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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994 Commission file number 1-11343
Coram Healthcare Corporation
(Exact name of registrant as specified in its charter)
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DELAWARE 33-0615337
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1125 SEVENTEENTH STREET, 15TH FLOOR 80202
DENVER, COLORADO (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (303) 292-4973
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock ($.001 par value per share) New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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 AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. / /
BASED ON THE CLOSING PRICE ON MARCH 20, 1995, THE AGGREGATE MARKET VALUE OF
COMMON STOCK HELD BY NONAFFILIATES OF THE REGISTRANT WAS $1,007.8 MILLION.
THE NUMBER OF COMMON SHARES OUTSTANDING OF THE REGISTRANT WAS 39,465,677 AS
OF MARCH 20, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
THE INFORMATION REQUIRED BY PART III IS INCORPORATED BY REFERENCE FROM THE
REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED WITH THE COMMISSION PURSUANT
TO REGULATION 14A NOT LATER THAN 120 DAYS AFTER THE END OF THE FISCAL YEAR
COVERED BY THIS REPORT.
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PART I
ITEM 1. BUSINESS.
GENERAL
Coram Healthcare Corporation, a Delaware corporation ("Coram" or the
"Company"), is currently the second largest provider of alternate site (outside
the hospital) infusion therapy and related services in the United States,
operating 140 branches located in 38 states. Infusion therapy involves the
intravenous administration of anti-infective, chemotherapy, pain management,
nutrition, and other therapies. Other services offered by the Company include
the provision of lithotripsy, non-intravenous infusion products and physician
support services. On January 29, 1995, the Company entered into an agreement to
acquire the alternate site infusion business of Caremark International Inc. (the
"Caremark Business.") Upon the consummation of the acquisition of the Caremark
Business, the Company will become the largest provider of alternate site
infusion therapy services in the United States, with the capability of providing
services to approximately 96% of the United States population.
The Company was formed on July 8, 1994 pursuant to a merger (the "Merger")
by and among T2 Medical, Inc. ("T2"), Curaflex Health Services, Inc.
("Curaflex"), Medisys, Inc. ("Medisys") and HealthInfusion, Inc.
("HealthInfusion"), each of which was a publicly-held national or regional
provider of home infusion therapy and related services. The Merger enabled the
Company to become a national provider of home infusion and other alternate site
health care services. On September 12, 1994, the Company further broadened its
geographic coverage by acquiring H.M.S.S., Inc. ("HMSS"), a leading regional
provider of home infusion therapies based in Houston, Texas. The Company is in
the process of completing a branch and corporate office consolidation of its
five predecessor companies (the "Coram Consolidation Plan") which is expected to
result in significant annual cost savings and operating efficiencies. The
Company expects to implement a similar branch office and consolidation program
after the consummation of the acquisition of the Caremark Business (the
"Caremark Consolidation Plan"), resulting in additional cost savings and
operating efficiencies. The Company is led by a newly formed management team
with extensive background in the health care industry, including James M.
Sweeney, Chairman and Chief Executive Officer.
DELIVERY OF ALTERNATE SITE HEALTH CARE SERVICES
General. Infusion patients are generally referred to the Company following
diagnosis of a specific disease or upon discharge from a hospital. Either the
patient's physician or a managed care payor will generally determine to which
infusion company a patient is referred. The referring physician will generally
determine whether the patient is a candidate for home infusion treatment or
outpatient infusion therapy. Because drugs administered intravenously tend to be
more potent and complex than oral drugs, the delivery of intravenous drugs
generally requires patient training, specialized equipment and periodic
monitoring by skilled nurses. Most therapies require either a gravity-based flow
control device or an electro-mechanical pump to meter the drugs. Some therapies
are administered continuously; most however, are taken for a given number of
hours per day. The Company's nurses and pharmacists work with the patient's
doctor to track the patient's condition and update the therapy as necessary.
Treatments can last from a few days to years.
Branch Facilities. The delivery of infusion services is coordinated
through regional infusion centers or "branches," whose functions include (i)
patient intake (usually physician-based), (ii) a pharmacy/mixing facility
staffed by pharmacists and pharmacy technicians, (iii) materials management,
including drug and supply inventory and delivery, (iv) billings, collections and
benefit verification, (v) sales to local referral services, including doctors,
hospitals and payors and (vi) general management. The Company's branch
facilities typically are leased and consist of 2,000 to 20,000 square feet of
office space in suburban office parks in close proximity to major medical
facilities. A typical branch has a fully equipped pharmacy, offices for
administrative personnel and a small storage warehouse. Facilities are staffed
with three to fifteen full-time employees, and a typical branch includes a
manager, a licensed pharmacist, registered nurses and sales and administrative
personnel. Each facility serves the metropolitan area in which it is located,
generally within a two-hour driving radius, as well as outlying locations where
it can arrange appropriate nursing services. Satellite facilities are also used.
These smaller centers contain limited supplies and pharmacy operations, and
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are used as dispatch centers serving a specified geographical area. The Company
currently has 40 full centers and 100 satellite centers.
In-Home Patient Care. Before accepting a patient for home infusion
treatment, the staff of the local branch works closely with the patient's
physician or clinicians and hospital personnel in order to assess the patient's
suitability for home care. This assessment process includes an analysis of the
patient's physical condition and of social factors such as the stability of the
patient's home life and the availability of family members or others who can
assist in the administration of the patient's therapy, if necessary. It also
includes a review of compliance with the requirements of the patient's insurance
carrier.
When a patient's suitability for home care has been confirmed, the patient
and the patient's family (or others) receive training and education concerning
the therapy to be administered, including proper infusion technique and care and
use of intravenous devices and other equipment used in connection with the
therapy. Assessment and training are generally performed by the Company's
nurses.
Prior to the patient receiving treatment services from the Company, the
treating physician devises the patient's plan of care and transmits it to the
local branch's clinical support team, including its nurses and pharmacists. This
team will work with the treating physician to administer the plan of care and
monitor the patient's progress. Throughout the patient's therapy, the local
branch's clinical support team will regularly provide the treating physician
with reports on the patient's condition, allowing the treating physician to play
an active role in the patient's treatment. The treating physician always remains
responsible for the patient's care, including changing the patient's plan of
care to meet the patient's needs and handling patient emergencies.
Upon the patient's arrival home, a nurse from the local branch typically
oversees the administration of the patient's first home infusion treatment.
Thereafter, the frequency of nursing visits depends upon the particular therapy
of the patient involved. During these subsequent visits, the nurse may check and
adjust the patient's infusion site, intravenous lines and related equipment,
obtain blood samples, change the pump settings and/or drug administration after
consulting with the physician and assess the patient's condition and compliance
with the plan of care. The patient's nutrition supplies and prescription drugs
are typically delivered on a weekly basis, depending on the therapy and the
particular drugs being used. Nurses will visit the patient as needed to monitor
the therapy, draw blood tests, check wounds and catheter insertion points, and
check the patient's overall medical condition.
The treating physician remains actively involved in monitoring his or her
patient's treatment by devising the patient's initial plan of treatment,
monitoring the plan's administration and revising the plan as necessary. In
addition, each branch has a medical advisory board comprised of local physicians
who review quality assurance and patient services issues and consult with the
Company on maintaining and improving its quality of care and patient service at
the local level.
Outpatient Facilities. The Company's ambulatory outpatient infusion
therapy centers have proven to be synergistic with its core home infusion
therapy business. Physicians use outpatient facilities to treat their patients
when the patient does not require hospitalization, but is not an ideal candidate
for home care because of severity of illness, complexity of therapy or
environmental concerns. Patients report to the facility for administration of
the required therapy and return home that day. Therapies commonly administered
at outpatient facilities include first dose antibiotics, complex or lengthy
chemotherapy regimens and transfusion of both red blood cells and platelets.
Other procedures may include the insertion of long line venous catheters,
aerosol therapies for prophylaxis and instruction related to such therapies.
PRODUCTS AND SERVICES OF THE COMPANY
Infusion Therapy. The Company provides a variety of infusion therapies,
principally anti-infective therapy, parenteral nutrition, chemotherapy and pain
management therapy. The initiation and duration of these therapies is determined
by a physician based upon a patient's diagnosis, treatment plan and response to
therapy. Certain therapies, such as anti-infective therapy, are generally used
in the treatment of temporary conditions such as infections, while others, such
as parenteral nutrition, may be required on a long-term or permanent basis. The
infusion therapies are either administered at the patient's home by an employee
of the
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Company or at a regional outpatient facility operated by the Company. In patient
groups such as immune repressed patients (e.g., AIDS/HIV, cancer and transplant
patients) anti-infective therapy must be provided episodically over the duration
of the primary disease or for the remainder of the patient's life.
The following table sets forth the aggregate percentages of patient
revenues derived by the Company from the designated types of infusion therapies
during the year ended December 31, 1994:
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Anti-Infective................................................................. 40%
Parenteral and Enteral Nutrition............................................... 27%
Chemotherapy................................................................... 11%
Pain Management................................................................ 10%
Other Therapies................................................................ 12%
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Total.......................................................................... 100%
===
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Anti-Infective Therapy. Anti-infective therapy is the infusion
of antibacterial, anti-viral or anti-fungal medications into the patient's
bloodstream for the treatment of a variety of infectious diseases, such as
osteomyelitis (bone infections), bacterial endocarditis (infection of the
heart valves), wound infections, infections associated with AIDS and
infections of the kidneys and urinary tract. Generally, intravenous
anti-infection drugs are delivered through a peripheral catheter inserted
in a vein in the patient's arm and are generally more effective when
infused directly into the bloodstream than when taken orally.
Parenteral and Enteral Nutrition. Total parenteral nutrition
therapy or "TPN" involves the intravenous feeding of life-sustaining
nutrients to patients with impaired or altered digestive tracts due to a
gastrointestinal illness or condition, such as an intestinal obstruction or
inflammatory bowel disease. The therapy is administered through a central
catheter, surgically implanted into a major blood vessel to introduce the
nutrient solution into the bloodstream. The nutrient solutions may contain
amino acids, dextrose, fatty acids, electrolytes, trace minerals and
vitamins. In many cases, the underlying illness or condition from which
parenteral nutrition patients suffer is recurrent in nature, requiring
periodic re-hospitalization for treatment followed by resumption of
parenteral nutrition at home. Some patients must continue this type of
therapy for life. Enteral nutrition therapy is administered to patients who
cannot eat as a result of an obstruction to the upper gastrointestinal
tract or other medical condition. Enteral nutrition therapy is often
administered over a long period, generally for more than six months.
Chemotherapy. Chemotherapy is the administration of cytotoxic
drugs to patients suffering from various types of cancer either alone or as
adjuvant (an immunological agent that increases the antigenic response) to
other therapies such as radiation or surgery. The Company has been advised
that breast, lung, colon, prostate and ovarian cancer, among others, are
most conducive to outpatient chemotherapy treatment. Chemotherapy generally
is administered periodically for several weeks or months. A majority of the
nurses employed by the Company are certified to administer chemotherapy.
The nature of drugs that are used to treat cancer is such that side effects
such as nausea and amnesia occur in most patients. This requires the
administration of additional agents to treat those side effects.
Pain Management Therapy. Pain management therapy is the
administration of analgesic drugs to patients suffering from acute or
chronic pain. It is often administered in conjunction with intravenous
chemotherapy or intravenous therapy given to patients with cancer or AIDS.
This type of therapy is often administered in a way that permits the
patient to regulate the infusion of analgesic drugs in proportion to the
severity of the pain the patient experiences, improving the medical outcome
at the same time as drug use is reduced.
Other Therapies. The Company provides other technologically
advanced therapies such as intravenous inotrope therapy for patients with
congestive heart failure or for those who are awaiting cardiac transplants,
intravenous anti-coagulant therapy for prevention of blood clots, myeloid
growth factor therapy for various anemias, and anti-nauseant therapy for
chemotherapy induced emesis.
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Lithotripsy. Lithotripsy is a non-invasive technique that uses shock waves
to disintegrate kidney stones. Depending on the particular lithotripter used,
the patient is sedated using either a general or an epidermal anesthetic while
seated in a bath or lying on a treatment table. The operator of the lithotripter
machine locates the stone using fluoroscopy or ultrasound and directs the shock
waves toward the stone either through the water in the bath or across a fluid
membrane placed next to the patient's body. The shock waves then fragment the
stone thereby enabling the patient to pass the fragments through his or her
urinary tract. Because lithotripsy is non-invasive and is provided on an
outpatient basis, lithotripsy is an attractive alternative to other more
invasive techniques otherwise used in treating urinary tract stones or to
extended hospital stays waiting for the stone to pass.
As of March 1, 1995, the Company owned a controlling interest in 15
lithotripsy partnerships as well as a wholly owned lithotripter maintenance
company. The Company's lithotripsy partnerships currently operate an aggregate
of 31 lithotripsy machines that provide services in 180 locations in 18 states.
The other owners of the partnerships are primarily physicians, many of whom
utilize the partnership's equipment to treat their patients. Ten of the 31
lithotripsy machines are stationary and located at hospitals or ambulatory
surgery centers, while the other 21 machines are mobile, allowing them to be
moved in order to meet patient needs and market demands. The Company's
lithotripsy partnerships typically lease the machine on a per procedure basis to
the hospital, ambulatory surgery center or other facility providing care to the
patient. In some cases, the lithotripsy partnership bills the patient directly
for the use of the partnership's machine.
The Company's agreements with its lithotripsy physician partners
contemplate that the Company will acquire the remaining interest in each
partnership at a defined price in the event that legislation is passed or
regulations are adopted that would prevent the physician from owning an interest
in the partnership and using the partnership's lithotripsy equipment for the
treatment of his or her patients. While current interpretations of existing law
are subject to considerable uncertainty, the Company believes that its
partnership arrangements with physicians in its lithotripsy business are in
compliance with current law. If, however, the Company were required to acquire
the minority interest of its physician partners in each of its lithotripsy
partnerships, the cost would be material to the Company.
The Company's lithotripsy operations have contributed an increasing amount
to the Company's operating income. However, there can be no assurance that
lithotripsy reimbursement rates will remain at their current levels and the
Company believes the amounts the partnerships currently receive for their
machines will be increasingly subject to pricing pressures similar to the
pricing pressures that have been exerted on the Company's infusion therapy
business. Recently, the Health Care Financing Administration ("HCFA") released a
proposed rule reducing the rate at which ambulatory surgery centers and certain
hospitals would be reimbursed for the technical component of a lithotripsy
procedure. The Company cannot predict what the final rate for such reimbursement
will be or what effect, if any, the adoption of this proposed rule would have on
lithotripsy revenues and whether this decreased reimbursement rate will be
applied to lithotripsy procedures performed at hospitals, where a majority of
the Company's lithotripsy machines are currently utilized.
Physician Practice Management Services. The Company is implementing a
physician practice management business that will provide a variety of consulting
and administrative services to small and medium sized physician groups. The
Company estimates that over 80% of the physicians in the United States practice
either alone or in a small group practice. As a result of growing pressure on
physicians to control costs and the rising influence of managed care
organizations, the Company believes that physicians have a growing need for
external management services. Through its physician services business, the
Company intends to provide consulting and administrative services in the
following areas: development and management; office systems, including
computerization, financial management, billing and collections; practice
marketing and development; other in-office services such as infusion therapy;
mergers, acquisitions, affiliations and ventures; and managed care and third
party payor contract opportunities. Initially, the physician services business
will focus on providing services to the Company's physician network and their
medical specialties. In addition, the Company intends to offer consulting and
management services to service organizations and other health care providers
that will offer a package of health care services to third party payors.
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Other Health Care Businesses. In addition to operating infusion therapy
companies and providing the other services described above, the Company was also
involved during 1994 in certain other health care businesses. Such complementary
businesses amounted to less than 1% of the Company's net revenues for the fiscal
year ended December 31, 1994, and some or all of such businesses are under
review for possible divestiture.
ORGANIZATION AND OPERATIONS
General. The Company's alternate site health care business operations are
conducted through approximately 140 branches which are managed through six area
offices reporting to the Vice President of Field Operations. The area office
provides each of its branches with key management direction and support
services. The Company's organizational structure is designed to create operating
efficiencies associated with centralized services and purchasing while also
promoting local decision making. The Company believes that its decentralized
approach to management facilitates high quality local decision making, allows it
to attract and retain experienced local managers and allows it to be responsive
to local market needs.
Operating Systems and Controls. An important factor in the Company's
ability to closely monitor its operating locations will be the reliability of
its management information systems. Besides routine revenue and cost reporting,
the Company is developing a performance model for monitoring district and branch
operations. Actual operating results derived from the Company's management
information systems will be compared to the performance model, enabling all
levels of management to identify areas requiring improvement. The Company
believes that the use of common, specific performance matrixes and the
identification of best demonstrated practices will expedite operating
improvement.
The Company has begun to implement standardized management information
systems throughout the Company. This has enabled the Company to begin
standardizing operating processes, track profit and loss performance by branch,
control and manage accounts receivable, process customer orders, reduce
administrative overhead and gather branch operating statistics for comparisons
and management decision making.
The Company has recently begun to standardize and simplify its financial
systems. This will enable the Company to access more detailed financial
information and respond accordingly. Moreover, the Company expects that managed
care organizations and other referral sources and health care providers will
benefit from these sophisticated reporting capabilities, thereby giving the
Company a further competitive advantage.
The Company endeavors to ensure that its local managers have the autonomy
and ability to perform effectively by providing them with training,
comprehensive policies and procedures and standardized systems. The Company is
designing management incentive plans that reward performance based on revenue
increases, earnings contribution, accounts receivable collection, inventory
control and control of capital expenditures.
REIMBURSEMENT OF SERVICES
Virtually all of the revenues of the Company are derived from third-party
payors, including private insurers, managed care organizations such as HMOs and
PPOs, and governmental payors such as Medicare and Medicaid. Similar to other
medical service providers, the Company experiences lengthy reimbursement periods
as a result of third-party payment procedures. Consequently, management of
accounts receivable through effective patient registration, billing, collection
and reimbursement procedures is critical to financial success and continues to
be a high priority for all levels of management. The Company has developed
substantial expertise in processing claims and carefully screens new cases to
determine whether adequate reimbursement will be available. Individual branches
are responsible for their own billing and collections, within strict guidelines.
The Company believes that accounts receivable management is best accomplished at
the local level because of direct relationships with payors and the ability of
branch personnel to identify and react promptly to billing discrepancies.
Medicare has developed a national fee schedule for respiratory therapy,
home medical equipment and infusion therapy which provides reimbursement for 80%
of the amount of any fee on the schedule. The remaining 20% co-insurance portion
is not paid by Medicare. In most cases, Medicaid reimburses the
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remaining 20% for "medically indigent" patients. In other cases, the Company
bills and actively monitors other third-party payors or patients responsible for
co-insurance reimbursement.
Reimbursement coverage is provided through private sources, such as
insurance companies, self-insured employers and patients, and through the
federal Medicare and Medicaid programs. Private payors typically reimburse a
higher amount for a given service and provide a broader range of benefits than
governmental payors, although net revenues and gross profits from private payors
have been affected by the continuing efforts of private payors to contain or
reduce the costs of health care. An increasing percentage of the Company's
private payor revenue has been derived in recent years from contracts with HMOs,
PPOs and other managed care providers. Although these contracts often provide
for negotiated reimbursement at reduced rates, they generally result in lower
bad debts, provide for faster payment terms and generate a greater volume than
other third-party payors.
The following table sets forth the approximate percentages of the Company's
net revenue attributable to private, governmental and managed care payors,
respectively, for the year ended December 31, 1994:
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Private Insurance and Other Payors........................................... 58%
Medicare and Medicaid Programs............................................... 28%
Managed Care Organizations................................................... 14%
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Total.............................................................. 100%
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QUALITY ASSURANCE
The Company has established quality assurance programs to ensure that
service standards are implemented and that the objectives of those standards are
met. As of March 1, 1995, all of the branch offices of the Company had received
or are in the process of applying for accreditation by the Joint Commission on
Accreditation of Healthcare Organizations ("JCAHO"). The Company's quality
assurance program also includes quality audits of branches by a member of the
Company's quality assurance department.
COMPETITION
The alternate site health care market is highly competitive and is
experiencing both horizontal and vertical consolidation. Some of the Company's
current and potential competitors include hospital chains and providers of
multiple products and services for the alternate site health care market. On
March 3, 1995, two of the largest companies in the alternate site health care
industry, Abbey and Homedco, announced an agreement to merge in a transaction
that would create the largest alternate site health care provider in the United
States based on pro forma combined 1994 revenues. The size, purchasing power,
ability to bundle products and services; and relationships with physicians and
payors which certain of these providers enjoy make them formidable competitors
to the Company. Moreover, there are relatively few barriers to entry in the
local markets that the Company serves. Local or regional companies have entered
the home health care market in the past and others may do so in the future.
There can be no assurance that the Company will not encounter increased
competition in the future that could limit its ability to maintain or increase
its market share. Such increased competition could have a material adverse
effect on the Company's business and results of operations.
The Company competes on the basis of a number of factors, including quality
of care and service, reputation within the medical community, geographical scope
and price. As it achieves low cost provider status, the Company believes that it
can compete effectively in each of its service areas with respect to all of the
above factors. The achievement of the operating scale required to achieve low
cost provider status is a critical source of competitive advantage and a major
objective of the Company's consolidation strategy.
Competition within the alternate site health care delivery system has been
affected by the decision of third party payors and their case managers to become
more active in monitoring and directing the care delivered to their
beneficiaries. Accordingly, relationships with such payors and their case
managers and inclusion within preferred provider and other networks of approved
or accredited providers may become a
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prerequisite to the Company's ability to serve many of the patients treated by
it. Similarly, the ability of the Company and its competitors to align
themselves with other health care service providers may increase in importance
as managed care providers and provider networks seek out providers who offer a
broad range of services that may exceed the range of services currently offered
by the Company.
SALES AND MARKETING
The Company's products and services are marketed through its field sales
force, branch sales personnel and various media formats. Most of the Company's
new patients are referred by hospitals, medical groups, home care agencies and
case managers. The Company's sales force is responsible for establishing and
maintaining referral sources. All sales employees receive a base salary plus
incentive bonuses based on collected net revenue. The Company recently
established improved sales training programs enabling its sales force to
generate more revenue from current referral sources and to assist them in
targeting and developing new referral sources. The Company believes that JCAHO
accreditation of its branches is important to its sales and marketing efforts,
particularly with large customers.
The Company's network of field representatives enables it to market its
home health care services to numerous sources of patient referrals, including
physicians, hospital discharge planners, hospital personnel and HMOs. Marketing
is focused on specific product lines and in specific payor groups. Products such
as physician services and disease state carveouts that are considerably
different than the base infusion therapy and ancillary service business are
supported by specialty marketing and sales support personnel.
As a result of escalating pressures to contain health care costs,
third-party payors are participating to a greater extent in decisions regarding
health care alternatives and are more important in the referral process. In
response, the Company has modified its sales and development focus and is
aggressively pursuing agreements with third party payors and is seeking to
participate in managed service organizations and provider networks that will
provide high quality, cost effective care. The Company has recruited a dedicated
sales force to enhance the Company's efforts to market and sell its services to
managed care payors. Managed care sales representatives are deployed in each
branch and a separate national accounts sales force reports to the Vice
President, Managed Care Sales and Marketing. Since commencing such marketing
efforts, the Company has successfully negotiated approximately 400 managed care
contracts, including agreements with CIGNA and Travelers Health Network
("Travelers"). Pursuant to these arrangements, the Company provides services to
members of the managed care organization on a non-exclusive basis at negotiated
prices in specified geographic areas. For example, the Company was recently
awarded a nationwide contract to be one of three providers authorized to
coordinate the delivery of infusion, durable medical equipment, respiratory
therapy, home nursing and other services to the approximately 5.3 million
beneficiaries of Travelers. The Company has subcontracted for those alternate
site services it has agreed to deliver under the Travelers contract which it is
currently unable to provide directly.
CUSTOMERS AND SUPPLIERS
The Company provides alternate site health care services and products to a
large number of patients and no single payor accounted for more than 5% of the
net revenue of the Company during the year ended December 31, 1994, excluding
Medicare and Medicaid payors. The Company purchases products from a large number
of suppliers. The Company considers its relationships with its vendors to be
good and believes that substantially all of its products are available from
alternative sources on terms not materially less favorable to the Company than
its present sources.
GOVERNMENT REGULATION
General. The Company is subject to extensive federal and state regulation
regarding, among other things, fraud and abuse, health and safety, environmental
compliance and toxic waste disposal. In particular, the illegal remuneration
provisions of the Social Security Act and similar state laws impose civil and
criminal sanctions. These sanctions include disqualification from participation
in the Medicare and Medicaid programs for persons who solicit, offer, receive or
pay any remuneration, directly or indirectly, for referring a patient for
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treatment which is paid for in whole or in part by Medicare and Medicaid or for
otherwise generating revenue reimbursed by either of these programs. Due to the
breadth of the statutory provisions and the absence in certain instances of
regulations or court decisions addressing many of the specific arrangements by
which the Company conducts its business, it is possible that the Company's
practices might be challenged under these laws and there can be no assurance
that the Company will not be required to change one or more of its current
business practices or be subject to sanctions. The Company's revenues and net
earnings could be adversely affected as a result of any such change or
sanctions. The Company believes it complies in all material respects with these
and all other applicable laws and regulations.
In particular, the operations of the Company are subject to federal and
state laws covering the repackaging and dispensing of drugs (including oxygen),
regulating interstate motor-carrier transportation, pharmacies, nursing services
and certain types of home health agency activities. Certain of the employees of
the Company are subject to state laws and regulations governing the ethics and
professional practice of pharmacy and nursing. The failure to obtain, renew or
maintain any of the required regulatory approvals or licenses could adversely
affect the Company's business and could prevent the location involved from
offering products and services to patients. The health care services industry
will continue to be subject to intense regulation at the federal and state
levels, the scope and effect of which cannot be predicted. No assurance can be
given that the activities of the Company will not be reviewed and challenged or
that health care reform, if enacted, will not result in a material adverse
change to the Company.
Fraud and Abuse. The Company's operations are subject to the illegal
remuneration provisions of the Social Security Act (sometimes referred to as the
"anti-kickback" statute) and similar state laws that impose criminal and civil
sanctions on persons who knowingly and willfully solicit, offer, receive or pay
any remuneration, whether directly or indirectly, in return for, or to induce,
the referral of a patient for treatment, or, among other things, the ordering,
purchasing, or leasing, of items or services that are paid for in whole or in
part by Medicare, Medicaid or similar state programs. Violations of the federal
anti-kickback statute are punishable by criminal penalties, including
imprisonment, fines and exclusion of the provider from future participation in
the Medicare and Medicaid programs. Federal enforcement officials also may
attempt to impose civil false claims liability with respect to claims resulting
from an anti-kickback violation. If successful, civil penalties could be
imposed, including assessments of $2,000 per improper claim for payment plus
twice the amount of such claim and suspension from future participation in
Medicare and Medicaid programs. Civil suspension for anti-kickback violations
also can be imposed through an administrative process, without the imposition of
civil monetary penalties. While the federal anti-kickback statute expressly
prohibits transactions that have traditionally had criminal implications, such
as kickbacks, rebates or bribes for patient referrals, its language has been
construed broadly and has not been limited to such obviously wrongful
transactions. Court decisions state that, under certain circumstances, the
statute is also violated when one purpose (as opposed to the "primary" or a
"material" purpose) of a payment is to induce referrals. Congress has frequently
considered federal legislation that would expand the federal anti-kickback
statute to include the same broad prohibitions regardless of payor source.
In addition, an increasing number of states in which the Company operates
have laws, which vary from state to state, prohibiting certain direct or
indirect remuneration or fee-splitting arrangements between health care
providers for the referral of patients to a particular provider, including
pharmacies and home health agencies. Possible sanctions for violation of these
restrictions include loss of licensure and civil and criminal penalties. The
Company maintains an internal regulatory compliance review program and has
retained Richard J. Kusserow, the former Inspector General of the U.S.
Department of Health and Human Services, to act as a consultant to assist the
Company in developing its compliance program. There can be no assurance that
such laws will ultimately be interpreted in a manner consistent with the
practices of the Company.
Prohibition on Physician Referrals. Under both the Omnibus Budget
Reconciliation Act of 1993 ("Stark II") and certain state legislation, it is
unlawful for a physician to refer patients for certain designated health
services to an entity with which the physician has a financial relationship. A
"financial relationship" under Stark II is defined as an ownership or investment
interest in, or a compensation arrangement between, the physician and the
entity. The entity is prohibited from claiming payment under the Medicare or
Medicaid programs for services rendered pursuant to a prohibited referral and is
liable for the refund of amounts
8
<PAGE> 10
received pursuant to prohibited claims. The entity also can receive civil
penalties of up to $15,000 per improper claim and can be excluded from
participation in the Medicare and Medicaid programs. Comparable provisions
applicable to clinical laboratory services became effective in 1992. Stark II
provisions which may be relevant to the Company became effective on January 1,
1995. Because of its broad language Stark II may be interpreted by the Office of
Inspector General ("OIG") of the Department of Health and Human Services ("HHS")
to apply to the Company's operations. Consequently, Stark II has required the
Company to restructure certain existing compensation agreements with physicians
or, in the alternative, to refuse to accept referrals for designated health
services from such physicians to bring its financial relationships with
referring physicians into material compliance with the provisions of Stark II,
including relevant exceptions. The Company has substantially completed the
termination of business arrangements with physicians that may be questionable in
the current regulatory environment, however if the Company does not achieve such
material compliance, and Stark II is broadly interpreted by HHS to apply to the
Company, such application of Stark II could have a material adverse effect on
the Company.
A California statute, which become effective January 1, 1995, makes it
unlawful for a physician who has, or a member of whose immediate family has, a
financial interest with or in an entity to refer a person to that entity for
laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy,
physical rehabilitation, psychometric testing, home infusion therapy, or
diagnostic imaging goods or services. Under the statute, "financial interest"
includes, among other things, any type of ownership interest, debt, loan, lease,
compensation, remuneration, discount, rebate, refund, dividend, distribution,
subsidy or other form of direct or indirect payment, whether in money or
otherwise, between a physician and the entity to which the physician makes a
referral for the items described above. The statute also prohibits the entity to
which the referral was made from presenting a claim for payment to any payor for
a service furnished pursuant to a prohibited referral, and prohibits a payor
from paying for such a service. Violation of the statute by a physician is a
misdemeanor, and will subject the physician to civil fines. Violation of the
prohibition on submitting a claim in violation of the statute is a public
offense, subjecting the offender to a fine of up to $15,000 for each violation
and possible action against licensure. The Company believes that other states in
which the Company does business have or are considering similar legislation.
Medicare and Health Care Reform. Because the Medicare program represents a
substantial portion of the federal budget, Congress takes action in almost every
legislative session to modify the Medicare program for the purpose of reducing
the amounts otherwise payable by the program to health care providers in order
to achieve deficit reduction targets, among other reasons. Legislation or
regulations may be enacted in the future that may substantially reduce the
amount paid for the Company's services. Further, statutes or regulations may be
adopted which impose additional requirements in order for the Company to be
eligible to participate in the federal and state payment programs. Such new
legislation or regulations may adversely affect the Company's business
operations. There is significant national concern today about the availability
and rising cost of health care in the United States. It is anticipated that new
federal and/or state legislation will be passed and regulations adopted to
attempt to provide broader and better health care and to manage and contain its
cost. The Company is unable to predict the content of any legislation or what,
if any, changes may occur in the method and rates of its Medicare and Medicaid
reimbursement or in other government regulations that may affect its businesses,
or, whether such changes, if made, will have a material adverse effect on its
revenues and net earnings.
State Laws Regarding Provision of Medicine and Insurance. The laws of many
states prohibit physicians from splitting fees with non-physicians and prohibit
non-physician entities from practicing medicine. These laws vary from state to
state and are enforced by the courts and by regulatory authorities with broad
discretion. Although the Company believes its operations as currently conducted
are in material compliance with existing applicable laws, certain aspects of the
Company's business operations have not been the subject of state or federal
regulatory interpretation. There can be no assurance that review of the
Company's business by courts or regulatory authorities will not result in
determinations that could adversely affect the operations of the Company or that
the health care regulatory environment will not change so as to restrict the
Company's existing operations or their expansion. In addition, expansion of the
operations of the Company to certain
9
<PAGE> 11
jurisdictions may require structural and organizational modifications of the
Company's form of relationships with physician groups, would could have an
adverse effect on the Company.
Most states have laws regulating insurance companies and HMOs. The Company
is not qualified in any state to engage in the insurance or HMO businesses. As
the managed care business evolves, state regulators may begin to scrutinize the
practices of, and relationships between, third-party payors, medical service
providers and entities providing management and other services to medical
service providers with respect to the application of insurance and HMO laws and
regulations. The Company does not believe that its practices, which are
consistent with those of other health care companies, would subject it to such
laws and regulations. However, given the limited regulatory history with respect
to such practices, there can be no assurance that states will not attempt to
assert jurisdiction. The Company may be subject to prosecution by state
regulatory agencies, and accordingly may be required to change or discontinue
certain practices which could have a material adverse effect on the Company.
Pharmacies and Home Health Agencies. All states require pharmacies to be
licensed and all of the Company's pharmacies are licensed in the states in which
they are located. All these pharmacies also have Controlled Substances
Registration Certificates issued by the Drug Enforcement Administration of the
United States Department of Justice. Many states in which the Company operates
also require home infusion companies to be licensed as home health agencies. The
Company's branches are licensed as home health agencies in all such states
except four, where it has applied for licensure. The failure of a branch
facility to obtain, renew or maintain any required regulatory approvals or
licenses could adversely affect its continued expansion and the existing
operations of that branch facility.
Other Regulations. The Company's operations are subject to various state
hazardous waste disposal laws. Those laws as currently in effect do not classify
most of the waste produced during the provision of the Company's services to be
hazardous, although disposal of non-hazardous medical waste is also subject to
regulation. OSHA regulations require employers of workers who are occupationally
subject to blood or other potentially infectious materials to provide those
workers with certain prescribed protections against bloodborne pathogens. The
regulatory requirements apply to all health care facilities, including the
Company's branches, and require employers to make a determination as to which
employees may be exposed to blood or other potentially infectious materials and
to have in effect a written exposure control plan. In addition, employers are
required to provide hepatitis B vaccinations, personal protective equipment,
infection control training, post-exposure evaluation and follow-up, waste
disposal techniques and procedures, and engineering and work practice controls.
Employers are also required to comply with certain record-keeping requirements.
The Company believes it is in material compliance with the foregoing laws and
regulations. Some states have established certificate of need programs
regulating the establishment or expansion of health care facilities, including
certain of the Company's facilities.
The Company believes it is in material compliance with current applicable
laws and regulations. As noted under Item 3 "Legal Proceedings," in September
1994 the Company entered into a settlement with the OIG regarding an
investigation of T2's financial arrangements with physicians which requires T2
to adhere to a compliance program in rendering its services. No assurance can be
made that in the future the Company's business arrangements, past or present,
will not be the subject of an investigation or prosecution by a federal or state
governmental authority. Such investigation could result in any, or any
combination, of the penalties discussed above depending upon the agency involved
in such investigation and prosecution. No assurance can be given that the
Company's activities will not be reviewed or challenged by regulatory
authorities. The Company monitors legislative developments and would seek to
restructure a business arrangement if the Company determined that one or more of
its business relationships placed it in material noncompliance with such a
statute. The health care service industry will continue to be subject to
substantial regulation at the federal and state levels, the scope and effect of
which cannot be predicted by the Company. Any loss by the Company of its various
federal certifications, its authorization to participate in the Medicare and
Medicaid programs or its licenses under the laws of any state or other
governmental authority from which a substantial portion of its revenues are
derived would have a material adverse effect on its business.
10
<PAGE> 12
POTENTIAL LIABILITY AND INSURANCE
Participants in the health care market are subject to lawsuits alleging
negligence, product liability or other similar legal theories, many of which
involve large claims and significant defense costs. The Company is from time to
time subject to such suits as a result of the nature of its business. The
Company maintains general liability insurance with coverage limits of $1 million
per occurrence and in the aggregate annually, professional liability insurance
on each of its professionals with coverage limits of $1 million per claim and in
the aggregate annually and excess liability coverage of $25 million per
occurrence and in the aggregate annually. In addition, the Company maintains a
$25 million excess umbrella insurance policy that covers liabilities in excess
of the Company's other liability policies subject to certain exclusions. Each of
these policies provides coverage on an "occurrence" basis and has certain
exclusions from coverage. The Company's insurance policies must be renewed
annually.
A successful claim against the Company in excess of the Company's insurance
coverage could have a material adverse effect upon the Company's business and
results of operations. Claims against the Company, regardless of their merit or
eventual outcome, also may have a material adverse effect upon the Company's
reputation. There can be no assurance that the coverage limits of the Company's
insurance policies will be adequate. While the Company has been able to obtain
liability insurance in the past, such insurance varies in cost, is difficult to
obtain and may not be available in the future on acceptable terms, if available
at all.
EMPLOYEES
As of March 1, 1995, the Company had approximately 2,400 full-time
equivalent employees. None of such employees are currently represented by a
labor union or other labor organization. Approximately 50% of such employees are
nurses and pharmacists, with the remainder consisting primarily of sales and
marketing representatives, reimbursement representatives, financial and systems
professionals and managers. The Company believes that its employee relations are
good.
ITEM 2. PROPERTIES.
The Company's headquarters are temporarily located in Denver, Colorado and
consist of approximately 16,000 square feet of office space leased through July,
1996. The Company has entered into a ten year lease for 35,000 square feet of
office space in a new headquarters facility near Boulder, Colorado, commencing
July 1996. Pending the closure of such facilities pursuant to the Consolidation
Plan, the Company leases facilities which formerly were the corporate
headquarters of Curaflex, HealthInfusion, Medisys and HMSS. The Company also
owns a building containing approximately 27,000 square feet of space which
formerly served as the headquarters of T2. As of March 1, 1995, the Company had
140 branch facilities in the United States.
ITEM 3. LEGAL PROCEEDINGS.
The Company has entered into a Stipulation of Settlement (the
"Stipulation") dated as of January 27, 1995 which sets forth the principal terms
of a proposed settlement of class action shareholder litigation which was
initiated against T2 in 1992. The settlement provides for the Company to pay the
shareholder class $25 million in cash (of which approximately $9.8 million will
be contributed by the Company's insurance carriers), and to issue warrants to
acquire an aggregate of 2.52 million shares of the Company Common Stock at an
exercise price of $20.25, subject to adjustment. The Stipulation is subject to
the review and approval of the court on May 5, 1995 and certain other
contingencies, and there can be no assurance 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 such 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.
In September, 1994, T2 entered into a settlement of an investigation by the
OIG into T2's financial arrangements with physicians (the "T2 OIG Settlement").
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
11
<PAGE> 13
management or other services to physicians. As a result of the T2 OIG Settlement
and the recent legal proceedings and investigations in which T2 has been
involved, the Company believes it will be subject to increased federal and state
regulatory scrutiny. The Company is implementing programs to ensure that it is
in compliance with the terms and conditions of the T2 OIG Settlement and has
engaged Richard P. Kusserow, the former Inspector General of the U.S. Department
of Health and Human Services, as a consultant to assist the Company in
developing its compliance program. However, in the event that T2 violates the T2
OIG Settlement or the Company engages in conduct that violates federal or state
laws, rules or regulations, the Company may be subject to a risk of increased
sanctions or penalties; including, but not limited to, partial or complete
exclusion from the Medicare/Medicaid program.
The Company is subject to certain claims and lawsuits, the outcome of which
are not determinable at this time. In the opinion of management, any liability
that might be incurred by the Company upon the resolution of these claims and
lawsuits will not, in the aggregate, have a material adverse effect on the
consolidated financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "CRH." The following table sets forth the high and low sale price of
the Common Stock as reported on the New York Stock Exchange Composite Tape for
the periods indicated (from the inception of trading on July 11, 1994):
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
CALENDAR YEAR 1994
First Quarter........................................................ -- --
Second Quarter....................................................... -- --
Third Quarter (July 11 through September 30)......................... 19 1/8 10 1/2
Fourth Quarter....................................................... 18 3/4 14 1/2
CALENDAR YEAR 1995
First Quarter (through March 20, 1995)............................... 26 1/2 15 3/8
</TABLE>
As of March 20, 1995, there were 3,297 record holders of the Company's
Common Stock. On March 20, 1995, the last reported sale price of the Common
Stock on the New York Stock Exchange was $25 5/8 per share.
The Company has not paid or declared any cash dividends on its capital
stock since its inception. The Company currently intends to retain all future
earnings for use in the expansion and operation of its business. Accordingly,
the Company does not anticipate paying cash dividends on its common stock in the
foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements, the general financial
condition of the Company, contractual restrictions and general business
conditions.
12
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and schedules
and accompanying notes and with "Management's Discussion and Analysis of
Financial Conditions and Results of Operations." Historical financial data for
the Company is based on the combined financial data of the predecessor entities,
and may not be comparable on a year by year basis. Certain data for the Company
prior to the fiscal year ended December 31, 1992 is unavailable based upon the
accounting records of such entities. Amounts are in thousands except per share
data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenue................................................... $162,214 $299,851 $ 413,100 $ 462,304 $ 450,496
Cost of service............................................... -- -- 224,356 285,023 313,182
-------- -------- --------- --------- ---------
Gross profit.................................................. -- -- 188,744 177,281 137,314
Selling, general and administrative expenses.................. -- -- 48,927 75,706 81,907
Provision for estimated uncollectible accounts................ -- -- 24,036 29,751 19,517
Amortization of goodwill...................................... -- -- 4,832 7,824 8,971
Provision for litigation settlements.......................... -- -- -- -- 23,220
Merger costs.................................................. -- -- -- 2,868 28,500
Restructuring costs........................................... -- -- 2,385 1,600 95,500
Special provision for uncollectible accounts.................. -- -- -- -- 17,300
-------- -------- --------- --------- ---------
Operating income (loss)....................................... 34,178 82,144 108,564 59,532 (137,601)
Interest income............................................... -- -- 4,940 3,746 2,469
Interest expense.............................................. -- -- (2,860) (3,916) (7,414)
Minority interest in net income of consolidated joint
ventures.................................................... -- -- (4,638) (9,715) (12,622)
Other income, net............................................. -- -- 3,969 7,862 865
-------- -------- --------- --------- ---------
Income (loss) before income taxes............................. -- -- 109,975 57,509 (154,303)
Provision (benefit) for income taxes.......................... -- -- 38,117 28,848 (26,231)
-------- -------- --------- --------- ---------
Net income (loss)............................................. $ 22,412 $ 56,009 $ 71,858 $ 28,661 $(128,072)
======== ======== ========= ========= =========
Net income (loss) per common share
Primary..................................................... $ 0.82 $ 1.67 $ 1.95 $ 0.76 $ (3.32)
Weighted average common shares outstanding:
Primary..................................................... 27,189 33,632 36,812 37,778 38,633
BALANCE SHEET DATA:
Cash and short-term investments............................... $ -- $ -- $ -- $ 56,003 $ 36,592
Working capital............................................... 69,977 123,543 165,150 124,992 83,395
Total assets.................................................. 207,340 334,613 476,422 555,877 576,115
Long-term debt................................................ 4,121 15,257 20,653 40,156 120,817
Stockholders' equity.......................................... 143,237 230,539 394,514 438,872 322,261
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
HISTORY
The operations of the Company commenced on July 8, 1994 as a result of a
merger of T2, Curaflex, HealthInfusion, and Medisys, each of which were publicly
held national or regional providers of alternate site infusion therapy and
related services. Pursuant to the Merger, which was accounted for as a pooling
of interests, each of those companies became and are now wholly owned
subsidiaries of the Company. On September 12, 1994, the Company acquired all of
the capital stock of HMSS, a leading regional provider of home infusion
therapies, in a transaction accounted for as a purchase. The Company is led by a
newly formed management team with extensive background in the health care
industry, including James M. Sweeney, Chairman and Chief Executive Officer.
IMPACT OF MERGER AND POST-MERGER CONSOLIDATION
During the quarter ended September 30, 1994, the Company recorded a special
charge of $17.3 million to provide for anticipated uncollectible accounts and
other receivables as a result of the Company's decision to implement
standardized policies for recognition of contractual and other allowances and to
provide for the disruptions experienced before and during the Merger and
post-Merger transition process.
The Company also recorded charges of $23.2 million, representing the
estimated cash and non-cash costs of settling certain pre-Merger litigation
matters, including an agreement in principle to settle the T2 shareholders
litigation, the T2 OIG Settlement and the settlement of a dispute with the
former principals of a company acquired by T2 in 1992.
13
<PAGE> 15
During the same quarter, the Company initiated a merger and restructuring
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 ventures and other non-infusion facilities. The
Coram Consolidation Plan provided for the elimination of approximately 100 of
the Company's alternative site infusion branch facilities and the consolidation
of corporate administrative operations into one location, with a corresponding
significant reduction of branch and corporate personnel. In connection with the
Coram Consolidation Plan, the Company recorded charges of $28.5 million in
estimated merger costs and $95.5 million in estimated restructuring costs in the
quarter ended September 30, 1994, including charges to assimilate HMSS.
Management believes these costs to be non-recurring; however, actual costs may
vary from the recorded charges as the Coram Consolidation Plan continues. The
Company anticipates that the branch and corporate consolidation portions of the
Coram Consolidation Plan will be substantially completed by March 31, 1995 and
that the Coram Consolidation Plan, when fully implemented, will generate annual
cost savings in excess of $55 million. The Company expects these savings will
arise through reductions in personnel described above and related costs,
facilities rent, operating and depreciation costs, corporate overhead and
procurement savings. In the first half of 1995, these savings will be partially
offset by the costs of relocation, retention and retraining of personnel,
currently estimated to be approximately $3 million.
In the aggregate, the Company recorded non-recurring charges of
approximately $164.5 million in the second and third quarters of 1994 related to
the Merger and the implementation of the Coram Consolidation Plan.
IMPACT OF PRICING/VOLUME TRENDS
Throughout 1993 and early 1994, the Company experienced severe pricing
pressure from payors related to its alternate site infusion therapy services.
The Company believes, however, that short-term pricing declines within
individual payor groups have moderated. Moreover, home infusion therapy patient
volume has increased since the Merger. No assurance can be given, however, that
such trends will continue. The increasing prevalence and influence of managed
care payors is expected to continue to apply pressure on pricing for the
Company's services. The Company believes that alternate site health care
providers will increasingly face lower operating margins as managed care
organizations constitute an increasing percentage of the mix of the industry's
revenues, and that maintaining offsetting growth in patient volumes will be
necessary to offset lower margins. In addition, there can be no assurance that
the Company's lithotripsy operations will not also experience pricing pressure
in the future. HCFA 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 the hospital. Such a proposal might result in similar
efforts by other third-party payors to limit reimbursement for lithotripsy
procedures.
RECENT DEVELOPMENTS
Consistent with the Company's strategy of focusing on its core businesses,
on January 30, 1995, the Company announced that it had reached an agreement in
principle to sell its pediatric home care business known as Kid's Medical Club
to Pediatric Services of America, Inc. ("PSAI") for $13.5 million, of which the
Company will receive proceeds of approximately $9.2 million (net of advances of
approximately $5 million). The Company is also in the process of soliciting
offers for its institutional pharmacy business known as Pharmcare, Inc.
("Pharmcare"), which had revenues of approximately $20 million and contributed
approximately $0.8 million to the Company's operating income in 1994. The
Company expects the sale of Pharmcare to be completed in the second quarter of
1995. The Company is continuing to evaluate the strategic fit and short-term
value of each of the partnerships and businesses inherited from its predecessor
entities, and management will consider additional divestitures of other
non-strategic businesses during 1995. As part of its strategy, the Company is
continually engaged in acquisition discussions with alternate site providers,
some of which acquisitions, if consummated, would be material to the Company.
14
<PAGE> 16
IMPACT OF THE CAREMARK TRANSACTION
On January 29, 1995, the Company entered into an agreement to acquire the
alternate site infusion business of Caremark (the "Caremark Transaction"). Upon
completion of the Caremark Transaction, the Company will be the largest provider
of alternate site infusion therapy services in the United States based on pro
forma 1994 net revenue. The consolidation of the Company and the Caremark
Business is expected to result in certain additional annual cost savings. No
assurances, however, can be given as to the amount of cost savings that actually
will be realized from the Coram Consolidation Plan or the consolidation of the
Caremark Business.
The purchase price for the Caremark Business is $310 million, subject to
adjustment, consisting of (i) $210 million in cash and (ii) $100 million junior
subordinated payment-in-kind notes (the "Junior Subordinated PIK Notes"). The
Company currently plans to finance the cash portion of the purchase price for
the Caremark Business through the issuance of up to $175 million in subordinated
notes (the "Notes") and through borrowings under a new credit facility providing
for borrowings of up to $300 million, of which $200 million will be term loans
and $100 million will be available as revolving credit loans and letters of
credit, with Chemical Bank as Agent (the "Senior Credit Facility"). A portion of
the cash proceeds will be used to repay all of the Company's indebtedness under
its existing credit facility (the "Existing Credit Facility") which was
approximately $108.1 million as of December 31, 1994.
The Company believes that the combination of the Company and the Caremark
Business will create an entity which will be able to leverage its cost base more
efficiently through a reduction in branch facilities, and which is expected to
be able to benefit from significant economies of scale and operating synergies,
particularly with regard to procurement, regulatory compliance and patient
outcomes tracking. Substantial cost savings are expected to be realized from
elimination of geographically duplicative branches, the elimination of
duplicative corporate overhead expenses, procurement savings and the
implementation of the best demonstrated business practices of the Company's
predecessor entities and the Caremark Business (e.g., accounts receivable
collections) throughout the combined entity. No assurances can be made as to the
amount of cost savings, if any, that actually will be realized. The Company
expects to record a charge against earnings in the second quarter of 1995 in
connection with the Caremark Consolidation Plan.
Upon the consummation of the Caremark Transaction, the Company will be
highly leveraged. Following the Caremark Transaction, the Company believes that
its primary liquidity needs will be cost of debt service, restructuring costs
and working capital. The Company believes that cash generated by operations and
amounts available under the revolving credit portion of the Senior Credit
Facility will be sufficient to meet its liquidity needs. The Company's strategy
includes the attainment of the operating scale required to achieve low cost
provider status through strategic acquisitions. All or a portion of any such
acquisitions may be financed through available credit under the Senior Credit
Facility or, depending upon capital market conditions, the issuance of
additional indebtedness or equity securities or other bank borrowings. At the
closing of the Caremark Transaction, the Company expects to have up to $100
million of unused borrowing capacity under the Senior Credit Facility. The
Senior Credit Facility, and the Notes will include various affirmative, negative
and financial covenants with which the Company must comply, including among
others, a requirement to maintain certain financial ratios and limitations on
the Company's ability to incur additional indebtedness and pay dividends.
15
<PAGE> 17
RESULTS OF OPERATIONS
The following table shows certain items as a percentage of the Company's
net revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1992 1993 1994
<S> <C> <C> <C>
Net revenue........................................................... 100.0% 100.0% 100.0%
Cost of service....................................................... 54.3 61.6 69.5
----- ----- -----
Gross margin................................................ 45.7 38.4 30.5
Selling, general and administrative expenses.......................... 11.8 16.4 18.2
Provision of estimated uncollectible accounts......................... 5.8 6.4 4.3
Amortization of goodwill.............................................. 1.2 1.7 2.0
Provision for litigation settlements.................................. -- -- 5.2
Merger costs.......................................................... -- 0.6 6.3
Restructuring costs................................................... 0.6 0.4 21.2
Special provision for uncollectible accounts.......................... -- -- 3.8
----- ----- -----
Total operating expenses.................................... 19.4 25.5 61.0
Operating income (loss)..................................... 26.3 12.9 (30.5)
Interest income....................................................... 1.2 0.8 0.6
Interest expense...................................................... (0.7) (0.9) (1.7)
Minority interest in net income of consolidated joint ventures........ (1.1) (2.1) (2.8)
Other income, net..................................................... 0.9 1.7 0.2
----- ----- -----
Income (loss) before income taxes..................................... 26.6 12.4 (34.2)
Provision (benefit) for income taxes.................................. 9.2 6.2 (5.8)
----- ----- -----
Net income (loss)..................................................... 17.4% 6.2% (28.4)%
===== ===== =====
</TABLE>
1994 COMPARED TO 1993
Net Revenue. Net revenue for the year ended December 31, 1994 declined by
2.6% from the prior year. Net revenue from the Company's home infusion therapy
business declined primarily due to the pricing pressures imposed by third-party
indemnity and managed care payors discussed above and the termination of certain
physician relationships by the Company. Net revenue from the Company's IntraCare
(outpatient infusion therapy) business declined by approximately $12.2 million
due to direct competition from physicians. This decline in net revenue was
offset by a $9.5 million increase in net revenue from the Company's lithotripsy
business and the addition of an estimated $14 million of net revenue resulting
from the HMSS acquisition. Additional factors affecting 1994 net revenue were
the implementation of consistent Company-wide policies for recognition of
contractual and other allowances, an effort to eliminate unprofitable business
relationships and the renegotiation of physician relationships which were
potentially incompatible with new regulatory requirements. Revenues for the
fourth quarter of 1994 were $113.6 million, as compared to $119.9 million in the
third quarter of 1994 on a pro forma basis including the HMSS acquisition for a
full quarter, representing a decline of 5.3%. While no assurance can be given
regarding the Company's future revenues, management believes that its fourth
quarter net revenue may be a more accurate reflection of the Company's current
operating environment than the Company's 1994 reported revenue taken as a whole.
Gross Margin. Gross margin decreased to 30.5% in 1994 from 38.4% in 1993.
This decrease was related primarily to the decline in pricing, changes in payor
mix, and the revenue recognition policy changes discussed above and the fact
that branch consolidations and corresponding reductions in fixed costs had not
been fully completed by year end. Other factors that affected gross margin
included patient and therapy mix changes and short-term costs not includable in
the restructuring charges which were necessary to facilitate the integration of
the Company's operating companies. However, despite this year-to-year decrease,
gross margin increased from 28.5% in the third quarter of 1994 to 29.5% in the
fourth quarter of 1994, primarily due to the implementation of the Coram
Consolidation Plan and reduced pricing pressures. The Company expects gross
16
<PAGE> 18
margin to increase from its current level as cost savings are realized in
connection with the Coram Consolidation Plan.
Selling, General and Administrative Expense. Selling, general and
administrative expenses ("S,G&A") increased 8.2% over the prior year primarily
as a result of the acquisition of HMSS. Excluding duplicative costs related to
the Merger and the acquisition of HMSS, S,G&A expenses for 1994 remained
substantially constant as compared to the prior year. Reductions in overall
payroll and other administrative costs since consummation of the Merger were
partially offset by costs incurred in the same period to establish a new
corporate office prior to the realization of cost savings through planned
reductions of the corporate staffs of the merged companies. Due to the
integration process, 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, contributed to the increase in S,G&A. The Company estimates that the
incremental expense related to these items was approximately $3.0 million.
Additional costs of this type are expected to be incurred during the balance of
the consolidation process.
Provision for Estimated Uncollectible Accounts. The provision for
estimated uncollectible accounts (including a special provision of $17.3 million
in 1994 in connection with the Merger), increased to 8.2% of net revenue in 1994
from 6.4% in 1993. This increase was related to disruptions in the Company's
collection activities experienced during the Merger and post-Merger transaction
process as well as continuing changes in reimbursement patterns, including the
retroactive effect of case management discounts and discounts demanded by
indemnity insurers.
Amortization of Goodwill. Amortization of goodwill increased in 1994 as a
result of a full year of amortization being taken for acquisitions completed
during 1993, as well as the acquisition of HMSS on September 12, 1994.
Provision for Litigation Settlements. The provision for litigation
settlements represents the estimated cash and non-cash costs of settling certain
litigation matters, including the T2 shareholder litigation, the T2 OIG
Settlement and the settlement of a dispute with the former principals of a
company acquired by T2 in 1992.
Operating Income (Loss). The Company incurred an operating loss of $137.6
million in 1994, compared to operating income of $59.5 million in the prior
year. Excluding the merger, restructuring, litigation charges and special
accounts receivable provision, which were taken as discussed above, and totalled
$164.5 million, the Company's operating income would have been $26.9 million.
The Company's lithotripsy business contributed approximately $19.9 million of
operating income in 1994 (after minority interest of $10.8 million) compared to
a contribution of $15.9 million (after minority interest of $8.9 million) in
1993, excluding the allocation of certain corporate overhead costs. Based on its
current contribution to operating income, any material change in the operations
of the lithotripsy business could have a material adverse effect on the
consolidated operating results of the Company.
Net Interest Expense. Interest expense increased over the prior year
primarily due to increased borrowings used to finance acquisitions, merger costs
and other working capital needs.
Minority Interest. Minority interest in net income of consolidated joint
ventures increased primarily due to the acquisition of majority interests in
several lithotripsy companies during the latter half of 1993.
Other Income. The higher level of other income in 1993 compared to 1994 is
primarily due to the $6.4 million gain realized on the sale of T2's respiratory
business in 1993.
Taxes. The Company's effective tax benefit rate for 1994 was approximately
17%. The rate was substantially below the expected benefit at combined statutory
federal and state rates due primarily to the non-deductibility of goodwill
amortization, certain merger costs and the realizability of losses created by
certain restructuring, litigation and receivable charges.
17
<PAGE> 19
1993 COMPARED TO 1992
Net Revenue. Net revenue for the year ended December 31, 1993, increased
by 11.9% over the prior year. The increase was primarily the result of increased
volume from acquisitions, offset by pricing pressures on the Company's home
infusion therapy business imposed by third-party indemnity and managed care
payors. IntraCare net revenue increased approximately $3.5 million over the
prior year while lithotripsy net revenue increased $30.3 million as a result of
both acquisitions and internal growth.
Gross Margin. Gross margin decreased to 38.3% in 1993 from 45.7% in the
prior year due primarily to the pricing pressures discussed above and changes in
patient and therapy mix.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased 54.7% over the prior year to 16.4% of net
revenue compared to 11.8% in the prior year. The increase was primarily the
result of lower than historical revenue gains without a corresponding decrease
in the fixed components of S,G&A as well as legal and accounting fees associated
with a special internal inquiry conducted by T2.
Provision for Estimated Uncollectible Accounts. The provision for
estimated uncollectible accounts increased primarily as a result of changes in
reimbursement patterns, including the retroactive effect of case management
discounts and larger discounts demanded by indemnity insurance carriers,
although as a percentage of sales it remained the same as the prior year.
Operating Income. The Company's operating income in 1993 was $59.5 million
compared to $108.6 million in the prior year. The Company's lithotripsy business
contributed approximately $15.8 million of operating income in 1993 (after
minority interest of $8.9 million) compared to a contribution of $3.7 million in
1992 (after minority interest of $1.4 million), excluding the allocation of
certain corporate overhead costs and before reflecting the minority interest in
those operating results, which are reflected in the non-operating section of the
Company's consolidated statement of operations.
Other Income. Other income includes net interest expense, compared to net
interest income in the prior year, due primarily to increased borrowings used to
finance acquisitions. Minority interest in net income of consolidated joint
ventures increased primarily due to the acquisition of majority interests in
several lithotripsy companies. Other income in 1993 includes the gain of $6.4
million on the sale of T2's respiratory business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents and marketable securities at
December 31, 1994 was $36.5 million (including restricted cash of approximately
$6.5 million), a decrease of $19.4 million from December 31, 1993. The ratio of
total debt to equity was 0.5:1 at December 31, 1994 compared to 0.2:1 at
December 31, 1993. The increase in the debt ratio is primarily attributable to
borrowings by the Company under the Existing Credit Facility subsequent to the
Merger. Working capital at December 31, 1994 was $83.4 million compared to $125
million at December 31, 1993. The principal reason for the decrease in working
capital was reserves established by the Company in connection with the Coram
Consolidation Plan and in connection with the settlement of the T2 shareholders'
litigation.
Cash used in operating activities was $11.1 million for the year ended
December 31, 1994 compared to $54.6 million of cash provided by operating
activities for the year ended December 31, 1993. The decrease of approximately
$65.7 million in cash from operating activities between 1993 to 1994 is
primarily attributable to the Company's lower gross margin for the year ended
December 31, 1994 and cash used to fund merger costs. EBITDA, excluding special
charges recorded in connection with the Coram Consolidation Plan, litigation and
certain other one-time costs, was $37.2 million for the year ended December 31,
1994 compared to $73.3 million for the year ended December 31, 1993. The
decrease of approximately $48.3 million is primarily attributable to the
reduction in gross profit which occurred in the year ended December 31, 1994.
The difference between cash used in operating activities and EBITDA for the year
ended December 31, 1994 is primarily due to cash payments for merger and
restructuring costs of $34.6 million.
18
<PAGE> 20
Under the Existing Credit Facility, the Company has a $150 million
revolving facility, with a maturity date of June 30, 1996, and an available
borrowing base of $120 million as of December 31, 1994. Base rate borrowings (as
defined) are at a rate of zero to 1.25% over the greater of (i) prime rate or
(ii) Federal funds rate plus 0.5%, and LIBOR borrowings (as defined) are at a
rate of LIBOR plus .875% to 2.25%. The Existing Credit Facility is secured by
the stock of all of the Company's subsidiaries and contains standard financial
covenants and conditions limiting the Company's ability to make certain
expenditures. The Existing Credit Facility was predominantly used to repay
amounts outstanding under the lines of credit maintained by the Company's
predecessors prior to the Merger, to enable the Company to acquire HMSS and
certain minority interests in T2, and to pay certain expenses incurred by the
Company in connection with the Merger and the Coram Consolidation Plan. The
Company expects to incur deferred loan charges of approximately $1.2 million in
order to refinance the Existing Credit Facility.
A number of events in fiscal 1994 had a significant impact on the Company's
financial statements, liquidity and results of operations. These events included
the Merger, the T2 OIG Settlement and the T2 shareholders litigation and the
implementation of the Coram Consolidation Plan.
As of December 31, 1994, the Company had recorded restructuring charges of
approximately $95.5 million in connection with the implementation of the Coram
Consolidation Plan. Actual charges against the reserve were $56.8 million,
consisting principally of write downs to discontinue certain non-core
businesses. Of the total non-recurring charges of $164.5 million incurred in
1994 for the settlement of litigation, the Coram Consolidation Plan and the
special provision for uncollectible accounts, approximately $33.0 million of
such charges were paid in cash and charged against the reserves in 1994. The
Company anticipates that the remainder of these charges, totaling approximately
$65.5 million, will be paid from cash from the Company's operations, cost
savings recognized from the Coram Consolidation Plan, proceeds from the sale of
certain non-core businesses and borrowings under the Senior Credit Facility.
The reserve for settlement of the T2 shareholder litigation represents the
Company's estimate of the net costs of the ultimate disposition of the
litigation based on discussions between the parties regarding the possible
settlement of such litigation. There can be no assurance, however, that such
litigation will be resolved pursuant to the terms currently under discussion or
that the Company's ultimate liability will not exceed such estimate.
The Company's liquidity, including cash provided by operating activities,
anticipated sales of non-core businesses, the realization of certain tax
benefits, the anticipated establishment of the Senior Credit Facility and the
sale of the Convertible Notes and the Notes is believed to be adequate to
finance planned capital expenditures, known operating needs, including the
settlements of the legal proceedings referred to herein, and costs related to
the Coram Consolidation Plan and the Caremark Consolidation Plan for at least
the next twelve months.
STATUS OF CORAM CONSOLIDATION PLAN
Through February 28, 1995 the Company had completed a significant portion
of the branch consolidation process, including the closure of 92 branch
facilities and a reduction of approximately 510 employees.
The following table summarizes the utilization of restructuring reserves
through December 31, 1994 (in millions):
<TABLE>
<CAPTION>
CASH NON-CASH TOTAL
<S> <C> <C> <C>
Personnel Reduction Costs............................... $6.2 $ 0.6 $ 6.8
Facility Reduction Costs................................ 1.2 16.2 17.4
Discontinuance Costs.................................... -- 32.6 32.6
---- ------ -----
$7.4 $ 49.4 $56.8
==== ====== =====
</TABLE>
The Company believes it has adequate reserves to complete the Coram
Consolidation Plan.
19
<PAGE> 21
FUTURE HEALTHCARE 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 healthcare 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.
ITEM 8. FINANCIAL STATEMENTS.
Consolidated financial statements of the Company at December 31, 1994, and
1993 and for the years ended December 31, 1994, 1993 and 1992 and the
independent auditors' report thereon as referenced in Item 14 herein are
incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to directors and executive officers of the Company
is incorporated herein by reference to the information under the caption
"Management -- Directors and Executive Officers" in the Company's Proxy
Statement for the 1995 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation is incorporated herein
by reference to the information under the caption "Management Compensation" in
the Company's Proxy Statement for the 1995 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain beneficial owners
and management is incorporated herein by reference to the tabulation under the
caption "Voting Securities and Principal Stockholders" in the Company's Proxy
Statement for the 1995 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related transactions
is incorporated herein by reference to this information under the caption
"Certain Transactions" in the Company's Proxy Statement for the 1995 Annual
Meeting of Stockholders.
20
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C>
(a) and (d) Financial Statements and Schedules
The financial statements and schedules of the Registrant listed on the
accompanying Index to Financial Statements and Index to Schedules are
filed as part of this Annual Report.
(b) Reports on Form 8-K:
None.
(c) Exhibits
Included as exhibits are the items listed on the Exhibit Index. The
Registrant will furnish a copy of any of the exhibits listed below upon
payment of $5.00 per exhibit to cover the costs to the Registrant of
furnishing such exhibit.
</TABLE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------ ------- ------------
<S> <C> <C>
2.1 Agreement and Plan of Merger dated as of February 6, 1994, by and among
the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition
Company, CHS Acquisition Company, HII Acquisition Company and MI
Acquisition Company (Incorporated by reference to Exhibit 2.1 of
Registration No. 33-53957 on Form S-4). ..................................
2.2 First Amendment to Agreement and Plan of Merger dated as of May 25, 1994,
by and among the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2
Acquisition Company, CHS Acquisition Company, HII Acquisition Company and
MI Acquisition Company (Incorporated by reference to Exhibit 2.2 of
Registration No. 33-53957 on Form S-4). ..................................
2.3 Second Amendment to Agreement and Plan of Merger dated as of July 8, 1994
by and between the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2
Acquisition Company, CHS Acquisition Company, HII Acquisition Company and
MI Acquisition Company (Incorporated by reference to Exhibit 2.3 of the
Registrant's Current Report on Form 8-K dated as of July 15, 1994). ......
3.1 Certificate of Incorporation of Registrant, as amended through May 11,
1994 (Incorporated by reference to Exhibit 2.1 of Registration No.
33-53957 on Form S-4). ...................................................
3.2 Bylaws of Registrant (Incorporated by reference to Exhibit 3.2 of
Registration No. 33-53957 on Form S-4). ..................................
4.1 Form of Common Stock Certificate for the Registrant's common stock, $.001
par value per share.* ....................................................
10.1 Amended and Restated Credit Agreement dated as of February 10, 1995, by
and among Curaflex, T2, HealthInfusion, Medisys, and HMSS as Co-Borrowers,
Toronto Dominion (Texas), Inc., as Agent (the "Amended Credit Agreement").
The exhibits and schedules to the Amended Credit Agreement are omitted
from this Exhibit. The Company agrees to furnish supplementally any
omitted exhibit or schedule to the Securities and Exchange Commission upon
request.* ................................................................
10.2 Form of Employment Agreement between the Registrant and Charles A. Laverty
(Incorporated by reference to Exhibit 10.1 of Registration No. 33-53957 on
Form S-4). ...............................................................
10.3 Form of Severance/Non-Compete Agreement between the Registrant and Miles
E. Gilman (Incorporated by reference to Exhibit 10.2 of Registration No.
33-53957 on Form S-4). ...................................................
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------ ------- ------------
<S> <C> <C>
10.4 Form of Severance/Non-Compete Agreement between the Registrant and William
J. Brummond (Incorporated by reference to Exhibit 10.3 of Registration No.
33-53957 on Form S-4). ...................................................
10.5 Form of Severance/Non-Compete Agreement between the Registrant and Tommy
H. Carter (Incorporated by reference to Exhibit 10.4 of Registration No.
33-53957 on Form S-4). ...................................................
10.6 Form of Indemnification Agreement between the Registrant and each of the
Registrant's directors and certain executive officers.* ..................
10.7 Registrant's 1994 Stock Option/Stock Issuance Plan and related forms of
agreements (Incorporated by reference to Exhibit 10.15 of Registration No.
33-53957 on Form S-4). ...................................................
10.8 Registrant's Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 10.16 of Registration No. 33-53957 on Form S-4). .................
10.9 401(k) Plan of T2 dated December 8, 1989 (Incorporated herein by reference
to Exhibit 10(s) of T2's Annual Report on Form 10-K for the fiscal year
ended September 30, 1989, filed with the Commission on or about December
29, 1988. ................................................................
10.10 1988 Stock Option Plan of T2, as amended and restated as of July 31, 1990
and as further amended as of (i) August 20, 1991; (ii) November 12, 1991;
and (iii) July 6, 1992 (Incorporated by reference to Exhibit 10.18 of
Registration No. 33-53957 on Form S-4). ..................................
10.11 Curaflex 1989 Stock Option Plan (Incorporated by reference to Exhibit
10.53 of Registration No. 33-53957 on Form S-4). .........................
10.12 Curaflex Amended 1990 Stock Option Plan (Incorporated by reference to
Exhibit 10.54 of Registration No. 33-53957 on Form S-4). .................
10.13 Curaflex Directors' Nonqualified Stock Option Plan (Incorporated by
reference to Exhibit 10.59 of Registration No. 33-53957 on Form S-4). ....
10.14 Clinical Homecare Ltd. 1990 Incentive Stock Option Plan, as amended
(Incorporated by reference to Exhibit 10.61 of Registration No. 33-53957
on Form S-4). ............................................................
10.15 Clinical Homecare Ltd. 1990 Stock Option Plan, as amended (Incorporated by
reference to Exhibit 10.62 of Registration No. 33-53957 on Form S-4). ....
10.16 1989 Stock Option Plan of Medisys (Incorporated by reference to Exhibit
10.85 of Registration No. 33-53957 on Form S-4). .........................
10.17 Form of Non-Plan Option Agreement of Medisys (Incorporated by reference to
Exhibit 10.86 of Registration No. 33-53957 on Form S-4). .................
11 Statement regarding Computation of Per Share Earnings.*...................
22.1 Subsidiaries of the Registrant.*..........................................
23.1 Consent of Ernst & Young LLP.*............................................
23.2 Consent of Deloitte & Touche LLP.*........................................
23.3 Consent of KPMG Peat Marwick LLP.*........................................
23.4 Consent of Arthur Andersen LLP.*..........................................
23.5 Consent of Coopers & Lybrand LLP.*........................................
27 Financial Data Schedule*..................................................
</TABLE>
- ---------------
* Filed herewith.
22
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
25, 1995.
CORAM HEALTHCARE CORPORATION
By: /s/ JAMES M. SWEENEY
------------------------------------
James M. Sweeney
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES M. SWEENEY Chairman and Chief Executive Officer March 25, 1995
- --------------------------------- (Principal Executive Officer)
James M. Sweeney
/s/ PATRICK J. FORTUNE President, Chief Operating Officer March 25, 1995
- --------------------------------- and Director
Patrick J. Fortune
/s/ SAM R. LENO Secretary and Chief Financial Officer March 25, 1995
- --------------------------------- (Principal Financial Officer and
Sam R. Leno Principal Accounting Officer)
/s/ TOMMY H. CARTER Vice Chairman of the Board of March 25, 1995
- --------------------------------- Directors
Tommy H. Carter
/s/ RICHARD A. FINK Director March 25, 1995
- ---------------------------------
Richard A. Fink
Director
- ---------------------------------
Stephen G. Pagliuca
/s/ L. PETER SMITH Director March 25, 1995
- ---------------------------------
L. Peter Smith
/s/ DR. GAIL R. WILENSKY Director March 25, 1995
- ---------------------------------
Dr. Gail R. Wilensky
</TABLE>
23
<PAGE> 25
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<S> <C>
Reports of Independent Auditors....................................................... F-2
Consolidated Balance Sheets -- As of December 31, 1994 and 1993....................... F-7
Consolidated Statements of Operations -- Years Ended December 31, 1994, 1993 and
1992................................................................................ F-8
Consolidated Statements of Stockholders' Equity -- Years Ended December 31, 1994, 1993
and 1992............................................................................ F-9
Consolidated Statements of Cash Flows -- Years Ended December 31, 1994, 1993 and
1992................................................................................ F-10
Notes to Consolidated Financial Statements............................................ F-11
Schedule II -- Valuation and Qualifying Accounts...................................... F-25
</TABLE>
F-1
<PAGE> 26
Board of Directors
Coram Healthcare Corporation and subsidiaries
We have audited the accompanying consolidated balance sheet of Coram
Healthcare Corporation and subsidiaries as of December 31, 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1994. Our audit also included the 1994 financial
statement schedules listed in the index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement and schedule presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the 1994 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Coram Healthcare Corporation and subsidiaries at December 31, 1994,
and the consolidated results of their operations and their cash flows for the
year ended December 31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related 1994 financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
We also have audited, as to combination only, the accompanying consolidated
balance sheet of Coram Healthcare Corporation and subsidiaries as of December
31, 1993, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1993. As described in Note 1 to such statements, these statements have been
combined from the financial statements of T(2) Medical, Inc., Curaflex Health
Services, Inc., HealthInfusion, Inc., and Medisys, Inc. (which are not presented
separately herein). The reports of Deloitte & Touche LLP, as it relates to T(2)
Medical, Inc., as of September 30, 1993, and for the two years in the period
ended September 30, 1993, KPMG Peat Marwick LLP, as it relates to Curaflex
Health Services, Inc., Arthur Andersen LLP, as it relates to HealthInfusion,
Inc., and Coopers & Lybrand, as it relates to Medisys, Inc., who have audited
these statements appear elsewhere herein. In our opinion, the accompanying
consolidated financial statements for 1993 and for the two years in the period
ended December 31, 1993 have been properly combined on the basis described in
Note 1.
We also audited the adjustments described in Note 1 that were applied to
present the statements of operations, stockholders' equity, and cash flows, of
T(2) Medical, Inc. for each of the two years in the period ended December 31,
1993. In our opinion, such adjustments are appropriate and have been properly
applied.
ERNST & YOUNG LLP
Orange County, California
February 17, 1995
F-2
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of T2 Medical, Inc.
We have audited the accompanying consolidated balance sheet of T2 Medical,
Inc. and its subsidiaries (the "Company") as of September 30, 1993, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the two years in the period ended September 30, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of T2 Medical, Inc. and
subsidiaries at September 30, 1993, and the results of their operations and
their cash flows for each of the two years in the period ended September 30,
1993 in conformity with generally accepted accounting principles.
As discussed in Note 12, the Company is a defendant in civil suits filed on
behalf of individuals claiming they have purchased Company stock at various
times during the time period from December 2, 1991 through August 12, 1993. The
ultimate outcome of the litigation cannot presently be determined. Accordingly,
no provision for any loss that may result upon resolution of these suits has
been made in the accompanying consolidated financial statements.
Deloitte & Touche LLP
Atlanta, Georgia
November 17, 1993
(December 23, 1993 as to Note 17)
F-3
<PAGE> 28
KPMG PEAT MARWICK LLP [LOGO]
INLAND EMPIRE OFFICE
ONE LAKESHORE CENTRE
3281 GUASTI ROAD, SUITE 550
ONTARIO, CA 91761
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Curaflex Health Services, Inc.:
We have audited the accompanying consolidated balance sheets of Curaflex Health
Services, Inc. and subsidiaries as of December 31, 1993, and the related
consolidated statements of operations, common stockholders' equity (deficit) and
cash flows for each of the years in the two-year period ended December 31, 1993.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects the financial position of Curaflex Health
Services, Inc. and subsidiaries as of December 31, 1993 and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
As discussed in note 8 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
KPMG PEAT MARWICK LLP
Ontario, California
February 28, 1994
F-4
<PAGE> 29
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
HealthInfusion, Inc. and subsidiaries:
We have audited the consolidated balance sheet of HealthInfusion, Inc. (a
Florida corporation) and subsidiaries as of December 31, 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of HealthInfusion, Inc. and
subsidiaries as of December 31, 1993 and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
March 18, 1994.
F-5
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
Medisys, Inc.:
We have audited the consolidated balance sheet of Medisys, Inc. and
Subsidiaries as of December 31, 1993, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the years
in the two-year period then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The 1992 consolidated financial statements of Medisys, Inc. and
Subsidiaries have been restated to give retroactive effect to the merger of
Medisys, Inc. and Subsidiaries and American Home Therapies, Inc., on July 30,
1993, which has been accounted for as a pooling of interests as described in
note 2 to the consolidated financial statements of Medisys, Inc. and
Subsidiaries.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Medisys,
Inc. and Subsidiaries as of December 31, 1993, and the consolidated results of
their operations and their cash flows for each of the years in the two-year
period then ended, in conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements of Medisys
Inc., and Subsidiaries, in 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
COOPERS & LYBRAND
Minneapolis, Minnesota
February 11, 1994
F-6
<PAGE> 31
CORAM HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 20,046 $ 22,971
Accounts receivable, net of allowances of $22,297 in 1994 and $25,076
in 1993........................................................... 111,000 112,944
Investment in available-for-sale securities.......................... 16,546 33,032
Inventories.......................................................... 11,064 11,158
Prepaid taxes........................................................ 11,430 --
Deferred income taxes, net........................................... 31,893 6,726
Other current assets................................................. 5,667 5,453
-------- --------
Total current assets......................................... 207,646 192,284
PROPERTY AND EQUIPMENT, NET............................................ 25,902 42,917
JOINT VENTURES AND OTHER ASSETS........................................ 8,651 26,558
DEFERRED INCOME TAXES NON-CURRENT...................................... 557 --
GOODWILL, NET.......................................................... 333,359 294,118
-------- --------
TOTAL ASSETS........................................................... $576,115 $555,877
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................................... $ 26,897 $ 18,745
Taxes payable........................................................ -- 3,600
Revolving lines of credit............................................ -- 15,073
Current maturities of long-term debt................................. 5,911 13,684
Deferred income taxes................................................ 5,788 5,769
Liabilities for securities sold under agreement to repurchase........ 7,430 --
Reserve for litigation............................................... 22,720 --
Accrued merger and restructuring..................................... 42,794 --
Other accrued liabilities............................................ 12,711 10,421
-------- --------
Total current liabilities.................................... 124,251 67,292
REVOLVING LINES-OF-CREDIT.............................................. 108,099 22,093
LONG-TERM DEBT......................................................... 12,718 18,063
MINORITY INTEREST IN CONSOLIDATED JOINT VENTURES....................... 6,599 6,298
OTHER LIABILITIES...................................................... 665 499
DEFERRED INCOME TAXES NON-CURRENT...................................... 1,522 2,760
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.001, authorized 75,000 shares, issued
38,964 in 1994 and 37,793 in 1993................................. 39 38
Additional paid-in capital........................................... 341,328 328,390
Stock purchase note.................................................. -- (860)
Unrealized loss on available-for-sale securities..................... (279) --
Retained earnings (deficit).......................................... (18,827) 111,304
-------- --------
Total stockholders' equity................................... 322,261 438,872
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $576,115 $555,877
======== ========
</TABLE>
See accompanying notes.
F-7
<PAGE> 32
CORAM HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
NET REVENUE................................................. $ 450,496 $462,304 $413,100
COST OF SERVICE............................................. 313,182 285,023 224,356
--------- -------- --------
Gross profit.............................................. 137,314 177,281 188,744
OPERATING EXPENSES:
Selling, general and administrative expenses.............. 81,907 75,706 48,927
Provision for estimated uncollectible accounts............ 19,517 29,751 24,036
Amortization of goodwill.................................. 8,971 7,824 4,832
Provision for litigation settlements...................... 23,220 -- --
Merger costs.............................................. 28,500 2,868 --
Restructuring costs....................................... 95,500 1,600 2,385
Special provision for uncollectible accounts.............. 17,300 -- --
--------- -------- --------
Total operating expenses.......................... 274,915 117,749 80,180
--------- -------- --------
OPERATING INCOME (LOSS)..................................... (137,601) 59,532 108,564
OTHER INCOME (EXPENSE):
Interest income........................................... 2,469 3,746 4,940
Interest expense.......................................... (7,414) (3,916) (2,860)
Minority interest in net income of consolidated joint
ventures............................................... (12,622) (9,715) (4,638)
Equity in net income of unconsolidated joint ventures..... 800 1,357 2,918
Gain (loss) on sales of property and equipment............ (255) 5,359 (254)
Other income.............................................. 320 1,146 1,305
--------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... (154,303) 57,509 109,975
PROVISION (BENEFIT) FOR INCOME TAXES........................ (26,231) 28,848 38,117
--------- -------- --------
NET INCOME (LOSS)........................................... $(128,072) $ 28,661 $ 71,858
========= ======== ========
NET INCOME (LOSS) PER COMMON SHARE:
Primary................................................... $ (3.32) $ 0.76 $ 1.95
========= ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary................................................... 38,633 37,778 36,812
========= ======== ========
</TABLE>
See accompanying notes.
F-8
<PAGE> 33
CORAM HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
COMMON STOCK ADDITIONAL STOCK AVAILABLE- RETAINED
--------------- PAID-IN PURCHASE FOR-SALE EARNINGS
SHARES AMOUNT CAPITAL NOTE SECURITIES (DEFICIT) TOTAL
------ ------ ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992................... 32,158 $ 32 $ 193,521 $ (860) $ -- $ 37,846 $ 230,539
Issuance of common stock, net............ 3,954 4 109,890 -- -- -- 109,894
Dividends................................ -- -- -- -- -- (2,349) (2,349)
Distribution of S Corporation earnings... -- -- -- -- -- (15,428) (15,428)
Net income............................... -- -- -- -- -- 71,858 71,858
------ ------ ---------- -------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1992................. 36,112 36 303,411 (860) -- 91,927 394,514
Issuance of common stock, net............ 1,681 2 24,979 -- -- -- 24,981
Dividends................................ -- -- -- -- -- (5,012) (5,012)
Distribution of S Corporation earnings... -- -- -- -- -- (4,272) (4,272)
Net income............................... -- -- -- -- -- 28,661 28,661
------ ------ ---------- -------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1993................. 37,793 38 328,390 (860) -- 111,304 438,872
Issuance of common stock, net (through
June 30, 1994)........................ 786 1 9,323 -- -- -- 9,324
Dividends (through June 30, 1994)........ -- -- -- -- -- (2,059) (2,059)
Net loss (through June 30, 1994)
(unaudited)........................... -- -- -- -- -- (5,788) (5,788)
------ ------ ---------- -------- ---------- --------- ---------
Balance, at June 30, 1994................ 38,579 39 337,713 (860) -- 103,457 440,349
Issuance of common stock, net............ 385 -- 3,615 -- -- -- 3,615
Unrealized loss on available-for-sale
securities............................ -- -- -- -- (279) -- (279)
Proceeds from stock purchase note........ -- -- -- 860 -- -- 860
Net loss from June 30, 1994 to December
31, 1994 (unaudited).................. -- -- -- -- -- (122,284) (122,284)
------ ------ ---------- -------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1994................. 38,964 $ 39 $ 341,328 $ -- $ (279) $ (18,827) $ 322,261
====== ====== ======== ======= ======== ========= =========
</TABLE>
See accompanying notes.
F-9
<PAGE> 34
CORAM HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................................. $(128,072) $ 28,661 $ 71,858
Adjustments to reconcile net income (loss) to net cash provided (used) by operating
activities:
Provision for estimated uncollectible accounts................................... 19,517 29,751 24,036
Special provision for additional uncollectible amounts........................... 17,300 -- --
Depreciation and amortization.................................................... 22,871 18,983 11,876
Income tax benefit of exercise of stock options.................................. -- -- 15,464
Merger/restructuring costs not requiring cash.................................... 50,100 -- --
Litigation settlements not requiring cash........................................ 5,520 -- --
Deferred income taxes, net....................................................... (26,943) 377 (330)
Minority interest in net income of consolidated joint ventures, net.............. (978) 1,240 901
(Gain) loss on sales of property and equipment................................... 255 (5,359) 254
(Gain) loss on sales of investments, net......................................... (177) (115) 278
Equity in net income of unconsolidated joint ventures, net....................... 562 406 (1,154)
Other, net....................................................................... 675 (115) 1,165
Change in assets and liabilities, net of acquisitions:
Increase in accounts receivable................................................ (20,597) (17,683) (35,483)
Increase in prepaid expenses, inventories and other assets..................... (15,286) (4,451) (12,347)
Decrease in current and other liabilities...................................... (3,112) (3,834) (9,997)
Increase in accrued merger and restructuring................................... 37,787 -- --
Increase in reserve for litigation............................................. 17,200 -- --
--------- -------- --------
Net cash provided (used) by operating activities........................... (23,378) 47,861 66,521
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale securities.............................. 17,207 -- --
Purchases of available-for-sale securities....................................... (1,000) -- --
Purchases and sales of short-term investments, net............................... -- 35,785 (66,668)
Proceeds from sale of property and equipment..................................... 1,100 5,439 150
Proceeds from sales of joint ventures............................................ 1,050 -- --
Purchases of property and equipment.............................................. (8,950) (14,701) (11,101)
Payments for acquisition of businesses, net of cash acquired..................... (61,450) (60,364) (57,153)
Capital contributions to unconsolidated joint ventures........................... (3,945) (11,897) (7,380)
Distributions of S corporation earnings.......................................... -- (4,272) (15,427)
--------- -------- --------
Net cash used by investing activities...................................... (55,988) (63,434) (157,579)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net of repurchases and issuance costs..................... 2,597 1,296 50,887
Borrowings and repayments of lines of credit, net................................ 70,933 -- --
Securities sold under agreements to repurchase................................... 7,430 -- --
Debt borrowings.................................................................. 2,180 62,941 22,809
Repayment of debt................................................................ (11,655) (50,823) (49,465)
Cash dividends paid.............................................................. (2,059) (5,012) (2,349)
Exercise of stock options........................................................ 7,015 223 291
--------- -------- --------
Net cash provided by financing activities.................................. 76,441 8,625 22,173
--------- -------- --------
NET INCREASE (DECREASE) IN CASH.................................................... (2,925) 6,476 (68,885)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 22,971 16,495 85,380
--------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 20,046 $ 22,971 $ 16,495
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest....................................................................... $ 9,596 $ 3,868 $ 2,963
========= ======== ========
Income taxes................................................................... $ 16,692 $ 32,183 $ 28,174
========= ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock in connection with acquisitions................................ $ 4,022 $ 23,331 $ 38,261
========= ======== ========
Capital lease obligations for purchase of property and equipment................. $ -- $ 1,700 $ --
========= ======== ========
Conversion of preferred stock to common stock.................................... $ -- $ -- $ 20,009
========= ======== ========
</TABLE>
See accompanying notes.
F-10
<PAGE> 35
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Coram Healthcare Corporation and its subsidiaries ("Coram" or the
"Company") are primarily engaged in providing alternate site infusion therapy
and related services. Other services offered by the Company include the
provision of lithotripsy, non-intravenous infusion products and physician
support services.
The operations of the Company commenced on July 8, 1994, as a result of a
merger of T(2) Medical, Inc. ("T(2)"), Curaflex Health Services, Inc.
("Curaflex"), HealthInfusion, Inc. ("HealthInfusion") and Medisys, Inc.
("Medisys") (collectively, the "Merged Entities"). Each of these companies
became and are now wholly owned subsidiaries of the Company. Each outstanding
share of the Merged Entities was converted, at varying exchange rates, into
shares of the Company's common stock, resulting in the issuance of 38.6 million
shares of Coram common stock. The transaction was accounted for as a pooling of
interests. Accordingly, the accompanying financial information was restated to
include the accounts of the Merged Entities for all periods presented.
The results of operations previously reported by the Merged Entities and
the combined amounts presented in the accompanying consolidated financial
statements are summarized below (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
SIX MONTHS ENDED ---------------------
JUNE 30, 1994 1993 1992
---------------- -------- --------
<S> <C> <C> <C>
Net Revenue:
T(2)........................................ $115,770 $265,090 $264,562
Curaflex.................................... 48,989 89,152 75,127
Medisys..................................... 27,438 51,381 23,662
HealthInfusion.............................. 34,515 56,681 49,749
---------------- -------- --------
Combined................................. $226,712 $462,304 $413,100
============= ======== ========
Net Income (Loss):
T(2)........................................ $ (3,387) $ 35,504 $ 64,859
Curaflex.................................... (4,400) (8,615) (875)
Medisys..................................... 599 652 1,551
HealthInfusion.............................. 1,703 1,120 6,323
Coram Holding............................... (304) -- --
---------------- -------- --------
Combined................................. $ (5,789) $ 28,661 $ 71,858
============= ======== ========
</TABLE>
HMSS Acquisition -- On September 12, 1994, the Company acquired all of the
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.
Other Acquisitions -- During 1994, T(2) completed 55 acquisitions totaling
$22.8 million which were accounted for as purchases. Individually, the
acquisitions were not considered material to the Company's financial position or
results of operations. During the years ended December 31, 1993 and 1992, the
Merged Entities completed numerous acquisitions. Acquisitions accounted for as
poolings of interests (four in 1993 and five in 1992) are reflected in the
accounts and operations of the Merged Entities for all periods presented.
Acquisitions accounted for as purchases (15 in 1993 and 14 in 1992) are included
in the operations of the Merged Entities subsequent to the dates of
acquisitions.
F-11
<PAGE> 36
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with these purchase transactions, certain purchase agreements
provided for additional contingent consideration. The amount of additional
consideration, if any, is based on the financial performance levels of the
acquired companies. If these contingent payments are paid, they will be recorded
as additional costs in excess of fair value in the period in which the payment
becomes probable.
Fiscal Year -- In conjunction with the merger, the Company adopted a
December 31 year end. While Curaflex, HealthInfusion and Medisys previously had
year ends of December 31, T(2) prepared its financial statements on the basis of
a September 30 fiscal year end. The restated financial statements for 1993 and
1992 include previously reported T(2) amounts adjusted to conform to a December
31 year end. Accordingly, T(2)'s results of operations as previously reported
have been adjusted as follows (in thousands):
<TABLE>
<S> <C>
NET REVENUES:
As previously reported -- fiscal year ended September 30, 1992.......... $250,944
As adjusted to conform to the year ended December 31, 1992.............. $264,562
As previously reported -- fiscal year ended September 30, 1993.......... $273,199
As adjusted to conform to the year ended December 31, 1993.............. $265,090
NET INCOME:
As previously reported -- fiscal year ended September 30, 1992.......... $ 64,959
As adjusted to conform to the year ended December 31, 1992.............. $ 64,859
As previously reported -- fiscal year ended September 30, 1993.......... $ 41,468
As adjusted to conform to the year ended December 31, 1993.............. $ 35,504
</TABLE>
The adjustments made to conform T(2)'s previously reported amounts reflect
the inclusion and exclusion, as necessary, of T(2)'s results of operations for
the quarters ended December 31, 1993, 1992 and 1991.
Merger and Restructuring -- During September 1994, the Company initiated a
merger and restructuring plan ("the Coram Consolidation 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
ventures and other non-infusion facilities. The Coram Consolidation Plan
anticipated the costs associated with consummation of the merger transaction
("Merger Costs"); it also anticipated costs associated with 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 Costs"). In
connection with the Coram Consolidation Plan, the Company recorded charges of
$28.5 million in estimated merger costs and $92.3 million in estimated
restructuring costs. Additionally, upon the completion of the HMSS acquisition,
the Company extended the Coram Consolidation Plan to include the consolidation
of HMSS operations. Accordingly, the Company recorded estimated restructuring
costs of $3.2 million related to the HMSS transaction. The estimated costs
associated with each component of the
F-12
<PAGE> 37
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Coram Consolidation Plan, including the writedown of existing assets to their
estimated net realizable value were as follows (in thousands):
<TABLE>
<CAPTION>
CASH NON-CASH
EXPENDITURES CHARGES TOTAL
------------ -------- -------
<S> <C> <C> <C>
Merger Costs......................................... $ 27,900 $ 600 $28,500
========= ======= =======
Personnel Reduction Costs............................ $ 26,200 $ 600 $26,800
Facility Reduction Costs............................. 15,600 16,300 31,900
Discontinuance Costs................................. 4,200 32,600 36,800
------------ -------- -------
Restructuring Costs.................................. $ 46,000 $49,500 $95,500
========= ======= =======
</TABLE>
Management believes these costs to be non-recurring; however, actual costs
may vary from the recorded charges as the Coram Consolidation Plan continues.
Implementation of the Coram Consolidation Plan began in September 1994. The
Coram Consolidation Plan provided for the elimination of approximately 100 of
the Company's home infusion branch facilities and the consolidation of corporate
administrative operations into one location, with a corresponding significant
reduction of branch and corporate personnel. The Company anticipates that the
branch and corporate consolidation portions of the Coram Consolidation Plan will
be substantially completed by March 31, 1995.
Through December 31, 1994, the Company had completed a significant portion
of the branch consolidation process, including the closure of 75 branch
facilities and a reduction of approximately 500 employees. The Company has made
total payments and recorded asset write-downs through December 31, 1994, as
follows (in thousands):
<TABLE>
<CAPTION>
CASH NON-CASH TOTAL
------- -------- -------
<S> <C> <C> <C>
Merger Costs............................................ $25,100 $ 600 $25,700
======= ======= =======
Personnel Reduction Costs............................... $ 6,200 $ 600 $ 6,800
Facility Reduction Costs................................ 1,200 16,200 17,400
Discontinuance Costs.................................... -- 32,600 32,600
------- -------- -------
Restructuring Costs..................................... $ 7,400 $49,400 $56,800
======= ======= =======
</TABLE>
The accrued merger and restructuring includes the remaining portion of the
restructuring amount related to the HMSS acquisition.
As a result of the Company's decision to implement standardized policies
for recognition of contractual and other allowances, de-emphasize certain
businesses and provide for the disruptions experienced during the merger and
post-merger transition process, the Company also recorded a special charge of
$17.3 million in September 1994, 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.
Although subject to future adjustment, management of the Company believes
it had adequate reserves as of December 31, 1994, to complete the Coram
Consolidation Plan.
Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation -- The consolidated
financial statements include the accounts of Coram, its subsidiaries and joint
ventures in which ownership is 51% or greater. All material intercompany
accounts and transaction balances have been eliminated in consolidation. The
Company uses the equity method of accounting to account for investments in
entities in which it exhibits significant influence
F-13
<PAGE> 38
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and has an ownership interest of 20 to 50%. The cost method is used to account
for investments in which ownership is less than 20%.
Revenue Recognition -- Revenue is recognized as services are rendered or
products are delivered. Substantially all of the Company's revenue is billed to
third-party payors, including insurance companies, managed care plans,
governmental payors and contracted institutions. Revenue is recorded net of
contractual adjustments and related discounts. Contractual adjustments represent
estimated differences between service revenue at established rates and amounts
expected to be realized from third-party payors under contractual agreements.
Management fees, which are collected from entities managed by the Company,
are based on a percentage of the entities' annual pretax earnings or a
percentage of revenue.
Cash and Cash Equivalents -- Cash equivalents include all highly liquid
investments with an original maturity of three months or less. A portion of the
Company's cash balances were restricted as to their use. The restricted balances
totaled approximately $6.5 million and $5.0 million at December 31, 1994 and
1993, respectively.
Investments -- Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." As of December 31, 1994, the Company
had classified all of its investment securities as available-for-sale.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported on a net basis as a separate component of stockholders'
equity until realized. Realized gains and losses on the sale of securities are
computed using the specific identification method.
Provision for Estimated Uncollectible Accounts -- The Company records a
provision for estimated uncollectible accounts for the portion of recognized
revenues which it estimates may not be ultimately collected. The provision
includes any contractual adjustments in excess of those estimated at the time
revenue is recognized and other differences between recorded revenues and
collections from third party payors and patients. The provision and related
allowance are adjusted periodically, based upon the Company's evaluation of
historical collection experience with specific payors for particular services,
anticipated reimbursement levels with specific payors for new services for which
the Company may not have had significant historical collection experience,
industry reimbursement trends and other relevant factors.
Inventories -- Inventories, consisting primarily of pharmaceuticals and
medical supplies, are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
Property and Equipment -- Property and equipment are stated at cost.
Depreciation is computed using straight-line and accelerated methods over the
estimated useful lives of one to 10 years for machinery and equipment, furniture
and fixtures and vehicles, and 30 to 31.5 years for buildings. Leasehold
improvements are amortized over the shorter of the lease term or estimated
useful lives of the related assets.
Goodwill -- Goodwill represents the excess of the purchase price over the
fair value of net assets acquired through business combinations accounted for as
purchases and is amortized on a straight-line basis over the expected periods to
be benefited. At December 31, 1994 and 1993, total accumulated amortization of
goodwill was approximately $28.4 million and $19.1 million, respectively.
Goodwill from acquisitions consummated prior to the merger and the HMSS
acquisition is amortized over useful lives ranging from 30 to 40 years. Goodwill
will be amortized over an average useful life of approximately 20 years for all
companies purchased subsequent to December 31, 1994. The Company assesses the
recoverability of goodwill at least annually using estimated undiscounted future
cash flows determined based on its judgments as to the future profitability of
its operations and the changing dynamics of the healthcare industry.
F-14
<PAGE> 39
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes -- The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes". SFAS 109 requires an asset and liability approach to
financial accounting and reporting for income taxes.
Per Share Data -- Per share data have been computed by dividing net income
or loss by the weighted average number of common and common equivalent shares
outstanding during the period. The weighted average calculation also includes
common shares issuable. Common stock equivalents include dilutive stock options
and warrants. Fully diluted per share calculations are not presented in the
financial statements because the assumed conversions of convertible debt and any
additional incremental shares would be either antidilutive or cause de minimus
dilution.
2. INVESTMENTS
The carrying value of the Company's available-for-sale securities and their
approximate fair values at December 31, 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED APPROXIMATE
COST LOSSES FAIR VALUE
--------- ---------- -----------
<S> <C> <C> <C>
U.S. Government agencies............................ $ 329 $ 4 $ 325
Asset and mortgage-backed securities................ 8,256 171 8,085
U.S. Treasury obligations........................... 7,531 93 7,438
Corporate obligations............................... 704 11 693
Other securities.................................... 5 -- 5
--------- ---------- -----------
Total..................................... $16,825 $279 $16,546
======= ======== =========
</TABLE>
In accordance with the Company's previous investment accounting policy, the
aggregate carrying value and estimated fair value of investments at December 31,
1993 were as follows (in thousands):
<TABLE>
<CAPTION>
APPROXIMATE
COST FAIR VALUE
-------- -----------
<S> <C> <C>
U.S. Government agencies...................................... $ 1,313 $ 1,323
Asset and mortgage-backed securities.......................... 18,438 18,484
U.S. Treasury obligations..................................... 12,296 12,307
Corporate obligations......................................... 985 986
-------- -----------
Total............................................... $ 33,032 $33,100
======= =========
</TABLE>
The amortized cost and approximate market value of investment securities at
December 31, 1994, by contractual maturity, are shown below (in thousands).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED APPROXIMATE
COST FAIR VALUE
--------- -----------
<S> <C> <C>
Due in one year or less....................................... $ 5,618 $ 5,574
Due after one year through five years......................... 2,951 2,887
Asset and mortgage-backed securities.......................... 8,256 8,085
--------- -----------
$16,825 $16,546
======= =========
</TABLE>
On December 28, 1994, the Company entered into an agreement to sell and
repurchase U.S. Treasury obligations totaling approximately $7.4 million. The
liability to repurchase securities sold under this agreement reported as a
current liability in the accompanying consolidated balance sheet because of its
short-term maturity. The related investments were included as available-for-sale
securities at December 31, 1994.
F-15
<PAGE> 40
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Gross realized gains and losses on sale of available-for-sale securities
were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gain.......................................................... $ 8 $ 69 $182
Loss.......................................................... $136 $264 $506
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Land and buildings............................................... $ 3,135 $ 3,218
Leasehold improvements........................................... 4,943 4,570
Machinery and equipment.......................................... 50,940 51,703
Furniture and fixtures........................................... 5,898 9,848
Vehicles......................................................... 5,493 5,274
------- -------
70,409 74,613
Less accumulated depreciation and amortization................... 44,507 31,696
------- -------
$25,902 $42,917
======= =======
</TABLE>
4. LINES OF CREDIT AND LONG-TERM DEBT
Lines of credit and Long-term debt were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- -------
<S> <C> <C>
Revolving lines of credit....................................... $108,099 $37,166
Subordinated convertible debentures, at 9%, with semi-annual
interest payments, due June 30, 1996, convertible into common
stock at the conversion rate of $16.36........................ 7,000 7,000
Other obligations, including capital leases, at rates ranging
from 6% to 16%, collateralized by certain property and
equipment..................................................... 11,629 24,747
-------- -------
126,728 68,913
Less current maturities......................................... 5,911 28,757
-------- -------
$120,817 $40,156
======== =======
</TABLE>
On October 17, 1994, the Company entered into a $120 million revolving line
of credit agreement to replace its prior borrowing facility. This agreement,
which has a maturity date of June 30, 1996, bears interest at an adjusted LIBOR
and/or base borrowing rates. Base rate borrowings under this agreement were zero
to 1.125% over the greater of 1) prime rate or 2) Federal funds rate plus 0.5%,
and LIBOR borrowings at a rate of floating LIBOR plus 0.875% to 2.125%. The
revolving line of credit is collateralized by a pledge of the stock of the
Company's subsidiaries, as well as accounts receivable, investment securities
and all of the general assets of the Company and its subsidiaries. The agreement
also requires the maintenance of certain financial ratios and contains other
restrictive covenants. At December 31, 1994, borrowings on the revolving line of
credit were at a weighted average LIBOR rate of 7.822%. At December 31, 1994,
the available borrowings under the revolving credit facility, as defined in the
Agreement, were approximately $12 million.
F-16
<PAGE> 41
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 10, 1995, the Company entered into an amendment, which had an
effective date of December 31, 1994, to its revolving line of credit agreement.
Under this amendment, the revolving line of credit was increased to $150
million. The base rate borrowings were adjusted to zero to 1.25% over the
greater of 1) prime rate or 2) Federal funds rate plus 0.5%, and LIBOR
borrowings at a rate of floating LIBOR plus 0.875% to 2.25%. The covenants
include but are not limited to the restrictions in the payment of any dividends.
The agreement contains a commitment fee ranging from 0.25% to 0.5% on the unused
balance.
The Company was in compliance with financial ratios and restrictive
covenants at December 31, 1994 and for the year then ended.
At December 31, 1994, the Company was obligated to make principal payments
on long-term debt outstanding as follows (in thousands):
<TABLE>
<S> <C>
Year Ending December 31,
1995.................................................................... $ 5,911
1996.................................................................... 117,879
1997.................................................................... 866
1998.................................................................... 820
1999 and thereafter..................................................... 1,252
--------
$126,728
========
</TABLE>
5. INCOME TAXES
The components of consolidated income tax provision (benefit) were as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................ $ 237 $27,019 $33,138
State.............................................. 68 3,479 4,793
-------- ------- -------
Total...................................... 305 30,498 37,931
-------- ------- -------
Deferred:
Federal............................................ $(17,676) $(1,440) $ 146
State.............................................. (8,860) (210) 40
-------- ------- -------
Total...................................... (26,536) (1,650) 186
-------- ------- -------
Provision (benefit) for income taxes....... $(26,231) $28,848 $38,117
======== ======= =======
</TABLE>
F-17
<PAGE> 42
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the effective income tax rate (benefit) to
the federal statutory rate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate...................................... (35.0)% 35.0% 34.0%
Valuation allowance......................................... 15.9 6.8 --
S corporation income........................................ -- (3.0) (4.9)
State income taxes, net of federal income tax benefit....... (5.4) 5.8 3.9
Non-deductible merger costs................................. 3.2 0.3 --
Goodwill.................................................... 1.1 2.0 1.1
Other....................................................... 3.1 3.3 0.5
----- ----- -----
Effective income tax rate (benefit)......................... (17.1)% 50.2% 34.6%
===== ===== =====
</TABLE>
The temporary differences, tax effected, which give rise to the Company's
net deferred tax asset (liability) were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Restructuring costs............................................ $ 33,320 $ --
Net operating loss carryforwards............................... 14,031 12,358
Accrued litigation............................................. 10,286 69
Allowance for doubtful accounts................................ 11,146 5,656
Accrued vacation............................................... 975 680
Other.......................................................... 1,303 383
-------- --------
Total gross deferred tax asset......................... 71,061 19,146
Less valuation allowance............................... (38,611) (12,420)
-------- --------
Net deferred tax asset................................. 32,450 6,726
Deferred tax liabilities:
State taxes.................................................... (4,911) (442)
Amortization of intangibles.................................... (1,492) (925)
Partnerships................................................... (608) (5,327)
Other.......................................................... (299) (1,835)
-------- --------
Total deferred tax liabilities......................... (7,310) (8,529)
-------- --------
Net deferred tax asset (liability)............................... $ 25,140 $ (1,803)
======== ========
</TABLE>
During the year ended December 31, 1992, the principal differences
resulting in the deferred income tax provision of $186,000 were not significant.
At December 31, 1994, the Company had net operating loss carryforwards
("NOL's") for federal income taxes of approximately $35 million which are
available to offset future federal taxable income, expiring in the years 2002
through 2008. The NOL carryforwards were generated by Curaflex prior to the
merger. Accordingly, the NOL's contain separate return limitations restricting
their use to Curaflex and its subsidiaries. In addition, the NOL's have a
maximum annual usuage limitation of approximately $4.5 million as imposed under
Section 382 of the Internal Revenue Code.
For financial reporting purposes, a valuation allowance of approximately
$14 million has been recognized to offset the deferred tax assets related to
these NOL's. An additional valuation allowance has been recognized to offset the
deferred tax assets which cannot be realized as part of the Company's loss
carryback. Both valuation allowances when realized will benefit the Company's
income tax provision.
F-18
<PAGE> 43
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. RELATED PARTY TRANSACTIONS
Prior to the merger, the Merged Entities entered into agreements with
individuals and/or companies considered to be related parties. The majority of
these individuals and/or companies are no longer related parties as these
individuals are no longer Company employees, officers and/or directors. The
following summarizes the significant related party transactions:
Receivables from officers and other related parties at December 31, 1993,
were approximately $1.6 million.
Certain executive officers and consultants to the Merged Entities had
employment, severance or consulting agreements that entitled such executive
officers or consultants to certain termination or severance payments upon
consummation of the merger or upon termination of employment following the
merger. In conjunction with the Coram Consolidation Plan (see Note 1), the
Company accrued $18.8 million for the termination of the existing employment,
consulting and/or severance agreements with these individuals. This accrual is
included as a component of the Coram Consolidation Plan.
All companies managed by the Company are considered related parties.
Management fee revenue from entities managed by the Company was approximately
$28.8 million, $51.6 million and $66.2 million in 1994, 1993 and 1992,
respectively. Receivables from managed companies were $4.8 million and $11.6
million at December 31, 1994 and 1993, respectively.
A former Director of one of the Merged Entities is associated with a law
firm that rendered various legal services to the Company. The legal fees to the
firm approximated $0.2 million in 1994 and $0.3 million in each of the years
1993 and 1992.
A Director of the Company is associated with a law firm that rendered
various legal services to the Company. The legal fees to the firm approximated
$1.4 million during 1994.
Certain former Directors of one of the Merged Entities were employed as
consultants. Consulting fees to these individuals approximated $2.5 million,
$0.3 million and $0.4 million during 1994, 1993, and 1992, respectively.
In 1994, a note receivable totaling $0.4 million from a former Director of
one of the Merged Entities was forgiven by the Company as part of his severance.
At December 31, 1994, the Company had outstanding loans to certain members
of management approximating $1.5 million. The loans are collateralized by the
individuals' former primary residences and had interest rates ranging from zero
to 6.6% per annum. The principal amount of the loans and all interest
accumulated is due no later than one year from the date of origination.
7. STOCKHOLDERS' EQUITY
At December 31, 1994, the Company was authorized to issue 10 million shares
of preferred stock, $.001 par value, which may be issued at the discretion of
the Company's Board of Directors without further stockholder approval. The Board
can also determine the preferences, rights, privileges and restrictions of any
series of preferred stock. At December 31, 1994, there were no shares of
preferred stock issued and outstanding.
In accordance with the Merger Agreement, Coram assumed the outstanding
obligations under the various stock option and stock purchase plans of the
Merged Entities. No further options will be granted under these plans, unless so
determined by the Company's Board of Directors. In addition, the Company has
implemented the 1994 Stock Option Plan (the "1994 Plan") and the Coram Employee
Stock Purchase Plan (the "Purchase Plan") pursuant to which an aggregate of up
to 7.9 million shares of common stock are
F-19
<PAGE> 44
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reserved for issuance. In 1994, options to purchase approximately 5.0 million
shares of Coram stock were issued under the 1994 Plan and no shares were issued
under the Purchase Plan.
Common shares reserved for future issuance also include approximately 0.6
million shares related to options outside of the 1994 Plan, 0.4 million shares
related to convertible debt (see Note 4), and 3.2 million shares related to
stock purchase warrants.
Stock Option Plan
The 1994 Plan contains three separate incentive programs which provide for
the granting of stock options to certain officers, key employees, consultants
and non-employee members of Coram's Board of Directors. Options granted under
the 1994 Plan may constitute either incentive stock options, non-statutory
options or stock appreciation rights based on the type of incentive program
utilized. For each of the incentive programs, options may be granted at exercise
prices ranging from 85% to 100% of the fair market value of the Company's stock
at the date of grant. Options granted under the 1994 Plan expire ten years from
the date of grant and become exercisable at varying dates depending upon the
incentive program utilized. The 1994 Plan is administered by a committee of the
Board of Directors. The committee has the authority to determine the employees
to whom awards will be made and the incentive program to be utilized. During the
year ended December 31, 1994 the options granted under the 1994 Plan were all at
100% of fair market value of the Company's stock at the date of grant. A summary
of the stock option transactions under the prior stock option plans and the 1994
Plan is as follows (in thousands):
<TABLE>
<CAPTION>
SHARES EXERCISE PRICE
OUTSTANDING PER SHARE
----------- ---------------
<S> <C> <C>
Balance at January 1, 1992.............................. 2,750 $ 0.79 - $49.90
Options granted....................................... 1,469 7.60 - 92.26
Options exercised..................................... (385) 0.79 - 51.19
Options cancelled..................................... (296) 1.38 - 92.26
----------- ---------------
Balance at December 31, 1992............................ 3,538 0.79 - 92.26
Options granted....................................... 1,254 9.52 - 41.67
Options exercised..................................... (258) 0.79 - 32.92
Options cancelled..................................... (714) 1.38 - 51.19
----------- ---------------
Balance at December 31, 1993............................ 3,820 1.44 - 92.26
Options granted....................................... 5,080 11.00 - 18.41
Options exercised..................................... (867) 1.44 - 19.84
Options cancelled..................................... (914) 1.44 - 92.26
----------- ---------------
Balance at December 31, 1994............................ 7,119 $ 1.44 - $92.26
========= ==============
Total options exercisable at December 31, 1994.......... 1,732 $ 1.44 - $92.26
========= ==============
</TABLE>
The Company has an option agreement outside of the 1994 Plan, with a firm
performing consulting services to the Company. An option to purchase 0.6 million
shares of the Company's common stock was granted at an exercise price of $15.63
and expires in November 1999. This option vests over a 3 year period, commencing
in November 1994.
Warrants to Purchase Common Stock
In connection with the settlement of certain stockholder litigation the
Company has issued warrants to acquire approximately 0.5 million shares of the
Company's common stock at an exercise price ranging from $18 per warrant,
subject to adjustment. The Company has agreed, subject to court approval and
certain other
F-20
<PAGE> 45
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contingencies, to issue additional warrants to acquire up to 2.5 million shares
of the Company's common stock at an exercise price of $20.25 per warrant,
subject to adjustment (see Note 8).
In addition, stock purchase warrants outstanding at December 31, 1994,
which had been issued by the Merged Entities prior to the merger were converted
into warrants to acquire approximately 0.2 million shares of the Company's stock
at a price ranging from $12.58-$29.63 per warrant. Certain of these warrants do
not have an expiration date.
8. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office, other operating space and equipment under
various operating and capital leases. The leases provide for monthly rental
payments including real estate taxes and other operating costs. Total rental
expense for 1994, 1993 and 1992 was approximately $14.8 million, $14.3 million
and $10.8 million, respectively. At December 31, 1994 the aggregate future
minimum lease commitments were as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year Ending December 31,
1995........................................................... $ 2,844 $ 7,845
1996........................................................... 1,376 5,560
1997........................................................... 617 3,876
1998........................................................... 484 1,795
1999 and thereafter............................................ -- 957
------- ---------
Total minimum lease payments................................... 5,321 20,033
Less amounts representing interest............................. 582 --
------- ---------
Net minimum lease payments..................................... $ 4,739 $20,033
====== =======
</TABLE>
Capital lease obligations are included in other obligations (see Note 4).
The cost and related accumulated depreciation of equipment under capital leases
were approximately $6.6 million and $3.2 million at December 31, 1994.
Employee Benefit Plans
The Merged Entities provide various defined contribution plans that are
available to their employees. Management of the Company intends to merge these
benefit plans during 1995. In general, each plan covers eligible employees, as
defined in the plan documents, and certain plans contain provisions whereby the
Company will contribute specified amounts. During the years ended December 31,
1994, 1993 and 1992, total contributions to these plans were approximately $1.4
million, $1.3 million and $0.9 million, respectively.
Litigation
The Company has entered into a Stipulation of Settlement (the
"Stipulation") dated as of January 27, 1995 which sets forth the principal terms
of a proposed settlement of class action shareholder litigation which was
initiated against T2 in 1992. The settlement provides for the Company to pay the
shareholder class $25 million in cash (of which approximately $9.8 million will
be contributed by the Company's insurance carriers), and to issue warrants to
acquire an aggregate of 2.52 million shares of the Company Common Stock at an
exercise price of $20.25, subject to adjustment. The Stipulation is subject to
the review and approval of the court on May 5, 1995 and certain other
contingencies, and there can be no assurance that the settlement will be
consummated.
F-21
<PAGE> 46
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 to the
former principals, warrants to acquire 500,000 shares of the Company's common
stock 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.
In September 1994, the Company announced that T2 had agreed to settle the
investigations conducted by Office of the Inspector General ("OIG") of the U.S.
Department of Health and Human Services regarding 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
$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
programs. On September 30, 1994, the U.S. District Court for the Northern
District of Georgia (Atlanta Division) approved the settlement.
The Company is involved in various legal proceedings incidental to the
normal course of business. While it is not possible to predict the outcome of
such proceedings with certainty, management is of the opinion that their
ultimate disposition will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Other Commitments
The Company's agreements with its lithotripsy physician partners
contemplate that the Company will acquire the remaining interest in each
partnership at a defined price in the event that legislation is passed or
regulations are adopted that would prevent the physician from owning an interest
in the partnership and using the partnership's lithotripsy equipment for the
treatment of his or her patients. While current interpretations of existing law
are subject to considerable uncertainty, the Company believes that its
partnership arrangements with physicians in its lithotripsy business are in
compliance with current law.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Most of the Company's financial instruments are carried at their fair
value. The Company has estimated the fair value of its financial instruments
whose carrying value differed from fair value using available market information
and appropriate valuation methodologies. Considerable judgment is required in
developing the estimates of fair value presented herein and, therefore, the
values are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
At December 31, 1994, the carrying amount and the estimated fair value of
such financial instruments consisted of the following:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Investment securities........................................... $ 16,546 $ 16,546
Long-term debt, including current portion....................... $126,728 $ 127,116
</TABLE>
The estimated fair value of investment securities is based on quoted market
prices and dealer quotes. The estimated fair value of long-term debt was
determined based on interest rates that are currently available to
F-22
<PAGE> 47
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company for issuance of debt with similar terms and remaining maturities.
See Note 2 and Note 4 for additional disclosures relating to the Company's
investment securities and long-term debt, respectively. The Company has
investments in unconsolidated subsidiaries totaling approximately $3.2 million.
Since these subsidiaries are all closely held companies and there are no quoted
market prices, it is not practicable to estimate the fair value of such
investments.
The fair value estimates presented herein are based on information
available to management as of December 31, 1994. Management is not aware of any
subsequent factors that would significantly affect the estimated fair value
amounts.
10. QUARTERLY RESULTS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994
Net revenue..................................... $ 113,065 $ 113,647 $ 110,206 $ 113,578
Gross profit.................................... 36,050 36,356 31,432 33,476
Net income (loss)............................... $ 3,211 $ (9,000) $ (121,176) $ (1,107)
======== ========= ========= =========
Net income (loss) per common share:
Primary...................................... $ 0.08 $ (0.23) $ (3.14) $ (0.03)
======== ========= ========= =========
Year Ended December 31, 1993
Total revenue................................... $ 113,416 $ 117,885 $ 119,259 $ 111,744
Gross profit.................................... 47,590 48,173 47,881 33,637
Net income (loss)............................... $ 10,217 $ 12,680 $ 10,235 $ (4,471)
======== ========= ========= =========
Net income (loss) per common share:
Primary...................................... $ 0.27 $ 0.33 $ 0.27 $ (0.12)
======== ========= ========= =========
</TABLE>
In 1994, unusual or infrequently occurring charges included the Company's
provision for litigation settlements of $17.2 million in the second quarter and,
during the third quarter, a special provision for uncollectible accounts of
$17.3 million, a provision for litigation settlements of $6.0 million and the
development and implementation of the Coram Consolidation Plan which resulted in
charges of $28.5 million in estimated Merger Costs and $95.5 million in
estimated Restructuring Costs. In 1993 unusual or infrequently occurring charges
included a $6.4 million gain or sale of assets during the second quarter and
charges aggregating $11.3 million for additional provisions for uncollectible
accounts during the fourth quarter.
11. SUBSEQUENT EVENTS
Caremark
In January 1995, the Company announced that it had reached a definitive
agreement to acquire Caremark International Inc.'s alternate site infusion
business. Under the terms of the agreement, the Company will pay Caremark
approximately $310 million, subject to a net asset adjustment of up to $18
million. Consummation of the transaction is subject to the Company obtaining
certain debt financing, which is currently being undertaken, and other normal
closing conditions, including required government approvals. The acquisition
will be accounted for as a purchase and accordingly, Caremark's results of
operations, after consummation of the transaction, will be included in the
Company's operating results.
F-23
<PAGE> 48
CORAM HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited pro forma financial position and results of operations of the
Company, as of and for the year ended December 31, 1994, assuming the purchase
had occurred at the beginning of the period, are as follows (in thousands):
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
CORAM CAREMARK ADJUSTMENTS COMBINED
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets................................ $ 207,700 $184,900 $ (23,100) $ 369,500
========= ======== ========= =========
Total Assets.................................. $ 576,100 $418,700 $ (20,000) $ 974,800
========= ======== ========= =========
Liabilities and Stockholders' Equity
Total Current Liabilities..................... $ 124,300 $ 81,700 $ -- $ 206,000
Revolving Lines of Credit and Long Term
Debt....................................... 120,800 600 321,900 443,300
Other Liabilities............................. 8,800 35,300 44,100
Total Stockholders' Equity.................... 322,200 301,100 (341,900) 281,400
---------- -------- ----------- ---------
Total Liabilities and Stockholders' Equity.... $ 576,100 $418,700 $ (20,000) $ 974,800
========= ======== ========= =========
Net Revenue..................................... $ 450,500 $441,900 $ -- $ 892,400
Cost of Service................................. 313,200 338,200 -- 651,400
---------- -------- ----------- ---------
Gross profit.................................... 137,300 103,700 -- 241,000
Total operating expenses........................ 274,900 106,300 5,800 387,000
---------- -------- ----------- ---------
Operating loss.................................. $ (137,600) $ (2,600) $ (5,800) $(146,000)
========= ======== ========= =========
Interest expense, net........................... $ (4,900) $ (500) $ (35,000) $ (40,400)
---------- -------- ----------- ---------
Net loss........................................ $ (128,100) $ (2,400) $ (33,800) $(164,300)
========= ======== ========= =========
Net loss per common share (primary)............. $ (4.25)
=========
Weighted average common shares outstanding
(primary)..................................... 38,633
=========
</TABLE>
This pro forma presentation assumes that the Company will obtain
approximately $450 million of debt structured either as a combination of
subordinated debt and convertible notes or entirely subordinated debt. For
purposes of the calculation of interest expense, the Company has assumed an
average interest rate of approximately 10%. The structure of the proposed
financing is currently being negotiated. However, the Company anticipates the
financing will also to provide for the repayment of the outstanding revolving
line of credit totaling approximately $108 million at year end.
The pro forma adjustments to financial position primarily relate to the
increase in debt to be incurred by the Company to finance the acquisition of
Caremark. In addition, the Company expects goodwill associated with the
acquisition to be approximately $250 million, including $196 million of
purchased goodwill. The pro forma adjustments to operational expenses are due to
interest expense on the acquisition debt and adjustments to amortization of the
excess purchase price over the net assets and liabilities assumed and is subject
to change based upon finalizing the purchase agreement, asset valuation and
potential future restructuring costs. The pro forma adjustments do not give
affect to any benefits derived from the anticipated closures of a substantial
number of branches, reduction of corporate administrative expenses and other
savings. Additionally, interest expense could change significantly depending
upon the structure of the financing which has not yet been determined.
The pro forma financial information does not necessarily reflect the
operations that would have occurred had the companies been combined as a single
entity as of January 1, 1994 and the year ended December 31, 1994.
Kids Medical Club
On January 30, 1995, the Company reached an agreement in principle to sell
its pediatric home care business known as Kid's Medical Club to Pediatric
Services of America, Inc. ("PSAI"). The Company and PSAI simultaneously
announced the formation of a strategic alliance pursuant to which PSAI's
comprehensive pediatric home care services would be included in the Company's
alternate site care network, allowing joint national marketing and capitation
agreements with managed care organizations. The transaction is not material to
the Company's results of operations or financial position.
F-24
<PAGE> 49
CORAM HEALTHCARE CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ------------------------------------------- ---------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 25,076 $ 19,517 $3,901(2) $(46,383)(1) $22,297
17,300 2,886(3)
Year Ended December 31, 1993
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 17,530(2) $ 29,751 $2,834(2) $(24,788)(1) $25,076
(251)(3)
Year Ended December 31, 1992
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 18,953(2) $ 24,036 $1,948(2) $(27,407)(1) $17,530
</TABLE>
- ---------------
(1) Accounts written off, net of recoveries.
(2) Balance acquired in purchase acquisition(s).
(3) Other charges.
F-25
<PAGE> 50
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<S> <C>
2.1 Agreement and Plan of Merger dated as of February 6, 1994, by and among the
Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition Company, CHS
Acquisition Company, HII Acquisition Company and MI Acquisition Company
(Incorporated by reference to Exhibit 2.1 of Registration No. 33-53957 on Form
S-4). ..............................................................................
2.2 First Amendment to Agreement and Plan of Merger dated as of May 25, 1994, by and
among the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition Company,
CHS Acquisition Company, HII Acquisition Company and MI Acquisition Company
(Incorporated by reference to Exhibit 2.2 of Registration No. 33-53957 on Form
S-4). ..............................................................................
2.3 Second Amendment to Agreement and Plan of Merger dated as of July 8, 1994 by and
between the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition
Company, CHS Acquisition Company, HII Acquisition Company and MI Acquisition Company
(Incorporated by reference to Exhibit 2.3 of the Registrant's Current Report on Form
8-K dated as of July 15, 1994). ....................................................
3.1 Certificate of Incorporation of Registrant, as amended through May 11, 1994
(Incorporated by reference to Exhibit 2.1 of Registration No. 33-53957 on Form
S-4). ..............................................................................
3.2 Bylaws of Registrant (Incorporated by reference to Exhibit 3.2 of Registration No.
33-53957 on Form S-4). .............................................................
4.1 Form of Common Stock Certificate for the Registrant's common stock, $.001 par value
per share.* ........................................................................
10.1 Amended and Restated Credit Agreement dated as of February 10, 1995, by and among
Curaflex, T2, HealthInfusion, Medisys, and HMSS as Co-Borrowers, Toronto Dominion
(Texas), Inc., as Agent (the "Amended Credit Agreement"). The exhibits and schedules
to the Amended Credit Agreement are omitted from this Exhibit. The Company agrees to
furnish supplementally any omitted exhibit or schedule to the Securities and
Exchange Commission upon request.* .................................................
10.2 Form of Employment Agreement between the Registrant and Charles A. Laverty
(Incorporated by reference to Exhibit 10.1 of Registration No. 33-53957 on Form
S-4). ..............................................................................
10.3 Form of Severance/Non-Compete Agreement between the Registrant and Miles E. Gilman
(Incorporated by reference to Exhibit 10.2 of Registration No. 33-53957 on Form
S-4). ..............................................................................
10.4 Form of Severance/Non-Compete Agreement between the Registrant and William J.
Brummond (Incorporated by reference to Exhibit 10.3 of Registration No. 33-53957 on
Form S-4). .........................................................................
10.5 Form of Severance/Non-Compete Agreement between the Registrant and Tommy H. Carter
(Incorporated by reference to Exhibit 10.4 of Registration No. 33-53957 on Form
-S-4). .............................................................................
10.6 Form of Indemnification Agreement between the Registrant and each of the
Registrant's directors and certain executive officers.* ............................
10.7 Registrant's 1994 Stock Option/Stock Issuance Plan and related forms of agreements
(Incorporated by reference to Exhibit 10.15 of Registration No. 33-53957 on Form
S-4). ..............................................................................
10.8 Registrant's Employee Stock Purchase Plan (Incorporated by reference to Exhibit
10.16 of Registration No. 33-53957 on Form S-4). ...................................
10.9 401(k) Plan of T2 dated December 8, 1989 (Incorporated herein by reference to
Exhibit 10(s) of T2's Annual Report on Form 10-K for the fiscal year ended September
30, 1989, filed with the Commission on or about December 29, 1988. .................
10.10 1988 Stock Option Plan of T2, as amended and restated as of July 31, 1990 and as
further amended as of (i) August 20, 1991; (ii) November 12, 1991; and (iii) July 6,
1992 (Incorporated by reference to Exhibit 10.18 of Registration No. 33-53957 on
Form S-4). .........................................................................
10.11 Curaflex 1989 Stock Option Plan (Incorporated by reference to Exhibit 10.53 of
Registration No. 33-53957 on Form S-4). ............................................
10.12 Curaflex Amended 1990 Stock Option Plan (Incorporated by reference to Exhibit 10.54
of Registration No. 33-53957 on Form S-4). .........................................
10.13 Curaflex Directors' Nonqualified Stock Option Plan (Incorporated by reference to
Exhibit 10.59 of Registration No. 33-53957 on Form S-4). ...........................
10.14 Clinical Homecare Ltd. 1990 Incentive Stock Option Plan, as amended (Incorporated by
reference to Exhibit 10.61 of Registration No. 33-53957 on Form S-4). ..............
10.15 Clinical Homecare Ltd. 1990 Stock Option Plan, as amended (Incorporated by reference
to Exhibit 10.62 of Registration No. 33-53957 on Form S-4). ........................
10.16 1989 Stock Option Plan of Medisys (Incorporated by reference to Exhibit 10.85 of
Registration No. 33-53957 on Form S-4). ............................................
10.17 Form of Non-Plan Option Agreement of Medisys (Incorporated by reference to Exhibit
10.86 of Registration No. 33-53957 on Form S-4). ...................................
11 Statement regarding Computation of Per Share Earnings.*.............................
22.1 Subsidiaries of the Registrant.*....................................................
23.1 Consent of Ernst & Young LLP.*......................................................
23.2 Consent of Deloitte & Touche LLP.*..................................................
23.3 Consent of KPMG Peat Marwick LLP.*..................................................
23.4 Consent of Arthur Andersen LLP.*....................................................
23.5 Consent of Coopers & Lybrand LLP.*..................................................
27 Financial Data Schedule*............................................................
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
$.001 PAR VALUE $.001 PAR VALUE
INCORPORATED UNDER THE LAWS THIS CERTIFICATE IS TRANSFERABLE
OF THE STATE OF DELAWARE IN THE CITIES OF BOSTON OR NEW YORK
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 218103 10 9
CORAM HEALTHCARE CORPORATION
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
Coram Healthcare Corporation transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid until countersigned
and verified by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
<TABLE>
<CAPTION>
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT AND REGISTRAR
<S> <C> <C>
/s/ SAM R. LENO /s/ JAMES M. SWEENEY By: /s/ MARY PENEZIC
- ------------------------------------ ------------------------------------ ------------------------------------
Secretary Chairman Authorized Signature
</TABLE>
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
A. The Certificate is boardered on the left and right sides by an (color) one
and one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are boxed.
C. The Delaware corporate seal appears in the lower left-hand corner of the
page.
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
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,
THE BANK OF NOVA SCOTIA and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Co-Agents
and
THE FINANCIAL INSTITUTIONS PARTY HERETO
Dated as of February 10, 1995
____________________
$150,000,000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1 Revolving Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Commitment Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Borrowing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2 Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Extensions and Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Adjustment of Rate Spreads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Computation of Interest and Commitment Fee . . . . . . . . . . . . . . . . . . . . . 25
(f) Illegality, Taxation and Additional Interest Rate
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(g) Capital Adequacy Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(h) Substitution of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Payment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Payments Prior to Interest Period Expiration . . . . . . . . . . . . . . . . . . . . 29
(e) Payments by the Co-Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Payments by the Banks to the Agent . . . . . . . . . . . . . . . . . . . . . . . . . 31
(g) Sharing of Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.4 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 3 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.1 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 4 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1 Conditions to Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(a) Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(b) Reports, Certificates and Other Information . . . . . . . . . . . . . . . . . . . . . 36
(c) Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(e) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(f) Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . 37
(g) Legality of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(h) [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(i) Perfection of Liens and Security Interests . . . . . . . . . . . . . . . . . . . . . 37
(j) [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(k) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(l) Written Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(m) Notice of Authorized Representatives . . . . . . . . . . . . . . . . . . . . . . . . 37
(n) Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.2 Conditions to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Amendment Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . 38
(d) Loan Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(e) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.3 Conditions for the Benefit of the Agent and the Banks . . . . . . . . . . . . . . . . . . . . . 39
4.4 Failure of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 5 Representations and Warranties of the Co-Borrowers . . . . . . . . . . . . . . . . . . . . . . . 39
5.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.2 Organization, Standing and Qualification of Subsidiaries . . . . . . . . . . . . . . . . . . . . 40
5.3 Absence of Certain Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.4 Requisite Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.6 Officer Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.7 Binding Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.8 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.9 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.11 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.13 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.17 Tax Returns and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.18 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Plans Maintained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.22 Statutory Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.23 Use of Proceeds; Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.24 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
5.25 Fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.26 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.27 Compliance With Physician Self-Referral Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.4 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.6 Qualifications To Do Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.8 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.10 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.11 Taxes and Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.12 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.17 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.18 Financial Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.19 Concentration Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.20 Compliance Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 7 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.1 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.2 Change of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.3 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.4 Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.5 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.6 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.7 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.8 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.9 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.10 Sale-Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.11 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.13 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.14 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.15 Certain ERISA Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.16 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.17 Litigation Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.18 Adoption of "Rabbi Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE 8 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(a) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(b) Certain Covenants in This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 62
(c) Other Covenants and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(d) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(e) Monetary Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(f) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(g) Liens for Pension Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(i) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(j) Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(k) Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(l) Invalidity of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(m) Impairment of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(n) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(o) Change of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.2 Termination of Commitment and Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 9 The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.10 Co-Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 10 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.1 Successors and Assigns and Sale of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.2 No Implied Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.4 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.6 Costs, Expenses and Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.7 General Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.8 Environmental Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.11 Governing Law and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.15 Amendment and Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
iv
<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(m) 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 5.2 List of Subsidiaries
Schedule 5.4 Exceptions to Requisite Corporate Power
Schedule 5.8 Exceptions to "No Conflicts"
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 5.20 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
Schedule 7.12 Existing Transactions with Affiliates
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
February 10, 1995, by and amongCORAM 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"), THE BANK OF NOVA SCOTIA and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as co-agents (in such capacity,
the "Co-Agents"), and THE FINANCIAL INSTITUTIONS PARTY TO THIS AGREEMENT
(collectively, the "Banks"; individually, a "Bank").
W I T N E S S E T H:
WHEREAS, the Co-Borrowers, the Agent and Toronto Dominion (Texas),
Inc. ("Toronto-Dominion"), as a Bank, were parties to a certain Credit
Agreement dated as of October 17, 1994 (the "Prior Credit Agreement"); and
WHEREAS, immediately prior to the execution and delivery of this
Agreement, Toronto Dominion (Texas), Inc. (a) assigned a portion of its
outstanding Loans and Commitments under the Prior Credit Agreement to The Bank
of Nova Scotia and (b) assigned a portion of its outstanding Loans and
Commitments under the Prior Credit Agreement to Bank of America National Trust
and Savings Association and such Banks thereby acquired interests in and became
parties to the Prior Credit Agreement; and
WHEREAS, the Borrower, the Agent and the Banks desire to amend and
restate the Prior Credit Agreement in its entirety as set forth herein;
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
<PAGE> 8
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
outstanding 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 those certain letters dated October 6, 1994
and January 10, 1995 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.
"Amendment Closing Date" means the date on which all of the conditions
set forth in Paragraph 4.1 hereof have been satisfied or waived.
"Applicable Spread" means
(i) with respect to Base Rate Loans, the Base Rate
Spread; and
(ii) with respect to LIBOR Loans, the LIBOR Spread.
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<PAGE> 9
"Assignee" has the meaning specified in Paragraph 10.1(b) hereof.
"Assignment and Acceptance" has the meaning specified in Paragraph
10.1(b) 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 or any affiliate thereof 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 from Toronto-Dominion or any affiliate thereof 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.
-3-
<PAGE> 10
"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 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.
"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 (net of re-sales of repurchased stock sold to employees) 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" means 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 acting in
concert as a partnership or other group; (b) Coram is merged or consolidated
with or into another corporation with the effect that all or any of the common
stockholders immediately prior to such merger or consolidation hold directly or
indirectly 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
-4-
<PAGE> 11
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.
"Co-Agents" has the meaning specified in the Preamble to this
Agreement.
"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 January 10, 1995
from The Toronto-Dominion Bank to Coram, countersigned by Coram January 10,
1995.
"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
-5-
<PAGE> 12
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
Amendment Closing Date, the Concentration Account is Account Number 4896044377
maintained at Wells Fargo Bank, N.A., 464 California Street, San Francisco,
California 94104, 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, all Letters of Credit, and all other
interest-bearing Indebtedness (excluding Reverse Repurchase Agreements
permitted pursuant to Section 7.5(g) hereof).
"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 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.
-6-
<PAGE> 13
"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 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
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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
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.);
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<PAGE> 15
(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
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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.
"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.
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<PAGE> 17
"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.
"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 October 17, 1994.
"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
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<PAGE> 18
(3), six (6), nine (9) or, subject to availability by each Lender, twelve (12)
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
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 Paragraph 5.14 hereof.
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<PAGE> 19
"Letters of Credit" shall mean all letters of credit issued on behalf
of Coram or any of its Subsidiaries to the extent permitted by Paragraph 7.8
hereof.
"Leverage Ratio" means, as of the last day of any fiscal quarter, the
ratio of (a) Consolidated Funded Debt as of such day to (b) EBITDA for the
period of four fiscal quarters ended on such day.
"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
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connection with this Agreement or the transactions contemplated hereby,
together with all amendments, modifications and supplements thereto.
"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.
"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.
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<PAGE> 21
"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(m) 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, any Letter of Credit issued by any Bank on behalf of Coram or
any of its Subsidiaries, or any of the other Loan Documents, whether or not for
the payment of money, arising by 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;
(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
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<PAGE> 22
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 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 the Initial Closing Date
(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 January 1, 1995 (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
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<PAGE> 23
or partnership at the time of acquisition) shall not exceed ten
million Dollars ($10,000,000); 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 (i) 3.50 to 1.00 for all periods prior to September 30,
1995, and (ii) 3.00 to 1.00 for all periods ending after September 29,
1995, in each case both before and after giving effect to the proposed
acquisition. In addition, for any Permitted Acquisition, the Borrower
shall provide pro forma financial statements to the Agent showing
compliance with Paragraph 6.18(a) hereof through the Final Maturity
Date. 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
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<PAGE> 24
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 (other than receivables) 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 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 Sections
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.
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<PAGE> 25
of the Banking Day on which each change in Prime Rate is announced by The
Toronto-Dominion Bank.
"Prior Credit Agreement" has the meaning specified in the Preamble to
this Agreement.
"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
protection 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, Treasurer or any Vice President or, with respect to any
other Co-Borrower, such Co-Borrower's Chief Executive Officer, Chief Financial
Officer or Treasurer.
"Reverse Repurchase Agreements" shall mean sales by Coram of its
assets with a concurrent agreement by Coram to repurchase the same assets at a
later date at a fixed price.
"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.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc. 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
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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)).
"Schedule Preparation Date" means September 12, 1994.
"Security Agreement" has the meaning specified in Paragraph 3.1 hereof.
"Significant Subsidiary" means any Subsidiary which has either (i)
assets the book value of which are at least equal to $250,000 or (ii) pre-tax
income or pre-tax loss at least equal to $250,000.
"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
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<PAGE> 27
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 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.
"Toronto-Dominion" has the meaning specified in the Preamble to this
Agreement.
"Total Commitment Amount" means, as of any date, subject to Paragraph
2.1(b) hereof, an amount equal to (a) one hundred fifty million Dollars
($150,000,000), minus (b) the total face amount of Letters of Credit
outstanding on such date.
"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.
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<PAGE> 28
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 Amendment 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).
(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 11:00 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
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<PAGE> 29
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 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 Amendment
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, and the Agent shall surrender to Coram all promissory notes
previously outstanding from the Co-Borrowers under the Prior Credit Agreement.
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 March 31, 1995, 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
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<PAGE> 30
an Interest Period of six (6), nine (9) or twelve (12) months shall be paid
three (3) months after commencement of such Interest Period and on each three
(3) month anniversary thereof), 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
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 (i) a LIBOR Loan may be converted only as of the last
day of the applicable Interest Period, and (ii) the Co- Borrowers may not
convert a Base Rate Loan into a LIBOR Loan or extend a LIBOR Loan after the
occurrence and during the continuance of an Event of Default hereunder. 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 2.2(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 1.250% per annum, and the LIBOR Rate Spread for the
Loans shall initially be 2.250% per annum. The Base Rate Spread for such Loans
and the LIBOR Spread for such
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<PAGE> 31
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):
<TABLE>
<CAPTION>
Leverage Ratio = x
LESS LESS LESS
THAN OR LESS THAN OR LESS THAN OR
x EQUAL TO 1.00 1.00 THAN x EQUAL TO 1.50 1.50 THAN x EQUAL TO 2.00
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIBOR Spread 0.875% 1.125% 1.500%
Base Rate Spread 0.00% 0.125% 0.500%
<CAPTION>
Leverage Ratio = x
LESS LESS
LESS THAN OR LESS THAN OR GREATER
2.00 THAN x EQUAL TO 2.50 2.50 THAN x EQUAL TO 3.00 x THAN 3.00
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIBOR Spread 1.750% 2.125% 2.250%
Base Rate Spread .750% 1.125% 1.250%
</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 Leverage 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:
<TABLE>
<CAPTION>
Leverage Ratio = x
LESS LESS LESS LESS
THAN OR LESS THAN OR LESS THAN OR LESS THAN OR GREATER
x EQUAL TO 1.00 1.00 THAN x EQUAL TO 1.50 1.50 THAN x EQUAL TO 2.00 2.00 THAN x EQUAL TO 2.50 x THAN 2.50
- ------------------------------------------------------------------------------------------------------------------------------------
<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 March 31, 1995 and on the Revolving Termination Date. The
initial Commitment Fee in effect shall be 0.50% 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
Leverage 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.
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<PAGE> 32
(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, 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
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<PAGE> 33
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.
(iv) Each Bank represents and warrants to the Agent and the
Co-Borrowers that, under applicable law and treaties, such Bank is
entitled to receive all payments under the Credit Agreement and the
Notes payable to it, without deduction or withholding of any taxes
imposed by the United States or any political subdivision thereof. On
or before the Amendment Closing Date, each Bank shall deliver to each
of Coram and the Agent two executed copies of valid and properly
completed (i) United States Internal Revenue Service Form 1001 or 4224
certifying that such Bank is entitled to receive payments under the
Credit Agreement and the Notes then held by it, without deduction or
withholding of any United States federal income taxes, and (ii)
Internal Revenue Service Form W-8 or W-9 establishing any exemption
from United States backup withholding tax. If any such form is found
to be incomplete or incorrect, or must be replaced (on the same or a
successor form) in order to maintain its effectiveness, the affected
Bank shall execute and deliver to each of Coram and the Agent two
executed copies of a valid, complete and correct replacement form.
(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
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<PAGE> 34
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 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 Paragraphs 2.3(c) and 2.3(d) 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 Paragraph 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).
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<PAGE> 35
(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 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 after the Initial Closing Date) 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 Paragraph 2.3(c) (other than a prepayment
resulting from the sale of those assets listed on Schedule 2.3(c)(ii) attached
hereto, to the extent such proceeds do not exceed $43,800,000) shall dollar for
dollar immediately permanently 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
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<PAGE> 36
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 Amendment 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 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, after consultation with the Banks, 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 or any Bank to debit the Concentration Account or any other account
maintained by any Co-Borrower with
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<PAGE> 37
the Agent or any Bank 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 immediately 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 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.
(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
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<PAGE> 38
rescinded and each other Bank shall repay to the purchasing Bank the purchase
price paid thereto 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-
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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 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 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
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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.
(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.
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(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
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 hereunder, 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 the
Amended and Restated 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 the Amended and Restated 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").
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ARTICLE 4
Conditions Precedent
4.1 Conditions to Initial Borrowing. The effectiveness of the
amendment and restatement of the Prior Credit Agreement contemplated hereby,
and the obligation of the Banks to make any Loans hereunder shall be subject to
the prior or contemporaneous satisfaction of each of the following conditions
precedent on the Amendment 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;
(b) Reports, Certificates and Other Information. The
Agent shall have received the following, dated and in full force and
effect on the Amendment 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 Guarantors (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
bearing a date satisfactory to the Agent; 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 Amendment Closing Date by Brobeck,
Phleger & Harrison, as counsel to the Co-Borrowers, in form and substance
reasonably acceptable to the Agent;
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(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
Amendment 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 Amendment Closing
Date;
(e) No Existing Default. No Event of Default or event which, 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 Amendment 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 Amendment 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) [Reserved];
(i) Perfection of Liens and Security Interests. The Banks shall
have obtained assurance satisfactory to the Majority Banks that the security
interests created by the Security Agreement and the Guaranty in the Collateral
thereunder are duly perfected under applicable law and are subject only to
Permitted Encumbrances and except for non-delivery of the share certificates
of the New York Subsidiaries referred to in Schedule 5.4 and as otherwise
provided in the Security Agreement;
(j) [Reserved];
(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 Amendment 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(m) (a "Notice of Authorized
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Representatives"), duly executed on behalf of the Co-Borrowers; and
(n) Other Documents. The Agent shall have received any other
document, instrument, undertaking or certificate stated in any of the Loan
Documents to be delivered on or prior to the Amendment 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) Amendment Closing Date. The Amendment 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 and Paragraphs 5.2 and 5.3 shall only
be required to be true and correct as of any subsequent date with
respect to the information in Schedule 5.2 on and as of the due date
for the updating report set forth in Section 6.2(c);
(d) Loan Request. The Agent shall have received in
connection with each Loan a Loan Request, the receipt of which by the
Agent shall (i) contain a certification as to the face amount of all
Letters of Credit outstanding on such date and (ii) 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, 1994.
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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
subsequent to the Amendment Closing Date, 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 subsequent to such 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 Amendment Closing Date does not occur on or before
February 10, 1995. 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 Significant
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).
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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 as of the Schedule Preparation Date,
showing their respective jurisdictions of incorporation or organization and, as
of the Schedule Preparation Date, the jurisdictions in which each is qualified
to do business. Set forth in Part 2 of Schedule 5.2 attached hereto is a
complete and accurate list of any new or additional Subsidiaries of Coram since
the Schedule Preparation Date showing their respective jurisdictions of
incorporation.
(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 of its Significant Subsidiaries
have been duly filed (where required) and are in proper order. All of the
outstanding capital stock of Coram and its Significant 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 Liens.
(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.
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.
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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 (except where the failure to do so would not have a Material Adverse
Effect). 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.
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 Schedules 5.4 and 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 material 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
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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
Amendment 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 heretofore
delivered pursuant to the Prior Credit Agreement 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 previously
disclosed in writing with respect to HMSS) the financial condition and results
of operations of each Co-Borrower respectively, consolidated with the
respective Subsidiaries of such Co-Borrower. Except as previously disclosed in
writing 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 [Reserved].
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 Significant 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 Significant
Subsidiaries used in connection with their business is in good operating
condition
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(ordinary wear and tear excepted), usable in the ordinary course of business,
and is adequate for the operation of their business.
5.14 Contracts. 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
material contracts to which Coram or any of its Subsidiaries is a party ("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.
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
the Schedule Preparation Date. 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 which could
reasonably be expected to have a Material Adverse Effect. 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 Significant 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 which could reasonably
be expected to have a Material Adverse Effect.
5.16 Litigation. Excepting those matters set forth in Schedule
5.16 attached hereto, as of the Amendment Closing Date, 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 material tax deficiency
against Coram or any of its Subsidiaries, except those being contested in good
faith and for which such reserve as is required by GAAP has been created.
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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 the Schedule Preparation Date, 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 the Schedule Preparation
Date, 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 the Schedule Preparation Date, 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
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adoption of 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) (i) The properties and operations
of Coram and each of its Subsidiaries comply in all
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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; and, in the case of
clauses (i) through (viii) above, any failure of the foregoing to be true and
correct would reasonably be expected in the aggregate to have a Material
Adverse Effect.
(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 the Amendment Closing Date, of all liability insurance
policies maintained by Coram or any of its Significant Subsidiaries. Coram and
each of its Significant 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.
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5.21 Compliance with Laws. Except as set forth in Schedule 5.21
attached hereto, as of the Amendment Closing Date, Coram and each of its
Significant 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 Significant
Subsidiaries is Solvent.
5.25 Fiscal year. The fiscal year of Coram ends on December 31.
5.26 [Reserved].
5.27 Compliance With Physician Self-Referral Laws. Except as set
forth on Schedule 5.27, as of the Amendment Closing Date, there presently
exists (i) no assertion of any claim of material
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<PAGE> 54
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
of the first three (3) fiscal quarters of each of Coram's fiscal
years, commencing with the fiscal quarter ending March 31, 1995: (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, 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;
(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
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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. 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 ofExhibit 6.2(c)-1 attached hereto;
(d) Contemporaneously with each second quarter and
year-end financial report required by the foregoing paragraph (b), a
certificate in the form of Exhibit 6.2(c)-2 attached hereto, together
with an updated version of, or addendum to, Schedule 5.2 as to the
identity of, and jurisdictions of incorporation or organization of,
Coram's Subsidiaries to the extent that such information set forth in
Schedule 5.2 has changed since the date of the most recent version
ofSchedule 5.2;
(e) Furnish from time to time the information required
under the Security Agreement with respect to (i) changes in the chief
executive offices of Coram or any Subsidiary or locations at which
records with respect to the accounts receivable of Coram or any
Subsidiary are kept, as specified by Section 11(a) thereof, and (ii)
changes in or additions to the locations at which the inventory and
equipment of Coram and its Subsidiaries are kept, as specified by
Section 9(a) of the Security Agreement;
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<PAGE> 56
(f) Promptly notify the Agent of the creation or
acquisition of any new Wholly Owned Subsidiary, or of any investment
that results in a new Wholly Owned Subsidiary, and within ten (10)
days from the creation or formation thereof, furnish the Agent a
Security Agreement Supplement in the form specified by the Security
Agreement, duly executed by such Wholly Owned Subsidiary;
(g) 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;
(h) 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 deemed to satisfy such requirements;
(i) 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;
(j) 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;
(k) 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
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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;
(l) 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 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;
(m) 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;
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(n) Not later than thirty (30) 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, together with the annual budget for such fiscal year;
(o) Within a reasonable time after a request therefor,
such other information as the Agent or the Majority Banks may
reasonably request; and
(p) Within fifteen (15) days from the end of each
calendar month, commencing on April 15, 1995, a report setting forth
the month end balance as of the end of such calendar month 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
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
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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, except
where the failure to do so would not have a Material Adverse Effect; 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 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 Significant 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 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 with respect to Coram and
its Significant Subsidiaries and certificates evidencing such insurance.
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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; and provided further, however, that
nothing herein shall restrict or preclude Coram from dissolving or liquidating
any Subsidiary that does not constitute a Significant Subsidiary.
6.11 Taxes and Other Liabilities. Coram and its Significant
Subsidiaries shall pay and discharge when due any and all material
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. Coram 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
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 except where the failure to do so would not have a Material
Adverse Effect.
6.15 Prevent Contamination. Coram and its Subsidiaries shall (i)
conduct their operations in such a way as to prevent material contamination of
any part of their respective properties by any Hazardous Substance; (ii) manage
all Hazardous Substances
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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; and (iii) not intentionally or recklessly, and endeavor
not to unintentionally, and 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 in the case of each of the foregoing clauses (i)
through (iii) if the failure to do so would have a Material Adverse Effect.
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
Paragraph 8.1(h)(i) hereof; 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.
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.
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6.18 Financial Tests. The Co-Borrowers shall,
(a) Maintain for each period of four (4) fiscal quarters
ending at the end of each fiscal quarter set forth below, a Leverage
Ratio of not more than the ratio set forth below for such period:
<TABLE>
<CAPTION>
Period Leverage Ratio
------ --------------
<S> <C>
December 31, 1994 3.50 to 1.00
March 31, 1995 3.50 to 1.00
June 30, 1995 3.50 to 1.00
September 30, 1995, and
each quarter end thereafter 3.00 to 1.00
</TABLE>
(b) Maintain EBITDA of not less than the following for
each period indicated:
<TABLE>
<CAPTION>
Period Minimum EBITDA
------ --------------
<S> <C>
Four (4) fiscal quarters
ending on December 31, 1994 $37,500,000
Four (4) fiscal quarters
ending on March 31, 1995 $40,000,000
Four (4) fiscal quarters
ending on June 30, 1995 $45,000,000
</TABLE>
(c) Maintain, for the four (4) fiscal quarters ending on
the last day of each fiscal quarter set forth below, a Cash Flow
Coverage Ratio of not less than the ratio set forth opposite such
period:
<TABLE>
<CAPTION>
Minimum Cash
Flow Coverage
Period Ratio
------ -------------
<S> <C>
December 31, 1994 1.75 to 1.00
March 31, 1995 1.50 to 1.00
June 30, 1995 1.75 to 1.00
September 30 , 1995 and
each quarter end thereafter 2.00 to 1.00
</TABLE>
(d) Maintain a Sales Turnover Ratio of not less than 3.25
to 1.00 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 Wells Fargo Bank, N.A. or another
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financial institution which is acceptable to the Agent and with respect to
which a lien has been placed on such account by the Agent on behalf of 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; (b) provided that no Incipient
Default or Event of Default exists, then (i) Coram may repurchase shares of its
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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 fifty
thousand Dollars ($250,000) in the aggregate; and (c) Coram may purchase,
redeem or otherwise acquire shares of its common stock or warrants, rights or
options to acquire any such shares with the proceeds received from the
substantially concurrent re-sale of any common stock purchased from employees
or issue of new shares of its common stock.
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.
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; (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 (i) at all times the Collateral Agent has a perfected security interest in
all of Coram's rights to repayment thereof and security therefor, (ii) that the
aggregate principal amount of such loans outstanding at any time, when added to
the aggregate amount of Investments made pursuant to clause (h) below, shall
not exceed four million Dollars ($4,000,000), and (iii) any such Loans entered
into after the Amendment Closing Date shall be evidenced by a promissory note;
(f) Employee Loans not exceeding four million Dollars ($4,000,000) in aggregate
principal amount at any time outstanding; (g) Reverse Repurchase Agreements
maturing within thirty (30) days of the date of purchase; provided that no such
Reverse Repurchase Agreement shall mature after June 30, 1995, and provided
further that the aggregate amount of such Reverse Repurchase Agreements does
not exceed seventy-five percent (75%) of all short-term Investments of the Co-
Borrowers; and (h) 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
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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; (d) Letters of Credit not to exceed $5,000,000
in aggregate face amount outstanding at any time; and (e) other 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 (e) do not at any time
exceed one million Dollars ($1,000,000) in the aggregate.
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 such Indebtedness matures
after the Final Maturity Date; (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; (l) Contingent Obligations permitted under
Paragraph 7.7 hereof; (m) interest-bearing Indebtedness shown on Schedule 7.8
attached hereto 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.
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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, (c) sales of the assets set
forth on Schedule 2.3(c)(ii) attached hereto, and (d) sales of inventory and
other property in the ordinary course of business, 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).
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 set forth below make
Consolidated Capital Expenditures in excess of the amount set forth below for
such year:
<TABLE>
<CAPTION>
Maximum Consolidated
Period Capital Expenditures
------ --------------------
<S> <C>
Year Ending December 31, 1994 $15,000,000
Year Ending December 31, 1995 $25,000,000
Six Months Ending June 30, 1996 $15,000,000
</TABLE>
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, 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).
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 provided that
nothing herein shall preclude Coram or
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any Subsidiary from effecting any conversion of any such Indebtedness into
common stock.
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 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.
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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-Borrower
shall default in the performance of any of its agreements set forth in
Paragraphs 6.18 through 6.20 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 such default shall continue for thirty (30)
days;
(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);
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(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 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
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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 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, 1994;
(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
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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
(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
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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 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
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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 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
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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 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
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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
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.
9.10 Co-Agents. The Co-Agents shall have no duties or obligations
under this Agreement or the other Loan Documents in their capacities as
Co-Agents.
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
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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 fee of three thousand five
hundred Dollars ($3,500) shall have been paid to the Agent. Notwithstanding
the foregoing, any Bank may at any time, with notice to Coram and the Agent but
without the consent of either Coram or the Agent, assign and delegate all or
any part of the Loans or the Commitments or any other rights or obligations of
such Bank hereunder to any Federal Reserve Bank as collateral security pursuant
to Regulation A of the Board of Governors of the Federal Reserve System and any
Operating Circular issued by such Federal Reserve Bank, so long as such
assignment does not relieve such Bank from its obligations hereunder.
(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
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
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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 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:
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(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 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,
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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 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
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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 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
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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: Richard M. Smith, Treasurer
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. Beth Olmstead
Facsimile: (212) 397-4135
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
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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.
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.
10.15 Amendment and Restatement. Each of the parties hereto agrees
that, from and after the Amendment Closing Date,
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this Agreement shall amend and restate the Prior Credit Agreement in its
entirety and the Notes delivered hereunder shall be substituted for the Notes
that were previously outstanding under the Prior Credit Agreement, which shall
thereupon be deemed cancelled. In connection therewith the security interests
in the Collateral created pursuant to the Prior Credit Agreement and the other
Loan Documents shall be preserved and continue in full force and effect.
Except as expressly amended or supplemented pursuant hereto or in connection
herewith, the Loan Documents shall remain unchanged and in full force and
effect and are hereby ratified and confirmed in all respects.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 84
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/ RICHARD M. SMITH
--------------------------------------
Title TREASURER
-----------------------------------
CURAFLEX HEALTH SERVICES, INC.
By /s/ RICHARD M. SMITH
--------------------------------------
Title TREASURER
-----------------------------------
HEALTHINFUSION, INC.
By /s/ RICHARD M. SMITH
--------------------------------------
Title TREASURER
-----------------------------------
MEDISYS, INC.
By /s/ RICHARD M. SMITH
--------------------------------------
Title TREASURER
-----------------------------------
T2 MEDICAL, INC.
By /s/ RICHARD M. SMITH
--------------------------------------
Title TREASURER
-----------------------------------
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
CREDIT AGREEMENT
Signature Page 1
<PAGE> 85
H.M.S.S., INC.
By /s/ RICHARD M.SMITH
--------------------------------------
Title TREASURER
-----------------------------------
AGENT: TORONTO DOMINION (TEXAS), INC., as Agent
for the Banks
By /s/ MARTHA L. GARIEPY
--------------------------------------
Title VICE PRESIDENT
-----------------------------------
BANKS: TORONTO DOMINION (TEXAS), INC.,
as a Bank
By /s/ MARTHA L. GARIEPY
--------------------------------------
Title VICE PRESIDENT
-----------------------------------
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. Beth Olmstead
Facsimile: (212) 397-4135
Commitment Percentage: 46.66666666%
CREDIT AGREEMENT
Signature Page 2
<PAGE> 86
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: /s/ WYATT R. RITCHIE
-------------------------------------
Title VICE PRESIDENT
-----------------------------------
Address: Bank of America National
Trust and Savings
Association
555 S. Flower Street
Department 5618
Los Angeles, California
90071
Attention: Mr. Ed Han
Facsimile: (213) 228-2756
Commitment Percentage: 26.66666667%
THE BANK OF NOVA SCOTIA, as a Bank
By /s/ M.K. MUNOZ
--------------------------------------
Title RELATIONSHIP MANAGER
-----------------------------------
Address: Suite 2700
600 Peachtree Street
Atlanta, Georgia 30308
Attention: Mrs. Mary Munoz
Facsimile: (404) 888-8998
Commitment Percentage: 26.66666667%
CREDIT AGREEMENT
Signature Page 3
<PAGE> 1
EXHIBIT 10.6
FORM OF INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is made and entered into as of this 1st day
of November, 1994, between Coram Healthcare Corporation, a Delaware corporation
(the "Company"), and ("Indemnitee").
RECITALS:
A. Indemnitee, as an executive officer and/or a member of the Board of
Directors of the Company, performs a valuable service in such capacity for the
Company;
B. The Bylaws of the Company (the "Bylaws") provide for the indemnification
of the officers, directors, agents and employees of the Company to the maximum
extent authorized by Section 145 of the Delaware General Corporation Law, as
amended (the "Delaware Code");
C. The Bylaws and the Delaware Code, by their non-exclusive nature, permit
contracts between the Company and its executive officers and/or members of its
Board of Directors with respect to the indemnification of such directors and
executive officers;
D. As a result of recent developments affecting the terms, scope and
availability of directors' liability insurance ("D & O Insurance"), there exists
general uncertainty as to the ability of the Company to obtain and maintain D &
O Insurance; and
E. In order to induce Indemnitee to continue to serve as an executive
officer and/or a member of the Board of Directors of the Company, the Company
has determined and agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of the Indemnitee's continued service as
an executive officer and/or a director after the date hereof, the parties hereto
hereby agree as follows:
1. Indemnity. The Company hereby agrees to hold harmless and indemnify
Indemnitee to the full extent authorized or permitted by the provisions of the
Delaware Code, as may be amended from time to time.
2. Additional Indemnity. Subject to the exclusions set forth in Section 3
hereof, the Company hereby further agrees to hold harmless and indemnify
Indemnitee:
(a) against any and all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by
1
<PAGE> 2
Indemnitee in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or
investigative (including an action by or in the right of the Company) to
which Indemnitee is, was or at any time becomes a party, or is threatened
to be made a party, by reason of the fact that Indemnitee is, was or at any
time becomes a director, officer, employee or agent of the Company, or is
or was serving or at any time serves at the request of the Company as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Indemnitee
by the Company under the non-exclusivity provisions of the Certificate of
Incorporation and Bylaws of the Company and of the Delaware Code.
3. Limitations on Additional Indemnity. No indemnity pursuant to Section 2
hereof shall be paid by the Company:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Indemnitee is
indemnified pursuant to Section 1 hereof or pursuant to any D & O Insurance
purchased and maintained by the Company;
(b) in respect to remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any suit in which judgment is rendered against
Indemnitee for an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
similar provisions of any federal, state or local statutory law;
(d) on account of Indemnitee's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) if a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful; or
(f) on account of any action, suit or proceeding (other than a
proceeding referred to in Section 8(b) hereof) commenced by the Indemnitee
against the Company or against any officer, director or stockholder of the
Company unless authorized in the specific case by action of the Board of
Directors.
4. Contribution. If the indemnification provided in Sections 1 and 2 is
unavailable any may not be paid to Indemnitee for any reason other than those
set forth in Section 3, then in respect of any threatened, pending or completed
action, suit or proceeding in which the Company is jointly liable with
Indemnitee (or would be if joined in such action,
2
<PAGE> 3
suit or proceeding), the Company shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by Indemnitee in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and Indemnitee on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of the Company on the one hand and of Indemnitee on the other in
connection with the events which resulted in such expenses, judgments, fines or
settlement amounts, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of Indemnitee on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. Continuation of Obligations. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is a
director, officer, employee or agent of the Company (or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) and shall
continue thereafter so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Indemnitee was a director
of the Company or serving in any other capacity referred to herein.
6. Notification and Defense of Claim. Promptly after receipt by Indemnitee
of notice of the commencement of any action, suit or proceeding, Indemnitee
will, if a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof; but the omission so
to notify the Company will not relieve it from any liability which it may have
to Indemnitee otherwise than under this Agreement. With respect to any such
action, suit or proceeding as to which Indemnitee notifies the Company of the
commencement thereof:
(a) The Company will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnitee. After notice from the Company to Indemnitee of
its election so as to assume the defense thereof, the Company will not be
liable to Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof
other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ its counsel in such
action, suit or proceeding but the fees and expenses of such counsel
incurred after notice from the Company of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (i) the employment of
counsel by Indemnitee has
3
<PAGE> 4
been authorized by the Company, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee in
the conduct of the defense of such action or (iii) the Company shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of counsel shall be at the expense of the Company.
The Company shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the conclusion provided for in (ii) above; and
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall be permitted to
settle any action except that is shall not settle any action or claim in
any manner which would impose any penalty or limitation on Indemnitee with
Indemnitee's written consent. Neither the Company nor Indemnitee will
unreasonably withhold its consent to any proposed settlement.
8. Advancement and Repayment of Expenses.
(a) In the event that Indemnitee employs his own counsel pursuant to
Section 6(b)(i) through (iii) above, the Company shall advance to Indemnitee,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigating, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigative, any and all reasonable expenses (including legal fees and
expenses) incurred in investigating or defending any such action, suit or
proceeding within twenty (20) days after receiving copies of invoices presented
to Indemnitee for such expenses; provided that Indemnitee first executes and
delivers to the Company an undertaking to repay any amounts so advanced if it
shall be determined ultimately that Indemnitee is not entitled to be indemnified
for such expenses under the provisions of the Delaware Code, the Bylaws, this
Agreement or otherwise.
(b) Indemnitee further agrees that Indemnitee will reimburse the Company
for all reasonable expenses paid by the Company in defending any civil or
criminal action, suit or proceeding against Indemnitee, unless Indemnitee
demonstrates that he or she is entitled, under the provisions of the Delaware
Code, the Bylaws, this Agreement or otherwise, to be indemnified by the Company
for such expenses, and the Company does not dispute such entitlement or an
ultimate determination as to such entitlement is made in favor of Indemnitee.
(c) Notwithstanding the foregoing, the Company shall not be required to
advance such expenses to Indemnitee if Indemnitee (i) commences any action, suit
or proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by the Company and approved by a majority of the Board of
Directors which alleges willful misappropriation of corporate assets by
Indemnitee, disclosure of confidential information in violation of Indemnitee's
fiduciary or contractual obligations to the Company, or any other willful
deliberate breach in bad faith of Indemnitee's duty to the Company or its
stockholders.
4
<PAGE> 5
8. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on the Company hereby in order to
induce Indemnitee to continue as a director of the Company, and acknowledges
that Indemnitee is relying upon this Agreement in continuing in such capacity.
(b) In the event Indemnitee is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Indemnitee for all Indemnitee's reasonable
fees and expenses in bringing and pursuing such action.
9. Non-Exclusivity of Rights. The rights conferred on Indemnitee by this
Agreement shall not be exclusive of any other right which Indemnitee may have or
hereafter acquire under any statute, provision of the Company's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office. To the extent that a change in the
Delaware Code (whether by statute or judicial decision) permits greater
indemnification by agreement then would be afforded currently under the
Certificate of Incorporation and Bylaws of the Company and this Agreement, it is
the intent of the parties hereto that Indemnitee shall enjoy by this Agreement
the greater benefits so afforded by such change.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings of the parties relating
thereto.
11. Survival of Rights. The rights conferred on Indemnitee by this
Agreement shall continue after Indemnitee has ceased to be a director, officer,
employee or other agent of the Company and shall inure to the benefit of
Indemnitee's heirs, executors and administrators.
12. Severability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
13. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
14. Binding Effect. This Agreement shall be binding upon Indemnitee and
upon the Company, its successors and assigns, and shall inure to the benefit of
Indemnitee, his heirs, personal representatives and assigns and to the benefit
of the Company, its successors and assigns. The Company shall require and cause
any successor (whether direct or indirectly by purchase, merger, consolidation
or otherwise) to all, substantially all, or a
5
<PAGE> 6
substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to Indemnitee, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no succession had taken place.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement on and as of the day and year first above written.
The Company:
CORAM HEALTHCARE CORPORATION
a Delaware corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Indemnitee:
By:
----------------------------------
----------------------------------
Title
6
<PAGE> 1
CORAM HEALTHCARE CORPORATION
EXHIBIT 11 -- COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- ------- -------
<S> <C> <C> <C>
PRIMARY
Average common shares outstanding............................. 38,544 37,442 35,228
Net effect of other dilutive securities....................... 89 336 1,584
--------- ------- -------
Total............................................... 38,633 37,778 36,812
--------- ------- -------
Net income (loss) applicable to common stock.................. $(128,072) $28,661 $71,858
Per share amounts:
Net income (loss) per common share.......................... $ (3.32) $ 0.76 $ 1.95
========= ======= =======
FULLY DILUTED
Average common shares outstanding............................. 38,544 37,442 35,228
Net effect of other dilutive securities....................... 89 825 2,022
--------- ------- -------
Total............................................... 38,633 38,267 37,250
--------- ------- -------
Net income (loss) applicable to common stock.................. $(128,072) $28,661 $71,858
Per share amounts:
Net income (loss) per common share.......................... $ (3.32) $ 0.75 $ 1.93
========= ======= =======
</TABLE>
Per share data have been computed by dividing net income or loss by the
weighted average number of common and common equivalent shares outstanding
during the period. The weighted average calculation also includes common shares
issuable. Common stock equivalents include dilutive stock options and warrants.
Fully diluted per share calculations include the assumed conversions of
convertible debt and any additional incremental shares from the use of the
treasury stock method on both stock options and warrants in periods when those
items would result in additional dilution.
<PAGE> 1
Exhibit 22.1
SUBSIDIARIES1
A. CORAM HEALTHCARE CORPORATION SUBSIDIARIES:
T2 Medical, Inc.
Curaflex Health
Services, Inc.
HealthInfusion, Inc.
Medisys, Inc.
H.M.S.S., Inc.
Coram, Inc.
B. T2 MEDICAL, INC. SUBSIDIARIES:
Alabama Home
Therapeutics VI, Inc.
Athens Home
Therapeutics, Inc.
Atlantic Coast Home
Therapeutics, Inc.
Augusta Home
Therapeutics, Inc.
Baltimore Home
Therapeutics, Inc.
Capital Home
Therapy, Inc.
Central Texas Home
Therapeutics, Inc.
Charleston Home
Therapeutics, Inc.
Charleston Home
Therapeutics II, Inc.
City Home
Therapeutics, Inc.
____________________
1 As of March 20, 1995.
1.
<PAGE> 2
Colonial Home
Therapeutics, Inc.
Columbia Home
Therapeutics, Inc.
Columbus Home
Therapeutics, Inc.
Commonwealth Home
Therapeutics, Inc.
Commonwealth Home
Therapeutics II, Inc.
Commonwealth Home
Therapeutics III, Inc.
Coram Healthcare
Corporation of Alabama,
formerly known as
Alabama Home
Therapeutics, Inc.
Coram Healthcare Corporation
of Asheville, formerly known as
Asheville Home Therapeutics, Inc.
Coram Healthcare
Corporation of Central
Florida, formerly known
as Home Therapeutics
of Florida, Inc.
Coram Healthcare
Corporation of
Central Virginia,
formerly known as
Central Virginia
Home Therapeutics,
Inc.
Coram Healthcare
Corporation of
Charlotte, formerly
known as North Carolina
Home Therapeutics, Inc.
Coram Healthcare
Corporation of
Connecticut, formerly
known as Connecticut
Home Therapeutics, Inc.
2.
<PAGE> 3
Coram Healthcare
Corporation of Georgia,
formerly known as
Georgia Home
Therapeutics, Inc.
Coram Healthcare
Corporation of Greater
Washington, D.C.,
formerly known as
Potomac Home
Therapeutics, Inc.
Coram Healthcare
Corporation of Iowa,
formerly known as Iowa
Home Therapeutics, Inc.
Coram Healthcare
Corporation of
Mississippi, formerly
known as Mississippi
Home Therapeutics, Inc.
Coram Healthcare Corporation
of New Jersey, formerly known as
Northern New Jersey
Home Therapeutics,
Inc.
Coram Healthcare
Corporation of Northern
California, formerly
known as Lifesource,
Inc.
Coram Healthcare
Corporation of Northern
Nevada, formerly known
as TPN, Inc.
Coram Healthcare
Corporation of
Northern Ohio, formerly
known as Cleveland Home
Therapeutics, Inc.
Coram Healthcare
Corporation of
Oklahoma, formerly
known as Tulsa Home
Therapeutics, Inc.
3.
<PAGE> 4
Coram Healthcare
Corporation of Rhode
Island, formerly known
as Rhode Island Home
Therapeutics, Inc.
Coram Healthcare
Corporation of Southern
Florida, formerly known
as Southwest Florida
Home Therapeutics, Inc.
Coram Healthcare
Corporation of Southern
Ohio, formerly known as
Tri-State Home
Therapeutics, Inc.
Coram Healthcare
Corporation of
Tennessee, formerly
known as Knoxville
Home Therapeutics, Inc.
Coram Healthcare
Corporation of the
Shenandoah Valley, formerly
known as Shenandoah Home
Therapeutics, Inc.
Coram Healthcare
Corporation of
Washington, formerly
known as Puget Sound
Home Therapeutics, Inc.
Coram Healthcare
Corporation of Western
Florida, formerly known as
Sarasota Home
Therapeutics, Inc.
Coram Healthcare
Corporation of Western
Kentucky, formerly
known as Western
Kentucky Home
Therapeutics, Inc.
4.
<PAGE> 5
Coram Healthcare
Corporation of West
Virginia, formerly
known as Southern
West Virginia Home
Therapeutics, Inc.
Cullman Home
Therapeutics, Inc.
Dallas Home
Therapeutics, Inc.
Dallas Home
Therapeutics II, Inc.
Delaware Valley Home
Therapeutics, Inc.
Diablo Home
Therapeutics, Inc.
Drs. MBWS Home
Therapeutics, Inc.
East Tennessee Home
Therapeutics, Inc.
Georgia Home
Nursing, Inc.
Georgia Home
Therapeutics V, Inc.
Golden Gate Home
Therapeutics, Inc.
Gramercy Park Home
Therapeutics, Inc.
Greater Connecticut Home
Therapeutics, Inc.
Greater New York Home
Therapeutics, Inc.
Heritage Medical
Services of Georgia,
Inc.2
____________________
2 Wholly owned subsidiary of T2 Lithotripter Investment, Inc.
5.
<PAGE> 6
Home Therapeutics
Supply, Inc.
Hunter Home
Therapeutics, Inc.
Indiana Home
Therapeutics, Inc.
Intracare
Corporation3
Intracare Holdings
Corporation
Kentucky Home
Therapeutics, Inc.
Keystone Home
Therapeutics, Inc.
Litho Center
Southwest, Inc.4
Long Island Home
Therapeutics, Inc.
Meridian Home
Therapeutics, Inc.
Merritt Home
Therapeutics, Inc.
Metropolitan Home
Therapeutics II, Inc.
Middle Tennessee Home
Therapeutics, Inc.
Mid-Florida Home
Therapeutics, Inc.
Midlands Home
Therapeutics, Inc.
Milwaukee Home
Therapeutics, Inc.
____________________
3 Wholly owned subsidiary of Intracare Holdings Corporation.
4 Wholly owned subsidiary of T2 Lithotripter Investment of Texas, Inc.
6.
<PAGE> 7
Milwaukee Home
Therapeutics II, Inc.
Minnesota Home
Therapeutics, Inc.
Mississippi Home
Therapeutics II, Inc.
Montgomery Home
Therapeutics, Inc.
Montgomery Home
Therapeutics II, Inc.
New Orleans Home
Therapeutics, Inc.
New York Home
Therapeutics, Inc.
Northern New York
Home Therapeutics,
Inc.
Northshore Home
Therapeutics, Inc.
North Texas Home
Therapeutics, Inc.
Oceanside Home
Therapeutics, Inc.
Penn Valley Home
Therapeutics, Inc.
Phoenix Home
Therapeutics, Inc.
Piedmont Home
Therapeutics, Inc.
Piedmont Home
Therapeutics III, Inc.
Piedmont Home
Therapeutics IV, Inc.
Professional Home
Nursing, Inc.
Rhode Island Home
7.
<PAGE> 8
Therapeutics II, Inc.
Rhode Island Home
Therapeutics III, Inc.
River City Nursing,
Inc.
Sacramento Home
Therapeutics, Inc.
Salem Home
Therapeutics, Inc.
Santa Barbara Home
Therapeutics, Inc.
Sarasota Home
Therapeutics II, Inc.
Servicetrends, Inc.
Southeast Home
Therapeutics, Inc.
Southeast Home
Therapeutics III, Inc.
Southeast Home
Therapeutics IV, Inc.
Southern Arizona Home
Therapeutics, Inc.
Southern California
Home Therapeutics, Inc.
Southern Connecticut
Therapeutics, Inc.
Space Coast Home
Therapeutics, Inc.
St. Louis Home
Therapeutics, Inc.
Syracuse Home
Therapeutics, Inc.
Tampa Bay Area Home
Therapeutics, Inc.
Texas Home
8.
<PAGE> 9
Therapeutics, Inc.
T-Med, Inc.
Triad Home
Therapeutics, Inc.
Tri-State Home
Therapeutics III, Inc.
T2 Lithotripter
Investment, Inc.
T2 Lithotripter
Investment of Alabama,
Inc.5
T2 Lithotripter
Investment of Indiana, Inc.6
T2 Lithotripter
Investment of Texas, Inc.7
T2 Medical Investments,
Inc.
Tucson Home
Therapeutics, Inc.
Utah Home Therapeutics,
Inc.
Westchester Home
Therapeutics, Inc.
West 82nd Street Home
Therapeutics, Inc.
White Plains Home
Therapeutics, Inc.
C. CURAFLEX HEALTH SERVICES, INC. SUBSIDIARIES:
CASC, Inc.
____________________
5 Wholly owned subsidiary of T2 Lithotripter Investments, Inc.
6 Wholly owned subsidiary of T2 Lithotripter Investments, Inc.
7 Wholly owned subsidiary of T2 Lithotripter Investments, Inc.
9.
<PAGE> 10
CHC of New York,
Inc.8
Clinical Homecare
Corporation9
Comprehensive Pharmacy
Home IV Services, Inc.
Coram Healthcare Corporation
of Arizona
Coram Healthcare Corporation
of Colorado
Coram Healthcare
Corporation of
Louisiana, formerly
known as Curaflex
Nursing Services, Inc.
Coram Healthcare Corporation
of Michigan
Coram Healthcare Corporation
of Nebraska
Coram Healthcare
Corporation of North
Texas, formerly known as
Continuecare/Curaflex
Health Services, Inc.
Coram Healthcare Corporation
of Oregon
Coram Healthcare Corporation
of Southern California
Coram Healthcare Corporation
of Southern Nevada
Coram Healthcare
Corporation of Utah,
formerly known as
Curaflex Home Solution, Inc.
____________________
8 Wholly owned subsidiary of Clinical Homecare Corporation.
9 Wholly owned subsidiary of Curaflex Clinical Services, Inc.
10.
<PAGE> 11
Curaflex Acquisition
Company, Inc.
Curaflex
Clinical Services, Inc.
Curaflex Infusion
Services, Inc.
Curaflex Management
Services, Inc.
Curaflex
Massachusetts, Inc.
Curaflex of
New York, Inc.
New Jersey Living
Center, Inc.
Stratogen of
Florida, Inc.
Stratogen of Rhode
Island, Inc.
D. MEDYSIS, INC. SUBSIDIARIES:
American Home
Therapies, Inc.
CareVan HomeCare of Illinois,
Inc.
CareVan Medical
Systems of Indiana,
Inc.
Coram Healthcare
Corporation of
Illinois, formerly
known as CareVan
Medical Systems of
Illinois, Inc.
Coram Healthcare
Corporation of
Minnesota, formerly
known as CareVan
Medical Systems Inc.
11.
<PAGE> 12
Coram Healthcare
Corporation of
Wisconsin, formerly
known as CareVan Medical
Systems of Wisconsin, Inc.
PharmCare, Inc.
E. HEALTHINFUSION, INC. SUBSIDIARIES:
Dickson Research Group, Inc.
First Circle, Inc.10
HealthInfusion
Dialysis, Inc.
HealthInfusion
Franchise, Inc.
HealthInfusion of
Delaware, Inc.
HealthInfusion of
Indiana, Inc.
HealthInfusion of
Mid-Atlantic, Inc.
HealthInfusion of
Naples, Inc.
HealthInfusion of
New York, Inc.
HealthInfusion of
Oklahoma, Inc.
HealthInfusion of
Oregon, Inc.
HealthInfusion of
Pennsylvania, Inc.
HealthInfusion of
Southern Oregon
Hospicenter of Texas,
Inc.
____________________
10 Ceased operations 12/94.
12.
<PAGE> 13
In Vivo Acquisition
Corporation
NEFRA, Inc.
F. H.M.S.S. SUBSIDIARIES:
Coram Healthcare Corporation
of Texas, formerly known as
H.M.S.S. of Texas, Inc.
H.M.S.S. Infusion
Affiliates, Inc.
H.M.S.S. Infusion
Affiliates of
Jacksonville, Inc.
H.M.S.S. Management,
Inc.
H.M.S.S. of New York,
Inc.
Therapeutic
Affiliates, Inc.
13.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-55547 and 33-55657) of Coram Healthcare Corporation of our
report dated February 17, 1995, with respect to the consolidated financial
statements and schedules of Coram Healthcare Corporation included in the Annual
Report on Form 10-K for the year ended December 31, 1994.
ERNST & YOUNG LLP
Orange County, California
March 24, 1995
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Shareholders of
T2 Medical, Inc.
Alpharetta, Georgia
We consent to the incorporation by reference in Registration Statements No.
33-55547 and No. 33-55657 of Coram Healthcare Corporation on Form S-8 of our
report on the financial statements of T2 Medical, Inc. dated November 17, 1993
(December 23, 1993 as to Note 17) (which expresses an unqualified opinion and
includes an explanatory paragraph relating to material uncertainties concerning
certain pending claims against T2 Medical, Inc.) appearing in the Annual Report
on Form 10-K of Coram Healthcare Corporation for the year ended December 31,
1994.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 24, 1995
<PAGE> 1
EXHIBIT 23.3
KPMG PEAT MARWICK LLP [LOGO]
INLAND EMPIRE OFFICE
ONE LAKESHORE CENTRE
3281 GUASTI ROAD, SUITE 550
ONTARIO, CA 91761
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Coram Healthcare Corporation:
We consent to the incorporation by reference in the registration statements (No.
33-55547 and 33-55657) on Form S-8 of Coram Healthcare Corporation of our report
dated February 28, 1994 relating to the consolidated balance sheet of Curaflex
Health Services, Inc. and subsidiaries as of December 31, 1993, and the related
consolidated statements of operations, common stockholders' equity (deficit),
and cash flows for each of the years in the two-year period ended December 31,
1993, and all related schedules, which report appears in the December 31, 1994
annual report on Form 10-K of Coram Healthcare Corporation and subsidiaries.
Our report contains an explanatory paragraph that states the Company changed its
method of accounting for income taxes in 1993.
KPMG Peat Marwick LLP
Ontario, California
March 22, 1995
<PAGE> 1
Exhibit 23.4
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report, dated March 18, 1994, included in this Form 10-K,
into Coram Healthcare Corporation's previously filed Form S-8 Registration
Statements File Nos. 33-55547 and 33-55657.
/s/ Arthur Andersen LLP
Miami, Florida,
March 24, 1995.
<PAGE> 1
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Coram Healthcare Corporation (Forms S-8 No.33-55547 and 33-55657) of our report
dated February 11, 1994, on our audits of the consolidated financial statements
and financial schedules of Medisys, Inc. and Subsidiaries as of December 31,
1993 and for each of the years in the two-year period ended December 31, 1993,
which report is included in the Coram Healthcare Corporation Annual Report on
Form 10-K for the Year ended December 31, 1994
Coopers & Lybrand L.L.P.
Minneapolis, Minnesota
March 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Art. 5 FDS FOR 1994 10-K
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 20,046
<SECURITIES> 16,546
<RECEIVABLES> 133,297
<ALLOWANCES> (22,297)
<INVENTORY> 11,064
<CURRENT-ASSETS> 207,646
<PP&E> 70,409
<DEPRECIATION> (44,507)
<TOTAL-ASSETS> 576,115
<CURRENT-LIABILITIES> 124,251
<BONDS> 120,817
<COMMON> 39
0
0
<OTHER-SE> 322,222
<TOTAL-LIABILITY-AND-EQUITY> 576,115
<SALES> 450,496
<TOTAL-REVENUES> 450,496
<CGS> 313,182
<TOTAL-COSTS> 313,182
<OTHER-EXPENSES> 274,915
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,414
<INCOME-PRETAX> (154,303)
<INCOME-TAX> (26,231)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,072)
<EPS-PRIMARY> (3.32)
<EPS-DILUTED> 0
</TABLE>
