code Section 139;
(c) California Business & Professions Code Section
Section 650.01 and 650.02;
and any successor or similar Governmental Requirement which imposes
restrictions on the right of Coram or any of its Subsidiaries or any of its
Subsidiaries to bill any Governmental Authority if the physician ordering the
applicable service has an ownership, investment or other financial interest in
Coram or any of its Subsidiaries or receives compensation from Coram or any of
its Subsidiaries.
"Prime Rate" shall be the rate most recently announced by The
Toronto-Dominion Bank as its "Prime Rate." Prime Rate is a base rate and
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto, and is evidenced by the reporting thereof
after its announcement in such internal publication or publications as the
Agent may designate. Any change in the interest rate resulting from a change
in such Prime Rate shall become effective as of 12:01 a.m. of the Banking Day
on which each change in Prime Rate is announced by The Toronto-Dominion Bank.
"Pro Forma Balance Sheet" has the meaning set forth in Paragraph 5.11
hereof.
"Rate Contracts" means interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protect ion against fluctuations in interest or currency exchange rates.
"Replacement Bank" has the meaning set forth in Paragraph 2.2(h)
hereof.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of thirty (30) days' notice to the PBGC is waived under
applicable regulations. In addition, a Reportable Event means a withdrawal
from a plan described in Section 4063 of ERISA or a cessation of operations
described in Section 4062(e) of ERISA, if such withdrawal or cessation could
reasonably be expected to result in a liability of any Co-Borrower or member of
the Controlled Group to the PBGC, to a trustee or to a Multiemployer Plan in
aggregate amount of one million Dollars ($1,000,000) or more.
"Responsible Officer" means Coram's Chief Executive Officer, Chief
Financial Officer or any Vice President or, with respect to any other
Co-Borrower, such Co-Borrower's Chief Executive Officer or Chief Financial
Officer.
"Revolving Termination Date" means the Final Maturity Date or earlier
if the Total Commitment Amount is reduced to zero pursuant to Paragraph 2.1(b)
hereof.
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<PAGE> 21
"S&P" means Standard & Poor's Corporation and any successor thereto
that is a nationally-recognized rating agency.
"Sale-Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby Coram or one of its Subsidiaries
transfers such property to a Person and Coram or one of its Subsidiaries leases
it from such Person.
"Sales Turnover Ratio" means, for any fiscal period, the ratio of
Consolidated Net Revenue for such period to accounts receivable as of the end
of such period; provided, however, that if the Sales Turnover Ratio is
determined for a period of less than four (4) fiscal quarters, Consolidated Net
Revenue for such period shall be proportionately adjusted so as to represent
the four-quarter equivalent of Consolidated Net Revenue for such period of less
than four fiscal quarters (as an example, to determine a Sales Turnover Ratio
for a period of two fiscal quarters, Consolidated Net Revenue for such period
shall be multiplied by two (2)).
"Security Agreement" has the meaning specified in Paragraph 3.1 hereof.
"Solvent" means, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair salable value) is in excess of the total amount of all
of its debts and liabilities, including contingent, subordinated,
unmatured and unliquidated liabilities; and
(ii) it is then able to pay its debts as they become due; and
(iii) it owns property having a value (both at fair valuation
and at present fair salable value) in excess of the total amount
required to pay its debts; and
(iv) it has capital sufficient to carry on its business.
"Special Charges" means (a) up to $160,000,000 for all cash and
non-cash items associated with the Merger (and the related restructuring
charges) and the T2 Shareholder Litigation; (b) up to $12,500,000 (or such
other amount as may be approved by the Majority Lenders) with respect to the
HMSS Acquisition; and (c)(i) up to $20,000,000 for cash items and (ii) up to
$40,000,000 for all cash and non-cash items, associated with Permitted
Acquisitions.
"Statutory Reserves" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including, without
limitation, any marginal, special, emergency or supplemental reserves, and
expressed as a decimal) established by the Federal Reserve Board or any other
United States banking authority to which the Agent or any Bank is subject for
Eurocurrency Liabilities (as defined in Regulation D of the Federal Reserve
Board). Such reserve percentages shall include, without limitation, those
imposed under said Regulation D. LIBOR Loans shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed to be subject to such
reserve requirements without benefit of or credit for proration, exceptions or
offsets which may be available from time to time to the Banks under said
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Subsidiary" of a Person means any corporation, partnership, joint
venture, association or other business entity of which such Person now or
hereafter owns, directly or indirectly, securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other governing
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body thereof.
"Subsidiary Guarantor" means each Subsidiary of Coram which is a
signatory to the Guaranty and the Security Agreement.
"T2" has the meaning specified in the heading to this Agreement.
"T2 Shareholder Litigation" means the litigation described under the
heading "T2 Stockholder Litigation" in item E of Schedule 5.16.
"Total Commitment Amount" means, subject to Paragraph 2.1(b) hereof,
an amount equal to one hundred twenty million Dollars ($120,000,000).
"UCC" means the Uniform Commercial Code as in effect in any
jurisdiction.
"Wholly Owned Subsidiary" means any direct or indirect Subsidiary of a
Person where such Person's ownership of such Subsidiary is through ownership of
100% of all issued and outstanding capital stock (or other ownership interests)
and warrants, options or rights to purchase capital stock (or other ownership
interests) at all levels.
Each accounting term not defined herein and each accounting term partly defined
herein to the extent not defined shall have the meaning given to it under GAAP.
ARTICLE 2
Loans
2.1 Revolving Credit.
(a) Revolving Loans. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make loans to any of the Co-Borrowers
on a revolving basis (each herein called a "Loan") from time to time on and
after the Initial Closing Date until the Revolving Termination Date, in an
aggregate principal amount not to exceed at any time outstanding such Bank's
Commitment Amount. The Co-Borrower to which Loans are disbursed shall use the
proceeds of the Loans exclusively for payment of expenses relating to the
Merger or the HMSS Acquisition, to pay Indebtedness of the Co- Borrower or one
of its Subsidiaries, for Permitted Acquisitions or for general working capital
purposes, or, in the case of Coram, to loan to one of the other Co-Borrowers
for any such purpose. All of the Loans in the aggregate shall consist of one
or more Base Rate Loans and LIBOR Loans. Subject to the terms and conditions
of this Agreement, Loans which are repaid may be reborrowed prior to the
Revolving Termination Date. Each Borrowing of a Base Rate Loan hereunder shall
be in an amount equal to an integral multiple of one hundred thousand Dollars
($100,000) and in a minimum amount of five hundred thousand Dollars ($500,000),
and each Borrowing of a LIBOR Loan hereunder shall be in an amount equal to an
integral multiple of one million Dollars ($1,000,000) and in a minimum amount
of five million Dollars ($5,000,000).
(b) Commitment Limits. The aggregate principal amount of Loans
outstanding shall not at any one time exceed the Total Commitment Amount. The
Co-Borrowers may reduce the Total Commitment Amount upon not less than five (5)
Banking Days' telephone notice, confirmed by an Authorized Representative on
the date of such notice by electronic facsimile transmission, to the Agent and
by repaying to the Banks any Loans outstanding in excess of the limits
specified in the foregoing sentence. Any such reduction shall be permanent and
shall (unless reducing the Total Commitment Amount to zero) be in an amount
equal to at least five million Dollars ($5,000,000) and be an integral multiple
of one million Dollars ($1,000,000).
Page 41 of 96 pages
<PAGE> 23
(c) Borrowing Procedures. For any proposed Borrowing which is to
be a Base Rate Loan, an Authorized Representative shall give the Agent
telephone notice not later than 11:30 a.m. (Houston, Texas time), provided,
however, that at such time as the treasury function of the Co-Borrowers is
moved to Colorado, the Agent shall receive notice not later than 11:00 a.m.
(Houston, Texas time) on the Banking Day of the proposed Borrowing, confirmed
by a written borrowing request in substantially the form attached hereto as
Exhibit 2.1(c) (a "Loan Request"), executed by an Authorized Representative and
received by the Agent by facsimile on the day of such telephone notice. For any
proposed Borrowing which is to consist of at least one LIBOR Loan, an
Authorized Representative shall give the Agent telephone notice not later than
11:30 a.m. (Houston, Texas time), provided, however, that at such time as the
treasury function of the Co-Borrowers is moved to Colorado, the Agent shall
receive notice not later than 11:00 a.m. (Houston, Texas time) at least three
(3) Banking Days prior to the date of the proposed Borrowing, confirmed by a
Loan Request executed by an Authorized Representative and received by the Agent
by facsimile on the day of such telephone notice. Upon receipt by the Agent of
the Loan Request, the Agent shall promptly notify each Bank of the proposed
Borrowing, including the date and amount thereof. Each Bank will make an
amount equal to its respective Commitment Percentage of the Borrowing available
to the Agent for the account of the Co-Borrower to which the Loan is to be
disbursed at the office specified by the Agent in Paragraph 10.9 hereof for
payment by 2:00 p.m. (Houston, Texas time) on the borrowing date requested by
such Co-Borrower in funds immediately available to the Agent. Unless any
applicable condition specified in Article 4 has not been satisfied, the
proceeds of all such Loans will then be made available to such Co-Borrower by
the Agent at such office by crediting the account of such Co-Borrower with the
aggregate of the amounts made available to the Agent by the Banks in like funds
as received by the Agent.
(d) Notes. The Co-Borrowers' obligations to repay all Loans made
by the Banks shall be evidenced by a promissory note in favor of each Bank in
the form attached hereto as Exhibit 2.1(d) (the "Notes"). On the Initial
Closing Date, the Co-Borrowers shall deliver to the Agent Notes payable to each
of the Banks in the Commitment Amount of each Bank, executed by an Authorized
Representative.
2.2 Interest and Fees.
(a) Interest. Subject to all other provisions of this Paragraph
2.2, all or a part of each Loan may, at the option of the Co-Borrowers, be a
Base Rate Loan or a LIBOR Loan. Subject to Paragraph 2.2(f) hereof, the Loans
shall bear interest from the date of disbursement on the unpaid principal
amount thereof until such amount shall become due and payable (whether upon
Maturity, by Acceleration or otherwise) (i) in the case of each Base Rate Loan,
at a fluctuating rate per annum equal to the Base Rate, as from time to time in
effect, plus the Base Rate Spread then in effect, and (ii) in the case of each
LIBOR Loan, at a rate per annum equal to LIBOR for the applicable Interest
Period plus the LIBOR Spread then in effect. Interest on each Base Rate Loan
shall be payable in arrears on the last day of each calendar quarter,
commencing with December 31, 1994, on any date that such Base Rate Loan is
converted to a LIBOR Loan, on the date of any prepayment as to the amount of
such prepayment, and on the Revolving Termination Date. Interest on each LIBOR
Loan shall be payable in arrears on the last day of the applicable Interest
Period (provided, however, that interest on each LIBOR Loan with an Interest
Period of six (6) months shall be paid three (3) months after commencement of
such Interest Period ), on any date when such LIBOR Loan is converted to a Base
Rate Loan, on the date on which any LIBOR Loan is prepaid as to the amount of
such prepayment, and on the Revolving Termination Date.
Upon Maturity, the Loans shall bear interest at a rate equal to the
applicable rate provided above plus two percent (2%) per annum. All other
Obligations, if not paid when due, shall bear interest from the date when due
until paid, at a rate equal to the Base Rate plus the Base Rate Spread plus two
Page 42 of 96 pages
<PAGE> 24
percent (2%) per annum.
(b) Extensions and Conversions. Subject to the terms and
conditions hereof, the Co-Borrowers shall have the option at any time to
convert all or any part of a Loan into a Base Rate Loan or a LIBOR Loan;
provided, however, that a LIBOR Loan may be converted only as of the last day
of the applicable Interest Period. Each LIBOR Loan shall be in an amount equal
to an integral multiple of one million Dollars ($1,000,000) and in a minimum
amount of five million Dollars ($5,000,000). Subject to the terms and
conditions hereof, the Co-Borrowers may extend a LIBOR Loan beyond its current
Interest Period. In the case of a proposed conversion of a Base Rate Loan into
a LIBOR Loan or an extension of a LIBOR Loan, an Authorized Representative
shall give the Agent telephone notice not later than 11:00 a.m. (Houston, Texas
time) at least three (3) Banking Days prior to the date of the proposed
conversion or extension, confirmed by a written notice in the form of Exhibit
2.1(b) attached hereto (a "Notice of Conversion/Extension") executed by an
Authorized Representative and received by the Agent by facsimile on the day of
such telephone notice. In the case of a proposed conversion into a Base Rate
Loan, an Authorized Representative shall give the Agent telephone notice not
later than 11:00 a.m. (Houston, Texas time) at least one (1) Banking Day prior
to the end of the applicable Interest Period confirmed by a Notice of
Conversion/Extension executed by any Authorized Representative and received by
the Agent by facsimile the day of such telephone notice. Any notice given by
an Authorized Representative under this Paragraph 2.2(b) shall be irrevocable.
Unless the Agent receives notice of a proposed conversion as and when required
hereunder, then at the end of an Interest Period for a LIBOR Loan, such Loan
shall automatically convert to a Base Rate Loan.
(c) Adjustment of Rate Spreads. The Base Rate Spread for the
Loans shall initially be .75% per annum, and the LIBOR Rate Spread for the
Loans shall initially be 1.75% per annum. The Base Rate Spread for such Loans
and the LIBOR Spread for such Loans shall be adjusted, from time to time, as
provided below (which adjustments shall remain effective only so long as Coram
maintains compliance with such conditions):
Funded Debt Ratio = x
<TABLE>
<CAPTION>
x <=1.00 1.00< x >=1.50 1.50< x >=2.00 2.00< x >=2.50 x >2.50
<S> <C> <C> <C> <C> <C>
LIBOR Spread 0.875% 1.125% 1.500% 1.750% 2.125%
Base Rate Spread 0.00% 0.125% 0.500% .750% 1.125%
</TABLE>
Any reduction or increase in the LIBOR Spread for such Loans and the Base Rate
Spread for such Loans in accordance with this Paragraph 2.2(c) shall become
effective as of the first day of the month following the month in which Coram
delivers to the Agent quarterly or annual financial statements pursuant to
Paragraph 6.2(a) or 6.2(b) hereof and a certificate of the Chief Financial
Officer of Coram specifying the applicable Funded Debt Ratio.
(d) Commitment Fee. The Co-Borrowers shall pay to the Agent for
the account of each Bank a commitment fee (the "Commitment Fee") on the average
daily unused portion of such Bank's Commitment Amount at rate per annum
determined as follows:
Funded Debt Ratio = x
<TABLE>
<CAPTION>
x <=1.00 1.00< x >=1.50 1.50< x >=2.00 2.00< x >=2.50 x >2.50
<S> <C> <C> <C> <C> <C>
</TABLE>
Page 43 of 96 pages
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C> <C>
Commitment Fee .25% .25% .3125% .375% .50%
</TABLE>
The Commitment Fee shall (i) be computed on a daily basis based on the
respective Commitment Amount of each Bank in effect on each day, (ii) accrue
from the Initial Closing Date to the Revolving Termination Date and (iii) be
payable quarterly in arrears on the last day of each quarter commencing with
the quarter ending December 31, 1994 and on the Revolving Termination Date. The
initial Commitment Fee in effect shall be 0.375% per annum. Any reduction or
increase in the Commitment Fee shall become effective as of the first day of
the month following the month in which Coram delivers to the Agent quarterly or
annual financial statements pursuant to Paragraph 6.2(a) or 6.2(b) hereof and a
certificate of the Chief Financial Officer of Coram specifying the applicable
Funded Debt Ratio.
(e) Computation of Interest and Commitment Fee. Interest and the
Commitment Fee shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days.
(f) Illegality, Taxation and Additional Interest Rate Provisions.
(i) In the event the Agent shall have determined (which
determination shall be conclusive and binding) that by reason of
circumstances affecting the interbank Eurodollar market, adequate and
reasonable means do not exist for ascertaining Base LIBOR, the Agent
shall forthwith give notice of such determination, confirmed in
writing, to the Co-Borrowers. If such notice is given, and until such
notice has been withdrawn by the Agent, no additional LIBOR Loans
shall be made and no additional conversions of Loans to LIBOR Loans
shall be permitted, and at the end of the Interest Period relating to
any outstanding LIBOR Loans, such Loans shall become Base Rate Loans.
(ii) Notwithstanding any other provisions herein, if any law,
treaty, rule or regulation, or determination of a court or other
Governmental Authority, or any change therein or in the interpretation
or application thereof, shall make it unlawful for a Bank to make or
maintain LIBOR Loans, as contemplated by this Agreement, the
obligation of such Bank hereunder to make LIBOR Loans shall forthwith
be suspended until such Bank shall notify the Agent that the
circumstances causing such suspension no longer exist, and each LIBOR
Loan of such Bank then outstanding shall immediately become a Base
Rate Loan.
(iii) In the event that any adoption or modification of any
law, treaty, rule or regulation, or determination of a court or other
Governmental Authority, or that any change in the interpretation or
application thereof, which adoption,
Page 44 of 96 pages
<PAGE> 26
modification or change becomes effective after the Initial Closing
Date, or in the event that compliance by a Bank with any request or
directive issued after the date hereof (whether or not having the
force of law) from any Governmental Authority:
(A) does or shall subject a Bank or any of its
foreign offices to any tax of any kind whatsoever (other than
taxes based on income from all sources) with respect to this
Agreement, the Notes, the Loans or any payments made to and
received by such Bank of principal, interest, fees or any
other amount payable hereunder; or
(B) does or shall impose, modify, or hold
applicable any reserve, special deposit, compulsory loan, FDIC
insurance or similar requirement against assets held by,
deposits or other liabilities in or for the account of,
advances or loans by, other credit extended by or any other
acquisition of funds by, any office of a Bank (other than to
the extent previously taken into account in determining the
Base Rate or Statutory Reserves); or
(C) does or shall impose on a Bank any other
condition;
and the result of any of the foregoing is to increase the cost to a
Bank of making, renewing or maintaining such Bank's Commitment Amount
or the Loans, or to reduce any amount receivable in respect thereof or
under any of the Loan Documents; then, in any such case, such Bank
shall notify the Co-Borrowers of any such event of which it has
knowledge and shall deliver to the Agent and the Co-Borrowers a
written statement specifying in reasonable detail the losses or
expenses sustained or incurred, and any reasonable allocation made by
such Bank of such losses and expenses shall be conclusive. The
Co-Borrowers shall, within ten (10) days following demand therefor,
pay the amount of such losses and expenses.
(g) Capital Adequacy Requirements. If any Bank shall determine
that the application of any law, rule, regulation or guideline regarding
capital adequacy, or any change therein or any change in the interpretation or
administration thereof by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or compliance by
such Bank (or its lending office) or any corporation controlling such Bank,
with any request, guideline or directive regarding capital adequacy (whether or
not having the force of law) of any such central bank or other authority (which
in any such case has become effective after the date hereof), affects or would
affect the amount of capital required or expected to be maintained by such Bank
or any corporation controlling such Bank, and such Bank
Page 45 of 96 pages
<PAGE> 27
determines that the amount of such capital is increased as a consequence of its
obligation under this Agreement, then, upon demand of such Bank, the
Co-Borrowers shall, within ten (10) days following demand therefor, pay to such
Bank, from time to time as specified by the Bank, additional amounts sufficient
to compensate such Bank for such increase.
(h) Substitution of Banks. Upon the receipt by any Co-Borrower
from any Bank (an "Affected Bank") of a request for compensation or payment
under this Paragraph 2.2, the Co-Borrower may: (i) request the Affected Bank to
use its best efforts to obtain a replacement bank or financial institution
satisfactory to the Co-Borrowers to acquire and assume all or part of such
Affected Bank's Loans and Commitments (a "Replacement Bank"); (ii) request one
or more of the other Banks to acquire and assume all or part of such Affected
Bank's Loans and Commitments; (iii) designate a Replacement Bank; or (iv)
terminate in whole or reduce in part the Commitments of the Affected Bank and
prepay all or part of the outstanding Loans owing to such Affected Bank in
accordance with Paragraph 2.3. Any such designation of a Replacement Bank under
clause (i) or (iii) shall be subject to the prior written consent of the Agent
and the other Banks (which consent in the case of the Banks shall not be
unreasonably withheld).
2.3 Payments.
(a) Payment of Loans. The Co-Borrowers shall repay all Loans then
outstanding on the Revolving Termination Date.
(b) Optional Prepayment. Subject to the following and the
provisions of Paragraph 2.3(c) hereof, the Co- Borrowers may at any time
prepay, upon notice given not later than 10:30 a.m. (Houston, Texas time) on
the date of such prepayment in the case of Base Rate Loans, or three (3)
Banking Days' prior written notice to the Agent as to any LIBOR Loans, any or
all of the Loans in whole or in part, without penalty or premium. With respect
to each prepayment hereunder, interest accrued to the date of prepayment on the
amount of such prepayment shall be payable (i) for LIBOR Loans, on the date of
the prepayment, and (ii) for Base Rate Loans, on the next scheduled date for
the payment of interest pursuant to Section 2.2(a) hereof. Any such notice of
prepayment shall specify the amount of the prepayment. Any such prepayment
shall be in a minimum principal amount of five million Dollars ($5,000,000) and
in a principal amount which is an integral multiple of one million Dollars
($1,000,000).
(c) Mandatory Prepayment.
(i) If at any time the aggregate principal amount of the
Loans outstanding exceeds the Total Commitment Amount, then the
Co-Borrowers shall immediately pay to the Agent for the account of
each Bank the amount of such excess (as a
Page 46 of 96 pages
<PAGE> 28
prepayment in respect of the Loans), plus any amount due under
Paragraph 2.3(d) hereof as a result of such prepayment.
(ii) The Co-Borrowers shall make prepayments to the Banks
in respect of the Loans in amounts equal to:
(A) eighty percent (80%) of all net cash proceeds in
excess of five million Dollars ($5,000,000) received at any
time by Coram and its Subsidiaries (considered in the
aggregate) from sales of assets or lines of business (other
than sales of readily marketable securities);
(B) one hundred percent (100%) of all net cash
proceeds received by Coram or any of its Subsidiaries from any
issuance by Coram or any of its Subsidiaries of debt or equity
securities; and
(C) one hundred percent (100%) of net cash proceeds
in excess of ten million Dollars ($10,000,000) received in
respect of any insurance policies covering liability (whether
of T2 or its officers and directors) in respect of the T2
Shareholder Litigation.
The Co-Borrowers shall also pay any amount due under Paragraph 2.3(d) as a
result of such prepayment or may, in lieu thereof, deposit the net cash
proceeds with the Agent, to be held pending expiration of Interest Periods
until the earliest time at which such proceeds may be used to prepay the Loans
in accordance herewith without the Co-Borrowers being obligated to pay any
amounts which would have been due under Paragraph 2.3(d) had payment been made
earlier.
Any prepayment made pursuant to this Section 2.3(c) (other than a prepayment
resulting from the sale of those assets listed on Schedule 2.3(c)(ii) attached
hereto) shall dollar for dollar immediately reduce the Total Commitment Amount.
(d) Payments Prior to Interest Period Expiration. The
Co-Borrowers hereby agree to indemnify and hold the Banks free and harmless
from any loss or expense (including, without limitation, any loss or expense
incurred by reason of the liquidation or redeployment of deposits or other
funds acquired by the Banks to fund or maintain any LIBOR Loan and in addition
to any interest or other payments which may be due the Banks under this
Agreement) which the Banks may incur as a result of (i) the termination of this
Agreement without the occurrence of the Initial Closing Date, other than by
reason of a default by the Banks, (ii) the failure by any Co-Borrower to accept
or complete a borrowing, conversion or extension with respect to a LIBOR Loan
after making a request therefor, (iii) the failure of any Co-Borrower to make
any prepayment after notice has been given in accordance with Paragraph 2.3(b)
hereof, (iv) a prepayment in whole or in part (whether
Page 47 of 96 pages
<PAGE> 29
optional or mandatory) of any LIBOR Loan prior to the expiration of a related
Interest Period, or (v) the conversion of a LIBOR Loan as a result of any of
the events indicated in Paragraph 2.3(g) hereof. The Agent shall deliver to
the Co- Borrowers a written statement specifying in reasonable detail any
amounts due the Banks as provided above, and such statement, in the absence of
manifest error, shall be fixed and binding on both parties. In no event shall
any amounts be payable by the Banks to any Co-Borrower under this Paragraph
2.3(d).
(e) Payments by the Co-Borrowers. All payments (including
prepayments) required to be made on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to the Agent,
for the account of the Banks, at the Agent's office referenced in Paragraph
10.9 hereof, in Dollars and in immediately available funds no later than 2:00
p.m. (Houston, Texas time). The Agent will promptly distribute such payments
to each Bank its Commitment Percentage of such principal, interest, fees or
other amounts, in like funds as received. Any payment which is received by the
Agent later than 2:00 p.m. (Houston, Texas time) shall be deemed to have been
received on the immediately succeeding Banking Day. Whenever any payment
hereunder shall be stated to be due on a day other than a Banking Day, such
payment shall be made on the next succeeding Banking Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be. Unless the Agent shall have received notice from the
Co-Borrowers prior to the date on which any payment is due to the Banks
hereunder that the Co-Borrowers will not make such payment in full, the Agent
may assume that the Co-Borrowers have made such payment in full to the Agent on
such date and the Agent may (but shall not be so required), in reliance upon
such assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent such
payment has not been made in full to the Agent, each Bank shall repay to the
Agent on demand such amount distributed to such Bank, together with interest
thereon for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the Federal Funds
Rate as in effect from time to time. The Co-Borrowers irrevocably authorize
the Agent to debit the Concentration Account or any other account maintained by
any Co-Borrower with the Agent for any payment due the Agent or the Banks
hereunder.
(f) Payments by the Banks to the Agent. Each Bank shall make
available to the Agent in immediate available funds the amount of such Bank's
Commitment Percentage of any Borrowing. Unless the Agent shall have received
notice from a Bank at least one Banking Day prior to the date of any proposed
Borrowing that such Bank will not make available to the Agent for the account
of the respective Co-Borrower the amount of that Bank' s Commitment Percentage
of the proposed Borrowing, the Agent may assume that each Bank has made such
amount available to the Agent on the borrowing date and the
Page 48 of 96 pages
<PAGE> 30
Agent may (but shall not be so required), in reliance upon such assumption,
make available to such Co-Borrower on such date a corresponding amount. If and
to the extent any Bank shall not have made its full amount available to the
Agent and the Agent in such circumstances has made available to such
Co-Borrower such amount, that Bank shall within two (2) Banking Days following
the date of such Borrowing make such amount available to the Agent, together
with interest at the Federal Funds Rate as in effect for each day during such
period. A notice from the Agent submitted to any Bank with respect to amounts
owing under this Paragraph 2.3(f) shall be conclusive, absent manifest error.
If such amount is so made available, such payment to the Agent shall constitute
such Bank's Loan on the date of the Borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent within two (2)
Banking Days following the date of such Borrowing, the Agent shall notify such
Co-Borrower of such failure to fund and, upon demand by the Agent, the Co-
Borrowers shall pay such amount to the Agent for the account of the Agent,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loans comprising such Borrowing. The failure of any Bank to make
any Loan on any date of any proposed Borrowing shall not relieve any other Bank
of its obligation hereunder to make its Loan on such date, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be made by
such other Bank on such date. In the event that, at any time when the
Co-Borrowers have the right to borrow hereunder, a Bank for any reason fails or
refuses to fund a Borrowing, then, notwithstanding any other provision of this
Agreement, and continuing until such time as such Bank has funded its portion
of the Borrowing, or all other Banks have received payment in full from the
Co-Borrowers (whether by repayment or prepayment), such non-funding Bank shall
not have the right (A) to vote regarding any issue on which voting is required
or advisable under this Agreement or any other Loan Document, and the amount of
the Loans of such Bank shall not be counted as outstanding for purposes of
determining "Majority Banks" hereunder, and (B) to receive payments of
principal, interest or fees from the Co-Borrowers, the Agent or the other Banks
in respect of its Loans.
(g) Sharing of Payments, etc. If while any Event of Default
exists any Bank shall obtain on account of the Loans made by it, any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) in excess of its Commitment Percentage of payments on account of
the Loans obtained by all the Banks, such Bank shall forthwith (a) notify the
Agent of such fact, and (b) purchase from the other Banks such participations
in the Loans made by them as shall be necessary to cause such purchasing Bank
to share the excess payment ratably with each of them; provided, however, that
if all or any portion of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded and each other
Bank shall repay to the purchasing Bank the purchase price paid thereto
Page 49 of 96 pages
<PAGE> 31
together with an amount equal to such paying Bank's Commitment Percentage
(according to the proportion of (i) the amount of such paying Bank's required
repayment to (ii) the total amount so recovered from the purchasing Bank) of
any interest or other amount paid or payable by the purchasing Bank in respect
of the total amount so recovered. The Co-Borrowers agree that any Bank so
purchasing a participation from another Bank pursuant to this Paragraph 2.3(g)
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of offset in Paragraph 2.3(h) hereof), with respect to
such participation as fully as if such Bank were the direct creditor of the
Co-Borrowers in the amount of such participation. The Agent shall keep records
(which shall be conclusive and binding in the absence of manifest error), of
participations purchased pursuant to this Paragraph 2.3(g) and shall in each
case notify the Banks following any such purchases.
(h) Offset. In addition to and not in limitation of all rights of
offset that the Banks may have under applicable law, the Banks, upon the
occurrence and during the continuance of an Acceleration, shall have the right
to appropriate and apply to the payment of all Obligations any and all
balances, credits, deposits, accounts or moneys of any Co-Borrower then or
thereafter with the Banks. Each Bank agrees promptly to notify the
Co-Borrowers and the Agent after any such offset and application made by such
Bank; provided, however, that the failure to give such notice shall not affect
the validity of such offset and application. The rights of each Bank under
this Paragraph 2.3(h) are in addition to the other rights and remedies which
such Bank may have.
2.4 Joint and Several Liability.
(a) Notwithstanding any other provision of this Agreement, the
Co-Borrowers are and shall be jointly and severally liable for all Obligations
(including, without limitation, those with respect to all Loans), and in each
instance where the term "Co-Borrower" is used, it is expressly understood that
the act, omission or interest of any Co-Borrower, and any act taken with
respect to any Co-Borrower shall be deemed, for purposes of the Loan Documents,
to be the act, omission or interest of each Co-Borrower or act taken with
respect to each Co-Borrower. The joint and several liability of each
Co-Borrower hereunder shall not in any way be affected, impaired or reduced as
a result of which particular Co-Borrower receives or uses the proceeds of Loans
or the purposes for which such proceeds are used.
(b) Each Co-Borrower hereby expressly waives any right to compel
the Agent or the Banks to sue or enforce payment of any and all Obligations of
any other Co-Borrower hereunder. Each Co-Borrower hereby expressly waives
presentment, protest, notice, demand or action on delinquency in respect of the
Obligations, and, to the extent applicable, any and all benefits under the
California
Page 50 of 96 pages
<PAGE> 32
Civil Code Sections 2809, 2810, 2815, 2819, 2839, 2845, 2848, 2849, 2850 and
3433 and any and all other similar benefits which might otherwise be available
under applicable law.
(c) No invalidity, irregularity or unenforceability, by reason of
any bankruptcy or similar law, any law or order of any Governmental Authority
purporting to reduce, amend or otherwise affect any liability of any
Co-Borrower, shall affect, impair or be a defense to the Obligations of any
other Co-Borrower here-under unless such invalidity, irregularity or
unenforceability is also applicable to such other Co-Borrower.
(d) Without in any manner limiting the generality of the
foregoing, each Co-Borrower agrees that the Agent and Majority Banks may, from
time to time, consent to any action or non-action of any Co-Borrower which, in
the absence of such consent, violates or may violate this Agreement, with or
without consideration, on such terms and conditions as may be acceptable to the
Agent and Majority Banks, without in any manner affecting or impairing the
liability of any other Co-Borrower hereunder. Each Co-Borrower waives any
defense arising by reason of any inability to pay or any defense based on
bankruptcy or insolvency or other similar limitations on creditors' remedies.
Each Co-Borrower authorizes the Agent and Majority Banks, without notice or
demand and without affecting such Co-Borrower's liability hereunder or under
any of the other Loan Documents, from time to time to: (i) renew, extend,
accelerate or otherwise change the time or place for payment of, or otherwise
change the terms of, the Notes or the Obligations or any part thereof
including, without limitation, increase or decrease of the rate of interest
thereon; (ii) take and hold security, and exchange, enforce, waive and release
any collateral or security or any part thereof or any such other security
surrender, modify, impair, change, alter, renew, continue, compromise or
release in whole or in part any such security, or fail to perfect its interest
in any such security or to establish its priority with respect thereof; (iii)
apply such security and direct the order or manner or sale thereof as the Agent
and Majority Banks in their sole discretion may determine; (iv) release or
substitute the any other Co-Borrower, in whole or in part any of the endorsers
or guarantors of the Obligations or any part thereof, and (v) settle or
compromise any or all of the Obligations with any other Co-Borrower or any
endorser or guarantor of the Obligations; and (vi) subordinate any or all of
the Obligations to any other obligations of or claim against any other
Co-Borrower, whether owing to or existing in favor of the Agent or the Banks or
any other party. The Obligations of each Co-Borrower shall continue to be
effective or be reinstated (as the case may be) if at any time payment by any
Co-Borrower of all or any part of the Obligations is rescinded or must
otherwise be returned by either of the Agent or the Banks upon the insolvency,
bankruptcy or reorganization of any Co-Borrower or otherwise, all as though
such payment to either of the Agent or the Banks had not been made.
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(e) Each Co-Borrower hereby acknowledges and agrees that, if and
to the extent that (i) the sum of (A) the amounts paid by such Co-Borrower to
the Agent and the Banks in respect of the Obligations, plus (B) the value of
any realization by the Agent and the Banks upon the assets of such Co-Borrower
pursuant to the Security Agreement, exceeds (ii) the amount of the Loans made
to such Co-Borrower plus interest accrued on such Loans and fees and expenses
attributable to such Loans plus the aggregate benefits, direct and indirect,
realized by such Co-Borrower from the Loans made to the other Co-Borrowers,
such Co-Borrower shall have a right of contribution from each other Co-Borrower
to such extent.
(f) Each Co-Borrower agrees that (i) it will not seek to exercise
any right of subrogation or contribution that it may have pursuant to
applicable law, subparagraph (e) above or otherwise against any of the other
Co-Borrowers until all of the Obligations have been paid in full and the
Commitments have expired or been terminated, and (ii) if by law any such right
of subrogation or contribution may not be so postponed, then such right shall
be subject and subordinate to the rights of the Agent and the Banks under the
Loan Documents.
(g) The Agent and Majority Banks may, at their election, exercise
any right or remedy they may have against any Co-Borrower or any security now
or hereafter held by or for the benefit of the Agent or the Banks including,
without limitation, the right to foreclose upon any such security by judicial
or nonjudicial sale, without affecting or impairing in any way the liability of
any other Co-Borrower hereunder, except to the extent the Obligations may
thereby be paid. Each Co-Borrower waives any defense arising out of the
absence, impairment or loss of any right of reimbursement or other right or
remedy against any other Co-Borrower or any such security, whether resulting
from the election by the Agent or Majority Banks to exercise any right or
remedy they may have against any other Co-Borrower, any defect in, failure of,
or loss or absence of priority with respect to the interest of the Agent or the
Banks in such security, or otherwise. In the event that any foreclosure sale
is deemed to be not commercially reasonable, each Co-Borrower waives any right
that it may have to have any portion of the Obligations discharged except to
the extent of the amount actually bid and received by the Banks at any such
sale. Neither the Agent nor any Bank shall be required to institute or
prosecute proceedings to recover any deficiency as a condition of payment
hereunder or enforcement hereof.
(h) Each Co-Borrower waives the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof, to
the extent permitted by law. Any part performance of the Obligations by a
Co-Borrower, or any other event or circumstances, which operate to toll any
statute of limitations as to such Co-Borrower, shall not operate to toll the
statute of limitations as to any other Co-Borrower. Each Co-Borrower
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understands and acknowledges that the Banks would not make the Loans in the
absence of the covenants and waivers of the Co-Borrowers contained herein.
(i) Each Co-Borrower acknowledges that repeated and successive
demands may be made and payments or performance made hereunder in response to
such demands as and when, from time to time, any Co-Borrower may default in
performance of the Obligations. Notwithstanding any such payment or
performance here-under, this Agreement shall remain in full force and effect
and shall apply to any and all subsequent defaults by any Co-Borrower in
payment or performance of the Obligations.
(j) Each Co-Borrower waives any defense arising by reason of any
disability or other defense of any other Co-Borrower or by reason of the
cessation from any cause whatsoever of the liability of any other Co-Borrower.
Each Co- Borrower waives any setoff, defense or counterclaim which any other
Co-Borrower may have or claim to have against the Agent or the Banks.
ARTICLE 3
Security Documents
3.1 Security Agreement. The Obligations shall be secured by a
Security Agreement to be executed and delivered by each of Coram, Curaflex,
HealthInfusion, Medisys, HMSS and T2, and by each of the other Wholly Owned
Subsidiaries of Coram (as amended, modified or supplemented from time to time,
the "Security Agreement") in the form of Exhibit 3.1 attached hereto.
3.2 Guaranty. The Obligations shall be unconditionally guaranteed
as set forth in a Guaranty in the form of Exhibit 3.2 attached hereto to be
executed and delivered by each of the Wholly Owned Subsidiaries of Coram (as
amended, modified or supplemented from time to time, the "Guaranty").
ARTICLE 4
Conditions Precedent
4.1 Conditions to Initial Borrowing. The obligation of the Banks
to make the initial Loans shall be subject to the prior or contemporaneous
satisfaction of each of the following conditions precedent on the Initial
Closing Date:
(a) Delivery of Documents. The Notes, the Security Agreement and
the Guaranty shall each have been duly executed and delivered to the Agent by
the respective signatories thereto;
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(b) Reports, Certificates and Other Information. The Agent shall
have received the following, dated and in full force and effect on the Initial
Closing Date:
(i) a certificate of the Secretary or an
Assistant Secretary of each Co-Borrower and each Subsidiary
Guarantor as to (A) its corporate charter and by-laws (as to
the Co-Borrowers only), (B) authorization of the execution,
delivery and performance of this Agreement and all of the
other Loan Documents by each Co-Borrower and each of the
Subsidiary Guarantor (including action of shareholders, where
required), and (C) the incumbency and signatures of persons
authorized to act hereunder and thereunder on behalf of the
respective Co-Borrowers or Subsidiary Guarantor;
(ii) a certificate, signed by a Responsible Officer of Coram,
stating (A) that the representations and warranties contained in
Article 5 hereof and in the Security Agreement and the Guaranty are
then true and accurate as though made on and as of such date, and (B)
that there then exists no Event of Default or Incipient Default;
(iii) good standing certificates for each of the Co-Borrowers
and the Subsidiary Guarantors (other than the Subsidiaries specified
in Schedule 4.1(b)(iii)) bearing a date satisfactory to the Majority
Banks in accordance with Schedule 4.1(b)(iii) hereof; and
(iv) such other instruments or documents as either the Agent
may reasonably request relating to the existence and good standing of
Coram or any of its Subsidiaries or corporate authority for execution,
delivery and performance of this Agreement or any of the other Loan
Documents.
(c) Opinions of Counsel. There shall have been delivered to the
Agent a written opinion dated as of the Initial Closing Date (i) by Brobeck,
Phleger & Harrison, as counsel to the Co-Borrowers, in form and substance
reasonably acceptable to the Agent, and (ii) (A) by Oppenheimer, Wolff &
Donnelly, in form and substance reasonably acceptable to the Agent, (B) by
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., in form and
substance reasonably acceptable to the Agent, and (C) by Scott Larson, Esq., in
form and substance reasonably acceptable to the Agent;
(d) Payment of Fees. The Agent shall have received payment of (i)
all fees required in the Commitment Letter to be paid on or prior to the
Initial Closing Date, and (ii) any other fee or other payment due the Agent or
the Banks under any of the Loan Documents on or before the Initial Closing
Date;
(e) No Existing Default. No Event of Default or event which,
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upon the lapse of time or the giving of notice or both, would constitute an
Event of Default (an "Incipient Default") shall exist on the Initial Closing
Date or after giving effect to the transactions contemplated to take place
hereunder on such date;
(f) Representations and Warranties Correct. The representations
and warranties set forth in Article 5 hereof and in the Guaranty shall be true
and correct on the Initial Closing Date, and after giving effect to the
transactions contemplated to occur on such date;
(g) Legality of Transactions. It shall not be unlawful for the
Co-Borrower, the Subsidiary Guarantors, the Agent or the Banks to carry out
their respective obligations under this Agreement;
(h) Insurance. The Co-Borrowers shall have obtained the insurance
called for in Paragraph 6.9 hereof, and the Banks shall have received evidence
satisfactory to the Majority Banks that such insurance is in effect;
(i) Perfection of Liens and Security Interests. The Banks shall
have obtained assurance satisfactory to the Majority Banks (including UCC
search reports, confirmation of filing or recording, and opinions of counsel)
that the security interests created by the Security Agreement and the Guaranty
in the property specified in Schedule 4.1(j) attached hereto shall have been
duly perfected under applicable law and shall be of first priority, subject
only to Permitted Encumbrances;
(j) Payment of Existing Indebtedness. The Banks shall have
received evidence satisfactory to the Majority Banks that the indebtedness of
Coram and its Subsidiaries identified on Schedule 4.1(k) attached hereto has
been paid in full and any commitment to lend associated therewith has been
terminated and all liens and security interests securing such indebtedness have
been released;
(k) Solvency. The Agent shall have received a certificate of the
Chief Financial Officer of Coram in form and substance satisfactory to the
Majority Banks that Coram and each of its Subsidiaries is Solvent on and as of
the Initial Closing Date;
(l) Written Receipt. If any part of the proceeds of the Loan is
to be disbursed to a Person other than a Co-Borrower, the Agent shall have
received from the Co-Borrowers written disbursement instructions and a written
receipt for such proceeds;
(m) Notice of Authorized Representatives. The Agent shall have
received a Notice of Authorized Representatives in the form attached hereto as
Exhibit 4.1(n) (a "Notice of Authorized Representatives"), duly executed on
behalf of the Co-Borrowers; and
(n) Other Documents. The Agent shall have received any other
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document, instrument, undertaking or certificate stated in any of the Loan
Documents to be delivered on or prior to the Initial Closing Date.
4.2 Conditions to Each Loan. The obligation of the Banks to make
any Loan is subject to the prior or contemporaneous satisfaction of each of the
following conditions precedent on and as of the date of such Borrowing
(a) Initial Closing Date. The Initial Closing Date shall have
occurred.
(b) No Existing Default. No Event of Default or Incipient Default
shall exist at the date of such Borrowing, or after giving effect to the
transactions contemplated to take place hereunder on such date;
(c) Representations and Warranties Correct. The representations
and warranties set forth in Article 5 hereof shall be true and correct at the
date of such Borrowing, and after giving effect to the transactions
contemplated to take place hereunder on such date (except that to the extent
that such representations and warranties by their terms relate solely to an
earlier date, in which case such representations and warranties shall have been
true and correct as of the date to which such representations and warranties
relate), provided that Paragraph 5.10 hereof shall be deemed to refer to the
financial statements most recently delivered to the Agent pursuant to Paragraph
6.2 hereof;
(d) Loan Request. The Agent shall have received in connection
with each Loan a Loan Request, the receipt of which by the Agent shall
constitute a certification by the Co-Borrowers that the conditions set forth in
Paragraphs 4.2(b) and 4.2(c) hereof are or will be satisfied on and as of the
date of such Borrowing; and
(e) No Material Adverse Change. No Material Adverse Change and no
material adverse change in the prospects of Coram and its Subsidiaries
considered as a whole shall have occurred since September 30, 1993.
4.3 Conditions for the Benefit of the Agent and the Banks. The
conditions set forth in this Article 4 are for the exclusive benefit of the
Banks and the Agent and may be waived only by a written waiver signed by all
the Banks or the Agent, as applicable. For purposes of determining
satisfaction of the conditions set forth in Paragraph 4.1 hereof, each Bank
agrees that, by funding its Commitment Percentage of the initial Borrowing, it
will be deemed to have approved any matter in such conditions requiring its
approval. For purposes of determining satisfaction or waiver of the conditions
set forth in Paragraph 4.2 hereof for any Borrowing
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subsequent to the initial Borrowing, each Bank which funds its Commitment
Percentage of such subsequent Borrowing shall be deemed to have approved any
matter disclosed by Coram in writing to such Bank (and to the Agent) at least
three (3) Banking Days prior to such Borrowing, which writing refers
specifically to Paragraphs 4.2 and 4.3 hereof and includes a statement to the
effect that such Bank's funding shall be deemed a waiver of the applicable
condition with respect to such matter. Such waiver shall not be deemed a
waiver with respect to the conditions applicable to any subsequent Borrowing,
but Coram shall not be required to send the Banks or the Agent any additional
written notice.
4.4 Failure of Conditions. This Agreement (exclusive of
obligations of the Co-Borrowers stated herein to survive termination hereof)
shall terminate if the Initial Closing Date does not occur on or before October
17, 1994. In such event, Coram shall pay to the Agent on demand such amounts
as may be due under the Commitment Letter. The obligation of Coram to make
such payment shall survive termination of this Agreement.
ARTICLE 5
Representations and Warranties of the Co-Borrowers
In order to induce the Agent and the Banks to enter into or become
parties to this Agreement and to extend the Loans, each of the Co-Borrowers
makes the following representations and warranties to the Agent and the Banks:
5.1 Due Organization. Each of Coram and its Subsidiaries is a
corporation or partnership, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, and each is duly licensed or qualified to conduct business, and
each is in good standing in, each jurisdiction wherein the character of the
property owned or the nature of the business transacted by it makes such
licensing or qualification necessary (except for jurisdictions in which the
failure to so qualify or be in good standing would not have a Material Adverse
Effect).
5.2 Organization, Standing and Qualification of Subsidiaries.
(a) Set forth in Schedule 5.2 attached hereto is a complete and
accurate list of Coram's Subsidiaries, showing their respective jurisdictions
of incorporation or organization and, as of September 12, 1994, the
jurisdictions in which each is qualified to do business.
(b) The corporate charter or articles of incorporation and all
amendments thereto or the partnership agreement or other constituent document
and all amendments thereto for Coram and each
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of its Subsidiaries (other than Subsidiaries which have substantially no
assets, are currently being liquidated, or which are otherwise inactive) have
been duly filed (where required) and are in proper order. All of the
outstanding capital stock of Coram and its Subsidiaries has been validly issued
in compliance with all federal and state securities laws and is fully paid and
nonassessable. Except as specified in Schedule 5.2, all of the capital stock
of or other ownership interest in each of the Subsidiaries listed in Schedule
5.2 attached hereto is owned by Coram or one of its Subsidiaries free and clear
of all mortgages, deeds of trust, pledges, liens, security interests and other
charges or encumbrances.
(c) Neither Coram nor any of its Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any other equity interest therein.
(d) The chief executive office of each Co-Borrower is located at
1125 17th Street, Suite 1500, Denver, Colorado 80802 for Coram, One Lakeshore
Centre, 3281 Guasti Road, Suite 700, Ontario California 91761 for Curaflex,
5200 Blue Lagoon Drive, Suite 200, Miami, Florida 33126 for HealthInfusion, 100
Bayview Circle, Suite 1000, Newport Beach, California 92660 for HMSS, 4550 West
77th Street, Edina, Minnesota 55435 for Medisys, and 1121 Alderman Drive,
Alpharetta, Georgia 30202 for T2.
5.3 Absence of Certain Activities. Except as set forth on
Schedule 5.2 attached hereto, neither Coram nor any or its Subsidiaries is a
partner in any partnership or a joint venturer in any joint venture which
partnership or joint venture accounts for more than one percent (1%) of the
Consolidated Net Revenue of Coram and its Subsidiaries.
5.4 Requisite Power. Except as set forth in Schedule 5.4 attached
hereto, Coram and each of its Subsidiaries each has all requisite corporate or
partnership power and all governmental licenses, permits, authorizations,
consents and approvals necessary to own and operate its respective properties
and to carry on its respective business as now conducted and as proposed to be
conducted. Each of the Co-Borrowers has and each of the Subsidiary Guarantors
has all requisite power to borrow the sums provided for in this Agreement and
to execute, deliver, issue and perform this Agreement, the Notes, the Security
Agreement, the Guaranty and the other Loan Documents to which any of them is a
party.
5.5 Authorization. All action on the part of Coram and each
Subsidiary and their respective directors, stockholders and partners necessary
for the authorization, execution and delivery and performance of this
Agreement, the Notes, the Security Agreement, the Guaranty and the other Loan
Documents has been duly taken and is in full force and effect.
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5.6 Officer Authorization. Each natural person executing this
Agreement or any of the other Loan Documents on behalf of any Co-Borrower or
any Subsidiary Guarantor is (as of the date of such execution) duly and
properly in office and fully authorized to execute and deliver the same.
5.7 Binding Nature. This Agreement, the Notes, the Security
Agreement, the Guaranty and each of the other Loan Documents is, or upon the
execution and delivery thereof will be, a legal, valid and binding obligation
of the Co-Borrowers or of the Subsidiary Guarantors, where any of such parties
is a signatory thereto, in full force and effect and enforceable in accordance
with its respective terms, except for the effect of applicable laws regarding
bankruptcy or insolvency and the effect of equitable principles generally.
5.8 No Conflict. Except as set forth in Schedule 5.8, neither the
execution nor delivery of this Agreement, the Notes, the Security Agreement,
the Guaranty or any of the other Loan Documents nor performance of nor
compliance with the terms and provisions hereof or thereof will (a) conflict
with or result in a breach of any Governmental Requirement, or of any other
agreement or instrument binding upon Coram or any of its Subsidiaries, or
conflict with or result in a breach of any provision of the corporate charter
or by-laws, partnership, or other constituent document of Coram or any of its
Subsidiaries, or (b) result in the creation or imposition of any Lien upon any
property of Coram or any of its Subsidiaries pursuant to any such agreement or
instrument (other than pursuant to the Security Agreement and the Guaranty).
No authorization, consent or approval or other action by, and no notice to or
filing with, any Governmental Authority is required to be obtained or made by
Coram or any of its Subsidiaries, other than those which will be obtained or
made prior to the Initial Closing Date, for the due execution, delivery and
performance by Coram or any of its Subsidiaries of this Agreement, the Notes,
the Security Agreement, the Guaranty or any of the other Loan Documents or for
the validity or enforceability thereof.
5.9 No Event of Default. No Event of Default or Incipient Default
has occurred and is continuing or would result from the execution, delivery or
performance of this Agreement, the Notes, the Security Agreement, the Guaranty
or any of the other Loan Documents.
5.10 Financial Statements. The financial statements described in
Schedule 5.10 attached hereto, copies of which have been furnished to the Agent
and the Banks, and the financial statements most recently delivered to the
Agent pursuant to Paragraph 6.2(b) hereof, fairly present (except as described
in Schedule 5.10 hereto with respect to HMSS) the financial condition and
results of operations of each Co-Borrower (other than Coram) respectively,
consolidated with the respective Subsidiaries of such Co-Borrower.
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Except as described in Schedule 5.10 hereto with respect to HMSS, all such
financial statements were prepared in accordance with GAAP consistently applied
throughout the respective periods covered thereby, except that financial
statements not dated as of the end of a fiscal year are subject to adjustments
upon audit. Except as disclosed in such financial statements or otherwise
disclosed in writing to the Banks, neither Coram nor any Subsidiary of Coram is
liable for any material liability, direct or contingent, including, but not
limited to, liabilities for taxes, long-term leases or long-term commitments,
which would be required to be shown as a liability or otherwise disclosed in
current financial statements.
5.11 Pro Forma Financial Statements and Projections. The Agent and
the Banks have been furnished with certain information, including (a) a pro
forma consolidated combined balance sheet (the "Pro Forma Balance Sheet") for
Coram and its Subsidiaries as of June 30, 1994, giving effect to the Merger and
the HMSS Acquisition, and (b) estimates and projections of the financial
position and the results of operations (consolidated for Coram and its
Subsidiaries) for, and as at the end of, certain future periods. The Pro Forma
Balance Sheet and such estimates and projections were prepared with reasonable
care on the basis of the assumptions stated therein, and such assumptions are,
to the best knowledge and belief of Coram and each of the other Co-Borrowers,
reasonable and made in good faith, it being understood that estimates and
projections by their nature involve uncertainty and approximations. It is
understood that no representation or warranty is made by any Co-Borrower
concerning any predictions, forecasts, estimates, or any other analyses
prepared by or on behalf of Coram or any of its Subsidiaries, except as above
stated. There is no fact known to any Co-Borrower which could reasonably be
expected to have a Material Adverse Effect which has not been disclosed in
documents furnished to the Banks in connection with this Agreement.
5.12 Real Property. Coram or one of its Subsidiaries has good
marketable title in fee simple to, or a valid and subsisting leasehold interest
in, all real property reasonably necessary for the operation of its business as
a whole, free from all Liens, charges, mortgages, deeds of trust, security
interests and encumbrances of any nature whatsoever, except for Permitted
Encumbrances.
5.13 Equipment. Coram and its Subsidiaries own or have the right
to use under valid and subsisting leases, equipment and fixtures, reasonably
necessary for the operation of their business as a whole. Substantially all of
the tangible property of Coram and its Subsidiaries used in connection with
their business is in good operating condition (ordinary wear and tear
excepted), usable in the ordinary course of business, and is adequate for the
operation of their business.
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5.14 Contracts. Schedule 5.14 attached hereto contains a list of
each material contract to which Coram or any of its Subsidiaries is a party
(the "Key Contracts") on the Initial Closing Date. Each of the Key Contracts
is in effect. Except as disclosed in Schedule 5.14, neither Coram nor any of
its Subsidiaries nor, to the best knowledge of any of the Co-Borrowers, any
other party to any of the Key Contracts is in material default thereunder, and
there are no presently existing facts or circumstances which, if continued or
on notice, could reasonably be expected to result in such a material default on
the part of Coram or any of its Subsidiaries, or, to the best knowledge of any
Co-Borrower, on the part of the other party thereto. No Co-Borrower has any
knowledge that any other party to any of the Key Contracts intends to terminate
such Key Contract. Each contract with a supplier to which Coram or any of its
Subsidiaries is a party is on normal trade terms and has been entered into in
the ordinary course of business. Each contract with a customer of Coram or any
of its Subsidiaries has been entered into in the ordinary course of business.
Performance by the parties to all contracts and other commitments of Coram and
its Subsidiaries would not in the aggregate have a Material Adverse Effect.
5.15 Intellectual Property. Schedule 5.15 attached hereto contains
a complete and correct list of all material patents, copyrights, trademarks,
licenses, service marks, trade names and other similar rights (the
"Intellectual Property Rights") used by Coram or any of its Subsidiaries as of
September 12, 1994. No proceedings have been instituted or are pending or have
been threatened in writing which challenge the validity, ownership or use of
any such Intellectual Property Rights. To the best knowledge of each of the
Co-Borrowers, no infringement of any Intellectual Property Right of any third
party has occurred or would result in any way from the operations or business
of Coram or any of its Subsidiaries, and, except as set forth in Schedule 5.16,
no claim has been made by any such third party based on allegation of any such
infringement.
5.16 Litigation. Excepting those matters set forth in Schedule
5.16 attached hereto, as of September 12, 1994, there is no action, suit,
investigation, tax claim or proceeding pending or, to the knowledge of each of
the Co-Borrowers, threatened in writing against or affecting Coram or any
Subsidiary or the property of Coram or any Subsidiary thereof, before any
court, arbitrator or administrative or governmental body, which would
reasonably be expected to have a Material Adverse Effect.
5.17 Tax Returns and Tax Matters. Coram and each of its
Subsidiaries has filed all federal and state income tax returns which are
required to be filed, and each has paid all taxes as shown on said returns and
on all assessments received by it to the extent that such taxes have become
due. There is no proposed, asserted or assessed tax deficiency against Coram
or any of its
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Subsidiaries, except those being contested in good faith and for which such
reserve as is required by GAAP has been created.
5.18 Employee Benefits.
(a) Plans Maintained. Except as provided in Schedule 5.18(i) with
respect to clauses (i) and (iii) below or in Schedule 5.18(ii) with respect to
clauses (ii) and (iv) below, as of September 12, 1994, no Co-Borrower is, and
no Controlled Group member is, a party to, contributes to or is currently
obligated to contribute to any plans, programs, agreements, policies,
commitments or other arrangements (whether or not set forth in a written
document) in the following categories:
(i) Any funded employee pension benefit plan subject to
Title IV of ERISA, including (without limitation) any Multiemployer
Plan,
(ii) Any material plan, program, agreement, policy,
commitment or other arrangement relating to severance or termination
pay, whether or not published or generally known,
(iii) Any material retiree health care plan other than COBRA
(as described in Section 5.18(g) below) and any material retiree life
insurance plan, and
(iv) Any material plan that is an excess benefit plan or
a "top hat" plan, as defined in section 3(36) or section 301(a) (3) of
ERISA, and is unfunded, as described in section 4(b) (5) or section
301(a) (3) of ERISA.
(b) Reporting and Disclosure. As of September 12, 1994, with
respect to each Employee Benefit Plan, including employee welfare benefit plans
not required to be listed in Schedule 5.18, and which is subject to the
reporting, disclosure and record retention requirements set forth in Part 1 of
Subtitle B of Title I of ERISA and the regulations thereunder, each of such
requirements has been fully met on a timely basis, except where instances of
failing to do so could not, considered in the aggregate, have a Material
Adverse Effect. The representation and warranty set forth in this Paragraph
5.18(b) is made to the best knowledge of the Co-Borrowers to the extent that it
applies to a Multiemployer Plan.
(c) Qualification of Plans. Except as provided on Schedule
5.18(i), as of September 12, 1994, each plan which is listed in Schedule
5.18(i) attached hereto, and which is intended to be qualified under section
401(a) of the Code, has been determined by the Internal Revenue Service in
writing to be so qualified. To the best knowledge of the Co-Borrowers, since
the Internal Revenue Service issued its determination with respect to any such
plan, there has been no occurrence (including, without limitation, a plan
amendment, the enactment of legislation or the adoption of
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regulations) that could cause such plan not to be so qualified. Within the
applicable remedial amendment period described in the regulations under section
401(b) of the Code, an application for such a determination was or will be
filed with the Internal Revenue Service with respect to each amendment to any
such plan for which a failure to do so could reasonably be expected to have a
Material Adverse Effect. Each such plan has in all material respects been
administered in accordance with its terms and the applicable provisions of
ERISA and the Code and the regulations thereunder. The representations and
warranties set forth in this Paragraph 5.18(c) are made to the best knowledge
of the Co-Borrowers with respect to any Multiemployer Plan.
(d) Contributions and Premiums. All material contributions,
premiums or other payments due from any Co-Borrower or any other member of the
Controlled Group to (or under) any Employee Benefit Plan have been fully paid
or adequately provided for on the books and financial statements of such
Co-Borrower or other member of the Controlled Group.
(e) Litigation and Extraordinary Claims. There are no pending or,
to the best knowledge of the Co-Borrowers, threatened claims, actions or
lawsuits, other than routine claims for benefits in the usual and ordinary
course, asserted or instituted against (i) any Employee Benefit Plan, (ii) any
member of the Controlled Group with respect to any Employee Benefit Plan, or
(iii) any fiduciary with respect to any Employee Benefit Plan, for which any
Co-Borrower may be directly or indirectly liable, through indemnification
obligations or otherwise that, in the aggregate could reasonably be expected to
have a Material Adverse Effect.
(f) Prohibited Transactions. To the best knowledge of the
Co-Borrowers, with respect to each Employee Benefit Plan which is subject to
Part 4 of Subtitle B of Title I of ERISA, there does not now exist, nor has
there existed within the six-year period ending on the date hereof, any act or
omission which constitutes a violation of sections 406 or 407 of ERISA and is
not exempted by section 408 of ERISA or which constitutes a violation of
section 4975(c) of the Code and is not exempted by section 4975(d) of the Code,
except for violations which, considered in the aggregate, would not have a
Material Adverse Effect.
(g) COBRA. To the best knowledge of the Co-Borrowers, the
Co-Borrowers and all of their Subsidiaries are in compliance with the
requirements of Title X of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended from time to time, except for violations which, considered
in the aggregate, would not have a Material Adverse Effect.
5.19 Environmental Matters. (a) Except as disclosed in Schedule
5.19 attached hereto, as of September 12, 1994, and provided that the Majority
Banks have not made a reasonable
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judgment that such failure of the following to be true and complete as may
exist would in the aggregate have a Material Adverse Effect: (i) the properties
and operations of Coram and each of its Subsidiaries comply in all respects
with all applicable Environmental Laws; (ii) none of the properties or
operations of Coram or any of its Subsidiaries is subject to any judicial or
administrative proceeding alleging the violation of any Environmental Law;
(iii) none of the properties or operations of Coram or any of its Subsidiaries
is the subject of any federal or state investigation concerning any use or
release of any Hazardous Substance; (iv) neither Coram nor any of its
Subsidiaries, nor, to the best knowledge of each of the Co-Borrowers, any
predecessor of Coram or any of its Subsidiaries, has filed any notice under any
federal or state law indicating past or present treatment, storage or disposal
of a Hazardous Substance or reporting a spill or release of a Hazardous
Substance into the environment; (v) neither Coram nor any of its Subsidiaries
has any contingent liability in connection with any release of any Hazardous
Substance into the environment and no such release which could, under
applicable law, require remediation has occurred; (vi) neither Coram nor any of
its Subsidiaries' operations involve the generation, transportation, treatment,
storage or disposal of Hazardous Substances, except for the generation of
Hazardous Substances in the ordinary course of business, and except for such
activities carried out through licensed independent contractors; (vii) neither
Coram nor any of its Subsidiaries has disposed of any Hazardous Substance in,
on or about any premises owned, leased or used by Coram or any of its
Subsidiaries and, to the best of the knowledge of each of the Co-Borrowers,
neither has any lessee, prior owner, or other Person; and (viii) no surface
impoundments or, to the best of the knowledge of each of the Co-Borrowers,
underground storage tanks are located in, on or about any of the premises
owned, leased or used by Coram or any of its Subsidiaries.
(b) No Lien in favor of any Governmental Authority for (i)
any liability under Environmental Laws, or (ii) damages arising from or costs
incurred by such Governmental Authority in response to a release of any
Hazardous Substance into the environment has been filed or attached to any of
the premises owned, leased or used by Coram or any of its Subsidiaries.
5.20 Insurance. Schedule 5.20 attached hereto contains a complete
and accurate list, as of September 12, 1994, of all liability insurance
policies maintained by Coram or any of its Subsidiaries. Coram and each of its
Subsidiaries maintain such insurance with insurers duly licensed in the
applicable jurisdictions, in such amounts and against such risks and losses as
is reasonable for their business and properties. All such insurance is in full
force and effect and all premiums due in respect thereof have been paid.
5.21 Compliance with Laws. Except as set forth in Schedule
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5.21 attached hereto, as of September 12, 1994, Coram and each of its
Subsidiaries are in compliance with all Governmental Requirements applicable to
their properties, assets and business with only such exceptions as in the
aggregate could not have a Material Adverse Effect. There are no proceedings
pending or, to the best of their knowledge, threatened, to terminate or modify
any material Governmental Approvals.
5.22 Statutory Regulation. Neither Coram nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended, or is, directly or indirectly, controlled by
or acting on behalf of any person which is an investment company, within the
meaning of said Act. Neither Coram nor any of its Subsidiaries is subject to
any state law or regulation regulating public utilities or similar entities, or
is, within the meaning of the Public Utility Holding Company Act of 1935, as
amended, (a) a holding company; (b) a subsidiary or affiliate of a holding
company; or (c) a public utility. Neither Coram nor any of its Subsidiaries is
subject to regulation under the Interstate Commerce Act or the Federal Power
Act or under any other federal or state statute or regulation limiting or
placing conditions upon their respective power or right to borrow money.
5.23 Use of Proceeds; Regulation U. Neither Coram nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System of the United States). No part of the proceeds of
the Loans will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock, except in compliance with such regulations. No part of the proceeds of
the Loans will be used for any purpose which violates the provisions of
Regulation G, T, U or X of said Board of Governors.
5.24 Solvency. As of the Initial Closing Date and after giving
effect to the transactions contemplated by this Agreement and the other Loan
Documents, including all of the Loans made and to be made hereunder, each of
the Co-Borrowers is Solvent and each of their respective Subsidiaries is
Solvent.
5.25 Fiscal year. The fiscal year of Coram ends on December 31.
5.26 Merger Agreement and HMSS Stock Purchase Agreement. The Banks
have received complete copies of the Merger Agreement and the HMSS Stock
Purchase Agreement. The Merger Agreement and the HMSS Stock Purchase Agreement
set forth the entire agreement among the respective parties thereto relating to
the Merger and the HMSS Acquisition, respectively. The Merger Agreement and
the HMSS Stock Purchase Agreement are in full force and effect, and no default
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exists under either thereof on the part of any party to either thereto.
5.27 Compliance With Physician Self-Referral Laws. Except as set
forth on Schedule 5.27, as of September 12, 1994, there presently exists (i) no
assertion of any claim of material violation by Coram or any of its
Subsidiaries of the Physician Self-Referral Laws, and (ii) no active inquiry,
investigation or audit with respect to the compliance of Coram and its
Subsidiaries with the Physician Self-Referral Laws.
ARTICLE 6
Affirmative Covenants
Each of the Co-Borrowers covenants and agrees that so long as any
Obligation is outstanding or any Commitment is in effect it will comply with
and, if applicable, cause each of its Subsidiaries to comply with the following
provisions:
6.1 Accounting Records. Coram and each of its Subsidiaries shall
maintain adequate books and accounts in accordance with sound business
practices and GAAP consistently applied. In the event of any changes in GAAP
or in the application of GAAP to Coram and its Subsidiaries, the parties shall,
unless they agree otherwise, continue to determine the compliance of the
Co-Borrowers with the covenants herein set forth and otherwise interpret the
provisions of this Agreement based on GAAP prior to any such changes.
6.2 Financial Statements and Notices. Coram shall furnish
directly to the Agent and each Bank the following financial statements,
information and notices:
(a) Within forty-five (45) days after the close of each
quarter of Coram's fiscal year, commencing with the fiscal quarter
ending September 30, 1994: (i) a statement of stockholders' equity for
such quarter; (ii) a statement of changes in financial position or
statement of cash flows (whichever is required by GAAP) for such
quarter; (iii) an income statement for such quarter; and (iv) a
balance sheet as of the end of such quarter. All such statements
shall be prepared on a consolidated basis for Coram and its
Subsidiaries, and on a consolidating basis for Coram and each of the
other Co-Borrowers, in reasonable detail, subject to year-end audit
adjustments and without footnotes, shall include (commencing with the
quarter ending March 31, 1995) appropriate comparisons to the same
period for the prior year, and shall be certified by the Chief
Financial Officer of Coram to have been prepared in accordance with
GAAP consistently applied, subject to year-end audit adjustments;
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(b) Within ninety (90) days after the close of each
fiscal year, commencing with the fiscal year ending December 31, 1994
a copy of the annual audit report for such year for Coram, including
for Coram and its Subsidiaries on a consolidated basis (i) a statement
of stockholders' equity for such fiscal year; (ii) a statement of
changes in financial position or statement of cash flows (whichever is
required by GAAP) for such fiscal year, (iii) an income statement for
such fiscal year, and (iv) a balance sheet as of the end of such
fiscal year, together with like unaudited consolidating statements for
Coram and its Subsidiaries. All statements required by this Paragraph
6.2(b) shall include appropriate comparisons to the prior year. Such
consolidated financial statements shall be audited by Ernst & Young or
another independent certified public accounting firm acceptable to the
Majority Banks, shall include a report of such accounting firm, which
report shall be unqualified and shall state that such financial
statements fairly present the financial position of Coram and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in
conformity with GAAP, consistently applied. Such accounting firm
shall also certify to the Agent and the Banks that in the course of
the regular annual examination of the business of Coram and its
Subsidiaries, which examination was conducted by such accounting firm
in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that an Event of Default, or
an Incipient Default, has occurred and is continuing as of the date of
certification, or if, in the opinion of such accounting firm, an Event
of Default or an Incipient Default has occurred and is continuing, a
statement as to the nature thereof;
(c) Contemporaneously with each quarterly and year-end
financial report required by the foregoing paragraphs (a) and (b),
certificates in the forms of Exhibits 6.2(c)-1 and 6.2(c)-2 attached
hereto;
(d) Contemporaneously with each year-end financial report
required by the foregoing paragraph (b), a schedule identifying all
insurance then in effect and certificates evidencing such insurance;
(e) Promptly after they are released, sent, made
available or filed, copies of all press releases, material reports,
proxy statements and financial statements that Coram sends or makes
available to its stockholders generally and all registration
statements and reports that Coram files with the Securities and
Exchange Commission, or any other governmental official, agency or
authority; copies of all such reports provided that include the
information required to be provided pursuant to Paragraph 6.2(a) or
6.2(b) shall to that extent be
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deemed to satisfy such requirements;
(f) Promptly but in no event later than one (1) Banking
Day after a Responsible Officer of any Co-Borrower obtains knowledge
of (i) the occurrence of an Event of Default or an Incipient Default,
or (ii) any default or event of default as defined in any evidence of
Indebtedness in excess of one million Dollars ($1,000,000) or under
any agreement, indenture or other instrument under which such
Indebtedness has been created, whether or not such Indebtedness is
accelerated or such default waived, the Co-Borrowers shall notify the
Agent, and, within five (5) calendar days after obtaining such
knowledge, the Co-Borrowers shall provide the Agent with a statement
of a Responsible Officer setting forth details thereof and the action
which the Co-Borrowers propose to take with respect thereto;
(g) As soon as available, any written report involving
the internal controls of Coram and its Subsidiaries submitted to Coram
by its independent public accountants in connection with their annual
or interim special audit of the financial condition of Coram and its
Subsidiaries;
(h) Promptly but in no event later than five (5) calendar
days after a Responsible Officer learns thereof, written notice of any
actual or threatened claim, litigation, suit, investigation,
proceeding or dispute against or affecting Coram or any of its
Subsidiaries, which: (i) may have a Material Adverse Effect; (ii)
involves a monetary amount in excess of one million Dollars
($1,000,000) and is not covered by insurance; (iii) is reasonably
expected to result in a strike, work stoppage, boycott, shutdown or
other labor disruption against or involving Coram or any of its
Subsidiaries which could reasonably be expected to have a Material
Adverse Effect; (iv) could reasonably be expected materially to limit,
prohibit or restrict the manner in which Coram or any of its
Subsidiaries currently conducts its business; or (v) concerns any
alleged violation by Coram or any of its Subsidiaries, or any of their
respective predecessors, of any Environmental Law, where there exists
a reasonable possibility that such violation could materially affect
any of the properties or the operations of Coram or such Subsidiary or
any alleged material noncompliance of any of the properties or the
operations of Coram or such Subsidiary therewith;
(i) As soon as possible, and in any event within twenty
(20) calendar days, after a Responsible Officer learns that any of the
following events has occurred, such Responsible Officer shall deliver
to the Agent a statement describing such event and any action that the
Co-Borrowers propose to take with respect thereto: (i) any Reportable
Event with respect to
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a Pension Plan; (ii) the institution of proceedings by the PBGC to
terminate any Pension Plan or to have a trustee appointed to
administer such plan, or receipt of notice of any intention by the
PBGC to do so; (iii) the filing of a request for a minimum funding
waiver by a Co-Borrower or a member of the Controlled Group under
section 412 of the Code with respect to any Pension Plan or any
employee pension benefit plan (as defined in section 3(2) of ERISA)
maintained by any member of the ERISA Affiliated Group; or (iv) the
receipt by any Co-Borrower or any other member of the Controlled
Group of a material demand for withdrawal liability under section 4219
or 4202 of ERISA;
(j) As soon as possible, and in any event within ten (10)
days after receipt of a written request from the Agent or the Majority
Banks, the Co-Borrowers shall deliver to the Agent, as requested by
either the Agent or the Majority Banks: (i) a copy of any Employee
Benefit Plan or summary description of such plan; (ii) a copy of any
report, description or other document filed with any governmental
agency with respect to any Employee Benefit Plan or any plan (as
defined in section 3(3) of ERISA) maintained by any Co-Borrower or any
ERISA Affiliate; or (ii) a copy of any notice, determination letter,
ruling or opinion that any Co-Borrower or any other Controlled Group
member receives from any governmental agency with respect to any
Employee Benefit Plan;
(k) Not later than forty-five (45) days prior to
commencement of each fiscal year of Coram, a copy of Coram's
consolidated financial projections for such fiscal year, including a
projected consolidated balance sheet, income statement, and statement
of changes in financial position or statement of cash flows for and as
of the end of such fiscal year;
(l) Within a reasonable time after a request therefor,
such other information as the Agent or the Majority Banks may
reasonably request; and
(m) Within five (5) Banking Days from the end of each
calendar month, a report setting forth the month end balance in each
deposit account maintained by Coram and each of its Subsidiaries.
6.3 Inspection of Property Books and Records. (a) Coram and each
of its Subsidiaries shall permit the Agent or any of the Banks, at such
reasonable times and intervals as the Agent or Banks may designate upon
reasonable notice, at their own expense, by and through the representatives of
the Agent or any of the Banks, to inspect, audit and examine their respective
books and records, to make copies thereof, to discuss their respective affairs,
finances and accounts with their respective officers and independent public
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accountants, and to visit and inspect their respective properties; provided,
however, when an Event of Default exists representatives of the Agent or any of
the Banks may visit and inspect at the expense of the Co-Borrowers such
properties at any time during business hours and without advance notice.
(b) Coram and its Subsidiaries shall extend their cooperation and
assistance and comply with the requests of the Agent or the Majority Banks or
their respective representatives in connection with any audit regarding the
Collateral and will furnish any information requested in respect thereof,
including, without limitation, appraisals of the Collateral, lien search
reports, and physical counts. At the request of the Agent or the Majority
Banks, the Co-Borrowers shall pay the reasonable fees and expenses of an
accounting firm selected by the Majority Banks to conduct examinations of the
Accounts of Coram and its Subsidiaries from time to time. The Co-Borrowers
shall also pay all reasonable out-of-pocket expenses of the Collateral Agent in
connection with any other audit or examination of the Collateral hereunder.
6.4 Maintenance of Existence. Coram and each of its Subsidiaries
shall preserve and maintain their respective existences and all of their
material licenses, permits, privileges and franchises and other rights
necessary or desirable in the normal course of their businesses, and will use
reasonable efforts, in the ordinary course and consistent with past practice,
to preserve their respective business organization and preserve the goodwill
and business of the customers, suppliers and others having business relations
with them; provided, however, that the foregoing shall not preclude the merger
of any Wholly Owned Subsidiary of Coram into another Wholly Owned Subsidiary of
Coram if permitted under Paragraph 7.1 hereof
6.5 Tax Returns. Coram and each of its Subsidiaries shall file
all federal and state income tax returns which are required to be filed, and
shall pay all taxes as shown on said returns and on all assessments received by
it to the extent that such taxes have become due, except any such assessments
which are being contested in good faith and for which such reserve as is
required by GAAP has been created.
6.6 Qualifications To Do Business. Coram and each of its
Subsidiaries shall qualify to do business and shall remain in good standing in
each jurisdiction in which the nature of their business requires them to be so
qualified, except where the failure to so qualify could not in the aggregate
have a Material Adverse Effect.
6.7 Compliance with Laws. Coram and its Subsidiaries shall comply
with all Governmental Requirements, except where the failure to do so could not
have a Material Adverse Effect.
6.8 Material Agreements. Coram and its Subsidiaries shall
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comply in all respects with the terms of each agreement to which any of them is
a party, except where all instances of any failure to so comply would not, in
the aggregate, have a Material Adverse Effect.
6.9 Insurance. Coram and its Subsidiaries shall maintain in full
force and effect insurance of such types and in such amounts as are customarily
carried in their respective lines of business, including, but not limited to,
fire, hazard, public liability, property damage, products liability and
workers' compensation insurance. All such insurance policies which insure real
or personal property shall include a standard form Lender's loss payee
endorsement, naming the Collateral Agent as loss payee. All such insurance
policies which insure liability shall name the Agent as additional insureds for
the benefit of the Agent and each Bank. Coram and its Subsidiaries shall
deliver or cause to be delivered to the Agent, as the Agent may from time to
time request, schedules identifying all insurance then in effect and
certificates evidencing such insurance.
6.10 Facilities. Coram and its Subsidiaries shall keep the
material properties (in the aggregate) used in their respective businesses in
good repair, working order and condition, and from time to time shall make
necessary repairs or replacements thereto so that their property shall be
maintained adequately for its intended use.
6.11 Taxes and Other Liabilities. Coram and its Subsidiaries shall
pay and discharge when due any and all indebtedness, obligations, liabilities,
assessments and real and personal property taxes, including, but not limited
to, federal and state income and personal and real property taxes, except as
may be subject to good faith contest or as to which a bona fide dispute may
arise; provided, however, that adequate reserves in accordance with GAAP or
other provision is made to the satisfaction of the Majority Banks for prompt
payment thereof in the event that it is found that any of the above are due and
owing.
6.12 Governmental Approvals. Except where the failure to do so
could not have a Material Adverse Effect, Coram and its Subsidiaries shall
apply for, diligently pursue, and obtain or cause to be obtained, and shall
thereafter maintain in full force and effect all Governmental Approvals that
shall now or hereafter be necessary under any Governmental Requirement (i) for
land use, public and employee health and safety, pollution or protection of the
environment, and (ii) for the operation of the business of Coram and the
Subsidiaries. The Co-Borrowers shall promptly notify the Agent in the event of
any, and provide the Agent with a copy of all notices of, denial, suspension,
or revocation of any material Governmental Approvals.
6.13 Compliance with Governmental Approvals and Governmental
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Requirements. Except where the failure to do so could not have a Material
Adverse Effect, Coram and each of its Subsidiaries shall comply with all terms
and conditions of all Governmental Approvals and with all other limitations,
restrictions, obligations, schedules, timetables and reporting requirements in
any Governmental Requirements in all material respects.
6.14 Compliance with Environmental Laws. Coram shall, and shall
cause each of its Subsidiaries to, conduct its respective operations and keep
and maintain its respective property in substantial compliance with all
Environmental Laws.
6.15 Prevent Contamination. Coram and its Subsidiaries shall
conduct their operations in such a way as to prevent material contamination of
any part of their respective properties by any Hazardous Substance. Coram and
its Subsidiaries shall manage all Hazardous Substances in a manner that does
not require a Hazardous Waste Facility Permit, and in compliance in all
material respects with all Governmental Requirements and Governmental
Approvals. Without limiting the foregoing covenants, Coram and its
Subsidiaries shall not intentionally or recklessly, shall endeavor not to
unintentionally, and shall not permit any other Person to, emit, release or
discharge into air, soil, surface water or groundwater, any Hazardous Substance
in excess of permitted levels or reportable quantities, or other
concentrations, standards, or limitations under any Governmental Requirements
or Governmental Approvals.
6.16 Tax Qualification. For any Employee Benefit Plan which is
intended to be qualified under section 401(a) of the Code, the Co-Borrowers
shall, or shall use their best efforts to cause the respective member of the
Controlled Group to:
(a) Use its best efforts to seek and receive
determination letters from the Internal Revenue Service stating that
such plan, or any material amendment to such plan, meets the
requirements for qualification under section 401(a) of the Code,
unless there is no reasonable possibility that the failure to do so
would have a Material Adverse Effect;
(b) Use its best efforts to cause such plan to meet such
requirements in operation and to be administered in accordance with
the requirements of the Code and ERISA, unless the failure to do so
could not reasonably be expected to result in a liability described in
Section 8.2(h)(i); and
(c) Use its best efforts to refrain from taking any
action that would cause such plan to lose its qualification under
section 401(a) of the Code or to violate the requirements of the Code
or ERISA in any material respect.
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6.17 Funding. Each Co-Borrower shall, and shall use its best
efforts to cause each other member of the Controlled Group to, make all
material contributions that it is required to make by law or by any plan prior
to the earliest date when statutory Liens could be imposed under the Code or
ERISA on any assets of such Co-Borrower or such member of the Controlled Group
in order to satisfy payment of such contributions. Each Co-Borrower shall not,
and shall use its best efforts to not permit any other member of the Controlled
Group to, allow or suffer any material statutory Lien to be placed upon its
assets under the Code or ERISA.
6.18 Financial Tests. The Co-Borrowers shall,
(a) Maintain for the period of three (3) fiscal quarters
ending September 30, 1994, and each period of four (4) fiscal quarters
ending at the end of each fiscal quarter thereafter, a Leverage Ratio
of not more than 3.00 to 1.00;
(b) Maintain EBITDA of not less than the following for
each period indicated:
<TABLE>
<CAPTION>
Period Minimum EBITDA
------ --------------
<S> <C>
Three (3) fiscal quarters
ending September 30, 1994 $28,125,000
Four (4) fiscal quarters
ending on December 31, 1994 $37,500,000
Four (4) fiscal quarters
ending on the last day
of each fiscal quarter
commencing with the
fiscal quarter ending
March 31, 1995 $45,000,000
</TABLE>
(c) Maintain a Cash Flow Coverage Ratio of not less than
2.00 to 1.00 for the period of three (3) fiscal quarters ending
September 30, 1994, and thereafter for the period of four (4) fiscal
quarters ending on the last day of each fiscal quarter, commencing
with the quarter ending December 31, 1994; and
(d) Maintain a Sales Turnover Ratio of not less than 3.25
to 1.00 for the period of three (3) fiscal quarters ending September
30, 1994, and thereafter for the period of four (4) fiscal quarters
ending on the last day of each fiscal quarter, commencing with the
quarter ending December 31, 1994.
6.19 Concentration Account. The Co-Borrowers shall maintain the
Concentration Account with a financial institution which is acceptable to the
Agent and which has entered into an agreement
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allowing a lien to be placed on such account by the Agent and the Banks. All
other bank accounts maintained by Coram and any of its Wholly Owned
Subsidiaries (other than accounts maintained exclusively for the purpose of
making disbursements) shall be and at all times remain subject to instructions
to transfer all funds out of such accounts into the Concentration Account no
less frequently than Friday of each week (or, when a Friday is not a Banking
Day, then on the previous Banking Day).
6.20 Compliance Procedures. Coram and its Subsidiaries shall at
all times comply with applicable Physician Self Referral Laws and shall
maintain adequate internal audit procedures to assure substantial compliance
with applicable Physician Self-Referral Laws.
ARTICLE 7
Negative Covenants
Each of the Co-Borrowers covenants and agrees that so long as any
Obligation is outstanding or any Commitment is in effect, it will comply with
and, if applicable, cause each of its Subsidiaries to comply with the following
provisions:
7.1 Mergers. Neither Coram nor any of its Subsidiaries shall
enter into any merger, consolidation, reorganization or recapitalization, or
any agreement to do any of the foregoing, except pursuant to a Permitted
Acquisition and except that any Wholly Owned Subsidiary of Coram may be merged
into another Wholly Owned Subsidiary of Coram.
7.2 Change of Business. Neither Coram nor any of its Subsidiaries
shall change the nature of its business or engage in any other business other
than the businesses which are substantially similar to the lines of business in
which Coram and its Subsidiaries are engaged as of the Initial Closing Date.
7.3 Distributions. Neither Coram nor any of its Subsidiaries
shall, directly or indirectly, make or declare any dividend (in cash,
securities or any other form of property) on, or other payment or distribution
on account of, or set aside assets for a sinking or other similar fund for
purchase, or redeem, purchase, retire or otherwise acquire, any capital stock
of Coram, or make any other distribution in respect thereof, whether in cash or
other property; provided, however, that (a) Coram may declare and distribute
dividends payable solely in its common stock; and (b) provided that no
Incipient Default or Event of Default exists, then (i) Coram may repurchase
shares of its common stock from former employees at an amount not to exceed the
then current market value for such stock, and (ii) Coram may make other
distributions or payments in respect of its capital stock not to exceed two
hundred
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fifty thousand Dollars ($250,000) in the aggregate.
7.4 Accounting Policies. Except in order to comply with GAAP,
Coram shall not materially change any of its accounting policies or its fiscal
year or the fiscal year of any of its Subsidiaries (except that the fiscal year
of T2 may be changed to December 31).
7.5 Investments. Neither Coram nor any of its Subsidiaries shall
make (or acquire as part of an acquisition) any Investment, except (a) future
investments in any Wholly Owned Subsidiary of Coram (provided that such Wholly
Owned Subsidiary is a Subsidiary Guarantor and is a party to the Security
Agreement); (b) Investments in cash or cash equivalents; (c) Investments in
accordance with the Cash Management Policy (provided that no such Investment
may be made in stock, securities or obligations of the Agent or of any
affiliate thereof (as defined in Section 23A of the Federal Reserve Act, 12
U.S.C. 371(c), as amended from time to time, or in a collective investment fund
as described in 12 C.F.R. 9.18 maintained by the Agent); (d) Permitted
Acquisitions; (e) Investments by Coram consisting of loans at arms' length
terms to any Person in which Coram, directly or indirectly, owns more than a
twenty percent (20%) equity interest (but which is not a Wholly Owned
Subsidiary of Coram), provided that at all times the Collateral Agent has a
perfected security interest in all of Coram's rights to repayment thereof and
security therefor, and further provided that the aggregate principal amount of
such loans outstanding at any time, when added to the aggregate amount of
Investments made pursuant to clause (g) below, shall not exceed four million
Dollars ($4,000,000); (f) Employee Loans not exceeding three million Dollars
($3,000,000) in aggregate principal amount at any time outstanding; and (g)
other Investments not exceeding five million Dollars ($5,000,000) in the
aggregate.
7.6 Liens. Neither Coram nor any of its Subsidiaries shall
mortgage, pledge, grant or permit to exist a security interest in, or Lien
upon, any of their respective assets of any kind now owned or hereafter
acquired, or any income or profits therefrom, except for Permitted
Encumbrances.
7.7 Contingent Obligations. Neither Coram nor any of its
Subsidiaries shall become liable, directly or indirectly, for any Contingent
Obligation except: (a) endorsements for collection or deposit in the ordinary
course of business; (b) Contingent Obligations incurred by Coram or one of its
Subsidiaries for the benefit of Coram or one of its Wholly owned Subsidiaries;
(c) contingent Obligations of Coram and its Subsidiaries existing as of the
Initial Closing Date; and (d) Contingent obligations incurred by Coram or one
of its Wholly Owned Subsidiaries for the benefit of a Subsidiary which is not a
Wholly Owned Subsidiary of Coram, which Contingent obligations outstanding
under this clause (d) do not at any time exceed one million Dollars
($1,000,000) in the aggregate.
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7.8 Indebtedness. Neither Coram nor any of its Subsidiaries shall
incur, create, assume or permit to exist any Indebtedness except: (a) the
Obligations; (b) Indebtedness where payment is secured by a Permitted
Encumbrance (other than a Permitted Encumbrance described in clause (k) of the
definition of "Permitted Encumbrances"); (c) taxes, assessments and
governmental charges or levies which are not delinquent or which are being
contested in good faith and for which, in accordance with GAAP adequate
reserves have been set aside on the books of Coram or the affected Subsidiary
of Coram; (d) current liabilities incurred in connection with the obtaining of
goods or services in the ordinary course of business; (e) Indebtedness incurred
to finance a Permitted Acquisition, provided that the condition specified
therefor in clause (e)(iii) of the definition of "Permitted Acquisition" is
satisfied; (f) Indebtedness owing by a Subsidiary acquired in a Permitted
Acquisition provided that such Indebtedness was not incurred or created in
connection with or in contemplation of such Permitted Acquisition; (g)
Indebtedness owing from Coram to a Wholly Owned Subsidiary of Coram or from one
Wholly Owned Subsidiary of Coram to another Wholly Owned Subsidiary of Coram;
(h) Indebtedness incurred in connection with Rate Contracts; (i) Indebtedness
which is subordinated to payment of the Obligations, provided that the terms of
repayment of such Indebtedness and the terms of subordination are acceptable to
Majority Banks; (j) Indebtedness undertaken by Coram in settlement of
contingent obligations to pay additional consideration undertaken in connection
with the acquisition prior to the Initial Closing Date of capital stock or
other ownership of a business or a line of business, but not to exceed one
million five hundred thousand Dollars ($1,500,000) in the aggregate; (k)
Indebtedness of a Subsidiary of Coram incurred by reason of an Investment made
pursuant to Paragraph 7.5(e) hereof; (I) Contingent Obligations permitted under
Paragraph 7.7 hereof; (m) interest-bearing Indebtedness shown on Schedule 7.8
and any other Indebtedness (other than interest-bearing Indebtedness) existing
on the Initial Closing Date; and (n) any extensions, renewals and refinancings
of the Indebtedness securing Permitted Encumbrances described in clauses (g),
(h) and (i) of the definition of "Permitted Encumbrances", provided that the
principal amount of such Indebtedness is not increased.
7.9 Sale of Assets. Other than (a) sales of assets (excluding
readily marketable securities) where the aggregate gross cash proceeds
therefrom do not exceed five million Dollars ($5,000,000) for any calendar
year, (b) sales of readily marketable securities, and (c) sales of the assets
set forth on Schedule 2.3(c)(ii) attached hereto, neither Coram nor any of its
Subsidiaries shall sell, transfer or otherwise dispose of any of their
respective assets (including, but not limited to, sales of stock of
Subsidiaries, but excluding sales, transfers, leases or other dispositions
between or among any of Coram and any of its Wholly Owned Subsidiaries).
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7.10 Sale-Leaseback Transactions. Neither Coram nor any of its
Subsidiaries shall enter into any Sale- Leaseback Transaction.
7.11 Capital Expenditures. Coram and its Subsidiaries, considered
in the aggregate, shall not during any calendar year make Consolidated Capital
Expenditures in excess of fifteen million Dollars ($15,000,000).
7.12 Transactions with Affiliates. Excepting the transactions or
arrangements described in Schedule 7.12 attached hereto, neither Coram nor any
of its Subsidiaries shall, directly or indirectly, enter into any transaction
or permit to exist any relationship material to Coram or any of its
Subsidiaries with or for the benefit of an Affiliate on terms which are not
fair and reasonable to Coram or such Subsidiary. Prior to Coram or any of its
Subsidiaries engaging in any transaction or relationship permitted by this
Paragraph 7.12, the board of directors of Coram shall determine that such
transaction has been negotiated or such relationship will be conducted in good
faith and that such transaction is fair and reasonable to Coram (or its
Subsidiary) and such determination shall be evidenced by a resolution of the
board of directors of Coram; provided, however, that no member of such board of
directors affiliated (except by virtue of being members of the board of
directors or by being employed by Coram or one of its Subsidiaries) with any
such Affiliate shall participate in such determination with respect to
transactions or relationships in which such holder or Affiliate is a
participant.
7.13 Restrictive Agreements. Coram shall not and shall not permit
any of its Subsidiaries to enter into any agreement which restricts the ability
or right of any such Subsidiary to make payments to Coram or another Subsidiary
of Coram by way of dividends, distributions, returns of capital, advances,
reimbursement or otherwise.
7.14 Prepayments. Neither Coram nor any of its Subsidiaries shall
prepay any Indebtedness which is subordinated to the Obligations.
7.15 Certain ERISA Payments. No Co-Borrower shall, and none of
their respective Subsidiaries shall, make any payment of any material liability
arising under ERISA or under the Code of any Controlled Group member which is
not a Subsidiary of such Co-Borrower.
7.16 Compliance with ERISA. No Co-Borrower shall, directly or
indirectly, and each Co-Borrower shall use its best efforts to prevent any
Controlled Group member from directly or indirectly undertaking to:
(a) Maintain, become a party to, contribute to or become
or be obligated to contribute to a Pension Plan, if such
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maintenance or contribution would result in material unfunded
liabilities in excess of one million Dollars ($1,000,000) immediately
following such action;
(b) Maintain, become a party to, contribute to or become
obligated to contribute to a material plan maintained outside of the
United States primarily for the benefit of persons substantially all
of whom are nonresident aliens, as described in section 4(b) (4) of
ERISA; or
(c) Maintain, become a party to, contribute to or being
obligated to contribute to or otherwise provide material health care
or material life insurance benefits to retirees or survivors of
employees.
7.17 Litigation Settlement. T2 shall not carry out any settlement
with respect to the T2 Shareholder Litigation if such settlement agreement
would require that cash payments (net of insurance proceeds received by T2 or
which T2 has a right to receive under a binding written agreement) aggregating
more than twenty-five million Dollars ($25,000,000) be made to or for the
benefit of the plaintiffs (a "Nonpermitted Settlement"), and T2 shall not enter
into any such agreement to carry out any such Nonpermitted Settlement unless
the obligations of T2 thereunder are conditional upon approval thereof by the
Majority Banks under this Agreement or upon payment in full of the Obligations
and complete termination of the Commitments.
7.18 Adoption of "Rabbi Trust". Neither Coram nor any of its
Subsidiaries shall adopt or fund any so-called "rabbi trust" unless the terms
thereof, the Security Agreement and such other documents as may be executed
pursuant to the Security Agreement result in the Collateral Agent and the Banks
having a perfected security interest of first priority in the right of
reversion with respect thereto in favor of the trustor, its creditors, or a
trustee of the trustor's estate.
ARTICLE 8
Events of Default
8.1 Events of Default. Each of the following shall constitute an
Event of Default under this Agreement:
(a) Payments. The Co-Borrowers shall fail to pay when
due any installment of principal or interest due hereunder, or the
Co-Borrowers shall fail to pay not later than two (2) Banking Days
after the date when due any other sum payable hereunder or under any
of the other Loan Documents;
(b) Certain Covenants in This Agreement. Any Co-
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Borrower shall default in the performance of any of its agreements set
forth in Paragraphs 6.18 through 6.21 hereof or in Article 7 hereof;
(c) Other Covenants and Agreements. Coram or any of its
Subsidiaries shall default in the performance of any of their
respective agreements set forth in any other provision herein or in
the Guaranty or in any of the other Loan Documents (and not
constituting an Event of Default under any of the other clauses of
this Paragraph 8.1) and continuation of such default for thirty (30)
days after written notice thereof to the Co-Borrowers from the Agent;
(d) Representations and Warranties. Any representation,
warranty or certification made by any of the Co-Borrowers or any of
their Subsidiaries or any officer of any of the Co-Borrowers or any of
their Subsidiaries, in any of the Loan Documents, shall be untrue in
any material respect, on any date as of which the facts set forth are
stated or certified;
(e) Monetary Judgment. A judgment shall be entered
against Coram or any of its Subsidiaries in the uninsured or unbonded
portion of which is in excess of five million Dollars ($5,000,000) and
such judgment shall remain unstayed, unvacated, undischarged or
unsatisfied for thirty (30) days;
(f) Non-Monetary Judgments. Any final nonmonetary
judgment, order or decree shall be rendered against Coram or any of
its Subsidiaries which may have a Material Adverse Effect, and either
(i) enforcement proceedings shall have been commenced by any Person
upon such judgment or order or (ii) there shall be any period of
thirty (30) days during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise, shall not be in
effect, unless such judgment, order or decree shall, within such
thirty-day period, be vacated or discharged (other than by
satisfaction thereof);
(g) Liens for Pension Contributions. Any statutory Lien
shall have been placed upon the assets of any Co-Borrower or any
member of the Controlled Group under the Code or ERISA in an amount in
excess of two hundred and fifty thousand Dollars ($250,000);
(h) ERISA. (i) An Employee Benefit Plan that is intended
to be qualified under section 401(a) of the Code shall lose its
qualification, and the resulting loss or cost to any Co-Borrower or
any other member of the Controlled Group can reasonably be expected to
exceed five million Dollars ($5,000,000); (ii) the commencement or
increase of contributions to, the adoption of, or the amendment of a
Pension Plan by, any Co-Borrower or any other Controlled Group
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member shall result in a net increase in unfunded liabilities to any
Co-Borrower or any other Controlled Group member in the aggregate in
excess of five million Dollars ($5,000,000) immediately following such
action; (iii) any termination of a single employer Employee Benefit
Plan (as defined in section 4001(a) (15) of ERISA, but also including
a plan amendment described in section 4041(e) of ERISA) or any
complete or partial withdrawal from a Multiemployer Plan shall occur,
or steps shall have been taken by any Person that make it reasonable
to expect that such termination or withdrawal will occur, and such
termination or withdrawal could reasonably be expected to result in
liability of any Co-Borrower or any member of the Controlled Group to
the PBGC, to a trustee or to such Multiemployer Plan in the aggregate
amount of five million Dollars ($5,000,000) or more; (iv) a
Co-Borrower or any member of the Controlled Group shall apply under
section 412 of the Code for a waiver of the minimum funding standard;
or (v) a Co-Borrower or any member of the Controlled Group shall incur
liability attributable to the participation of a member of the ERISA
Affiliated Group (other than the Co-Borrower or a member of the
Controlled Group) in an employee benefit plan (as defined in section
3(3) of ERISA) and such liability will or can reasonably be expected
to have a Material Adverse Effect;
(i) Cross-Default. Coram or any of its Subsidiaries
shall default (unless waived) in the payment when due, whether by
acceleration or otherwise, of any amount of principal or interest due
in respect of Indebtedness in an aggregate principal amount greater
than five million Dollars ($5,000,000), or any guaranty of such
indebtedness, or default (unless waived) in the performance or
observance (subject to any applicable grace period) of any agreement,
covenant or condition with respect to any such Indebtedness or
guaranty if the effect of such default is to accelerate the maturity
of any such indebtedness or to permit the holder or holders of any
such Indebtedness or guaranty, or any trustee or agent for such
holders, to cause such indebtedness to become due and payable prior to
its expressed maturity or to call upon such guaranty in advance of
nonpayment of the guaranteed indebtedness;
(j) Bankruptcy. Coram or any of its Subsidiaries shall
institute a voluntary case seeking liquidation or reorganization under
Chapter 7 or Chapter 11, respectively, of the United States Bankruptcy
Code, or shall consent to the institution of an involuntary case
thereunder against it; or Coram or any of its Subsidiaries shall file
a petition initiating or shall otherwise institute any similar
Insolvency Proceeding under any other applicable federal or state law,
or shall consent thereto; or Coram or any of its Subsidiaries shall
apply for, or by consent or acquiescence there shall be
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an appointment of, a receiver, liquidator, sequestrator, trustee or
other officer with similar powers, or Coram or any of its Subsidiaries
shall make an assignment for the benefit of creditors; or Coram or any
of its Subsidiaries shall admit in writing its inability to pay its
debts generally as they become due; or, if an involuntary case shall
be commenced seeking the liquidation or reorganization of Coram or any
of its Subsidiaries under Chapter 7 or Chapter 11, respectively, of
the United States Bankruptcy Code, or any similar proceeding shall be
commenced against Coram or any of its Subsidiaries under any other
applicable federal or state law, and (i) the petition commencing the
involuntary case is not timely controverted; or (ii) the petition
commencing the involuntary case is not dismissed within forty-five
(45) days of its filing; or (iii) an interim trustee is appointed to
take possession of all or a portion of the property and/or to operate
all or any part of the business of Coram or such Subsidiary; or (iv)
an order for relief shall have been issued or entered therein; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee or other
officer having similar powers over Coram or such Subsidiary, or of all
or a part of the property of any of the foregoing, shall have been
entered; or any other similar relief shall be granted against Coram or
any of its Subsidiaries under any applicable federal or state law;
(k) Material Adverse Change. The Majority Banks shall
have determined in their reasonable judgment that a Material Adverse
Change has occurred since September 30, 1993;
(l) Invalidity of Loan Documents. Any of the Loan
Documents shall cease for any reason to be in full force and effect or
any party thereto (other than the Agent or the Banks) shall purport to
disavow its obligations thereunder, shall declare that it does not
have any further obligation thereunder or shall contest the validity
or enforceability thereof;
(m) Impairment of Collateral. A judgment creditor of any
of the Co-Borrowers or any of their Subsidiaries shall obtain
possession of any of the Collateral having a value in excess of five
million Dollars ($5,000,000) by any means, including, but not limited
to, levy, distraint, replevin or self-help, or the Collateral Agent's
or the Banks' security interest in, or Lien on, any portion of the
Collateral with a fair market value in excess of five million Dollars
($5,000,000) shall become impaired or otherwise unenforceable;
(n) Change of Control. A Change of Control shall occur;
or
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(o) Change of Management. James Sweeney shall cease to
act as Chairman of the Board of Directors and Chief Executive Officer
of Coram.
8.2 Termination of Commitment and Acceleration. If any Event of
Default described in Paragraph 8.1(j) hereof shall occur, the Commitments shall
terminate immediately, and the Notes and all other obligations shall become
immediately due and payable, all without notice of any kind. If any other
Event of Default shall be continuing, the Agent or the Majority Banks may
declare the Commitments to be terminated and the outstanding Notes and all
other Obligations to be due and payable, or all of the foregoing, whereupon the
Commitments shall be terminated and the Notes and all other Obligations shall
immediately become due and payable, all as so declared by the Agent or the
Majority Banks and without presentment, demand, protest or other notice of any
kind. Any such declaration made pursuant to this Paragraph 8.2 may be
rescinded by the Agent or the Majority Banks.
ARTICLE 9
The Agent
9.1 Appointment and Authorization. Each Bank hereby irrevocably
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan 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 Loan 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 Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or 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 Loan Document or
otherwise exist against the Agent.
9.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan 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. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that has been
selected with reasonable care.
9.3 Liability of Agent. Neither the Agent, nor any of its
Affiliates, nor any of their respective officers, directors, employees, agents,
or attorneys-in-fact (collectively, 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
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Agreement (except for their own gross negligence or willful misconduct) or (b)
be responsible in any manner to any of the Banks for any recital, statement,
representation or warranty made by the Co-Borrowers or any Subsidiary of Coram
or any officer thereof contained in this Agreement or in any other Loan
Document, or in any certificate, report, statement or other document referred
to or provided for in, or received by the Agent under or in connection with,
this Agreement or any other Loan Document, or for the value of any Collateral
or the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of any
Co-Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. 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 Loan Document, or to inspect the properties, books or records of Coram or
any of its Subsidiaries.
9.4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, facsimile or telephone message, statement or
other document or conversation believed by the Agent 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 Coram or any of
its Subsidiaries), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless the Agent shall
first receive such advice or concurrence of the Majority Banks as the Agent
shall deem appropriate and, if the Agent so requests, the Agent shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by the Agent by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Majority Banks and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Paragraphs 4.1 and 4.2 hereof, each Bank shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or
other matter required thereunder to be consented to or approved by or
acceptable or satisfactory to the Majority Banks unless an officer of the Agent
responsible for the transactions contemplated by the Loan Documents shall have
received notice from a Bank prior to the extension of a Borrowing specifying
its objection thereto and either such objection shall not have been withdrawn
by notice to the Agent to that effect or such Bank shall
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not have made available to the Agent the Bank's ratable portion of such
Borrowing.
9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
payable to the Agent for the account of the Banks, unless the Agent shall have
received written notice from a Bank or a Co-Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Banks. The Agent shall take
such action with respect to such Default or Event of Default as shall be
requested by the Majority Banks in accordance with Article 8; provided,
however, that unless and until the Agent shall have received any such request,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as the
Agent shall deem advisable in the best interests of the Banks.
9.6 Credit Decision. Each Bank expressly acknowledges that none
of the Agent-Related Persons has made any representation or warranty to it and
that no act by the Agent hereinafter taken, including any review of the affairs
of Coram and its Subsidiaries shall be deemed to constitute any representation
or warranty by the Agent to any Bank. Each Bank represents to the Agent that
it has, independently and without reliance upon the Agent 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 Coram and its
Subsidiaries and made its own decision to enter into this Agreement and extend
credit to the Co-Borrowers hereunder. Each Bank also represents that it will,
independently and without reliance upon the Agent 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 Loan 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 Coram and its Subsidiaries. Except for notices, reports
and other documents expressly required to be furnished to the Banks by the
Agent hereunder, the Agent 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 Coram and its Subsidiaries which may come into the
possession of any of the Agent-Related Persons.
9.7 Indemnification. The Banks agree to indemnify the
Agent-Related Persons (to the extent not reimbursed by or on behalf of
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the Co-Borrowers and without limiting the obligation of the Co-Borrowers to do
so), ratably according to the respective amounts of their outstanding Loans,
or, if no Loans are outstanding, their outstanding Commitment Percentages, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind
whatsoever which may at any time (including at any time following the repayment
of the Loans) be imposed on, incurred by or asserted against any such person
any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any such
person under or in connection with any of the foregoing; provided, however,
that no Bank shall be liable for the payment to the Agent-Related Persons of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from such person's gross negligence or willful misconduct. Without limitation
of the foregoing, each Bank shall reimburse the Agent promptly upon demand for
its ratable share of any costs or out-of-pocket expenses (including attorneys'
fees and the allocated cost of in-house counsel) incurred by the 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 Loan Document, or any
document contemplated by or referred to herein to the extent that the Agent is
not reimbursed for such expenses by or on behalf of the Co-Borrowers.
9.8 Agent in Individual Capacity. The Agent and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from and generally engage in any kind of business with Coram or any of its
Subsidiaries as though the Agent were not the Agent hereunder and without
notice to the Banks. With respect to its Loans, the Agent shall have the same
rights and powers under this Agreement as any other Bank and may exercise the
same as though it were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
9.9 Successor Agent. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon thirty (30) days' notice to the
Banks. The new Agent shall succeed to all the rights, powers and duties of the
Agent hereunder, including the rights, powers and duties of the Agent as the
Collateral Agent. If no successor Agent is appointed prior to the effective
date of the resignation of the Agent, the Agent shall appoint, after consulting
with the Banks and Coram, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor Agent hereunder, such successor
Agent shall succeed to all the rights, powers and duties of the prior Agent,
and the retiring Agent's rights, powers and duties as such shall be terminated.
After any retiring Agent's resignation hereunder as such, the provisions of
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this Article 9 and Paragraphs 10.6, 10.7 and 10.8 hereof shall inure to the
benefit of such Agent as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
ARTICLE 10
Miscellaneous
10.1 Successors and Assigns and Sale of Interests.
(a) The terms and provisions of this Agreement shall be binding
upon, and, subject to the provisions of this Paragraph 10.1, the benefits
thereof shall inure to, the parties hereto and their respective successors and
assigns; provided, however, that no Co-Borrower may assign this Agreement or
any of the rights, duties or obligations of such Co-Borrower hereunder without
the prior written consent of all of the Banks.
(b) Any Bank, with the written consent of Coram, which shall not
be unreasonably withheld, and with the written consent of the Agent, and upon
three (3) Banking Days' written notice to the Agent, may at any time assign and
delegate to any Person, or, with notice to Coram and the Agent but without the
consent of either Coram or the Agent, may assign and delegate to any of its
wholly owned Affiliates (each an "Assignee") all or any part of the Loans or
the Commitments or any other rights or obligations of such Bank hereunder in a
minimum amount of five million Dollars ($5,000,000), representing the principal
amount of the Loans assigned plus the amount of the Commitment Percentage so
assigned multiplied by the Total Commitment Amount; provided, however, that the
Co-Borrowers and the Agent may continue to deal solely and directly with such
Bank in connection with the interests so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Co-Borrowers and the Agent by such Bank and the Assignee and (ii)
such Bank and its Assignee shall have delivered to the Co-Borrowers and the
Agent an Assignment and Acceptance in the form of Exhibit 10.1 (an "Assignment
and Acceptance") together with any Note or Notes subject to such assignment;
and (iii) the processing fees of three thousand five hundred Dollars ($3,500)
shall have been paid to the Agent.
(c) From and after the date that the Agent notifies the assignor
Bank that it has received the Assignment and Acceptance, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Bank under the Loan
Documents and (ii) assignor Bank shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Page 86 of 96 pages
<PAGE> 68
Acceptance, relinquish its rights and be released from its obligations under
the Loan Documents.
(d) Within five (5) Banking Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance, the
Co-Borrowers shall execute and deliver to the Agent new Notes evidencing such
Assignee's assigned Loans and Commitment Amount and, if the assignor Bank has
retained a portion of its Loans and its Commitment Amount, replacement Notes in
the Commitment Amount retained by the assignor Bank (such Notes to be in
exchange for, but not in payment of, the Notes held by such Bank). Immediately
upon each Assignee's making its payment under the Assignment and Acceptance,
this Agreement shall be deemed to be amended to the extent, but only to the
extent necessary to reflect the addition of the Assignee and the resulting
adjustment of the Assignor's Commitment Amount arising therefrom. The
Commitment Amount allocated to each Assignee shall reduce such the Commitment
Amount of the assigning Bank pro tanto.
(e) Any Bank may at any time sell to one or more banks or other
entities (a "Participant") participating interests in any Loans, the Commitment
Amount of that Bank or any other interest of that Bank hereunder in a minimum
amount of five million Dollars ($5,000,000); provided, however, that (i) the
Bank's obligations under this Agreement shall remain unchanged, (ii) the
selling Bank shall remain solely responsible for the performance of such
obligations, (iii) the Co-Borrowers and the Agent shall continue to deal solely
and directly with the selling Bank in connection with such Bank's rights and
obligations under this Agreement, and (iv) no Bank shall transfer or grant any
participating interest under which the Participant shall have rights to approve
any amendment to, or any consent or waiver with respect to this Agreement
except to the extent such amendment, consent or waiver would require unanimous
consent as described in the first proviso to Paragraph 10.3 hereof. In the
case of any such participation, the Participant shall not have any rights under
this Agreement, or any of the other Loan Documents, and all amounts payable by
the Co-Borrowers hereunder shall be determined as if such Bank had not sold
such participation, except that if amounts outstanding under this Agreement are
due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall be
deemed to have the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement.
10.2 No Implied Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Agent or any Bank upon any breach or
default of any of the Co-Borrowers under this Agreement or under any of the
other Loan Documents shall impair any such right, power or remedy of the Agent
or any Bank, nor shall it be
Page 87 of 96 pages
<PAGE> 69
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default occurring thereafter, nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default occurring theretofore or thereafter.
10.3 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document and no consent with
respect to any departure by any of the Co-Borrowers therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Banks,
and then such waiver shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all the Banks, do
any of the following:
(a) increase the Commitment Amount of any Bank or subject
any Bank to any additional obligations;
(b) postpone or delay any date fixed for any payment of
principal, interest, fees or other amounts due hereunder or under any
Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or of any fees or other amounts payable
hereunder or under any Loan Document;
(d) change the definition of "Majority Banks" or the
percentage of the aggregate Commitment Percentages or of the aggregate
unpaid principal amount of the Loans which shall be required for the
Banks or any of them to take any action hereunder;
(e) amend this Paragraph 10.3; or
(f) release any material portion of the Collateral,
(unless pursuant to a bona fide arms' length transaction not with an
Affiliate of Coram which transaction either permitted by this
Agreement of, if such transaction requires the consent of the Majority
Banks, such consent has been obtained);
and, provided, further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Majority Banks, affect
the rights or duties of the Agent under this Agreement, and (ii) the definition
of "Majority Banks" or the percentage of the aggregate Commitment Percentages
or of the aggregate principal amount of the Loans which shall be required for
the Banks or any of them to take any action here-under may be changed without
the consent of the Co-Borrowers.
10.4 Remedies Cumulative. All rights and remedies, either under
this Agreement, by law or otherwise afforded to the Agent or
Page 88 of 96 pages
<PAGE> 70
the Banks shall be cumulative and not exclusive, and any single or partial
exercise of any power or right hereunder or thereunder does not preclude other
or further exercise thereof, or the exercise of any other power or right.
10.5 Severability. Any provision of this Agreement, the Notes or
any of the other Loan Documents which is prohibited or unenforceable in any
jurisdiction, shall be, only as to such jurisdiction, ineffective to the extent
of such prohibition or unenforceability, but all the remaining provisions of
this Agreement, the Notes and the other Loan Documents shall remain valid.
10.6 Costs, Expenses and Attorneys' Fees. The Co-Borrowers shall
reimburse the Agent for all reasonable costs and expenses, including, but not
limited to, reasonable attorneys' fees and expenses (including the allocated
cost of the Agent's internal counsel) and appraisal, audit, review, search and
filing fees and expenses, expended or incurred by the Agent in connection with
the preparation, negotiation and execution of this Agreement, in connection
with the initial Borrowing, in amending this Agreement, or extending any waiver
or consent hereunder, or in any transaction referred to in Paragraph 10.1(b)
hereof, and shall reimburse the Agent and the Banks for all costs and expenses,
including, but not limited to, reasonable attorneys' fees and expenses
(including the allocated cost of the Agent's internal counsel), expended or
incurred by the Agent or any Bank in collecting any sum which becomes due under
the Notes or under this Agreement or any of the other Loan Documents, or in the
protection, perfection, preservation and enforcement of any and all rights of
the Agent or any Bank in connection with the Loan Documents, including, without
limitation, the fees and costs incurred in any out-of-court work-out or a
bankruptcy or reorganization proceeding. This obligation on the part of the
Co-Borrowers shall survive the expiration or termination of this Agreement,
with or without occurrence of the Initial Closing Date.
10.7 General Indemnification. The Co-Borrowers shall indemnify and
hold each Bank, the Agent and each of their directors, officers, employees,
Affiliates, attorneys and agents (collectively referred to herein as the "Bank
Indemnitees") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including, without
limitation, any expenses (including attorneys' fees and the allocated cost of
in-house counsel) incurred by any such Bank Indemnitee in connection with any
investigation in connection with any such matter, whether or not any such Bank
Indemnitee shall be designated a party thereto) which may be imposed on,
incurred by or asserted against such Bank Indemnitees by any Person other than
the Bank with which such Bank Indemnitee is affiliated (whether direct,
indirect or consequential and
Page 89 of 96 pages
<PAGE> 71
whether based on any federal or state laws or other statutory regulations,
including, without limitation, securities, environmental and commercial laws
and regulations, under common law or at equitable cause, or on contract or
otherwise) in any manner relating to or arising out of this Agreement, any
other Loan Documents, or any act, event or transaction related or attendant
thereto; the making of Loans hereunder, the management of the Loans (including
any liability under federal, state or local environmental laws or regulations),
the use or intended use of the proceeds of the Loans (collectively, the
"Indemnified Matters"); provided, however, that the Co-Borrowers shall have no
obligation to any Bank Indemnitee under this Paragraph 10.7 with respect to
Indemnified Matters to the extent such Indemnified Matters were caused by or
resulted from the gross negligence or willful misconduct of a Bank Indemnitee.
To the extent that the undertaking to indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, the Co-Borrowers shall contribute to the payment and
satisfaction of all Indemnified Matters incurred by the Bank Indemnitees the
maximum portion which the Co-Borrowers are permitted to pay and satisfy under
applicable law. This indemnification shall survive repayment by the
Co-Borrowers of all Loans made under this Agreement, and the termination of
this Agreement without occurrence of the Initial Closing Date.
10.8 Environmental Indemnification. The Co-Borrowers hereby agree
to indemnify, defend and hold harmless each Bank Indemnitee, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, charges, expenses or disbursements (including
attorneys' fees and the allocated cost of in-house counsel), which may be
incurred by or asserted against such Bank Indemnitee in connection with or
arising out of any pending or threatened investigation, litigation or
proceeding, or any action taken by any Person, with respect to any
Environmental Claim arising out of or related to any property subject to a
mortgage in favor of the Collateral Agent, the Agent or any Bank. No action
taken by legal counsel chosen by the Agent or any Bank in defending against any
such investigation, litigation or proceeding or requested remedial, removal or
response action shall vitiate or any way impair the Co-Borrowers' obligations
and duties hereunder to indemnify and hold harmless the Agent and each Bank.
In no event shall site visit, observation, or testing by the Agent or any Bank
be a representation that Hazardous Materials are or are not present in, on, or
under the site, or that there has been or shall be compliance with any law,
regulation, or ordinance pertaining to Hazardous Materials or any other
applicable governmental law. Neither the Co-Borrowers nor any other party is
entitled to rely on any site visit, observation, or testing by the Agent or any
Bank. Neither the Agent nor any Bank owes any duty of care to protect any
Co-Borrower or any other party against, or to inform any Co-Borrower or any
other party of, any Hazardous Materials or any other adverse condition
affecting any site or
Page 90 of 96 pages
<PAGE> 72
property. Neither the Agent nor any Bank shall be obligated to disclose to any
Co-Borrower or any other party any report or findings made as a result of, or
in connection with, any site visit, observation, or testing by the Agent or any
Bank. This indemnification shall survive repayment of all Loans made under
this Agreement and termination of the Commitments, and the termination of this
Agreement without occurrence of the Initial Closing Date.
10.9 Notices. Any notice which the Co-Borrowers, the Agent or any
of the Banks may be required or may desire to give to the other parties under
any provision of this Agreement shall be in writing by electronic facsimile
transmission and shall be deemed to have been given or made when transmitted
and addressed to any Bank at the address set forth on the signature pages
hereto or to the Agent or the Co-Borrowers as follows:
To any of the
Co-Borrowers: Coram Healthcare Corporation
Curaflex Health Services, Inc.
HealthInfusion, Inc.
Medisys, Inc.
T2 Medical, Inc.
H.M.S.S., Inc.
1125 17th Street
15th Floor
Denver, Colorado 80202
Attention: Mr. James Sweeney
Facsimile: (303) 298-0043
Copy to: Richard A. Fink, Esq.
Brobeck, Phleger & Harrison
4675 MacArthur Court,
Suite 1000
Newport Beach, California 92660
Facsimile: (714) 752-7522
To the Agent: Toronto Dominion (Texas), Inc.
909 Fannin Street, Suite 1700
Houston, Texas 77010
Attention: Manager, Agency
Facsimile: (713) 951-9921
Copy to: The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: Ms. Diana K. Sajer
Facsimile: (212) 397-4135
Page 91 of 96 pages
<PAGE> 73
Copy to: Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Douglas S. Gosden, Esq.
Facsimile: (404) 572-6999
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.
10.10 Entire Agreement. This Agreement, together with the exhibits
to this Agreement and all of the other Loan Documents, is intended by the
Co-Borrowers, the Agent and the Banks as a final expression of their agreement
and, together with all of the other Loan Documents, is intended as a complete
statement of the terms and conditions of their agreement. This Agreement and
the other Loan Documents contain all of the agreements and understandings
between or among the Co-Borrowers, the Agent and the Banks concerning the Loans
and the other transactions contemplated hereby.
10.11 Governing Law and Consent to Jurisdiction. The validity,
construction and effect of this Agreement, the Notes and all of the other Loan
Documents shall be governed by the laws of the State of New York, without
regard to its laws regarding choice of applicable law, but giving effect to
federal laws applicable to national and federally insured banks. All judicial
proceedings brought against the Co-Borrowers with respect to this Agreement,
the Notes or any of the other Loan Documents may be brought in any state or
federal court of competent jurisdiction in the State of New York, and the
Co-Borrowers accept for themselves and their assets and properties, generally
and unconditionally, the nonexclusive jurisdiction of the aforesaid courts.
Each of the Co-Borrowers waives, to the fullest extent permitted by applicable
law, any objection (including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens) which it may now or
hereafter have to the bringing of any such action or proceeding in any such
jurisdiction. Nothing herein shall limit the right of a Bank or the Agent to
bring proceedings against the any Co- Borrower in the court of any other
jurisdiction.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Page 92 of 96 pages
<PAGE> 74
10.13 Waiver of Jury Trial. Each of the Co-Borrowers waives any
right to trial by jury with regard to any action of any type or nature
whatsoever under or concerning this Agreement or any of the other Loan
Documents or in any way related to the Loans or the administration or
enforcement thereof.
10.14 Headings. Captions, headings and the table of contents in
this Agreement are for convenience only, and are not to be deemed part of this
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Page 93 of 96 pages
<PAGE> 75
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement by its duly authorized officers as of the date and year first above
written.
CO-BORROWERS: CORAM HEALTHCARE CORPORATION
By /s/ Sam R. Leno
Title Chief Financial Officer
CURAFLEX HEALTH SERVICES, INC.
By /s/ Sam R. Leno
Title Chief Financial Officer
HEALTHINFUSION, INC.
By /s/ Sam R. Leno
Title Chief Financial Officer
MEDISYS, INC.
By /s/ Sam R. Leno
Title Chief Financial Officer
T2 MEDICAL, INC.
By /s/ Sam R. Leno
Title Chief Financial Officer
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
CREDIT AGREEMENT
Signature Page 1
Page 94 of 96 pages
<PAGE> 76
AGENT: TORONTO DOMINION (TEXAS), INC.,
as Agent for the Banks
By /s/ Melissa B. Nigro
Title Vice President
BANKS: TORONTO DOMINION (TEXAS), INC.,
as a Bank
By /s/ Melissa B. Nigro
Address: The Toronto-Dominion Bank
909 Fannin Street
Suite 1700
Houston, Texas 77010
Facsimile: (713) 951-9921
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: Ms. Diana K. Sajer
Facsimile: (212) 397-4135
Commitment Percentage: 100%
CREDIT AGREEMENT
Signature Page 2
Page 95 of 96 pages
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
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0
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