<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 6, 1995
CORAM HEALTHCARE CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 1-11343 33-0615337
- - --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1125 Seventeenth Street, 15th Floor, Denver, Colorado 80202
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 292-4973
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(Registrant's telephone number, including area code)
Not applicable
- - --------------------------------------------------------------------------------
(Former name or address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 29, 1995, Coram Healthcare Corporation, a Delaware
corporation (the "Company"), entered into a definitive agreement to acquire
substantially all of the assets used in the alternate site infusion health care
business, the home care management and utilization system business and women's
health care business of Caremark Inc. (the "Caremark Business"), and issued the
press release attached hereto as Exhibit A, which is incorporated herein in its
entirety by this reference. On April 6, 1995, the Company completed the
acquisition of the Caremark Business and issued the press release attached
hereto as Exhibit B, which is incorporated herein in its entirety by this
reference.
Pursuant to the terms of the Asset Sale and Note Purchase Agreement
dated as of January 29, 1995, as amended on April 1, 1995 between the Company,
Caremark Inc., a California corporation ("Caremark") and a wholly-owned
subsidiary of Caremark International Inc., a Delaware corporation ("Caremark
International") (the "Asset Purchase Agreement"), attached hereto as Exhibit C
and incorporated herein in its entirety by this reference, the purchase price
of the Caremark Business was $309 million, consisting of (i) $209 million in
cash and (ii) $100 million of junior subordinated pay-in-kind notes payable to
Caremark, consisting of a $75 million 7% Convertible Subordinated PIK Note (the
"Junior Convertible Subordinated PIK Note") and a $25 million 12%
Non-Convertible Subordinated PIK Note (the "Junior Non-Convertible Subordinated
PIK Note" and, collectively with the Junior Convertible Subordinated PIK Note,
the "Junior Subordinated PIK Notes"). The purchase price may be increased or
decreased by up to $15 million, plus an additional increase or decrease of up
to $3 million depending upon the amount of certain employee health plan
liabilities pursuant to a post-closing adjustment.
The Company acquired all of the assets of Caremark and Caremark
International used in or related to the Caremark Business (collectively, the
"Acquired Assets") including tangible and intangible assets owned by Caremark.
The Company also assumed only the liabilities of the Caremark Business (i)
adequately reflected or fully reserved against in a net assets statement of the
Caremark Business dated as of December 31, 1994, (ii) which are immaterial and
incurred in the ordinary course of business, (iii) which arise after April 6,
1995 under certain contracts assumed by the Company, and (iv) certain employee
liabilities. Other assets (the "Excluded Assets"), including cash and cash
equivalents, and the rights to any mark using "Care" or "Caremark", and all
remaining liabilities of Caremark and Caremark International (the "Excluded
Liabilities") including liabilities associated with the pending investigation
of Caremark by the Office of the Inspector General of the U.S. Department of
Health and Human Services (the "OIG"), remain the responsibility of Caremark
and Caremark International.
The Asset Purchase Agreement provides for indemnification by each of
the parties thereto of the other within certain limits. Under the terms of the
Asset Purchase Agreement, Caremark and Caremark International, jointly and
severally, will indemnify the Company and its affiliates against any
liabilities arising out of the (i) breach by Caremark of any of its covenants
under the Asset Purchase Agreement, (ii) the failure of any representation or
warranty made by Caremark in the Asset Purchase Agreement to be true in all
respects as of the date of the Asset Purchase Agreement and the deemed closing
date of April 1, 1995, (iii) the use, operation or ownership of any of the
Excluded Assets, (iv) any Excluded Liability and (v) certain other liabilities,
including the failure of Caremark to obtain certain consents and approvals
necessary to transfer
Page 2 of 6 Pages
<PAGE> 3
the assets of the Caremark Business; provided, however, that with respect to
breaches by Caremark of any representation or warranty the aggregate of all
such liabilities and damages exceeds $10 million. With respect to breaches by
it of any representation or warranty, the total amount Caremark may be required
to pay is limited to $130 million and the representations and warranties,
subject to certain exceptions, will expire on April 1, 1997. With respect to
all other claims for indemnification (including any claims related to the
pending investigation of Caremark by the OIG), Caremark must indemnify the
Company without any minimum threshold and without limitation by time or amount.
Pursuant to the Asset Purchase Agreement, the Company will indemnify Caremark
and Caremark International against any liabilities arising out of the (i)
material breach by the Company of any of its covenants under the Asset Purchase
Agreement, (ii) the failure of any representation or warranty made by the
Company in the Asset Purchase Agreement to be true in all respects as of the
date of the Asset Purchase Agreement and April 6, 1995, (iii) the use,
operation or ownership of any of the Acquired Assets after April 6, 1995 or
(iv) any of the liabilities assumed under the Asset Purchase Agreement.
Pursuant to the Asset Purchase Agreement, for a period from April 1,
1995 through December 31, 2001, Caremark will not and will not permit any of
its affiliates to engage in, directly or indirectly, or have any direct or
indirect interest in any entity or person that engages in any business which is
the same or substantially similar to the Caremark Business (a "Competing
Business"); provided, however, that Caremark may own up to 20% of the equity of
an entity whose Competing Business revenues are at all times less than 30% of
such entity's total revenues; provided, further, that the aggregate of (i)
Caremark's proportionate share of the Competing Business Revenues per year and
(ii) revenues of certain physician groups associated with Caremark does not
exceed certain specified thresholds.
The Company financed the cash portion of the purchase price of the
Caremark Business and the repayment of all of its outstanding indebtedness
under the Amended and Restated Credit Agreement dated as of February 10, 1995,
by and among the Company, Curaflex Health Services, Inc., HealthInfusion, Inc.,
Medisys, Inc., H.M.S.S., Inc. and T2 Medical, Inc., Toronto Dominion (Texas),
Inc., the Co-Agents named therein and the financial institutions party thereto,
of $123,800,000 principal amount, together with related fees and expenses,
through (i) borrowings under a new credit facility (the "Senior Credit
Facility"), with Chemical Bank, as agent, providing for aggregate commitments
of up to $300 million, including a $100 million revolving credit facility, and
(ii) the proceeds of a $150 million bridge financing provided by an affiliate
of DLJ Bridge Finance, Inc.
Concurrently with the acquisition of the Caremark Business, the
Company contributed the Caremark Business to a wholly-owned subsidiary of
Coram, Inc., a Delaware corporation and a newly-formed, wholly-owned subsidiary
of the Company ("Coram"), and the Company contributed to Coram all of the
outstanding capital stock of each of its direct and indirect subsidiaries other
than Coram. As a result of these transactions, all of the operations conducted
by the Company immediately prior to the acquisition of the Caremark Business on
April 1, 1995 and the Caremark Business were conducted through subsidiaries of
Coram immediately following the acquisition of the Caremark Business.
Pursuant to the terms of the Credit Agreement dated as of April 6,
1995, among the Company, Coram, the lenders named therein and Chemical Bank as
Administrative Agent,
Page 3 of 6 Pages
<PAGE> 4
Collateral Agent and Fronting Bank, attached as Exhibit D hereto and
incorporated herein in its entirety by this reference, Coram is entitled to
borrow up to an aggregate principal amount of $300 million. The Senior Credit
Facility consists of (i) a five-year senior secured term loan facility (the
"Term Loan") in an aggregate principal amount of $200 million and (ii) a
revolving credit facility (the "Revolving Credit Facility"), of which up to $20
million is available in the form of letters of credit. The Term Loan will
mature in five years. Coram may borrow, pay or repay and reborrow under the
Revolving Credit Facility and the letters of credit issued thereunder for a
five year period. Loans under the Senior Credit Facility bear interest at a
rate equal to, at Coram's option, a Eurodollar rate or an alternate base rate
(equal to the highest of the prime rate as reported by Chemical Bank, the
secondary market rate for a three month certificate of deposit plus 1% and (3)
the federal funds rate in effect plus 0.5%) plus a margin ranging from 1.50% to
.50% for the base rate or 1.50% to 2.50% for the Eurodollar rate. Coram's
obligations under the Senior Credit Facility are guaranteed by the Company and
each of Coram's subsidiaries, and such guarantees are secured by security
interests on all of the capital stock of Coram and each of its corporate
subsidiaries and by substantially all of the Company's assets.
Pursuant to the Securities Purchase Agreement (including a Form of
Subordinated Bridge Note (the "Bridge Note")), dated as of April 6, 1995 among
Coram, the Company and Coram Funding, Inc., attached as Exhibit E hereto and
incorporated herein in its entirety by this reference, interest on the Bridge
Note is payable at the prime rate plus a spread (the "Spread") initially equal
to 300 basis points. If the Bridge Note is not retired in whole by the end of
the first six-month period following the issuance date, the Spread will
increase by 100 basis points and continue to increase by an additional 50 basis
points at the end of each subsequent three-month period for so long as the
Bridge Note is outstanding; provided, that such rate will not exceed 21% per
annum; provided further, that the portion, if any, of any interest payment
representing a rate per annum of in excess of 15.25% shall be paid by issuing
subordinated bridge notes with a principal amount equal to such excess portion.
The Company may, at its option, redeem the Bridge Note upon ten days' notice to
the holder of the Bridge Note at par. The Bridge Note is also subject to
mandatory redemption upon the occurrence of certain conditions. The Bridge
Note is subordinated to the Senior Credit Facility and certain refinancings
thereof.
Pursuant to the terms of the Junior Subordinated PIK Notes, attached
as Exhibit F hereto and incorporated herein in their entirety by this
reference, interest is payable semi-annually at the rate of 7% per annum for
the Junior Subordinated Convertible PIK Notes, and at the rate of 12% per annum
for the Junior Subordinated Non-Convertible PIK Notes. The Junior Subordinated
PIK Notes mature upon the earlier of an event of default or October 1, 2005.
Also, prior to April 6, 1997, interest on the Junior Subordinated PIK Notes is
payable in additional Junior Subordinated PIK Notes, at the election of the
Company. Thereafter, interest is payable in cash, subject to the satisfaction
of certain lender tests. The Junior Subordinated Convertible Note is
convertible at any time subsequent to April 6, 1996, in whole or in part, into
shares of the Company's Common Stock determined by dividing the aggregate
principal amount thereof by $27 per share, subject to adjustment. The Company
is required to file, and use its best efforts to cause to become effective on
or before April 6, 1996, a registration statement covering the shares of Common
Stock of the Company issuable upon conversion thereof. The Company is required
to maintain the effectiveness of such registration statement for a three-year
period following the original effective date of the registration statement.
The Junior Subordinated PIK Notes are expressly subordinated to the Senior
Credit Facility and the indebtedness under the Bridge Note.
Page 4 of 6 Pages
<PAGE> 5
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statement of Business Acquired
Audited financial statements of the Caremark Business,
including a Combined Statement of Operations and Combined
Statement of Cash Flows for the years ended December 31, 1994,
1993 and 1992, and a Balance Sheet for the years ended
December 31, 1994 and 1993, together with a manually signed
accountants' report, are filed herewith.
(b) Pro Forma Financial Information
Pro forma financial information, including a Combined
Condensed Statement of Continuing Operations and Combined
Condensed Balance Sheets, in each case giving effect to the
acquisition of the Caremark Business, will be filed within 60
days of filing this report on Form 8-K.
(c) Exhibits
The following exhibits are furnished in accordance with Item 601
of Regulation S-K.
99.A Press Release Issued by the Company on
January 30, 1995.
99.B Press Release Issued by the Company on April
6, 1995.
99.C Asset Sale and Note Purchase Agreement dated
as of January 29, 1995, among Coram
Healthcare Corporation, Caremark
International Inc. and Caremark Inc, as
amended April 1, 1995.
99.D Credit Agreement dated as of April 6, 1995
among Coram Healthcare Corporation, Coram,
Inc., the lenders named therein and Chemical
Bank as Administrative Agent, as Collateral
Agent and as Fronting Bank.
99.E Securities Purchase Agreement, and Form of
Subordinated Bridge Note, dated as of April
6, 1995 among Coram, Inc., as Issuer, Coram
Funding, Inc., as initial Purchaser and Coram
Healthcare Corporation.
99.F $75 million 7% Convertible Subordinated PIK
Note and $25 million 12% Non-Convertible
Subordinated PIK Note.
Page 5 of 6 Pages
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: April 17, 1995 CORAM HEALTHCARE CORPORATION
(registrant)
By: /s/ Sam R. Leno
--------------------
Sam R. Leno
Vice President and Chief
Financial Officer
Page 6 of 6 Pages
<PAGE> 7
CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS
INDEX TO COMBINED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants 1
Combined Statements of Operations 2
Combined Balance Sheets 3
Combined Statements of Cash Flows 4
Combined Statements of Divisional Equity 5
Notes to Combined Financial Statements 6 - 14
<PAGE> 8
200 East Randolph Drive Telephone 312 540 1500
Chicago, IL 60601
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PRICE WATERHOUSE LLP (PRICE WATERHOUSE LOGO)
REPORT OF INDEPENDENT ACCOUNTANTS
March 15, 1995
To the Board of Directors of
Caremark International Inc.
In our opinion, the accompanying combined balance sheets and the
related statements of operations, divisional equity and of cash flows
present fairly, in all material respects, the financial position of
Caremark International Inc.'s Home Infusion Business at December 31,
1994 and 1993, and the results of its operations and its cash flow for
each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. 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 of
these statements in accordance with generally accepted auditing
standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
<PAGE> 9
Caremark International Inc.
Home Infusion Business
Combined Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
(in millions) ---- ---- ----
<S> <C> <C> <C>
Net revenues $441.9 $420.5 $457.0
Cost of goods and services sold 338.2 300.6 321.2
Marketing and administrative expenses 58.7 68.3 82.2
Provision for doubtful accounts 22.6 31.1 25.4
Restructuring and integration charges 25.0 - 26.7
Minority interests 3.5 9.9 10.7
------ ------ ------
Income (loss) before sundry and income taxes (6.1) 10.6 (9.2)
Sundry income, net 2.0 0.5 5.4
------ ------ ------
Income (loss) before income taxes (4.1) 11.1 (3.8)
Income tax expense (benefit) (1.7) 4.7 (1.0)
------ ------ ------
Net income (loss) $ (2.4) $ 6.4 $ (2.8)
====== ====== ======
</TABLE>
See accompanying Notes to Combined Financial Statements.
- 2 -
<PAGE> 10
Caremark International Inc.
Home Infusion Business
Combined Balance Sheets
<TABLE>
<CAPTION>
Year ended December 31 1994 1993
(in millions) ---- ----
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 4.7 $ 1.6
Accounts receivable, net 143.5 118.6
Deferred tax assets 23.5 14.1
Inventories 11.5 9.9
Prepaid expenses and other current assets 1.7 1.2
Total current assets 184.9 145.4
------- -------
Property and equipment, net 29.7 32.8
Goodwill, net 196.7 21.2
Other noncurrent assets 7.4 7.2
------- -------
Total assets $ 418.7 $ 206.6
======= =======
Liabilities and Divisional Equity
Current liabilities:
Current maturities of long-term debt
and lease obligations $ 1.6 $ 0.4
Accounts payable 26.7 34.6
Accrued liabilities 53.4 30.0
------- -------
Total current liabilities 81.7 65.0
------- -------
Long-term debt and lease obligations 0.6 0.3
Deferred tax liabilities 26.6 4.5
Other noncurrent liabilities 3.7 2.5
Commitments and contingent liabilities (Note 11)
Minority interests 5.0 10.9
Divisional equity 301.1 123.4
------- -------
Total liabilities and divisional equity $ 418.7 $ 206.6
======= =======
</TABLE>
See accompanying Notes to Combined Financial Statements.
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<PAGE> 11
Caremark International Inc.
Home Infusion Business
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
(brackets denote cash outflows)
(in millions)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss) $ (2.4) $ 6.4 $ (2.8)
Adjustments for non-cash items:
Provision for doubtful accounts 22.6 31.1 25.4
Depreciation and amortization 17.5 16.1 14.4
Deferred income taxes 12.7 19.3 (8.9)
Restructuring and integration charges 25.0 - 26.7
Other 1.5 2.9 1.8
Changes in balance sheet items:
Accounts receivable 4.4 (6.3) (54.4)
Inventories 4.3 6.5 (1.5)
Accounts payable and accrued liabilities (10.0) (24.6) 31.3
Prepaid expenses and other current assets 0.7 1.4 (3.7)
Restructuring and integration payments (65.8) (17.8) -
-------- -------- --------
Cash flows from operations 10.5 35.0 28.3
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (7.1) (10.5) (21.2)
Acquisitions, net of cash received (180.8) - (7.6)
-------- -------- --------
Cash flows from investing activities (187.9) (10.5) (28.8)
-------- -------- --------
Cash flows from financing activities:
Net issuances of debt and lease obligations 0.4 0.7 -
Advances from (payments to) Caremark International Inc. 180.1 (36.2) (8.3)
-------- -------- --------
Cash flows from financing activities 180.5 (35.5) (8.3)
-------- -------- --------
Increase (decrease) in cash and equivalents 3.09 (11.0) (8.8)
Cash and equivalents, beginning of year 1.6 12.6 21.4
-------- -------- --------
Cash and equivalents, end of year $ 4.7 $ 1.6 $ 12.6
======== ======== ========
</TABLE>
See accompanying Notes to Combined Financial Statements.
- 4 -
<PAGE> 12
Caremark International Inc.
Home Infusion Business
Combined Statements of Divisional Equity
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
(in millions) ---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 123.4 $ 153.2 $ 164.3
Net income (loss) (2.4) 6.4 (2.8)
Advances from (payments to) Caremark International Inc. 180.1 (36.2) (8.3)
------- -------- -------
Balance, end of year $ 301.1 $ 123.4 $ 153.2
======= ======== =======
</TABLE>
See accompanying Notes to Combined Financial Statements.
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<PAGE> 13
CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1: BUSINESS
The accompanying combined financial statements comprise Caremark International
Inc.'s ("Caremark") Home Infusion Business ("Home Infusion" or the "business")
which consists of Caremark's Clinical Management Services Division and its Home
Care Management System Division. The Clinical Management Services Division
provides alternate site infusion therapies which include: total parenteral
nutrition therapy, enteral nutrition therapy, antibiotic, antiviral and
antifungal therapies, chemotherapy and pain management therapy. The Home Care
Management System Division provides or arranges for all of a patient's homecare
needs including respiratory therapy and durable medical equipment. In January
1995, Caremark entered into a definitive agreement to sell the business to
Coram Healthcare Corporation (Note 13).
The accompanying combined financial statements reflect the "carve-out"
financial position, results of operations and cash flows of Home Infusion for
the periods presented. The combined financial statements have been prepared as
if Home Infusion had operated as a stand-alone entity for all periods
presented, and include those assets, liabilities, revenues and expenses
directly attributable to the Home Infusion operations. Certain corporate
general and administrative expenses of Caremark have been allocated to the
business on various bases which, in the opinion of management, are reasonable.
However, such expenses are not necessarily indicative of, and it is not
practical for management to estimate, the nature and level of expenses which
might have been incurred had the business been operating as a separate company.
The financial information included herein does not necessarily reflect what the
financial position and results of operations of Home Infusion would have been
had it operated as a stand-alone entity during the periods covered, and may not
be indicative of future operations or financial position.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the combined financial statements.
These policies are in conformity with generally accepted accounting principles
and have been applied consistently in all material respects.
Basis of combination
The combined financial statements include the accounts of the business and
majority-owned subsidiaries and partnerships in which it has more than 50%
ownership interest or exercises control. All material intercompany accounts
and transactions have been eliminated in consolidation.
Revenues
Revenues are recorded net of estimated contractual allowances under third party
reimbursement agreements.
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<PAGE> 14
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and equivalents
Cash and equivalents include cash, cash investments and marketable securities
with original maturities of three months or less. Home Infusion participates
in Caremark's centralized cash management program. Consequently, cash on hand
at the balance sheet date is not necessarily indicative of the cash balance on
a stand-alone basis (Note 12).
Inventories
Inventories primarily consist of pharmaceutical drugs, which require
compounding and other processing before delivery to customers, and related
supplies. Inventories are valued at the lower of cost (first-in, first-out
method) or market.
Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation.
Assets purchased in acquisitions are recorded at their respective fair values.
Expenditures that extend the useful life of property and equipment or increase
productivity are capitalized, whereas maintenance and repairs are charged to
expense in the year incurred.
Depreciation and amortization are provided for financial reporting purposes
principally on the straight-line method over the estimated useful lives of the
assets or, for leasehold improvements, over the terms of the related leases if
shorter. Both straight-line and accelerated methods of depreciation are used
for income tax purposes.
Goodwill and other intangible assets
Goodwill represents the excess of consideration paid for businesses acquired in
purchase transactions over the fair value of net assets acquired. It is
amortized on a straight-line basis over estimated useful lives not exceeding 40
years. The business recorded goodwill amortization of $4.5, $0.6 and $0.7
million in 1994, 1993 and 1992, respectively. Other intangible assets
primarily include noncompete agreements and other identified rights which are
amortized on a straight-line basis over the lesser of their legal or estimated
useful lives. The carrying values of intangible assets are reviewed for
impairment on a periodic basis.
Income taxes
Home Infusion's operations have been included in Caremark's consolidated U.S.
federal and state income tax returns. Prior to November 30, 1992, operations
of the business were included in Baxter International Inc.'s consolidated
income tax returns. The provision for income taxes shown in the accompanying
combined financial statements has been determined as if Home Infusion had filed
separate tax returns under its existing legal structure for the periods
presented. All U.S. income taxes, including deferred taxes, are settled with
Caremark on a current basis through the "Advances from and payments to
Caremark" account.
Income tax expense is based on pre-tax income for financial reporting
purposes, adjusted for the effects of permanent differences between such income
and that reported for tax return purposes. In 1992, the business prospectively
adopted Statement of Financial Accounting Standards No. 109 ("FAS 109"),
"Accounting for Income Taxes." FAS 109 requires an asset and liability
approach, whereby deferred tax assets and liabilities are recognized for
expected future tax consequences of temporary differences between the carrying
amounts and tax bases of the underlying assets and liabilities. The impact of
adopting FAS 109 was not material to the financial statements of the business.
- 7 -
<PAGE> 15
NOTE 3: ACQUISITIONS
Effective March 1, 1994, the business acquired the assets and assumed certain
liabilities of Critical Care America ("Critical Care") for approximately $175
million in cash. This transaction was accounted for using the purchase method
of accounting. As such, operating results of Critical Care have been included
in the financial statements of the business from the date of acquisition.
The following summary, prepared on a pro forma basis, depicts Home
Infusion's combined results of operations as if Critical Care had been acquired
as of the beginning of the periods presented, after including the impact of
certain adjustments, such as amortization of intangibles and related income tax
effects. Actual results of the business for the year ended December 31, 1994
include a pre-tax charge of $25.0 million for estimated costs to integrate the
operations of Critical Care (Note 4).
Year ended December 31 1994 1993
(in millions) ---- ----
(unaudited)
Net revenues $473.0 $655.6
Income (loss) before income taxes ($7.9) $15.8
Net income (loss) ($4.5) $9.2
These pro forma results do not anticipate any efficiencies from consolidating
the Critical Care operations, are not necessarily indicative of what actually
would have occurred if the Critical Care acquisition had been in effect for the
entire periods presented, and are not intended to project future results.
NOTE 4: RESTRUCTURING AND INTEGRATION CHARGES
The business recorded a pre-tax charge of $25.0 million in the first quarter of
1994 for estimated costs to integrate the operations of Critical Care, acquired
in March 1994 (Note 3). This charge consists primarily of estimated exit costs
to close redundant Home Infusion facilities and related headcount reductions.
Accrued costs include severance ($16.8 million), lease commitments ($5.0
million), as well as fixed asset and other disposal costs ($3.2 million). The
company also established a $54.4 million reserve via purchase method
accounting, with no charge to income, for costs associated with the closing of
redundant Critical Care facilities.
Integration-related cash outlays during 1994 of $58.6 million for the
activities cited above were funded through the "Advances from and payments to
Caremark" account. Actual spending coincided with management's estimates.
There were no unusual adjustments to these reserves during the year.
During 1992, a pre-tax charge of $26.7 million was recorded for a
restructuring program to reorganize sales and operations functions in the
field, standardize operations throughout the business and consolidate certain
facilities and administrative functions. Cumulative restructuring spending
approximated $25.0 million as of December 31, 1994, of which $7.2 million was
spent during 1994. Actual spending coincided with management's estimates.
- 8 -
<PAGE> 16
NOTE 5: FINANCIAL INSTRUMENTS
Financial instruments of the business primarily consist of cash and
equivalents, receivables, payables, investments and debt obligations. The
carrying value of these financial instruments approximated fair value at
year-end.
NOTE 6: TRADE RECEIVABLES
The business provides credit in the normal course of business to third-party
payors (such as private insurers, Medicare and Medicaid), patients and private
enterprises. Amounts due from Medicare and Medicaid approximated 29% and 30%
of gross accounts receivable at December 31, 1994 and 1993, respectively.
Revenues from Medicare and Medicaid approximated 22% and 23% of net revenues in
1994 and 1993, respectively. The company performs ongoing credit evaluations
of its customers and maintains an allowance for doubtful accounts based on the
collectibility of trade receivables. Credit losses have historically coincided
with management's expectations.
A summary of the activity in the allowance for doubtful accounts is
presented below:
Year ended December 31 1994 1993
(in millions) ---- ----
Balance, beginning of year $12.8 $29.5
Provision for doubtful accounts 22.6 31.1
Write-offs, net of recoveries (27.0) (31.1)
Other (1) (2.1) (16.7)
----- -----
Balance, end of year $6.3 $12.8
===== =====
-----------
(1) Represents valuation accounts of acquired or divested companies and
account transfers.
- 9 -
<PAGE> 17
NOTE 7: OTHER BALANCE SHEET DATA
Year ended December 31 1994 1993
(in millions) ---- ----
Property and equipment, net:
Buildings and leasehold improvements $ 3.7 $ 4.7
Machinery and other equipment 44.8 52.7
Equipment leased to customers 24.5 24.4
Software costs 6.8 5.6
Construction in progress 3.7 0.6
----- -----
Property and equipment, at cost 83.5 88.0
Accumulated depreciation and amortization (53.8) (55.2)
----- -----
Totals $29.7 $32.8
===== =====
Accrued liabilities:
Employee compensation and related taxes $21.0 $16.2
Restructuring and integration costs 22.5 8.9
Other 9.9 4.9
----- -----
Totals $53.4 $30.0
===== =====
NOTE 8: DEBT AND LEASE OBLIGATIONS
The business leases certain facilities and equipment under operating and
capital leases expiring at various dates. Most of the operating leases contain
renewal options. Total rent expense under operating leases approximated $20.5,
$20.1 and $16.1 million in 1994, 1993 and 1992, respectively.
Future minimum lease payments under capital and noncancelable operating
leases and aggregate long-term debt maturities as of December 31, 1994 are
summarized as follows:
(in millions) Operating Capital Debt
leases leases maturities
--------- ------- ----------
1995 $10.8 $1.2 $0.4
1996 7.7 0.2 0.1
1997 4.5 -- 0.3
1988 2.0 -- --
1999 0.9 -- --
Thereafter 0.4 -- --
----- ---- ----
Total obligations and commitments $26.3 $1.4 $0.8
===== ==== ====
The net book value of capitalized lease property approximated $0.7 million at
December 31, 1994.
- 10 -
<PAGE> 18
NOTE 8: DEBT AND LEASE OBLIGATIONS (CONTINUED)
Caremark maintains, on behalf of the business, a $20.0 million unsecured line
of credit, primarily for granting partnership loans that mature in three years
and bear interest at specified floating rates. At December 31, 1994 and 1993,
there were no borrowings under this facility.
NOTE 9: RETIREMENT PROGRAMS
Home Infusion participates in Caremark-sponsored retirement plans for all
qualifying employees of the business. Liabilities and expenses related to these
retirement programs have been allocated to the business based on its eligible
payroll in relation to the eligible payroll of Caremark. Benefits are
typically based on years of service and the employee's compensation during five
of the last ten years of employment as defined by the plans. Caremark's
funding policy is to make contributions, which meet or exceed the minimum
requirements of the Employee Retirement Income Security Act of 1974, based on
the projected unit credit actuarial cost method, and to limit such
contributions to amounts currently deductible for tax reporting purposes.
Pension expense allocated to the business was $2.8, $2.5 and $2.2 million for
the years 1994, 1993 and 1992, respectively.
Most employees of the business are eligible to participate in a qualified
401(k) plan sponsored by Caremark. Participants may contribute up to 12% of
their annual compensation (limited in 1994 to $9,240 per individual) to the
plan and Caremark matches the participants' contributions up to 3% of
compensation.
In 1992, the business adopted Statement of Financial Accounting Standards
No. 106 ("FAS 106"), "Employers' Accounting for Postretirement Benefits Other
Than Pensions", which requires the business to accrue costs for postretirement
benefits over the service years of employees. The adoption of FAS 106 and its
ongoing impact have not been material to the business' financial statements.
In 1994, the business adopted Statement of Financial Accounting Standards
No. 112 ("FAS 112"), "Employers' Accounting for Postemployment Benefits", which
requires employers to accrue costs for postemployment benefits (including
salary continuation, severance and disability benefits, job training and
counseling and continuation of benefits such as health care and life insurance
coverage to former or inactive employees). The adoption of FAS 112 was not
material to the business' financial statements.
- 11 -
<PAGE> 19
NOTE 10: INCOME TAXES
Income tax expense for the indicated years consists of the following:
Year ended December 31 1994 1993 1992
(in millions) ---- ---- ----
Current:
Federal ($12.6) ($12.6) $ 6.8
State and Local (1.8) (2.0) 1.1
------ ------ -----
Current income tax expense (benefit) (14.4) (14.6) 7.9
====== ====== =====
Deferred:
Federal 11.1 16.7 (7.7)
State and local 1.6 2.6 (1.2)
------ ------ -----
Deferred income tax expense (benefit) 12.7 19.3 (8.9)
------ ------ -----
Income tax expense (benefit) ($1.7) $ 4.7 ($1.0)
====== ====== =====
Deferred tax assets (liabilities) under FAS 109 are composed of the following:
Year ended December 31 1994 1993
(in millions) ---- ----
Deferred tax assets:
Bad debt and sales allowances $ 7.1 $ 3.6
Restructuring and integration costs 10.8 4.4
Accrued compensation and employee benefits 4.4 4.9
Other accrued expenses 1.2 1.2
----- -----
Deferred tax assets $23.5 $14.1
===== =====
Deferred tax liabilities:
Accelerated depreciation and amortization $25.3 $ 4.8
Other 1.3 (0.3)
----- -----
Deferred tax liabilities $26.6 $ 4.5
----- -----
Net deferred tax assets (liabilities) ($3.1) $ 9.6
===== =====
- 12 -
<PAGE> 20
NOTE 10: INCOME TAXES (CONTINUED)
Income tax expense applicable to pre-tax income for financial reporting
purposes differs from income tax expense calculated by using the U.S. federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
(in millions) ---- ---- ----
<S> <C> <C> <C>
Income tax (benefit) expense at statutory rate ($1.4) $3.9 ($1.3)
State and local taxes (0.2) 0.6 (0.2)
Non-deductible goodwill 0.1 0.2 0.3
Non-deductible meals and entertainment 0.2 0.1 0.1
Other (0.4) (0.1) 0.1
----- ---- -----
Income tax expense (benefit) ($1.7) $4.7 ($1.0)
===== ==== =====
</TABLE>
All income taxes related to the business have been paid by Caremark.
NOTE 11: COMMITMENTS AND CONTINGENT LIABILITIES
Caremark was notified in August 1991 that the Office of the Inspector General
of the U.S. Department of Health and Human Services (the "OIG") and the U.S.
Department of Justice, with subsequent grand jury participation, were
investigating Caremark. The nature, scope, timing and outcome of the
investigation are not currently determinable. Caremark has provided and
continues to provide information and documents in connection with the
investigation.
Caremark is in discussions with the OIG and the U.S. Department of Justice
to settle the investigation. Because certain state agencies are conducting
related investigations of Caremark, representatives of various state health
care programs are participating in these discussions. Caremark is seeking to
settle all aspects of the investigation including any potential claims by the
federal government or any state agency, as applicable, under the federal laws
prohibiting payment of remuneration to induce the referral of Medicare and
Medicaid beneficiaries (the "Medicare Referral Payments Law"), the federal
False Claims Act (the "False Claims Act") or any other federal or state civil
or criminal statute. No assurances can be given with regard to the outcome of
these settlement discussions. Criminal penalties under the Medicare Referral
Payments Law could include fines of up to $25,000 per violation or up to five
years imprisonment, or both. Criminal penalties under the Medicare Referral
Payments Law could be increased, under the alternative fines statute, to
include fines of up to $500,000 per violation. Fines could be increased to a
maximum of two times the amount of gross gain or loss in connection with the
violation under the alternative fines statute, and could also be increased
under the Federal Organizational Sentencing Guidelines. Civil penalties under
the Medicare Referral Payments Law include exclusion from participation in the
Medicare and Medicaid programs; civil penalties under the False Claims Act
could include fines of up to $10,000 per claim and treble damages. If imposed,
such penalties, although not estimable at this time, could have a material
adverse effect on the company's business or on its income, cash flows or
financial condition. In conjunction with the sale of the business, Caremark
will retain liability for this investigation.
The business is party to various other commitments, claims and routine
litigation arising in the ordinary course of business. Based on the advice of
counsel, management does not believe that the result of such commitments,
claims and litigation, individually or in the aggregate, will have a material
effect on the business or its income, cash flows or financial condition.
- 13 -
<PAGE> 21
NOTE 12: RELATED PARTY TRANSACTIONS
The business participated in a centralized cash management program administered
by Caremark. Advances from Caremark or excess cash sent to Caremark have been
treated as an adjustment to Divisional Equity. No interest has been charged on
this balance. Intercompany receivables and payables have historically been
settled in the normal course of business, usually within 90 days, and are not
interest bearing. The net intercompany balances have been included in the
combined balance sheets as "Divisional Equity".
Caremark has provided to Home Infusion certain legal, treasury, regulatory,
insurance, benefits, administrative services and facilities. Charges for these
services to Home Infusion have been based on allocation of Caremark's actual
direct and indirect costs using varying allocation methods designed to estimate
actual costs incurred by Caremark to render these services to the business.
The allocation methodology is consistent with the methods used by Caremark to
allocate the cost of similar services to its other business units. The
allocated costs of these services as reflected in the combined statements of
operations were $11.0, $5.1 and $4.0 million in 1994, 1993 and 1992,
respectively. No provision has been made for possible incremental costs that
may have been incurred had Home Infusion operated as a stand-alone entity for
the periods presented. The business has provided facilities, nursing and other
services to other operating units of Caremark. Reimbursement for these
services have been at arm's length pricing and have not been material to the
results of operations.
NOTE 13: SUBSEQUENT EVENT
In January 1995, Caremark entered into a definitive agreement to sell specified
assets and liabilities of the business to Coram Healthcare Corporation for
approximately $310 million in cash and securities, not to exceed $328 million,
subject to net asset adjustments. Both companies' Boards of Directors have
approved the transaction. The sale is subject to government approval under the
Hart-Scott-Rodino Act and other conditions. Assets and liabilities excluded
from the sale include cash, specified receivables and fixed assets, income
taxes, legal, employee benefit and certain restructuring/integration
obligations and specified deferred purchase obligations.
- 14 -
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- - ------- -----------
<S> <C>
99.A Press Release Issued by the Company on January 30, 1995.
99.B Press Release Issued by the Company on April 6, 1995.
99.C Asset Sale and Note Purchase Agreement dated as of January 29, 1995, among Coram
Healthcare Corporation, Caremark International Inc. and Caremark Inc, as
amended April 1, 1995.
99.D Credit Agreement dated as of April 6, 1995 among Coram Healthcare Corporation, Coram,
Inc., the lenders named therein and Chemical Bank as Administrative Agent, as Collateral
Agent and as Fronting Bank.
99.E Securities Purchase Agreement, and Form of Subordinated Bridge Note, dated as of April
6, 1995 among Coram, Inc., as Issuer, Coram Funding, Inc., as initial Purchaser and Coram
Healthcare Corporation.
99.F $75 million 7% Convertible Subordinated PIK Note and $25 million 12% Non-Convertible
Subordinated PIK Note.
</TABLE>
<PAGE> 1
FOR IMMEDIATE RELEASE
Contact: Lawrence Watts
CORAM HEALTHCARE
(303) 672-8728
Heidi Boenisch/Loree Bowen
PAINE & ASSOCIATES
(714) 755-0400
CORAM ANNOUNCES AGREEMENT TO ACQUIRE
CAREMARK'S HOME INFUSION THERAPY BUSINESS
DENVER, JAN. 30, 1995 -- Coram Healthcare Corp. (NYSE:CRH) today announced that
it had reached a definitive agreement to acquire Caremark International's home
infusion therapy business. Under the agreement, which has been approved by the
Boards of Directors of both companies, Caremark will receive approximately $310
million in cash and securities, subject to post-closing adjustment, in exchange
for the assets of its home infusion business. Responsibility for the pending
OIG investigation of Caremark's home care business will remain with Caremark.
After the transaction is completed, Coram will be the nation's leading
provider of home infusion therapy services, with projected 1995 revenues
approaching $1 billion.
Under the terms of the agreement, Caremark will receive from Coram
approximately $210 million in cash, $75 million in 7 percent convertible
subordinated notes, and $25 million in 12 percent non-convertible subordinated
notes. Both notes will be subordinate to all Coram debt. The convertible
notes will be convertible into Coram common stock at a share price of 30
percent above the average trading price of Coram common stock during the period
between signing and closing. In no event will the conversion price be less
than $18
-more-
<PAGE> 2
CORAM ANNOUNCES AGREEMENT WITH CAREMARK/2222
per share or more than $27 per share. Interest on both notes will be paid in
kind for two years.
"We are delighted to have Caremark's home infusion therapy
organization as a part of Coram" said James M. Sweeney, Coram chairman and
chief executive officer. "They are a group with a history of innovation and
dedication to quality patient care, and will be a great addition to our
company."
Coram is a leading provider of "alternate site care" to patients with
complex acute and chronic medical needs, for example patients with cancer and
AIDS. In industry terminology, alternate site care refers to care provided in
locations other than the hospital or the physician's office, such as home care,
skilled nursing facilities, clinics, or subacute care facilities.
DEFINING A NEW MODEL OF CARE
"We have two major strategic goals," said Sweeney. "First, to achieve
the scale necessary to be a key player in a health care system in which both
payors and providers are rapidly consolidating. Second, to define a new,
better integrated model of care for patients with complex needs, one that
appropriately involves physician specialists, managed care, hospitals and other
health care providers. Acquiring Caremark's home infusion business allows us
to take a major step forward in achieving both goals, in that home infusion
therapy is a cornerstone of alternate site service for the patient populations
we serve."
The proposed acquisition would include Caremark's domestic home
infusion business, women's health, and Home Care Management System (HCMS).
Caremark will retain its
-more-
<PAGE> 3
CORAM ANNOUNCES AGREEMENT WITH CAREMARK/3333
other home care businesses, including the distribution and monitoring of
specialty pharmaceutical drugs, hemophilia and immune deficiency services, and
its international operations.
The agreement, which does not require shareholder approval, is
expected to be completed in the first quarter of 1995.
Consummation of the transaction is subject to Coram obtaining certain
debt financing and to customary conditions, including Hart-Scott-Rodino Act
clearance.
Coram Healthcare Corp. is headquartered in Denver, Colorado. Coram's
name, which is Latin for "openly, face-to-face," reflects its mission: to work
with patients, physicians, managed care, and other providers to develop new and
better models of care for those with serious or chronic medical problems.
# # #
COR-1DAA.DAM
<PAGE> 1
FOR IMMEDIATE RELEASE
Contact: Lawrence Watts
CORAM HEALTHCARE
(303) 672-8728
Heidi Boenisch/Loree Bowen
PAINE & ASSOCIATES
(714) 755-0400
CORAM COMPLETES PURCHASE OF CAREMARK'S
HOME IV THERAPY BUSINESS
DENVER, APRIL 6, 1995 -- Coram Healthcare Corp. (NYSE:CRH) today announced that
it has completed the previously announced acquisition of Caremark's (NYSE:CK)
home IV therapy business. The acquisition included Caremark's domestic home
infusion, acute intravenous immune globulin, women's health and Home Care
Management System (HCMS) businesses.
"With the completion of this acquisition, Coram has become the leading
provider of alternate site IV therapy," said James M. Sweeney, Coram's chairman
and CEO. "We have the resources needed to work with large health insurers,
managed care providers and hospital companies that are looking for ways to
deliver health care more efficiently on a national scale."
Coram, headquartered in Denver, is a leading provider of alternate
site patient care. Coram's name, which is Latin for "openly, face-to-face,"
reflects its mission: to work with patients, physicians, managed care, and
other providers to develop new and better models of care, for those with
serious or chronic medical problems.
# # #
COR-1DAB.DAM
<PAGE> 1
ASSET SALE AND NOTE PURCHASE AGREEMENT
BETWEEN
CORAM HEALTHCARE CORPORATION
("Buyer"),
CAREMARK INTERNATIONAL INC.
("CII")
AND
CAREMARK INC.
("Seller")
Dated as of January 29, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.1 Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.2 Assignment of Contracts, Leases and Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.4 Assumed Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 2 - PURCHASE PRICE AND PAYMENT; NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Allocation of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Determination of Closing Date Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4 Procedures for Acquired Assets Not Transferable. . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.5 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 3 - FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Bank and Subordinated Debt Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Bridge Financing for Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 Due Incorporation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Due Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 No Undisclosed Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Real Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.8 Equipment and Personal Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.10 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.11 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.12 Compliance Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.13 Certain Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.14 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.15 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.16 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.17 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.18 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.19 Capital Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.20 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.21 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.22 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.23 Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.24 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.25 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.26 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Due Incorporation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 Buyer Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 6 - PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Consents to Transfer Material Contracts and Material Permits . . . . . . . . . . . . . . . . . . . . 25
6.3 Ordinary Course. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 HSR Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Updated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.7 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.8 Other Discussions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.9 Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.10 Transition Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.11 Bank Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7 - CONDITIONS TO OBLIGATIONS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Expiration of HSR Waiting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 No Actions or Proceedings to Restrain Transaction . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Bank Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8 - CONDITIONS TO OBLIGATIONS OF SELLER AND CII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1 Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Expiration of HSR Waiting Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 No Actions or Proceedings to Restrain Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9 - EMPLOYEES AND BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 10 - CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Deliveries by Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Deliveries by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 11 - POST-CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.2 Records for Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.3 Access to Records, Information and Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.4 Retention of Information and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.5 Infusion Therapy Services Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.6 Post-Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.7 Post-Closing Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 12 - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 13 - SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 Indemnification by Seller and CII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.4 Losses Net of Insurance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.5 Procedures for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 14 - SECURITIES LAW AND STANDSTILL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.1 Acquisition for Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.2 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.3 Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.4 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<TABLE>
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Page
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14.5 Term and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 15 - CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.1 Nondisclosure and Nonuse of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . 40
15.2 Obligations with Respect to Agents, Employees and Representatives . . . . . . . . . . . . . . . . . 40
15.3 Return of Written Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 16 - NONCOMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.1 Competing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.2 Business Relating to Affiliated Physician Groups . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.3 Acquired Competing Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.4 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16.5 Scope of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 17 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
17.1 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
17.2 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.3 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.5 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.8 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.9 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.10 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.11 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.12 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.13 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.14 Entire Understanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
iv
<PAGE> 6
SCHEDULES
Schedule 0.1 Financial Statements*/
Schedule 0.2 Year-End Net Assets Statement
Schedule 1.1(a) Equipment
Schedule 1.1(d) Intellectual Property
Schedule 1.1(e) Other Assets
Schedule 1.2(e) Permits
Schedule 1.3 Excluded Assets
Schedule 4.4 Exceptions to Financial Statements
Schedule 4.5(a) Material Adverse Changes Relating to the Business,
etc.
Schedule 4.5(b) Material Adverse Changes Relating to the Acquired
Assets
Schedule 4.6 Real Property Leases
Schedule 4.7 Exceptions to Title
Schedule 4.8 Exceptions to Equipment and Personal Property Leases
Schedule 4.9 Exceptions to Intellectual Property
Schedule 4.10 Material Contracts
Schedule 4.11 Employee Benefit Plans
Schedule 4.12 Material Contract Defaults
Schedule 4.13 Certain Environmental Matters
Schedule 4.14 Litigation and Judgments
Schedule 4.15 Insurance Policies
Schedule 4.16 Exceptions to Condition of Assets
Schedule 4.19 Capital Improvements
Schedule 4.20 Undisclosed Liabilities
Schedule 4.21 Governmental Consents
Schedule 4.22 Subsidiaries
Schedule 4.23 Partnerships
Schedule 5.3 Buyer Consents
EXHIBITS
Exhibit A Form of Convertible Notes
Exhibit B Form of Nonconvertible Exchangeable Note
Exhibit 7.3 Form of Opinion of Seller's Counsel
Exhibit 8.3 Form of Opinion of Buyer's Counsel
__________________________________
*/ Initially: Unaudited Financial Statements at and for the year ended
December 31, 1994
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<PAGE> 7
ASSET SALE AND NOTE PURCHASE AGREEMENT
THIS AGREEMENT IS MADE as of January 29, 1995, between CORAM
HEALTHCARE CORPORATION, a Delaware corporation ("Buyer"), CAREMARK
INTERNATIONAL INC., a Delaware corporation ("CII"), and CAREMARK INC., a
California corporation ("Seller").
In consideration of the mutual covenants, agreements and
warranties herein contained, it is agreed that Buyer, or a subsidiary
corporation wholly-owned by Buyer, shall acquire from Seller all of the
Acquired Assets (defined herein) and assume the Assumed Obligations (defined
herein), and Seller shall purchase from Buyer the Notes (defined herein), all
upon the terms and subject to the conditions hereinafter set forth.
DEFINITIONS
The following terms shall have the following meanings:
"Accounts Receivable" shall have the meaning set forth in
Section 1.1(g) (Acquired Assets).
"Acquired Assets" shall have the meaning set forth in Section
1.1 (Acquired Assets).
"Acquired Competing Business" shall have the meaning set forth
in Section 16.3 (Acquired Competing Businesses).
"Additional Agreements" shall mean the Assignment and
Assumption Agreement, the Buyer License to Seller, the Seller License to Buyer,
the Trademarks Assignment, the Patents Assignment, the Transition Services
Agreement, the Tax Procedures Agreement and, if applicable, the documents
required in connection with the Bridge Financing.
"Affiliate" of any person or entity shall mean any person or
entity that, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such first person or
entity.
"Affiliated Physician Group" shall mean any physician group
that includes primary care physicians with which Seller or any Affiliate of
Seller has contracted to provide comprehensive management and administrative
support services.
"Agreement" shall mean this agreement, including all exhibits
and schedules, as it may be amended from time to time in accordance with its
terms.
<PAGE> 8
"Assignment and Assumption Agreement" shall mean the
Assignment and Assumption Agreement and Bill of Sale between Seller and Buyer,
to be executed at the Closing.
"Assumed Obligations" shall have the meaning set forth in
Section 1.4 (Assumed Obligations).
"Bridge Financing" shall have the meaning set forth in Section
3.2 (Bridge Financing for Subordinated Debt).
"Bulk Sales Laws" shall mean the laws of any jurisdiction
relating to bulk sales that may be applicable to the sale of the Acquired
Assets by Seller hereunder.
"Business" shall mean the United States business and
operations of Seller and, if applicable, CII relating to (i) sales and
marketing, pharmacy and nursing functions for the provision to patients in home
care settings of acute gamma globulin, IV pain management, IV chemotherapy,
hydration therapy, total parenteral nutrition, enteral nutrition, IV
antibiotics, uterine activity monitoring, tocolytic therapy, catheter care,
hematpoitic therapy, and pentamidine therapy and (ii) the HCMS Business. The
term "IV" also includes infusions of other types (including "IM") which are
administered with the direct aid of a health care professional.
"Buyer License to Seller" shall mean the license agreement to
be executed at the Closing, granting a nonexclusive license from Buyer to
Seller with respect to certain intellectual property.
"Buyer's Plans" shall have the meaning set forth in Section
9.2(b) (Employee Benefit Plans).
"Buyer's Savings Plan" shall have the meaning set forth in
Section 9.2(a) (Employee Benefit Plans).
"CCA" shall mean, collectively, Critical Care America, Inc.,
Critical Care America-West, Inc. and Critical Care America-East, Inc., each a
Delaware corporation.
"CII" shall mean Caremark International Inc., a Delaware
corporation and the parent of Seller.
"Claim" shall mean any claim, suit, action or proceeding.
"Claim Notice" shall have the meaning set forth in Section
13.5(a) (Procedures for Indemnification).
"Closing" shall mean the consummation of the transactions
contemplated herein in accordance with Article 10 (Closing Matters).
2
<PAGE> 9
"Closing Date" shall mean the date on which the Closing occurs
or is to occur pursuant to Section 10.1 (Closing).
"Closing Date Net Assets" shall mean the net assets of the
Business as set forth on the Closing Date Net Assets Statement.
"Closing Date Net Assets Statement" shall mean a statement of
the net assets of the Business as of 12:01 a.m. on the Closing Date, as
adjusted for Excluded Assets and Excluded Liabilities, prepared in accordance
with Section 2.3 (Determination of Closing Date Net Assets).
"Code" shall mean the United States Internal Revenue Code of
1986, as amended.
"Competing Business" shall have the meaning set forth in
Section 16.1 (Competing Business).
"Confidential Information" shall mean any trade secrets or
confidential or proprietary information designated as such by either of the
parties hereto, whether or not reduced to tangible form (including information
regarding such party's organization, personnel, business activities, customers,
vendors, policies, assets, finances, costs, pricing, sales, revenues,
technology and strategies); provided, however, that none of the following shall
be deemed to be Confidential Information: (i) any information generally
available or known to the public, (ii) any information already known or
available to the receiving party (the "Receiving Party") prior to the
disclosure of such information by the disclosing party (the "Disclosing
Party"), (iii) information which becomes part of the public domain by
publication or otherwise through no fault of the Receiving Party, (iv)
information required to be disclosed to a court or tribunal or (v) any
information which is independently developed by the Receiving Party; provided,
however, that in the event that the Receiving Party is required to disclose
such information to a court or tribunal such party shall give written notice of
the proceeding to the Disclosing Party in accordance with Section 17.4
(Notices) to allow the Disclosing Party to seek an appropriate protective order
and/or waive compliance with this Agreement.
"Continuing Employee" shall have the meaning set forth in
Section 9.1 (Employees).
"Conversion Shares" shall have the meaning set forth in
Section 14.3 (Standstill).
"Convertible Notes" shall mean Buyer's 7% Convertible
Subordinated Notes, substantially in the form of Exhibit A.
"Disclosing Party" shall have the meaning set forth in the
definition of Confidential Information.
3
<PAGE> 10
"Employee Benefit Plans" shall have the meaning set forth in
Section 4.11(a) (Employee Benefit Plans).
"Environmental Law" shall mean any law, statute, regulation,
rule, order, consent decree, settlement agreement or governmental requirement,
that relates to or otherwise imposes liability or standards of conduct
concerning discharges, releases or threatened releases of odors or any
pollutants, contaminants or hazardous or toxic wastes (including medical
wastes), substances or materials into ambient air, water or land, or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants or hazardous or toxic wastes, substances or materials, including
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, any other so-called "Superfund" or "Superlien" law, the Toxic
Substances Control Act, or any other similar federal, state or local statutes.
"Environmental Permit" shall mean any of the Permits required
by or pursuant to any applicable Environmental Law.
"Equipment" shall have the meaning set forth in Section 1.1(a)
(Acquired Assets).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Excluded Assets" shall have the meaning set forth in Section
1.3 (Excluded Assets).
"Excluded Liabilities" shall have the meaning set forth in
Section 1.5 (Excluded Liabilities).
"Financial Statements" shall mean the unaudited financial
statements of the Business as of December 31, 1994 and for the year then ended,
consisting of a balance sheet and the related statement of operations, as
certified by the chief financial officer of Seller, a copy of which is attached
as Schedule 0.1. The term "Financial Statements" shall also be deemed to
include the updated financial statements prepared and delivered in accordance
with Section 6.5 (Updated Financial Statements).
"GAAP" shall mean U.S. generally accepted accounting
principles at the time in effect, consistently applied.
"Governmental Authority" shall mean the government of the
United States or any state or political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to such government.
4
<PAGE> 11
"Government Programs" shall mean, collectively, Federal
Medicare programs and all state Medicaid programs.
"HCMS Business" shall mean the business of coordinating and/or
contracting with payors to manage the package of services to be performed in a
home care setting involving: (i) nursing, (ii) respiratory therapy, (iii)
durable medical equipment and (iv) infusion therapy.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"including" shall mean "including, without limitation."
"Information and Records" shall have the meaning set forth in
Section 1.1(c) (Acquired Assets).
"Infusion Therapy Services Contract" shall mean a form of
nonexclusive contract appropriate to be used as a subcontract for the provision
of infusion therapy services by an Affiliated Physician Group. The fee
schedule and appropriate standards of customer service and quality benchmarks
to be contained therein shall be renegotiated by the parties each year.
"Intellectual Property" shall have the meaning set forth in
Section 1.1(d) (Acquired Assets).
"Inventories" shall have the meaning set forth in Section
1.1(b) (Acquired Assets).
"IRS" shall mean the Internal Revenue Service.
"JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organizations.
"Key Employee" shall mean an employee of the Business at the
level of vice president or above.
"knowledge" shall mean actual knowledge after due inquiry.
"Law" shall mean any law, statute, rule, regulation or
ordinance applicable to the Business.
"Liability" shall mean any debt, claim, obligation or
liability (absolute, accrued, contingent or otherwise), matured or unmatured,
known or unknown, including, with respect to the Business, Assumed Obligations
and Excluded Liabilities.
5
<PAGE> 12
"Liens" shall mean any mortgage, lien, pledge, security
interest, option, lease (or sublease), conditional sales agreement, title
retention agreement, charge, claim, encumbrance, easement or encroachment.
"Losses" shall mean all liabilities, losses, costs, damages,
penalties or expenses (including reasonable attorneys' fees and expenses and
costs of investigation in any action, suit or proceeding).
"Material Adverse Effect" shall mean a material adverse effect
on the financial condition, business, assets or results of operations of the
Business, taken as a whole.
"Material Contracts" shall have the meaning set forth in
Section 4.10 (Material Contracts).
"Material Permits" shall have the meaning set forth in Section
4.3 (Permits).
"Net Assets Deficiency" shall mean the amount, if any, by
which the Closing Date Net Assets are less than $308 million. If the Closing
Date Net Assets equal or exceed $308 million, there shall be no Net Assets
Deficiency.
"Net Assets Excess" shall mean the amount, if any, by which
the Closing Date Net Assets are greater than $308 million. If the Closing Date
Net Assets equal or are less than $308 million, there shall be no Net Assets
Excess.
"Nonconvertible Notes" shall mean Buyer's 12% Non-Convertible
Subordinated Notes, substantially in the form of Exhibit B.
"Notes" shall mean the Convertible Notes and the
Nonconvertible Notes.
"OIG Investigation" shall mean the government investigation
described in CII's reports and statements filed with the Securities and
Exchange Commission.
"Other Assets" shall have the meaning set forth in Section
1.1(e) (Acquired Assets).
"Other Contracts" shall have the meaning set forth in Section
1.2(d) (Assignment of Contracts, Leases and Other Assets).
"Partnership" shall have the meaning set forth in Section 4.23
(Partnerships).
"Patents Assignment" shall mean the Patents Assignment from
Seller to Buyer, to be executed at the Closing.
"Permits" shall have the meaning set forth Section 1.2(e)
(Assignment of Contracts, Leases and Other Assets).
6
<PAGE> 13
"Permitted Competing Business Revenues" shall have the meaning
set forth in Section 16.1 (Competing Business).
"Personal Property Leases" shall have the meaning set forth in
Section 1.2(b) (Assignment of Contracts, Leases and Other Assets).
"Placement Agent" shall have the meaning set forth in Section
3.1 (Bank and Subordinated Debt Financing).
"Provider Contracts" shall have the meaning set forth in
Section 1.2(c) (Assignment of Contracts, Leases and Other Assets).
"Purchase Price" shall have the meaning set forth in Article 2
(Purchase Price and Payment; Notes).
"Real Property Leases" shall have the meaning set forth in
Section 1.2(a) (Assignment of Contracts, Leases and Other Assets).
"Receiving Party" shall have the meaning set forth in the
definition of Confidential Information.
"Referee" shall have the meaning set forth in Section 2.3
(Determination of Closing Date Net Assets).
"Seller License to Buyer" shall mean the license agreement to
be executed at the Closing, granting a nonexclusive license from Seller to
Buyer with respect to certain intellectual property, including a sublicense of
certain software specified in Schedule 1.3.
"Seller Purchase Orders" shall mean the purchase orders,
contracts and agreements relating to, or used in the operation of, the Business
for purchase by Seller of goods, materials and services.
"Seller's 401 CARE Plan" shall mean the Caremark International
Inc. 401 CARE Retirement Savings Plan.
"Seller's Savings Plan" shall mean the Caremark International
Inc. Retirement and Savings Plan for Selected Employees.
"Senior Bank Financing" shall have the meaning set forth in
Section 3.1 (Bank and Subordinated Debt Financing).
"Senior Bank Lenders" shall have the meaning set forth in
Section 6.11 (Bank Financing).
7
<PAGE> 14
"Subordinated Debt Financing" shall have the meaning set forth
in Section 3.1 (Bank and Subordinated Debt Financing).
"Subsidiaries" shall have the meaning set forth in Section
4.22 (Subsidiaries).
"Taxes" shall mean all taxes, charges, fees, duties, levies or
other assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational and interest equalization, windfall profits that
are imposed by the United States, or any state, local or foreign government or
subdivision or agency thereof, and such term shall include any interest,
penalties or additions to tax attributable to such Taxes; provided, however,
that Taxes shall not include any severance and employees' income withholding
and Social Security taxes.
"Tax Procedures Agreement" shall mean the agreement regarding
state audit mechanics between Buyer and Seller, to be executed on or before the
Closing Date.
"Tax Return" shall mean any report, return or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Trademarks Assignment" shall mean the Trademarks Assignment
from Seller to Buyer, to be executed at the Closing.
"Transition Services Agreement" shall mean the Transition
Services Agreement between Buyer and Seller (relating, inter alia, to Business
locations in which Seller conducts other businesses and to the operation of
certain Business locations by Seller on behalf of Buyer pending receipt by
Buyer of certain Permits) to be executed at the Closing.
"Transition Team" shall have the meaning set forth in Section
6.10(a) (Transition Matters).
"United States" shall mean the fifty states of the United
States, but shall not include Puerto Rico or any territories.
"Waste or Contamination Site" shall mean any site or location,
wherever located (including any well, pit, pond, lagoon, impoundment, ditch,
trench, drain, landfill, warehouse or waste storage container), where
pollutants, contaminants or hazardous or toxic wastes (including medical
wastes), substances or materials used at or generated by the Business shall
have been deposited, stored, treated, reclaimed, disposed of, placed or
otherwise come to be located.
"Year-End Net Assets" shall mean the net assets of the
Business as set forth on the Year-End Net Assets Statement.
8
<PAGE> 15
"Year-End 1994 Balance Sheet" shall mean the unaudited balance
sheet of the Business dated as of December 31, 1994 and attached as part of
Schedule 0.1.
"Year-End Net Assets Statement" shall mean the unaudited
statement of the Year-End Net Assets dated as of December 31, 1994 and attached
as Schedule 0.2, which shall be the Year-End 1994 Balance Sheet as adjusted for
Excluded Assets and Excluded Liabilities.
ARTICLE 1
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES
1.1 Acquired Assets. Subject to the terms and conditions
set forth in this Agreement, at the Closing Seller shall sell, assign, transfer
and deliver to Buyer, and Buyer shall purchase, acquire and take assignment and
delivery of, all of the assets owned by Seller (wherever located) relating to,
or used in the operation of, the Business, as they shall exist on the Closing
Date, except for those assets specifically excluded in Section 1.3 (Excluded
Assets). All of the assets sold, assigned, transferred and delivered to Buyer
hereunder are referred to collectively herein as the "Acquired Assets." The
Acquired Assets include the following, as they shall exist on the Closing Date,
subject to the acquisition or disposition of such assets in the ordinary course
of business:
(a) Equipment. All of the machinery, equipment,
installations, furniture, tools, spare parts, supplies, maintenance
equipment and supplies, materials and other items of personal property
of every kind and description (other than the personal property
described in Section 1.1(b)), usually located on or at the real
property subject to the Real Property Leases, or otherwise used in the
operation of the Business, including those items described on Schedule
1.1(a) (the "Equipment");
(b) Inventories. All of the inventories of the
Business, including all raw materials, work in process and finished
goods inventories, wherever located (the "Inventories");
(c) Information and Records. All information and
records relating to, or used in the operation of, the Business,
including all patient records, referral source records, records
relating to certification by JCAHO or similar health care rating
organizations, records relating to pharmacy and nursing operations,
including training and regulatory compliance, product files, technical
information, laboratory information, research information, price
lists, marketing information, sales records, customer lists and files
(including credit and collection information) and other proprietary or
confidential records or information relating to, or used in the
operation of, the Business, together with the following papers and
records in Seller's care, custody or control or otherwise available to
them: all personnel and labor relations records, all records relating
to the disposal of medical waste, all employee benefit and
compensation records, all environmental control, monitoring and test
records, all
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maintenance and production records and all blueprints, plans, designs
and specifications of buildings, structures, fixtures and equipment
(the "Information and Records");
(d) Intellectual Property. All United States
patents, patent applications, patent licenses, trade names,
trademarks, trade name and trademark registrations (and applications
therefor), copyrights and copyright registrations (and applications
therefor), trade secrets, inventions, processes, designs, software,
know-how, formulae, outcomes data and databases, cost data and drug
testing records and information relating to, or used in the operation
of, the Business, including those items described on Schedule l.l(d)
(the "Intellectual Property");
(e) Other Assets. All assets reflected on the
Year-End Net Assets Statement and all assets acquired in the ordinary
course of the business of Business (other than those assets (i)
described in this Section 1.1 or in Section 1.2 (Assignment of
Contracts, Leases and Other Assets) below and to be acquired pursuant
to those sections or (ii) disposed of in the ordinary course of the
business of the Business since December 31, 1994), including those
items described on Schedule 1.1(e) (the "Other Assets");
(f) Intangibles. All intangible assets,
including goodwill, if any, and all intangible assets acquired from
CCA, relating to, or used in the operation of, the Business; and
(g) Accounts Receivable. All accounts
receivable, trade receivables, notes receivable and other receivables
arising out of the operation of the Business (the "Accounts
Receivable").
1.2 Assignment of Contracts, Leases and Other Assets.
Subject to the terms and conditions set forth in this Agreement, Seller will
assign and transfer to Buyer, effective as of the Closing Date, all of Seller's
right, title and interest in and to, and Buyer will take assignment of, all of
the following, as they shall exist on the Closing Date (and they shall be
deemed included in the term "Acquired Assets"), subject to the acquisition or
disposition of such assets in the ordinary course of business:
(a) Real Property Leases. Leases of real
property relating to, or used in the operation of, the Business,
including all leases identified on Schedule 4.6 (the "Real Property
Leases");
(b) Personal Property Leases. Leases of
equipment, machinery, installations, vehicles and other personal
property relating to, or used in the operation of, the Business (the
"Personal Property Leases");
(c) Provider Contracts. Purchase orders,
contracts and agreements with customers for the sale by Seller of
goods and services relating to, or used in the operation of, the
Business (the "Provider Contracts");
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(d) Other Contracts. Other contracts relating
to, or used in the operation of, the Business, including the Seller
Purchase Orders (the "Other Contracts"); and
(e) Permits. Pharmacy licenses, nursing and
nursing agency licenses, home health agency licenses, certificates of
need, medical waste disposal licenses and any other licenses, permits,
variances, interim permits, permit applications, approvals or other
authorizations, certificates, franchises and rights (federal, state or
local) issued by any Governmental Authority and used in the operation
of the Business, including those listed on Schedule 1.2(e) (the
"Permits").
1.3 Excluded Assets. Those assets of Seller that relate
to, or are used in the operation of, the Business but shall be retained by
Seller and are not being sold or assigned to Buyer hereunder are set forth on
Schedule 1.3 (the "Excluded Assets").
1.4 Assumed Obligations. At the Closing, Buyer shall
assume, and agree to pay, perform, fulfill and discharge only the:
(a) Liabilities adequately reflected or fully
reserved against in the aggregate in the Year-End Net Assets
Statement;
(b) individual Liabilities in an amount of
$10,000 or less and (i) arising in the ordinary course of business
consistent with past practice, (ii) not required, under GAAP, to be
reflected in the Year-End Net Assets Statement, and (iii) arising
from Claims other than (x) employee Claims, (y) product or service
liability Claims or (z) Claims by any Government Programs or any third
party fiscal intermediary or carrier administering a Government
Program for the receipt of any amounts previously paid to Seller by
any such Government Program or third party fiscal intermediary or
carrier;
(c) Liabilities arising after the Closing under
the Material Contracts or contracts that do not meet the materiality
standards that would require disclosure as Material Contracts; and
(d) Liabilities set forth in Article 9 (Employees
and Benefit Plans)
which are hereinafter referred to as the "Assumed Obligations".
1.5 Excluded Liabilities. Anything in this Agreement to
the contrary notwithstanding, except as specifically provided in Section 1.4
(Assumed Obligations), neither Buyer nor any of its Affiliates shall assume,
nor be deemed to have assumed, or otherwise be responsible for, any Liabilities
of Seller or its Affiliates arising out of events or occurrences happening
prior to, at or subsequent to the Closing (the "Excluded Liabilities"). The
Excluded Liabilities shall include without limitation, except as specifically
provided in Section 1.4 (Assumed Obligations), the following:
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(a) (i) Debt securities or obligations under agreements
with banks, (ii) Liabilities payable to CII or any subsidiary of CII, (iii)
pension obligations and obligations under employee health benefit plans, (iv)
reserves relating to the 1992 restructuring program, (v) cash overdrafts and
(vi) reserves relating to employees terminated as of December 31, 1994;
(b) federal, state or local income taxes (including
deferred income taxes) of Seller;
(c) employment-related Claims, including Claims alleging
wrongful discharge, discrimination or sexual harassment and Claims arising
under applicable workers compensation laws, whether such Claims are known or
unknown, threatened or pending;
(d) product or service liability Claims, whether or not
covered by insurance, whether known or unknown, threatened or pending;
(e) Claims by any Government Programs or any third party
fiscal intermediary or carrier administering a Government Program for the
receipt of any amounts previously paid to Seller by any such Government Program
or third party fiscal intermediary or carrier;
(f) any Liability relating to the OIG Investigation;
(g) any Liability resulting from or arising out of any
failure by Seller to conduct the Business in compliance with all Laws
applicable thereto; and
(h) any Liability of any kind whatsoever to Dr. Bruce A.
Margulis, including the (i) Partnership Retirement Agreement between Caremark
Inc., Physician Health Resources, Physician Care, P.C. and Bruce A. Margulis,
(ii) Non-Compete Agreement between Caremark Inc. and Bruce A. Margulis and
(iii) Employment Agreement between Caremark Inc. and Bruce A. Margulis.
ARTICLE 2
PURCHASE PRICE AND PAYMENT; NOTES
2.1 Payment of Purchase Price. Buyer shall pay to Seller
the purchase price (the "Purchase Price") as follows:
(a) On the Closing Date, Buyer shall pay Seller
$210,000,000 by wire transfer, in immediately available funds, to a
bank account of Seller designated in writing to Buyer at least three
business days prior to the Closing Date.
(b) On the Closing Date, Buyer shall issue to
Seller $75,000,000 of Convertible Notes and $25,000,000 of
Nonconvertible Notes of Buyer.
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(c) On the Closing Date, Buyer shall deliver to
Seller the executed Buyer License to Seller.
(d) Within 14 days after the Closing Date Net
Assets are finally determined in accordance with Section 2.3
(Determination of Closing Date Net Assets), Buyer or Seller shall make
the following payments, as applicable:
(i) If there is a Net Assets Deficiency:
(x) Seller shall pay to Buyer an
amount up to or equal to $5
million of such Net Assets
Deficiency, in cash, by wire
transfer of immediately
available funds;
(y) Seller shall pay to Buyer the
amount above $5 million of
such Net Assets Deficiency,
by surrendering to Buyer
Convertible Notes having a
face amount equal thereto;
provided, however, that
Seller shall have no
obligation to pay Buyer the
portion of any Net Assets
Deficiency above the sum of
(A) $15 million and (B) the
amount of any employee health
plan Liabilities as of the
Closing Date up to $3
million.
(ii) If there is a Net Assets Excess:
(x) Buyer shall pay to Seller an
amount up to or equal to $5
million of such Net Assets
Excess in cash, by wire
transfer of immediately
available funds; and
(y) Buyer shall pay to Seller the
amount above $5 million of
such Net Assets Excess, by
delivering to Seller
additional Convertible Notes
having a face amount equal
thereto; provided, however,
that Buyer shall have no
obligation to pay to Seller
the portion of any Net Assets
Excess above the sum of (A)
$15 million and (B) the
amount of any employee health
plan Liabilities as of the
Closing Date up to $3
million.
2.2 Allocation of Purchase Price. The parties hereto
agree (a) to allocate the Purchase Price, as adjusted pursuant to Section
2.1(d) (Payment of Purchase Price), in accordance with the allocation schedule
to be mutually agreed to by Buyer and Seller no later than 90 days after the
Closing Date; provided, that no more than $20 million of the Purchase Price
shall be allocated to the noncompetition portion of this Agreement; provided,
further,
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that no more than $7.5 million shall be allocated to inventory and fixed
assets, in the aggregate, (b) to treat and report the transactions contemplated
by this Agreement in all respects consistently for purposes of any Taxes, and
(c) not to take any action inconsistent with this Section 2.2. Any adjustment
to the Purchase Price shall be allocated by Buyer and Seller in accordance with
the rules set forth in Temp. Treas. Reg. Section 1.1060-1T(f).
2.3 Determination of Closing Date Net Assets. In order
to confirm the Closing Date Net Assets, Seller will cause the Closing Date Net
Assets Statement to be prepared in a manner consistent with the Year-End Net
Assets Statement, as promptly as practicable after the Closing Date, but in any
event within 30 days after the Closing Date; provided that if the Closing Date
does not occur at the end of a fiscal month of Seller, for purposes of
preparing the Closing Date Net Assets Statement, Buyer and Seller shall agree
on a method of prorating revenues and expenses of Seller for the fiscal month
in which the Closing occurs. The Closing Date Net Assets Statement, shall be
audited by Price Waterhouse, Seller's independent public accountants. As soon
as practicable, but within 60 days after receipt of the Closing Date Net Assets
Statement, Price Waterhouse will issue a preliminary opinion on the Closing
Date Net Assets Statement.
Buyer and its independent public accountants, Ernst & Young,
shall be entitled to review Price Waterhouse's workpapers at the completion of
the Closing Date audit. Price Waterhouse shall make its Closing Date audit
workpapers and its preliminary opinion with respect thereto available to Buyer
and Ernst & Young as soon as practicable. Within 60 days after the receipt by
Buyer and Ernst & Young of the last of Price Waterhouse's workpapers and its
preliminary opinion, Buyer and Ernst & Young may propose any adjustments
thereto which Buyer deems to be appropriate. Ernst & Young and Price
Waterhouse shall work together to resolve promptly any proposed adjustments
and, upon resolution of any such adjustments, Price Waterhouse shall issue a
final opinion on the Closing Date Net Assets Statement.
In the event that any disagreement between Ernst & Young and
Price Waterhouse is not resolved by agreement between Buyer and Seller within
30 days after the adjustments are proposed, a firm of independent public
accountants mutually acceptable to Buyer and Seller (the "Referee"), will be
promptly engaged to render within 30 days after the date of such engagement an
opinion regarding the issue or issues in dispute and such opinion shall be
binding on the parties hereto.
Seller shall pay the fees and expenses of Price Waterhouse,
and Buyer shall pay the fees and expenses of Ernst & Young, incurred in
connection with this Section 2.3. Seller and Buyer shall each pay one-half of
the fees and expenses of the Referee.
2.4 Procedures for Acquired Assets Not Transferable.
Notwithstanding any provision of this Agreement to the contrary, this Agreement
shall not constitute an agreement to assign any Acquired Asset or any Claim,
right or benefit arising thereunder or resulting therefrom if any attempted
assignment thereof, without the consent of a third party, would constitute a
breach or other contravention thereof or a violation of Law with respect to any
such Acquired Asset or Claim, right or benefit. Seller and Buyer shall comply
with the
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covenants set forth in Section 6.2 (Consents to Transfer Material Contracts and
Material Permits) with respect to obtaining such consents. If any such consent
is not obtained, Seller will take all practicable action necessary to ensure
that Buyer will obtain the Claims, rights and benefits of Seller arising under,
or resulting from, any such Acquired Asset and, as among the parties hereto,
Buyer shall assume all obligations that would otherwise have been Assumed
Obligations of Seller had the related Acquired Assets been transferred in
accordance with this Agreement. Seller will promptly pay to Buyer when
received all monies received by Seller under any Acquired Asset not transferred
in accordance with this Section 2.4.
2.5 Reimbursement. If, after the Closing Date, (i)
Seller receives any payment in respect of any Acquired Assets, Seller shall
promptly pay such amounts to Buyer or (ii) Buyer makes any payment in respect
of any Excluded Liabilities, Seller shall reimburse Buyer promptly after Seller
receives satisfactory evidence of any such payment. Buyer agrees not to make
any payment in respect of Excluded Liabilities except uncontested obligations
in the ordinary course of business.
ARTICLE 3
FINANCING
3.1 Bank and Subordinated Debt Financing. The cash
portion of the Purchase Price will be funded by Buyer with a portion of the
proceeds of (i) approximately $300 million of senior bank debt (the "Senior
Bank Financing") and (ii) approximately $150 million of privately placed
subordinated debt (the "Subordinated Debt Financing").
3.2 Bridge Financing for Subordinated Debt. If Buyer
provides written notice to Seller that, in the judgment of the Placement Agent
such agent is or will be unable to complete the Subordinated Debt Financing on
substantially the terms proposed and in the full amount proposed, Seller may,
in its sole discretion, provide bridge financing by purchasing up to $100
million principal amount of the securities to be issued in the Subordinated
Debt Financing, on the same terms and conditions offered or proposed to be
offered to third party investors (the "Bridge Financing"). If Seller exercises
such option, the cash portion of the Purchase Price set forth in Section 2.1(a)
(Payment of Purchase Price) will be increased by an amount equal to 2% of the
amount of the Bridge Financing. After the first six months, the interest rate
on the Bridge Financing will increase prospectively by 1/2 of 1% every six
months so long as the Bridge Financing is outstanding, up to a maximum 3%
increase. Buyer agrees that if Seller exercises its option to provide the
Bridge Financing, Buyer will apply as great a portion of the proceeds of the
Senior Bank Financing as is necessary, when combined with the Subordinated Debt
Financing, to total $110 million.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Due Incorporation, etc. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California, with corporate power and authority to own, lease and operate its
properties and to carry on the Business as it is now being conducted. Seller
is qualified to do business as a foreign corporation in each jurisdiction where
such qualification is necessary to conduct the Business, except where any
failure or failures to be so qualified, in the aggregate, would not have, and
could not reasonably be expected to have, a Material Adverse Effect.
4.2 Due Authorization, etc.
(a) Corporation Authorization. Seller has full
corporate power and authority to enter into this Agreement and the
Additional Agreements to which it is a party and to perform its
obligations hereunder and thereunder. This Agreement has been, and
the Additional Agreements to which Seller is a party will be, duly
authorized, executed and delivered by Seller, and constitute the valid
and binding obligations of Seller, enforceable in accordance with
their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect that affect creditors'
rights, and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding at law or in
equity).
(b) No Violation. The execution and delivery of
this Agreement does not, and the performance of its obligations
hereunder by Seller will not (assuming compliance with applicable
requirements of the HSR Act, the Exchange Act, any Law with respect to
the transfer of Permits and any New York Law with respect to the
transfer of the Acquired Assets), (i) violate any Law, (ii) violate
any decree or judgment of any court or Governmental Authority binding
on Seller, any of the Acquired Assets or the Business, or (iii)
violate or conflict with any provision of the certificate of
incorporation or by-laws of Seller.
4.3 Permits. Seller holds all of the Permits described
on Schedule 1.2(e). To the knowledge of Seller (and excluding any state
license requirements of the State of New York), the Permits held by Seller
include all Permits that are currently necessary for the operation of the
Business as presently conducted in accordance with all applicable Laws, and no
other Permits are currently necessary for the operation of the Business as
presently conducted in accordance with all applicable Laws, except for any
failure to hold any of the foregoing that does not have, and could not
reasonably be expected to have, a Material Adverse Effect (the "Material
Permits"). Seller is in compliance in all material respects with all material
conditions or requirements of the Material Permits.
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4.4 Financial Statements. Seller has delivered to Buyer
true, correct and complete copies of the Financial Statements, which are
attached as Schedule 0.1. The Financial Statements present fairly in all
material respects the financial position of the Business and the results of its
operations as of their respective dates and for the years then ended, in
conformity with GAAP and the past accounting practices of Seller, consistently
applied (except as set forth on Schedule 4.4), and the Financial Statements
make full and adequate provision for all material Liabilities of Seller related
to the Business as of the dates thereof, to the extent required by GAAP.
4.5 No Undisclosed Material Adverse Change.
(a) Relating to the Business, etc. Except as set
forth on Schedule 4.5(a), since December 31, 1994 there has not been
any Material Adverse Effect or any other event or condition that could
reasonably be expected to result in a Material Adverse Effect (other
than as a result of changes in conditions, including economic or
political developments, applicable to the business of health care
generally or the business of home infusion therapy generally and not
having a disproportionate effect on the Business relative to the
effect of any such change on other entities in the business of home
infusion therapy); provided, however, that none of the following shall
be deemed to be a Material Adverse Effect: (i) any restriction or
restrictions imposed by a Governmental Authority on the conduct of the
Business by Seller, whether as a result of the settlement of pending
litigation or otherwise; provided that such restriction or
restrictions do not affect the continued operation of the Business by
Buyer in whole or in part, (ii) any restriction or restrictions
imposed by a Governmental Authority on the conduct of certain
employees of Seller; provided that such employees are not officers or
Key Employees, whether as a result of the settlement of pending
litigation or otherwise, or (iii) any negative developments in the OIG
Investigation that have not resulted in the imposition of any control,
restriction or restrictions by a Governmental Authority on the
operation of the Business by Buyer, (iv) any periodic audits by payors
as provided for by contract or routine payor audits under applicable
Law or (v) any adverse publicity with respect to matters relating to
the OIG Investigation or other business practices relating to the
Business.
(b) Relating to the Acquired Assets. Except as
set forth on Schedule 4.5(b), since December 31, 1994, Seller has not
taken any action described in Section 6.3(b) (Ordinary Course).
Except as set forth on Schedule 4.5(b), there has not been, since
December 31, 1994, (i) any resignation or threatened resignation of
any officer or Key Employee, (ii) a loss of a material order or
contract cancellation by any customer of the Business (in each case in
an amount in excess of $100,000), or (iii) (other than pursuant to the
expiration of a contract by its terms) the giving of notice by any
present material customer of the Business of any intention to cancel
or otherwise terminate a material business relationship with Seller.
4.6 Real Property Leases. Schedule 4.6 lists all leases
pursuant to which Seller holds any real property relating to, or used in the
operation of, the Business other than real property that, individually or in
the aggregate, is not material to the operation of
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the Business. Except as disclosed on Schedule 4.6, the buildings, facilities,
installations, fixtures and other structures or improvements located on or at
the real property subject to the Real Property Leases are in good operating
condition and repair (with the exception of normal wear and tear), free, to the
knowledge of Seller, from defects other than such defects as do not interfere
in any material respect with the continued use therefor in the operation of the
Business. The activities carried on in such buildings, facilities,
installations, fixtures and other structures or improvements, and the
buildings, facilities, installations, fixtures and other structures or
improvements themselves, are not in violation of or in conflict with any
applicable material zoning or OSHA regulation or similar Law, except for any
violation or conflict that has not had, and may not reasonably be expected to
have, a Material Adverse Effect. Seller owns no real property that is an
Acquired Asset.
4.7 Title. Except as set forth on Schedule 4.7, Seller
has good and marketable title to, and has the right to sell, convey, transfer,
assign and deliver the Acquired Assets free and clear of any Liens, other than
those that, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect. At and as of the Closing and subject to the
terms and conditions of this Agreement, Seller will convey the Acquired Assets
to Buyer by deeds, bills of sale, certificates of title and instruments of
assignment and transfer effective to vest in Buyer good and marketable title to
all of the Acquired Assets, free and clear of all Liens other than Liens that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect and Liens disclosed on Schedule 4.7.
4.8 Equipment and Personal Property Leases. Except as
disclosed in Schedule 4.8, all of the Equipment and all of the personal
property leased by Seller under the Personal Property Leases is in good
operating condition and repair (with the exception of normal wear and tear),
fit for the continued use thereof in the operation of the Business.
4.9 Intellectual Property. Schedule 1.1(d) is an
accurate and complete list of all material Intellectual Property. Except as
set forth in Schedule 4.9, all of the Intellectual Property is owned by Seller
free and clear of all Liens (except for any Lien that has not had, and could
not reasonably be expected to have, a Material Adverse Effect) or has been duly
licensed for use by Seller. Except as set forth on Schedule 4.9, none of the
Intellectual Property is the subject of any pending adverse claim, or, to the
knowledge of Seller, any threatened litigation or claim of infringement, except
for any of the foregoing that does not and could not reasonably be expected to
have a Material Adverse Effect. To the knowledge of Seller, the operation of
the Business does not infringe any trademark, trade name, copyright or patent,
and, except as set forth on Schedule 4.9, Seller has not received any notice
contesting its right to use any Intellectual Property, except for any of the
foregoing that does not and could not reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 4.9, Seller has not granted
any license in respect of any Intellectual Property. To the knowledge of
Seller, Seller owns or possesses adequate rights in and to all Intellectual
Property reasonably necessary to conduct the Business as presently conducted.
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4.10 Material Contracts. Schedule 4.10 lists each
contract, agreement or instrument relating to, or used in the operation of, the
Business, or to which any of the Acquired Assets is subject, of the following
types:
(a) any material Real Property Lease;
(b) any material Provider Contract;
(c) any material Seller Purchase Order;
(d) any contract with an Affiliate or any
officer, director, or stockholder of Seller;
(e) any interest in a partnership or joint
venture;
(f) any contract containing restrictions on the
geographical area of, or other scope of operation of, the Business;
(g) any power of attorney or agency agreement
pursuant to which any party is granted the authority to act for or on
behalf of Seller (except as might be deemed to exist pursuant to
immaterial payor contracts);
(h) any material payor contract;
(i) any material contract with a nursing agency;
(j) any material contract relating to patient
education and clinical management;
(k) any HCMS Business payor or provider contract
or subcontract;
(l) any material contract relating to pharmacy
compounding;
(m) any contract that requires an annual payment
by Seller in excess of $200,000 or any contract that requires an
annual payment to Seller in excess of $1 million; and
(n) any other contract outside the ordinary
course of business that is material to the Business.
The contracts and agreements that are required to be
identified in Schedule 4.10 pursuant to subsections (a) through (n) above are
hereinafter referred to as the "Material Contracts." Except as set forth in
Schedule 4.10, (i) Seller is not a party to any contracts with physicians or
physician groups, (ii) each of the Material Contracts is a valid, binding and
enforceable agreement of Seller and, to the knowledge of Seller, the other
parties thereto, and (iii) as of the date hereof, Seller has no reason to
believe that it will not be able
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to fulfill in all material respects all of its obligations under the Material
Contracts that remain to be performed after the date hereof and prior to the
Closing Date.
4.11 Employee Benefit Plans.
(a) Except as set forth on Schedule 4.11, Seller
does not maintain, participate in or contribute to any of the
following for the benefit of employees of the Business:
(i) any "employee benefit plan" (as
defined in Section 3(3) of ERISA);
(ii) any retirement or deferred
compensation plan, incentive
compensation plan, stock plan,
vacation pay, severance pay, bonus
or benefit arrangement, insurance or
hospitalization program or any other
fringe benefit arrangements that do
not constitute employee benefit
plans; or
(iii) any employment contract not
terminable upon 30 days' or less
written notice without further
liability.
(collectively, the "Employee Benefit Plans").
(b) To Seller's knowledge:
(i) all Employee Benefit Plans comply in
all material respects with
applicable Laws and no notice has
been issued by any Governmental
Authority questioning or challenging
such compliance;
(ii) Seller has not engaged in a
prohibited transaction (as defined
in section 406 of ERISA or section
4975 of the Code) with respect to
any Employee Benefit Plan;
(iii) there are no pending Claims (other
than routine Claims for benefits)
involving any Employee Benefit Plan
or the assets thereof;
(iv) no Employee Benefit Plan is a
"multiemployer plan" (within the
meaning of section 3(37) of ERISA);
and
(v) the only Employee Benefit Plan that
is subject to title IV of ERISA is
the Caremark International Inc.
Pension Plan and, with respect to
that plan;
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(1) there has been no reportable
event (as described in
section 4043 of ERISA) for
which the notice requirements
have not been waived; and
(2) no steps have been taken to
terminate the plan.
4.12 Compliance Material Contracts. Except as set forth
on Schedule 4.12, Seller has not breached any provision of, nor is it in
default under the terms of, any Material Contract, which breach or default has,
or could reasonably be expected to have, a Material Adverse Effect, and, to the
knowledge of Seller, no other party to any Material Contract is in default
thereunder in any material respect.
4.13 Certain Environmental Matters. Except as disclosed
on Schedule 4.13, or except as has not had, and could not reasonably be
expected to have, a Material Adverse Effect: (a) the operations of the Business
do not violate and have not violated any applicable Environmental Law in effect
as of the date hereof, (b) Seller has not used, treated, stored, disposed of or
released any pollutants, contaminants or hazardous or toxic wastes (including
medical wastes), substances or materials on or at any of the properties subject
to the Real Property Leases or any property adjacent thereto, except for
inventories of chemicals that are to be used in the ordinary course of business
of Seller (which inventories have been stored or used in accordance with all
applicable Environmental Permits and all Environmental Laws) and storage of
medical waste prior to disposal (which waste has been stored in accordance with
all Environmental Laws), (c) neither Seller nor any of its Affiliates have
received any notice from any Governmental Authority or private entity advising
it that any of the properties subject to the Real Property Leases or the
operation thereof is in violation of any Environmental Law or any applicable
Environmental Permit or that it is responsible (or potentially responsible) for
the cleanup of any pollutants, contaminants or hazardous or toxic wastes,
substances or materials at, on or beneath any of the properties subject to the
Real Property Leases or at, on or beneath any land adjacent thereto or in
connection with any Waste or Contamination Site and (d) neither the Business
nor the operation thereof are the subject of federal, state, local or private
litigation or, to the knowledge of Seller, proceedings involving a demand for
damages or other potential liability with respect to violations of
Environmental Laws.
4.14 Litigation and Judgments. Except as disclosed on
Schedule 4.14, (a) there are no Claims pending or, to the knowledge of Seller,
threatened, against Seller and affecting the Business, any officers, directors
or employees of Seller in their capacity as such or relating to the
transactions contemplated by this Agreement, other than Claims that,
individually or in the aggregate, do not have, and could not be reasonably
expected to have, a Material Adverse Effect, and (b) Seller is not subject to
any order, judgment, decree or stipulation of or with any Governmental
Authority that has, or could reasonably be expected to have, a Material Adverse
Effect.
4.15 Insurance Policies. Seller maintains paid up
insurance, including employee health and accident insurance, property, general
liability, product liability and worker's compensation insurance, as described
on Schedule 4.15, and is not in material
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default under any such policies. Schedule 4.15 lists each insurance policy
currently providing coverage for the Acquired Assets or the Business.
4.16 Condition of Assets. Except as disclosed on Schedule
4.16, the Acquired Assets (other than the assets whose condition is described
in Sections 4.6 (Real Property Leases) or 4.8 (Equipment and Personal Property
Leases)), whether real or personal, owned or leased, have been well maintained
and are in operating condition (with the exception of normal wear and tear)
sufficient for the operation of the Business in accordance with past practices.
The Acquired Assets and the Excluded Assets constitute all of the assets and
properties required for the operation of the Business as it is presently
operated by Seller in all material respects.
4.17 Inventories. Subject to any reserve therefor
included in the Year-End Net Assets Statement or the Closing Date Net Assets
Statement, all inventories of Seller (including inventory ordered but not yet
received) constituting Acquired Assets consist of items of a quality usable or
saleable in the normal course of the Business consistent with past practices
and are in quantities sufficient for the normal operation of the Business in
accordance with past practices. The inventories at December 31, 1994 are
fairly reflected in the inventory accounts on the Year-End Net Assets
Statement and are valued at the lower of cost or market.
4.18 Accounts Receivable. All Accounts Receivable of
Seller constituting Acquired Assets have arisen out of bona fide transactions
in the ordinary course of business and, to the knowledge of Seller, such
Accounts Receivable are (except to the extent of the reserves thereon as set
forth in the Year-End Net Assets Statement and the Closing Net Assets
Statement) collectible in the ordinary course of business. The values at which
such Accounts Receivable are carried on the books and records of Seller reflect
the receivables valuation policy of Seller which is consistent with its past
practice and in accordance with GAAP.
4.19 Capital Improvements. Other than as described in
Schedule 4.19, Seller is not aware of any capital improvements or purchases or
other capital expenditures (as determined in accordance with GAAP) relating to
the Business in excess of $500,000 that Seller has committed to or contracted
for which have not been completed prior to the date hereof.
4.20 No Undisclosed Liabilities. Except as set forth in
Schedule 4.20, Seller does not have, and as of the Closing Date will not have,
any Liabilities related to the Business except (i) Liabilities that are
adequately reflected or fully reserved against in accordance with GAAP in the
Year-End 1994 Balance Sheet, (ii) Liabilities which have been incurred in the
ordinary course of business and consistent with past practice through December
31, 1994 but are not required, under GAAP, to be reflected in the Year-End 1994
Balance Sheet, (iii) Liabilities which have been incurred in the ordinary
course of business and consistent with past practice since December 31, 1994,
(iv) Liabilities (including those under Material Contracts) disclosed in the
Schedules hereto and (v) Liabilities arising under contracts or other
agreements that are not Material Contracts.
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4.21 Governmental Consents. Except as set forth in
Schedule 4.21 or as may be required for the transfer of Permits, no notice to,
filing with, authorization of, exemption by or consent of any Governmental
Authority is required in order for Seller to consummate the transactions
contemplated hereby, except for any notice or filing, the failure of which to
be given or made, and any authorization, exemption or consent, the failure of
which to be obtained, could not reasonably be expected to have a Material
Adverse Effect.
4.22 Subsidiaries. Except as set forth on Schedule 4.22,
Seller does not have a greater than 50% interest in, directly or indirectly,
any corporation that is used in the Business (each, a "Subsidiary" and,
collectively, the "Subsidiaries"). Each of the Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Subsidiaries is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect.
Each of the Subsidiaries has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Seller has delivered to the Buyer correct and complete copies of
the Certificate or Articles of Incorporation and bylaws of each of the
Subsidiaries (as amended to date). All of the issued and outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and are
validly issued, fully paid and nonassessable. Seller holds of record and owns
beneficially all of the outstanding shares of each of the Subsidiaries, free
and clear (except as set forth on Schedule 4.22) of any Liens. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Seller to sell, transfer, or otherwise dispose of any
rights, or other contracts or commitments that could require Seller to sell,
transfer, or otherwise dispose of any capital stock of any of the Subsidiaries
or that could require any of the Subsidiaries to issue, sell, or otherwise
cause to become outstanding any of their own capital stock (other than this
Agreement). There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any of the Subsidiaries.
4.23 Partnerships. Except as set forth on Schedule 4.23,
Seller does not control, directly or indirectly, any partnership joint venture,
business, trust or other entity (other than a corporate Subsidiary described in
Section 4.22 (Subsidiaries)) that is used in the Business (a "Partnership").
Each Partnership is duly organized in the jurisdiction of its organization and
has the partnership power and authority to carry or the businesses in which it
is engaged and to own and use the properties owned and used by it. Seller has
delivered to Buyer correct and complete copies of the organizational documents
of each Partnership.
4.24 Representations Complete. None of the
representations and warranties made by Seller herein, nor any statement made in
any Exhibit, Schedule or certificate furnished pursuant to this Agreement,
contains any untrue statement of a material fact, or omits to state any
material fact required to be stated therein, or necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
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4.25 Taxes. Seller has duly and timely filed all material
Tax Returns required to be filed by it and has paid all Taxes disclosed on such
returns. Such material Tax Returns accurately reflect all material liability
for taxes of Seller for the periods covered thereby. All deposits required by
law to be made by Seller with respect to employees' withholding taxes have been
made except for those that have not had, and could not be reasonably expected
to have, a Material Adverse Effect. There are no tax liens on any Acquired
Assets, except liens for Taxes not yet due except for those that have not had,
and could not reasonably be expect to have, a Material Adverse Effect.
4.26 Compliance with Law. (i) The Business has been and
is being conducted in compliance with all Laws and (ii) the Material Contracts
comply with all Laws, except, in the case of clause (i) and clause (ii), where
the failure to be so in compliance could not reasonably be expected to have a
Material Adverse Effect; provided, however, that no representation is made with
respect to the OIG Investigation or any investigations, allegations or actions
by any other Governmental Authority arising out of or connected with the OIG
Investigation.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Due Incorporation, etc. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Buyer is
qualified to do business as a foreign corporation in each jurisdiction where
such qualification is necessary to conduct the Business, except where any
failure or failures to be so qualified would not, in the aggregate, have a
Material Adverse Effect.
5.2 Corporate Authority.
(a) Due Authorization. Buyer has corporate power
and authority to enter into this Agreement and the Additional
Agreements to which it is a party and to perform its obligations
hereunder and thereunder. This Agreement has been, and the Additional
Agreements to which Buyer is a party will be, duly executed and
delivered by Buyer and constitute the valid and binding obligations of
Buyer, enforceable in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws from time to time in effect
that affect creditors' rights, and by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding at law or in equity).
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(b) Certificate of Incorporation, By-Laws, etc.
The execution and delivery of this Agreement does not, and the
performance of its obligations hereunder by Buyer will not, violate
any provisions of the Certificate of Incorporation or by-laws of Buyer
or violate any provision of or result in the creation of any Lien
under, any agreement, indenture, instrument, lease, security,
mortgage, lien, order, arbitration award, judgment or decree to which
Buyer is a party or by which it or any of its properties is bound.
5.3 Buyer Consents. Except as set forth on Schedule 5.3,
no notice to, filing with, authorization of, exemption by, or consent of, any
person, entity, or Governmental Authority is required in order for Buyer to
consummate the transactions contemplated hereby.
ARTICLE 6
PRE-CLOSING COVENANTS
6.1 Access to Information. As coordinated by the
Transition Team, Seller shall give Buyer's representatives access, during
normal business hours and without unreasonable interference with business
operations, to all of the information, facilities, properties, books,
contracts, commitments and records of Seller and shall make Seller's officers
and employees available to such representatives as Buyer shall from time to
time reasonably request; provided, however, that Seller may withhold access to
the identity of key customers and other sensitive information of Seller not
relevant to establishing the value of the Business.
6.2 Consents to Transfer Material Contracts and Material
Permits. As soon as practicable, Seller shall provide Buyer with a schedule of
all contracts for which the failure to obtain consent of a third party for the
transfer thereof to Buyer would have a Material Adverse Effect and Material
Permits that will require the consent of third parties for the transfer thereof
to Buyer. Seller and Buyer will use their respective best efforts to arrange
meetings between appropriate representatives of Seller and Buyer and any
parties to any contract where such consent is required and otherwise to obtain
such consents. Seller and Buyer will use their respective best efforts to
obtain all required consents and approvals to assign and transfer the Material
Permits to Buyer at Closing, to the extent that such Material Permits are
transferable.
6.3 Ordinary Course.
(a) Seller shall use its best efforts to:
(i) operate the Business only in its
usual, regular and ordinary course and manner;
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(ii) retain all key contracts of the
Business;
(iii) retain the Key Employees of the
Business; and
(iv) observe and perform, and remain in
compliance with, its obligations under the Material Contracts
and any other obligations the breach or violation of which
would have, individually or in the aggregate, a Material
Adverse Effect.
Seller shall maintain its books, accounts and records in its usual, regular and
ordinary manner, and on a basis consistent with the Financial Statements.
(b) Without limiting the generality of the
foregoing, Seller shall not, and shall not agree to, without Buyer's prior
written consent:
(i) enter into any agreements or
contracts that would require payments by Seller of more than
$200,000 over any period of twelve (12) months (other than in
settlement of litigation for cash) or impose material
restrictions that would affect the continued operation of the
Business by Buyer in whole or in part;
(ii) amend or terminate any Material
Contract or Material Permit, other than in the ordinary course
of business;
(iii) increase the compensation payable or
to become payable to any of Seller's officers, employees or
agents employed by the Business, other than in the ordinary
course of business;
(iv) except as set forth on Schedule
4.11, enter into any employment contract or agreement with any
existing or prospective employee of the Business that is not
terminable at will;
(v) except as set forth on Schedule 4.7,
create or suffer to be imposed any Lien on any of the Acquired
Assets;
(vi) sell or transfer any of the Acquired
Assets, other than in the ordinary course of business;
(vii) change its accounting systems,
accounting policies or accounting practices;
(viii) waive any rights relating to the
Business that have any value, other than in the ordinary
course of business;
(ix) enter into any transactions relating
to the Business with any of its Affiliates, other than in the
ordinary course of business;
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(x) terminate or threaten to terminate
the employment of any officer or Key Employee; or
(xi) take any action, or omit to take any
actions, within its control, that would cause any of the
representations and warranties set forth in Article 4
(Representations and Warranties of Seller) to become untrue in
any material respect as of or prior to the Closing Date.
(c) Seller shall use all commercially reasonable
efforts to (i) preserve the present business organization and personnel of the
Business, and (ii) preserve the present goodwill and advantageous relationships
of Seller with respect to the Business.
6.4 HSR Filings. Buyer and Seller shall make all
filings, applications, statements and reports to all Governmental Authorities
that are required to be made prior to the Closing Date in connection with the
HSR Act and shall use their respective best efforts to obtain all necessary
governmental approvals.
6.5 Updated Financial Statements. Seller shall prepare
audited financial statements of the Business as of and for the years ended
December 31, 1992, 1993 and 1994. Such updated financial statements shall be
prepared in accordance with GAAP, shall be certified by the Chief Financial
Officer of Seller and shall be provided to Buyer as soon as practicable, but in
no event later than 55 days after the Closing Date.
6.6 Financing. In the event that Buyer is unable to
obtain the Senior Bank Financing described in Article 3 (Financing), Buyer will
use its best efforts to obtain alternate financing on substantially similar
terms from comparable lenders.
6.7 Notice of Certain Events. Buyer and Seller shall
promptly notify the other party of:
(a) any notice or other communication from any
Governmental Authority, person or entity alleging that the consent of
such person or entity is required in connection with the transactions
contemplated by this Agreement; and
(b) any Claim commenced or, to such party's
knowledge, threatened, relating to the consummation of the
transactions contemplated by this Agreement.
6.8 Other Discussions. Seller and its Affiliates and
each of their respective officers, directors, employees, representatives and
agents will not solicit or (subject to their fiduciary duties) negotiate any
offers, by or with any entity, directly or indirectly, other than Buyer,
regarding the sale or transfer of any of the Acquired Assets; provided,
however, that any activity described in this Section 6.8 shall be permitted
that is otherwise subject to, and consistent with, this Agreement.
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6.9 Additional Agreements. The parties will negotiate in
good faith in order to attempt to agree on the terms of each Additional
Agreement at or before the Closing.
6.10 Transition Matters.
(a) Transition Team. Buyer and Seller will form
a transition team (the "Transition Team") headed by their respective chief
operating officers to create a plan to transition the Business and to resolve
operating issues as they arise from the date hereof to the Closing.
(b) Transition Assistance of Seller and CII.
Except as approved by the Transition Team, from the date hereof, Seller and CII
will not take any action that is designed, intended or could reasonably be
expected to have the effect of discouraging material customers, suppliers,
lessors and other business associates from maintaining their business
relationships with Buyer after the Closing Date.
(c) Transition Assistance of Buyer. Except as
approved by the Transition Team, from the date hereof, Buyer and its Affiliates
will not take any action that is designed, intended or could reasonably be
expected to have the effect of discouraging material customers, suppliers,
lessors and other business associates from maintaining their business
relationship with Seller from the date hereof until the Closing, nor will Buyer
or its Affiliate take any action that is designed, intended or could reasonably
be expected to cause the resignation or termination of any employee of Seller
or CII prior to the Closing.
6.11 Bank Financing. Buyer will not willfully and
intentionally cause a condition to the obligations of Buyer's senior bank
lenders (the "Senior Bank Lenders") or the Placement Agent not to be met, the
satisfaction of which is under its control.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are, at the
option of Buyer, subject to satisfaction of the following conditions on or
before the Closing Date:
7.1 Warranties True. The representations and warranties
of Seller contained herein shall have been true in all respects on and as of
the date hereof.
7.2 Expiration of HSR Waiting Period. The waiting period
under the HSR Act shall have expired or been earlier terminated without action
by the Justice Department or the Federal Trade Commission to prevent
consummation of the transactions contemplated by this Agreement.
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7.3 Opinions of Counsel. Buyer shall have received
opinions, dated as of the Closing Date, of Thomas R. Schuman, General Counsel
to Seller and CII, and Latham & Watkins, special counsel to Seller and CII, to
the cumulative effect set forth on Exhibit 7.3.
7.4 No Actions or Proceedings to Restrain Transaction.
No Governmental Authority shall have issued any order restraining or
prohibiting the consummation of the transactions contemplated by this
Agreement.
7.5 Bank Financing. A definitive agreement shall have
been executed by Buyer and the Senior Bank Lenders with respect to the Senior
Bank Financing and such lenders shall be prepared to fund simultaneously with
the Closing.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF SELLER AND CII
The obligations of Seller and CII under this Agreement are, at
the option of Seller and CII, subject to the satisfaction of the following
conditions on or before the Closing Date:
8.1 Warranties True. The representations and warranties
of Buyer contained herein shall have been true in all respects on and as of the
date hereof.
8.2 Expiration of HSR Waiting Period. The waiting period
under the HSR Act shall have expired or been earlier terminated without action
by the Justice Department or the Federal Trade Commission to prevent
consummation of the transactions contemplated by this Agreement.
8.3 Opinion of Counsel. Seller shall have received an
opinion, dated as of the Closing Date, of Brobeck, Phleger & Harrison, special
counsel to Buyer, to the effect set forth on Exhibit 8.3.
8.4 No Actions or Proceedings to Restrain Transaction.
No Governmental Authority shall have issued any order restraining or
prohibiting the consummation of the transactions contemplated by this
Agreement.
ARTICLE 9
EMPLOYEES AND BENEFIT PLANS
9.1 Employees. As of the Closing Date, Buyer shall offer
to hire (i) each of the employees then employed by Seller in connection with
the Business (whether or not then actively at work), other than such employees
as agreed upon in writing by Buyer and
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Seller, and (ii) accounts payable personnel dedicated to accounts payable of
the Business in a number no greater than twenty, on terms and conditions (other
than employee benefits) that in the aggregate are substantially comparable in
material respects to those provided to such employees immediately prior to the
Closing Date. Each such employee who accepts Buyer's offer of employment shall
be referred to herein as a "Continuing Employee". Notwithstanding the
foregoing, employees of Seller receiving long-term disability benefits as of
the Closing Date (and their dependents) shall remain the responsibility of
Seller.
9.2 Employee Benefit Plans.
(a) Effective as of the Closing Date, Buyer shall
cause a defined contribution plan (within the meaning of section 3(34) of
ERISA) maintained by Buyer which is designed to be qualified under section
401(a) of the Code (the "Buyer's Savings Plan") to accept direct transfers (of
the type referred to in Code Section 401(a)(31)) from Seller's 401 CARE Plan
and Seller's Savings Plan.
(b) Effective as of the Closing Date, all
Continuing Employees (and, to the extent applicable, their respective
dependents) shall cease participation in the Employee Benefit Plans, except as
specifically provided by the terms of such plans or as required by law, and for
periods on and after the Closing Date, shall be eligible to participate in
employee benefit plans, arrangements, programs and policies maintained by Buyer
(collectively referred to herein as "Buyer's Plans") which shall provide
benefits (other than stock based or related benefits or severance benefits) to
Continuing Employees (and, to the extent applicable, their dependents and
beneficiaries) which, in the aggregate, are substantially comparable in all
material respects to the benefits provided to Buyer's other employees in
comparable positions. Buyer shall cause its "group health plans," as defined
in section 5000(b) of the Code, which cover any of Continuing Employees or in
which Continuing Employees (and their dependents) are eligible to participate,
to waive any limitations or exclusions on pre-existing conditions, except to
the extent that such limitations or exclusions are applied as of the Closing
Date to a Continuing Employee or a dependent under the group health plans of
Seller and, to the extent applicable, Continuing Employees (and their eligible
dependents) shall be given credit for all purposes under each of Buyer's Plans
(other than benefit accrual purposes under any such plan which is an employee
pension benefit plan (as that term is defined in section 3(2) of ERISA)) for
their service with Seller, including the following purposes: eligibility for
participation, vesting, satisfying any waiting periods, evidence of
insurability requirements and determining benefits based on length of service
(such as vacation and severance). To the extent applicable, Continuing
Employees (and their eligible dependents) shall be given credit under each of
the applicable Buyer's Plans which is an employee welfare benefit plan (as that
term is defined in section 3(1) of ERISA) for amounts paid under a
corresponding Employee Benefit Plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of Buyer's
Plans. Seller shall provide to Buyer appropriate information with respect to
the service of Continuing Employees and amounts paid under the Employee Benefit
Plans to enable Buyer to properly provide credit for such service and amounts
as required pursuant to this Section 9.2(b) and Buyer shall be entitled to rely
on such information.
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(c) Seller and its Affiliates shall assume and
retain, and Buyer shall not assume or have any liability or obligation for,
under or with respect to any Employee Benefit Plan, including Claims incurred
under any Employee Benefit Plan prior to the Closing Date and all Liabilities
for retiree medical benefits, and Seller shall have no liability or obligation
for, under or with respect to any of Buyer's Plans.
(d) Notwithstanding the foregoing provisions of
this Article 9, nothing in this Agreement shall limit or restrict in any way
the rights of Buyer to modify, amend, terminate or establish employee benefit
plans or arrangements in whole or in part at any time after the Closing Date,
nor shall it require Buyer to provide any form or level of benefit to any
employee after the Closing Date; provided, however, that for a period of 180
days following the Closing Date, Buyer shall maintain for the benefit of
Continuing Employees a severance pay program that is substantially similar in
all material respects to the Caremark International Inc. Severance Plan; and
provided, further, that Buyer shall have no liability for any severance or
similar payments to any employees or group of employees scheduled to be
terminated subsequent to the Closing Date (which employees need not, in any
event, have been specifically identified prior to Closing) as a result of any
plans of Seller in effect prior to the Closing Date; and any such terminations
prior to the Closing Date will be subject to the written consent of Buyer.
ARTICLE 10
CLOSING MATTERS
10.1 Closing. The Closing shall take place at the offices
of Latham & Watkins, Sears Tower, Suite 5800, Chicago, Illinois 60606, at 10:00
AM: (i) as soon as practicable following the date on which all of the Closing
conditions set forth in Article 7 (Conditions to Obligations of Buyer) and
Article 8 (Conditions to Obligations of Seller and CII) are satisfied or
waived, or (ii) such later date to which the parties agree.
10.2 Deliveries by Seller. At the Closing, Seller and, if
applicable, CII, will deliver the following to Buyer:
(a) executed Additional Agreements;
(b) to the extent that Seller has received
consents therefor, originals of, and duly executed assignments of, all
of the following:
(i) the Real Property Leases (and, if
any such Real Property Lease or a
memorandum thereof has been
recorded, such assignment shall be
in recordable form);
(ii) the Personal Property Leases (and,
if any such Personal Property Lease
or a memorandum thereof has been
recorded, such assignment shall be
in recordable form);
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(iii) Seller Purchase Orders;
(iv) the Provider Contracts;
(v) the Other Contracts;
(c) an assignment of all contracts pursuant to
which Seller or any of its Subsidiaries subcontracts with third
parties for the provision of infusion therapy services outside the
home including in-office supply agreements, supply agreements to
hospices and nursing homes, and agreements relating to any Caremark
Connection locations;
(d) satisfactory evidence of transfer to Buyer of
all joint venture or partnership interests included in the Other
Assets to the extent transferred on or prior to the Closing Date;
(e) certificates representing the stock of all
Subsidiaries, duly endorsed for transfer, or executed stock powers
with respect thereto;
(f) copies of all consents and approvals for the
transfer of acquired Assets obtained by Seller prior to the Closing
Date;
(g) a copy of each insurance policy listed in
Schedule 4.15; and
(h) the opinion referred to in Section 7.3
(Opinions of Counsel).
10.3 Deliveries by Buyer. At the Closing, Buyer will
deliver the following to Seller:
(a) executed Additional Agreements;
(b) the portion of the Purchase Price payable to
Seller at the Closing pursuant to Sections 2.1(a) and (b) (Payment of
Purchase Price), including the Notes;
(c) copies of all documents pursuant to which the
Notes are issued, including indentures; and
(d) the opinion referred to in Section 8.3
(Opinion of Counsel).
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ARTICLE 11
POST-CLOSING MATTERS
11.1 Further Assurances. Upon the reasonable request of
Buyer, Seller and, if applicable, CII, will on and after the Closing Date
execute and deliver to Buyer such documents, releases, assignments and
instruments as may be required to effectuate the transfer and assignment to
Buyer of, and to vest in Buyer title to, each of the Acquired Assets and
Assumed Obligations.
11.2 Records for Tax Returns. Each party shall retain and
make available to the other party (i) such records and information (including,
with respect to Buyer, the Information and Records) as it may reasonably
require for the preparation of any Tax Return or (ii) the defense of any audit,
examination, administrative appeal or litigation of any Tax Return.
11.3 Access to Records, Information and Personnel.
(a) Information and Records. Buyer agrees to
provide Seller with access to all relevant documents and other information
(including the Information and Records) that may be needed by Seller for
purposes of responding to any audits, investigations or other proceedings by
any Governmental Authority or other person or entity or for any other
reasonable purpose (including the defense or prosecution of any Claim or any
investigation, including the OIG Investigation). Such access will be during
normal business hours, upon reasonable prior notice and without unreasonable
interference with normal business operations.
(b) Personnel. In the event that, after the
Closing Date, Seller shall require the participation of officers and employees
formerly employed by Seller to aid in the defense or prosecution of Claims or
investigations (including the OIG Investigation), and so long as there exists
no conflict of interest between the parties, Buyer shall make such officers and
employees reasonably available to Seller to participate in such defense or
prosecution; provided, that Seller shall pay all reasonable out-of-pocket
costs, charges and expenses arising from such participation.
11.4 Retention of Information and Records.
(a) Buyer agrees for a period extending five (5)
years from and after the Closing Date not to destroy or otherwise dispose of
any records (including the Information and Records) relating to the period
prior to the Closing Date. After such five (5) year period, Buyer may destroy
or otherwise dispose of such records, but only if Buyer first shall offer in
writing to surrender such records to Seller and Seller shall not agree in
writing, during the thirty (30) day period after such offer is made, to take
possession of such records. In addition, Buyer shall (i) retain all
Information and Records that might be sought by a Governmental Authority in
connection with the OIG Investigation until the termination of such
investigation, (ii) notify Seller of the initial location of such Information
and
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Records, (iii) notify Seller of any subsequent change in the location of such
Information and Records and (iv) cooperate with Seller, at Seller's expense, in
any production of documents required pursuant to the OIG Investigation.
(b) Buyer consents to the retention by Seller of
originals of Information and Records that, as of the Closing, have been
subpoenaed or produced in connection with the OIG Investigation.
11.5 Infusion Therapy Services Contract. If any
Affiliated Physician Group subcontracts with another entity to provide such
services, Seller will make available to such Affiliated Physician Group a copy
of the Infusion Therapy Services Contract, and will use its reasonable efforts,
subject to applicable law, to ensure that such Affiliated Physician Group
fairly evaluates such agreement and that such Affiliated Physician Group makes
a determination as to whether to enter into such agreement based on
considerations of service, quality and price.
11.6 Post-Closing Deliveries. After the Closing, each
party agrees to promptly deliver to the other party any and all monies, checks,
instruments, invoices, bills, receipts, notices, mail and other written
communications received by it but addressed or directed toward or, with respect
to payments, due to the other party.
11.7 Post-Closing Inquiries. After the Closing, Seller
and CII will refer all customer inquiries relating to the Business to Buyer.
ARTICLE 12
TERMINATION
12.1 Termination. This Agreement may be terminated at any
time on or prior to the Closing Date:
(a) With the mutual written consent of Seller,
CII and Buyer; or
(b) By Seller and CII or Buyer, if the Closing
shall not have taken place on or before June 30, 1995, or such later
date as may be mutually approved in writing by Buyer and Seller and
CII.
12.2 Effect of Termination. If this Agreement is
terminated as permitted by Section 12.1 (Termination), termination shall be
without liability of any party (or any stockholder, director, officer,
employee, agent, consultant or representative of such party) to the other party
to this Agreement. The provisions of Section 17.1 (Expenses), Article 15
(Confidentiality), Section 17.3 (Brokers), Section 17.8 (Applicable Law),
Section 17.10 (No Third Party Beneficiaries) and Section 17.11 (Publicity)
shall survive any termination hereof pursuant to Section 12.1 (Termination).
If this Agreement is terminated as permitted by Section 12.1 (Termination), all
Confidential Information shall be returned to the Disclosing
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Party, together with any and all copies made thereof, upon request for such
return by it (except for documents submitted to a Governmental Authority with
the consent of the Disclosing Party or upon subpoena and that cannot be
retrieved with reasonable effort), and, in the case of (i) oral Confidential
Information furnished to one party by the other which shall have been reduced
to writing by the Receiving Party and (ii) all internal documents of any party
describing, analyzing or otherwise containing Confidential Information
furnished by one party, all such writings and documents shall be destroyed upon
the request of the Disclosing Party, and the Receiving Party shall confirm in
writing to the other party compliance with any such request.
ARTICLE 13
SURVIVAL AND INDEMNIFICATION
13.1 Survival. All representations and warranties made by
the parties herein or in any instrument or document furnished in connection
herewith shall survive the Closing and (a) the representations and warranties
set forth in Section 4.25 (Taxes) and Section 4.26 (Compliance with Law) shall
survive until the expiration of the statute of limitations with respect to such
matters and (b) all other representations and warranties set forth herein or in
any instrument or document furnished in connection herewith will expire on the
second anniversary of the Closing Date. No claim or action for indemnity
pursuant to Sections 13.2 (Indemnification by Seller and CII) or Section 13.3
(Indemnification by Buyer) hereof for breach of any representation or warranty
shall be asserted or maintained by any party hereto after the expiration of
such representation or warranty pursuant to the provisions of this Section 13.1
except for claims made in writing prior to such expiration and actions (whether
instituted before or after such expiration) based on any claim made in writing
prior to such expiration. Each party hereto may rely on the representations
and warranties made by the other party hereto notwithstanding any investigation
of the facts constituting the basis of the representations and warranties of
any party by any other party hereto. It is understood and agreed that, except
as explicitly provided in this Agreement, after the Closing there shall be no
liability or obligation in respect of a breach or alleged breach of any
representation or warranty.
13.2 Indemnification by Seller and CII. Seller and CII,
jointly and severally, agree to indemnify Buyer and, without duplication, each
of its Affiliates, and each of their respective officers, directors, employees
and representatives, against, and agrees to hold it and them harmless from, any
and all Losses incurred or suffered by Buyer or any of its Affiliates, or any
of their respective officers, directors, employees or representatives (or any
combination thereof), arising out of any of the following:
(a) the failure of any representation or warranty
made by Seller pursuant to this Agreement, disregarding all
qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect, to be true in all respects
(except for such changes as are contemplated by, or as are not in
violation of, the
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terms of this Agreement) on and as of the date hereof and the Closing
Date (as though made again on the Closing Date);
(b) any material breach by Seller of any covenant of
Seller set out in this Agreement;
(c) the use, operation or ownership of any of the
Excluded Assets after the Closing;
(d) any Liabilities of Seller or any of its
Affiliates other than the Assumed Obligations, including the Excluded
Liabilities;
(e) any Taxes owed by Subsidiaries for the periods
ending prior to the Closing Date, including any Liability for Taxes
imposed under Treas. Reg. Section 1.1502-6 (or comparable provisions
of state or local law);
(f) Liabilities under Bulk Sales Laws; or
(g) the failure by Seller to obtain, as of the
Closing Date or within 45 days thereafter, all consents, approvals and
waivers from third parties necessary to transfer Material Contracts to
Buyer and to transfer the Acquired Assets as provided in Section 4.7
(Title) herein;
provided that Seller shall not be liable under Section 13.2(a) with respect to
Losses substantially caused by the willful or grossly negligent actions of
Buyer or the proper disclosure of this Agreement; and provided, further, that
Seller shall not be liable under Section 13.2(a) with respect to Losses arising
from a breach of any representation or warranty unless the aggregate amount of
Losses with respect to such breach exceeds $10 million and then only to the
extent of such excess amount; and provided, further, that Seller shall in no
event be liable to Buyer under Section 13.2 (a) with respect to Losses arising
from breaches of representations and warranties in an amount exceeding $130
million. For purposes of this Section 13.2, any Loss which might be deemed to
arise both (i) under Section 13.2(a) and (ii) under any of Sections 13.2(b)-(g)
shall be deemed to not arise under Section 13.2(a) but instead to arise under
such Section 13.2(b), (c), (d), (e), (f) or (g).
13.3 Indemnification by Buyer. Buyer agrees to indemnify
Seller, CII and, without duplication, each of their Affiliates, and each of
their respective officers, directors, employees and representatives, against,
and agrees to hold them harmless from, any and all Losses incurred or suffered
by Seller, CII or any of their Affiliates, or any of their respective officers,
directors, employees or representatives (or any combination thereof), arising
out of any of the following:
(a) the failure of any representation or warranty
made by Buyer pursuant to this Agreement to be true in all material
respects as of the date hereof;
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(b) the failure of a representation or warranty made
by Buyer pursuant to this Agreement, disregarding all qualifications
and exceptions contained therein relating to materiality or Material
Adverse Effect, to be true in all respects (except for such changes as
are contemplated by, or as are not in violation of, the terms of this
Agreement) on and as of the Closing Date, with only such exceptions as
could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect;
(c) any material breach by Buyer of any covenant of
Buyer set out in this Agreement;
(d) the Assumed Obligations (including Buyer's
failure to perform or to pay and discharge in due course any Assumed
Obligations); or
(e) the use, operation or ownership of any of the
Acquired Assets, or the operation of the Business, after the Closing.
13.4 Losses Net of Insurance, etc. The amount of any Loss
for which indemnification is provided under this Article 13 shall be net of any
amounts recovered by the indemnified party under insurance policies with
respect to such Loss.
13.5 Procedures for Indemnification.
(a) Notice of Claims; Assumption of Defense. The
indemnified party shall give prompt notice to the indemnifying party,
in accordance with the terms of Section 17.4 (Notices), of the
assertion of any Claim in respect of which indemnity may be sought
hereunder (including in connection with any Losses that the
indemnified party deems to be within the ambit of this Article 13).
Such notice (a "Claim Notice") shall specify with reasonable
particularity the reason therefore and provide reasonable detail of
how the Claim has arisen and an estimate of the amount the indemnified
party reasonably anticipates that it will be entitled to on account of
indemnification by the indemnifying party; provided that no failure to
give any such notice shall result in the loss of any rights to
indemnification hereunder except to the extent that the ability of the
indemnifying party to defend a Claim was materially prejudiced by the
failure to send such Claim Notice. If the indemnifying party does not
object to such Claim Notice within 45 days of receipt thereof, the
indemnified party shall be entitled to recover the amount owed by it
as a result of such Claim. If, however, the indemnifying party
advises the indemnified party that it disagrees with the indemnified
party's claim for indemnification, the parties shall, for a period of
45 days after the indemnifying party advises the indemnified party of
such disagreement, attempt to resolve the difference. The
indemnifying party may, at its own expense, (i) participate in and,
(ii) upon notice to the indemnified party and the indemnifying party's
written agreement that the indemnified party is entitled to
indemnification pursuant to Section 13.2 (Indemnification by Seller
and CII) or Section 13.3 (Indemnification by Buyer) for all Losses
arising out of such Claim, at any time during the course of any such
Claim, assume control of the defense thereof; provided
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that the indemnifying party shall thereafter consult with the
indemnified party upon the indemnified party's reasonable request for
such consultation from time to time with respect to such Claim. If
the indemnifying party assumes such defense, the indemnified party
shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party. Whether or not the
indemnifying party chooses to defend or prosecute any such Claim, all
of the parties hereto shall cooperate in the defense or prosecution
thereof. If the indemnifying party elects to defend a third party
Claim, the indemnified party (x) shall, at the indemnifying party's
expense, make available to the indemnifying party and its agents and
representatives all records, personnel and other materials reasonably
required in connection with the defense of such Claim and (y) shall
otherwise cooperate with and assist the indemnifying party in the
defense of such Claim, all at the indemnifying party's expense. The
provisions of this Section 13.5(a) regarding consultation with the
indemnified party and the indemnified party's right to participate in
any defense shall apply without limitation to any Claim by a third
party payor for which indemnification is sought hereunder.
(b) Settlement or Compromise. Whether or not the
indemnifying party shall have assumed the defense of any such Claim of
the kind referred to above, the indemnified party shall not admit any
liability with respect to, or settle, compromise or discharge such
Claim without the indemnifying party's prior written consent (which
will not be unreasonably withheld). The indemnifying party shall
obtain the written consent of the indemnified party before entering
into any settlement, adjustment, compromise or discharge, or ceasing
to defend against any such Claim, only if, as a result thereof, there
would be imposed on the indemnified party any liability or obligations
not covered by the indemnity obligations of the indemnifying party
under this Agreement.
(c) Failure of Indemnifying Party to Act. In the
event that the indemnifying party does not elect to assume the defense
of any Claim, then any failure of the indemnified party to defend or
to participate in the defense of any such Claim to cause the same to
be done, shall not relieve the indemnifying party of its obligations
hereunder.
13.6 Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto, (x) pursuant to Sections
13.2(b)-(g) (Indemnification by Seller and CII) and Sections 13.3(c)-(e)
(Indemnification by Buyer) shall terminate when the applicable statutes of
limitations with respect to the Liabilities in question expire and (y) pursuant
to Section 13.2(a) (Indemnification by Seller and CII) and Sections 13.3(a) and
(b) (Indemnification by Buyer) shall terminate when the applicable
representation terminates pursuant to Section 13.1 (Survival); provided,
however, that as to clause (x) and (y) above such obligations to indemnify and
hold harmless shall not terminate with respect to any item as to which the
person to be indemnified or the related party hereto shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice stating in reasonable detail the basis of such claim to the indemnifying
party.
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ARTICLE 14
SECURITIES LAW AND STANDSTILL PROVISIONS
14.1 Acquisition for Investment. Buyer and Seller hereby
acknowledge that the Notes to be issued to Seller pursuant to the terms of this
Agreement are being acquired in good faith for investment for Seller's own
account and not with a view to a distribution or resale thereof.
14.2 Legend. The Notes issued pursuant to the provisions
of this Agreement shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF EXEMPTION
THEREFROM UNDER SAID ACT OR THE RULES AND REGULATIONS
PROMULGATED THEREUNDER."
14.3 Standstill. Except for the conversion shares
issuable to Seller pursuant to the terms of this Agreement and the Convertible
Notes (the "Conversion Shares"), for the time period set forth in Section 14.5
(Term and Termination), neither Seller nor any Affiliate of Seller (regardless
of whether such person or entity is an Affiliate on the date hereof) shall (a)
acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or direct or indirect rights or
options to acquire any voting securities of Buyer, (b) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" to vote
(as such terms are used in the proxy rules of the Securities and Exchange
Commission), or seek to advise or influence any person or entity with respect
to the voting of any voting securities of Buyer, (c) form, join or in any way
participate in a "group" within the meaning of Section 13(d)(3) of the Exchange
Act with respect to any voting securities of Buyer (a "13D Group") or (d)
otherwise act, alone or in concert with others, to seek to control or influence
the management, board of directors or policies of Buyer.
14.4 Transfer Restrictions. For the time period set forth
in Section 14.5 (Term and Termination), neither Seller nor any Affiliate of
Seller (regardless of whether such person or entity is an Affiliate on the date
hereof) shall, directly or indirectly (i) sell, transfer, assign, pledge,
encumber or otherwise dispose of any of the Convertible Notes or Conversion
Shares to any person or entity engaged in any business that is the same as or
substantially similar to the business of Buyer as conducted on the date thereof
or (ii) transfer "beneficial ownership" (within the meaning of Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder) of (A)
Convertible Notes representing the right to acquire 5% or more of Buyer's
outstanding voting securities or (B) 5% or more of Buyer's outstanding voting
securities, including the Conversion Shares, to any person, entity or 13D Group
in any transaction or series of related transactions, without the prior written
consent of a majority of Buyer's disinterested directors, which consent shall
not be unreasonably withheld. For purposes of this Section 14.4, a series of
transactions will be
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deemed to be related if they occur within twelve months of another transaction
involving the same person, entity or 13D Group.
14.5 Term and Termination. Seller will no longer be
subject to the restrictions contained in this Article 14 (i) when the
Conversion Shares beneficially owned or held by Seller and its Affiliates no
longer constitute more than 2% of the outstanding voting securities of Buyer,
(ii) if a tender offer or exchange offer is made by any person (other than
Seller or its Affiliates) to acquire more than 50% of Buyer's outstanding
voting securities or (iii) if the board of directors and the stockholders of
Seller (other than Seller and its Affiliates) shall have approved a merger,
business combination or other similar transaction in which Buyer would not be
the surviving corporation and Seller participates in such transaction in the
same manner as Buyer's remaining stockholders.
ARTICLE 15
CONFIDENTIALITY
15.1 Nondisclosure and Nonuse of Confidential Information.
Until the Closing, all Confidential Information shall be kept confidential by
the Receiving Party, and shall only be used in connection with the transactions
contemplated hereby. Until the Closing, the Receiving Party shall not disclose
the Confidential Information to any person or entity without the written
consent of the Disclosing Party and the Receiving Party shall safeguard the
Confidential Information to the same extent that such party safeguards its own
confidential information, and in any event with not less than a reasonable
degree of care.
15.2 Obligations with Respect to Agents, Employees and
Representatives. Buyer and Seller acknowledge that certain of the agents,
employees and representatives of the Receiving Party may have access to the
Confidential Information disclosed by the Disclosing Party, and the parties
hereto agree that the only agents, employees and representatives of the
Receiving Party who will receive the Confidential Information will be those who
have a need to know such Confidential Information for purposes of enabling the
Receiving Party to pursue the transactions contemplated hereby. The parties
hereto will instruct each of their agents, employees and representatives who
may receive Confidential Information to safeguard the Confidential Information
from disclosure and treat such Confidential Information as confidential; if
either party fails to so instruct any agent, employee or representative who may
receive Confidential Information in accordance herewith such party shall be
deemed to have materially breached this Agreement.
15.3 Return of Written Confidential Information. Any and
all written information or materials distributed hereunder, along with all
copies of the same, shall be destroyed or returned to the Disclosing Party upon
request.
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ARTICLE 16
NONCOMPETITION
16.1 Competing Business. For the period from the Closing
through December 31, 2001, Seller will not, and will not permit any of its
Affiliates to, engage in, directly or indirectly, or have any direct or
indirect interest in any entity or person that engages in any business which is
the same as or substantially similar to the Business as it is conducted on the
date hereof (a "Competing Business"); provided, however, that Seller may own up
to 20% of the equity of an entity whose Competing Business revenues are at all
times less than 30% of such entity's total revenues; provided, further, that
the aggregate of (i) Seller's proportionate share of the Competing Business
Revenues per year described in this Section 16.1 above and (ii) the Affiliated
Physician Group revenues described in Section 16.2 (Business Relating to
Affiliated Physician Groups) below does not exceed the following amounts (the
"Permitted Competing Business Revenues"):
<TABLE>
<CAPTION>
Permitted Competing
After Closing Business Revenues
<S> <C>
Through 12/31/95 $10 million
Through 12/31/96 $10 million
Through 12/31/97 $10 million
Through 12/31/98 $10 million
Through 12/31/99 $14 million
Through 12/31/2000 $18 million
Through 12/31/2001 $22 million
</TABLE>
16.2 Business Relating to Affiliated Physician Groups.
For any calendar year ending after the Closing through December 31, 2001, no
Affiliated Physician Group shall have Competing Business revenues which, when
combined with Seller's proportionate share of the Competing Business revenues,
described in Section 16.1 (Competing Business), exceed the Permitted Competing
Business Revenues. Buyer acknowledges that Seller does not control medical
decision-making by any Affiliated Physician Group. Seller acknowledges,
however, that Competing Business revenues of Affiliated Physician Groups shall
be included, as set forth above, in calculating Permitted Competing Business
Revenues hereunder.
16.3 Acquired Competing Businesses. Nothing contained
herein shall prohibit Seller from acquiring more than a 20% equity interest in
any business, the Competing Business revenues of which are less than 30% of its
total revenues; provided, however, that either the competitive portion of any
such acquired business (an "Acquired Competing Business") is divested no later
than one year after such acquisition or Seller divests itself of sufficient
interest so that it remains in compliance with the foregoing restrictions after
such one-year period. Seller will propose sale terms for the Acquired
Competing Business to Buyer as soon as practicable after its acquisition, and
Buyer shall have a right of first refusal to acquire the Acquired Competing
Business on such terms as
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may be agreed by Buyer and Seller. If Buyer and Seller do not agree on sale
terms within 60 days thereafter, Seller shall be free to sell the Acquired
Competing Business to another entity; provided, however, that Buyer shall have
the right (for ten business days) to match the terms offered by such other
entity if these terms are significantly less advantageous to Seller than the
terms previously proposed by Seller to Buyer.
16.4 Compliance Certificates. Not later than February 15
of each year, Seller's Chief Financial Officer shall certify to Buyer in
writing that Seller was in compliance with the foregoing noncompetition
provisions during the preceding calendar year. If Buyer so requests and at
Buyer's expense, Seller's independent public accountants will certify to Buyer
in writing at the same time and to the same effect. Buyer's independent public
accountants shall be entitled to review the workpapers of Seller's independent
public accounts with respect to such certificate.
16.5 Scope of Covenants. Seller agrees and acknowledges
that this Article 16 is reasonable with respect to duration, geographic area
and scope. Each of the covenants of Seller contained in this Article 16 shall
be construed as a separate and independent covenant covering the respective
subject matter of the covenant. To the extent that any covenant shall be
determined to be judicially unenforceable in any one or more area, that
covenant shall not be affected with respect to every other area, each covenant
being construed as severable and independent with respect to each area.
16.6 Severability. To the extent any provision of this
Article 16 shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this Article 16 shall be
unaffected and shall continue in full force and effect. In furtherance and not
in limitation of the foregoing, should the duration or geographical extent of,
or business activities covered by any provision of this Article 16 be in excess
of that which is valid and enforceable under applicable Law, then such
provision shall be construed to cover only that duration, extent or activities
which may validly and enforceably be covered. Buyer and Seller acknowledge the
uncertainty of the Law in this respect and expressly stipulate that this
Article 16 shall be given construction that renders its provisions valid and
enforceable to the maximum extent (not exceeding its express terms) possible
under applicable Law.
ARTICLE 17
MISCELLANEOUS
17.1 Expenses. Except as provided in the next sentence,
each party hereto shall bear its own expenses with respect to this transaction.
Buyer shall pay all sales, use, stamp, transfer, service, recording, real
estate and like taxes or fees, if any, imposed by any Governmental Authority,
required to be paid in connection with the transfer and assignment of the
Acquired Assets.
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17.2 Amendment. This Agreement may be amended, modified
or supplemented, but only in writing signed by all parties.
17.3 Brokers. Except for Lazard Freres & Co., on behalf
of Seller (whose fees will be paid by Seller) and The Parthenon Group, Inc. on
behalf of Buyer (whose fees will be paid by Buyer), each of the parties hereto
represents that no broker or finder has acted for it in connection with this
Agreement or the transactions contemplated hereby and that no broker or finder
is entitled to any brokerage or finder's fee or other commission based on
agreements, arrangements or understandings made by it.
17.4 Notices. Any notice, request, instruction or other
document to be given hereunder by a party hereto shall be in writing and shall
be deemed to have been given, (i) when received if given in person, (ii) on the
date of transmission if sent by telex, telecopy or other wire transmission
(provided that a copy of such transmission is simultaneously posted in the
manner provided in clause (iii) below) or (iii) three days after being
deposited in the U.S. mail, certified or registered mail, postage prepaid:
(a) If to Seller addressed as follows:
Caremark Inc.
2215 Sanders Road, Suite 400
Northbrook, Illinois 60062
Attention: C. A. Lance Piccolo,
Chairman of the Board,
Chief Executive Officer
Facsimile: (708) 559-4603
with copies to:
Caremark Inc.
2215 Sanders Road, Suite 400
Northbrook, Illinois 60062
Attention: Thomas R. Schuman
General Counsel
Facsimile: (708) 559-5250
and
Latham & Watkins
Suite 5800
Sears Tower
Chicago, Illinois 60606
Attention: Marilee C. Unruh
Facsimile: (312) 993-9767
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(b) If to CII, addressed as follows:
Caremark International Inc.
2215 Sanders Road, Suite 400
Northbrook, Illinois 60062
Attention: C.A. Lance Piccolo
Chairman of the Board
Chief Executive Officer
Facsimile: (708) 559-4603
with copies to:
Caremark International Inc.
2215 Sanders Road, Suite 400
Northbrook, Illinois 60062
Attention: Thomas R. Schuman
Facsimile: (708) 559-4790
and
Latham & Watkins
Suite 5800
Sears Tower
Chicago, Illinois 60606
Attention: Marilee C. Unruh
Facsimile: (312) 993-9767
(c) If to Buyer, addressed as follows:
Coram Healthcare Corporation
1125 Seventeenth Street, Suite 1500
Denver, CO 80202
Attention: James M. Sweeney
Chairman of the Board and
Chief Executive Officer
Facsimile: (303) 298-0043
with a copy to:
Brobeck Phleger & Harrison
Suite 1000
4675 MacArthur Court
Newport Beach, CA 92660-1836
Attention: Richard Fink
Facsimile: (714) 752-7522
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or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
17.5 Waivers. The failure of a party hereto at any time
or times to require performance of any provision hereto shall in no manner
affect its right at a later time to enforce the same. No waiver by a party of
any condition or of any breach of any term, covenant, representation or
warranty contained in this Agreement shall be effective unless in writing, and
no waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any such condition or breach in other instances or a
waiver of any other condition or breach of any other term, covenant,
representation or warranty.
17.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17.7 Headings. The headings preceding the text of this
Agreement are for convenience only and shall not be deemed part of this
Agreement.
17.8 Applicable Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Illinois
(without reference to the choice of law provisions of Illinois law), except
with respect to matters of law concerning the internal corporate affairs of
Seller and Buyer or their Affiliates, and as to those matters, the law of the
jurisdiction under which the respective entity derives its powers shall govern.
17.9 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Prior to the Closing, Buyer may assign to a wholly-owned subsidiary
corporation Buyer's right to the Acquired Assets; provided, however, that in no
event shall such assignment release Buyer of any of its obligations under this
Agreement; and provided, further, that no other assignment or other transfer
shall be made without the prior written approval of each of the parties hereto.
17.10 No Third Party Beneficiaries. This Agreement is
solely for the benefit of the parties hereto and their respective Affiliates
and no provision of this Agreement (including the provisions of Article 9
(Employees and Benefit Plans)) shall be deemed to confer upon third parties
(including any Continuing Employee, any participant in any benefit or
compensation plan or any beneficiary thereof) any remedy, claim, liability,
reimbursement, cause of action or other right.
17.11 Publicity. Unless otherwise required by law and
after prior written notice to the other parties, none of the parties hereto
shall issue any press release or make any public statement regarding the
transactions contemplated hereby without the prior reasonable approval of the
other parties and the parties hereto shall issue a jointly acceptable press
release or press releases as soon as practicable after the execution of this
Agreement.
45
<PAGE> 52
17.12 Injunctive Relief. Buyer and Seller acknowledge and
agree that a breach of any of the covenants contained in Article 14 (Securities
Law and Standstill Provisions), Article 15 (Confidentiality) and Article 16
(Noncompetition) may cause irreparable damage and harm, and that monetary
damages may not be an adequate remedy for any such breach or may be virtually
impossible to ascertain. Therefore, the parties hereto agree that such parties
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants
contained in Article 14 (Securities Law and Standstill Provisions), Article 15
(Confidentiality) and Article 16 (Noncompetition) and that such right to
injunction shall be cumulative and in addition to any other available remedies.
17.13 Attorneys' Fees. In the event of litigation between
Buyer and Seller, the non-prevailing party as determined by the court shall pay
to the prevailing party all costs and reasonably attorneys' fees incurred by
the prevailing party including those costs and fees related to any trial,
arbitration, appellate, bankruptcy, insolvency and administrative proceedings.
17.14 Entire Understanding. This Agreement and the
Additional Agreements set forth the entire agreement and understanding of the
parties hereto in respect to the transactions contemplated hereby and supersede
all prior agreements, arrangements and understandings relating to the subject
matter hereof. There have been no representations or statements, oral or
written, that have been relied on by any party hereto except those expressly
set forth in this Agreement and the Additional Agreements.
* * *
46
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on the date first above written.
CAREMARK INC.
By: ______________________________
Name:
Title:
CAREMARK INTERNATIONAL INC.
By: ______________________________
Name:
Title:
CORAM HEALTHCARE CORPORATION
By: ______________________________
Name:
Title:
S-1
<PAGE> 54
AMENDMENT NO. 1 TO THE ASSET SALE AND
NOTE PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO THE ASSET SALE AND NOTE PURCHASE
AGREEMENT is made as of April 1, 1995 (this "Amendment"), among CORAM
HEALTHCARE CORPORATION, a Delaware corporation ("Buyer"), CAREMARK
INTERNATIONAL INC., a Delaware corporation ("CII"), and CAREMARK INC., a
California corporation ("Seller").
In consideration of the mutual covenants, agreements and
warranties contained herein, the receipt and sufficiency of which are hereby
acknowledged, Buyer, CII and Seller agree as follows:
1. Definitions. Terms not otherwise defined herein shall have
the meanings set forth in the Asset Sale and Note Purchase Agreement, dated as
of January 29, 1995, among Buyer, CII and Seller (the "Agreement").
2. Amendments. The parties hereto agree that the Agreement is
amended as follows:
(a) The following recitals are added to the Agreement:
The Purchase Price (as defined herein) shall consist of Notes
issued by Buyer to Seller and cash paid by Coram, Inc., a
wholly-owned subsidiary of Buyer, each of which shall be in
consideration for a proportionate share of the Acquired Assets
(as defined herein) and the Assumed Obligations (as defined
herein).
Buyer intends to cause all of the Acquired Assets to be
directed to Curaflex Health Services, Inc., a wholly-owned
indirect subsidiary of Buyer.
(b) (i) The following definitions are inserted into
the Definitions section:
"Employee Transfer Date" shall have the
meaning set forth in Section 9.1 (Employees).
"Escrow Agreement" shall have the
meaning set forth inSection 2.1(e) (Payment
of Purchase Price).
"Escrowed Cash Amount" shall mean
$500,000.
"Escrowee" shall mean The First
National Bank of Chicago.
<PAGE> 55
"Seller Operations" shall mean those
aspects of Seller's business operations that,
although not a part of the Acquired Assets,
are presently commingled at a Transition
Location with the Business. Seller
operations shall be deemed to include
business operations sold or to be sold by
Seller to HMI Illinois, Inc.
"Transition Assets" shall mean those
Acquired Assets located at, or pertaining to,
a Transition Location and identified on
Schedule 2.1(e) which will not be transferred
to Buyer on the Closing Date because such
assets are required by Seller to operate,
after the Closing Date, a Transition Location
in compliance with applicable law.
"Transition Assignment and Assumption
Agreement" shall mean an assignment and
assumption agreement between Seller and Buyer
relating to certain Transition Assets.
"Transition Transfer Document" shall
mean a transfer document between Buyer and
Seller relating to certain Transition Assets.
"Transition Employees" shall have the
meaning set forth inSection 9.1 (Employees).
"Transition Locations" shall mean those
locations identified on Schedule 2.1(e).
"Transition Permits" shall have the
meaning set forth inSection 2.1(e) (Payment
of Purchase Price).
(ii) The phrase "the Patents Assignment" is
replaced with the phrase "the Escrow
Agreement" in the "Additional Agreements"
definition contained in the Definitions
section.
(iii) The phrase ", the Seller License to Buyer" is
deleted from the "Additional Agreements"
definition contained in the Definitions
Section.
(iv) The definition of "Patents Assignment"
contained in the Definitions section is
deleted in its entirety.
(v) The definition of "Seller License to Buyer"
contained in the Definitions Section is
deleted in its entirety.
2
<PAGE> 56
(c) Subsection 2.1(a) (Payment of Purchase Price), is
deleted in its entirety and replaced with the
following:
On the Closing Date, Coram, Inc., a
wholly-owned subsidiary of Buyer, shall pay
Seller $210,000,000 less the Escrowed Cash
Amount by wire transfer, in immediately
available funds, to a bank account of Seller
designated in writing to Buyer; provided,
however, that the preceding amount shall be
reduced by $1,000,000 in the event that the
Closing Date is on or prior to April 7, 1995.
(d) The following is added to become Subsection 2.1(e)
(Payment of Purchase Price):
(e) On the Closing Date, Buyer shall
deposit with Escrowee by means of a wire transfer, in
immediately available funds, an amount equal to the
Escrowed Cash Amount, which is the value assigned by
the parties to those Transition Assets identified
on Schedule 2.1(e). The Escrowed Cash Amount is to be
held by Escrowee pursuant to the terms of a strict
joint order escrow (the "Escrow Agreement"). The
parties hereto agree to promptly direct Escrowee to
deliver the Escrowed Cash Amount in accordance with
the terms of thisSection 2.1(e). The Escrowed Cash
Amount will be invested as provided in the Escrow
Agreement, and any interest or other income earned
thereon shall accrue to the benefit of Seller. Upon
the date the Transition Services Agreement is
terminated with respect to a Transition Location, the
parties shall direct Escrowee to (i) insert a
specified effective date in the Transition Assignment
and Assumption Agreement and the Transition Transfer
Document for the Transition Assets for such
Transition Location and (ii) deliver to Buyer such
Transition Assignment and Assumption Agreement and
such Transition Transfer Document. Upon the date the
Transition Services Agreement has been terminated
with respect to all Transition Locations, the parties
shall direct Escrowee to deliver to Seller the
Escrowed Cash Amount. The Transition Services
Agreement shall be deemed terminated with respect to
a Transition Location upon the earlier of (i) the
occurrence of both (A) Seller's written notice to
Buyer that all pharmacy licenses, nursing and nursing
agency licenses, home health agency licenses,
certificates of need, medical waste disposal licenses
and any other licenses, permits, variances, interim
permits, permit applications, approvals or other
authorizations, certificates, franchises, rights
(federal, state or local) and provider numbers issued
by any Governmental Authority, managed care
organization or other payor (collectively, the
"Transition Permits") have been obtained that are
necessary, in Seller's reasonable judgment, to enable
the continuous, uninterrupted operation of the
Seller's Operations at a facility other than such
Transition Location and
3
<PAGE> 57
(B) Buyer's written notification to Seller that Buyer has obtained all
Transition Permits necessary, in Buyer's judgment, to enable Buyer's
operation of the Business at such Transition Location or (ii) the
period relating to such Transition Services Location set forth in the
Transition Services Agreement.
(e) In Section 2.3 (Determination of Closing Date Net
Assets), the phrase "but in any event within 30 days after the Closing Date" is
replaced with "but in any event within 36 days after the Closing Date."
(f) The following is inserted at the end of Section 4.25
(Taxes):
The Acquired Assets constitute less than two thirds
of the gross value of all of the assets of Seller
within the meaning of Section 279 of the Code.
(g) In Section 6.2 (Consents to Transfer Material
Contracts and Material Permits), the first sentence
is deleted in its entirety and replaced with the
following: "As soon as practicable Seller shall
provide Buyer with a schedule of all Material
Contracts and Permits that will require the consent
of third parties for the transfer thereof to Buyer."
(h) The following is inserted at the end of Section 9.1
(Employees):
Any other provision of this Agreement not
withstanding, any Continuing Employee identified on
Schedule 9.1(the "Transition Employees") shall not be
employed by Buyer until the termination of the
Transition Services Agreement with respect to the
Transition Location at which such Continuing Employee
is located. As used herein, the term "Employee
Transfer Date" shall mean (a) for Continuing
Employees other than Transition Employees, the
Closing Date and (b) for Transition Employees, the
date upon which the Transition Services Agreement
terminates with respect to the Transition Location at
which such Continuing Employee is located.
(i) In Section 9.2(b) (Employee Benefit Plans), the term
"Closing Date" is replaced wherever it appears by the term "Employee Transfer
Date."
(j) In Section 9.2(c) (Employee Benefit Plans), the
phrase "or Employee Transfer Date, as applicable" is inserted after the phrase
"prior to the Closing Date."
(k) In Section 9.2(d) (Employee Benefit Plans), the
phrase "180 days following the Closing Date" is replaced with "180 days
following the Employee Transfer Date."
4
<PAGE> 58
(l) Subsection 10.2(g) (Delivery by Seller) is deleted in
its entirety and replaced with the following: "a summary of the insurance
policies listed on Schedule 4.15; and."
(m) The following is added to become Section 10.4 (Escrow
Deliveries):
Escrow Deliveries. At the Closing, (a) Seller shall
deliver to Escrowee, to be held pursuant to the
Escrow Agreement, Transition Assignment and
Assumption Agreements and Transition Transfer
Documents for the Transition Assets for each
Transition Location and (b) Buyer shall deliver to
Escrowee, to be held pursuant to the Escrow
Agreement, an amount equal to the Escrowed Cash
Amount, and executed counterparts of the Transition
Assignment and Assumption Agreements.
(n) The following is inserted at the end of Subsection
11.3(a) (Access to Records, Information and Personnel):
In addition, Seller shall be permitted to photocopy
(at Seller's cost) and remove copies of any such
documents or other information in connection with
Seller's operation of the Business prior to Closing
(at Seller's cost) as Seller may deem reasonably
necessary, or to the extent that Seller reasonably
believes that it is required to retain, produce or
deliver the original of such documentation or
information, Seller shall be permitted to remove the
originals and leave photocopies of such documents or
information in Buyer's files;provided, however, that
Seller shall return such originals to Buyer promptly
after such need to retain, produce or deliver such
originals has been fulfilled. In addition, Seller
will cooperate with Buyer to enable Buyer to respond
to any request to retain, produce or deliver the
originals of such documentation or information.
(o) The following is inserted at the end of Subsection
11.3(b) (Access to Records, Information and Personnel):
"Conflict of interest between the parties" shall mean
for purposes of thisparagraph (b) that Seller's
reason for seeking the participation of officers and
employees formerly employed by Seller is (i) for the
purpose of developing claims (or facts with respect
to claims), if any, against Buyer and (ii) not in any
way related to claims, audits or investigations by
third-parties, Governmental Authorities or other
entities or persons arising in connection with
Seller's operation of the Business prior to the
Closing.
(p) In Section 11.5 (Infusion Therapy Services Contract),
the phrase "to provide such services" is replaced with the phrase "to provide
infusion therapy services."
5
<PAGE> 59
(q) The following is added to become Section 11.8:
"Cooperation. Buyer and Seller shall cooperate fully in attempting to obtain
the consents referred to in Sections 13.2(g) and (h) (Indemnification by Seller
and CII)."
(r) In Section 13.2 (Indemnification by Seller and CII),
the following is inserted after clause (g):
(h) nonpayment for services provided by Buyer from
the Closing Date to and including the date 45 days
after the Closing Date under any Material Contract,
because consent was required, but not obtained, for
assignment of such contract to Buyer.
(s) The following is inserted at the end of Section 15.1
(Nondisclosure and Nonuse of Confidential Information):
In addition, the parties hereto acknowledge and agree
that, in the event that certain of Seller's
attorney-client privileged communications or
information may have remained among the documentation
and information transferred to Buyer in connection
with the Closing of the transactions contemplated by
this Agreement, it was not the intent of the Seller
or CII to waive any attorney-client privilege by the
possible failure to remove all such privileged
communications and information, and in no way shall
this failure be deemed to constitute a waiver of such
privilege or a public disclosure of such
documentation. Buyer agrees that if at any time
after the Closing any such privileged communications
or documents are discovered, then all such materials
and all copies thereof will be promptly returned to
Seller.
(t) The phrase "and Article 16 (Noncompetition)" is
replaced with the phrase ", Article 16 (Noncompetition) and Section 11.3
(Access to Records, Information and Personnel)" in the first sentence of
Section 17.12 (Injunctive Relief).
(u) The phrase "and the Additional Agreements" is
replaced with ", the Additional Agreements, the confidentiality agreements
dated November 7, 1994, the Non-Solicitation Agreement, dated as of February
28, 1995, among Buyer, Seller and CII and the Letter Agreement, dated as of
March 31, 1995, between Buyer and Seller" in the first sentence of Section
17.14 (Entire Understanding).
(v) (i) The "Patents" section of Schedule 1.1(d) is
deleted in its entirety.
(ii) The following are added to the "Trademarks"
section of Schedule 1.1(d):
6
<PAGE> 60
<TABLE>
<CAPTION>
Trademark Application Registration
--------- ----------- ------------
<S> <C>
6. American Cardiology 1,782,299
Care July 13, 1993
7. Critical Care America 1,744,060
December 29, 1992
8. Design and American 1,766,369
Cardiology Care April 20, 1993
9. Home-Net 1,754,314
February 23, 1993
10. Pediatricare 1,772,624
America May 18, 1993
11. We Bring Kids' 1,773,883
Care Home May 15, 1993
</TABLE>
(w) The reference to Caremark Home Health Services Inc.
in the "Subsidiaries" section of Schedule 1.1(e) is deleted in its entirety.
(x) The following are added to the "Other Assets" section
of Schedule 1.3:
Refrigerators and other equipment used by the
CSPS division set forth on the
attached Exhibit A unless also used
(other than incidentally and
immaterially) by CMS and a
functional requirement of a Pharmacy
that Buyer is acquiring
Caremark trade show booth
New York subsidiary - Caremark Home Health
Services, Inc.
Any originals of Information and Records
retained by Seller as of the Closing
or requested and received by Seller
in accordance withSection
11.3(a)(Access to Records,
Information and Personnel) or
Section 15.1 (Nondisclosure and
Nonuse of Confidential Information)
Infusion pumps in the possession of patients
of Caremark Therapeutic Services and
Caremark Specialty Pharmaceutical
Services.
(y) Schedules 2.1(e) and 9.1 attached hereto are made
part of the Agreement.
7
<PAGE> 61
(z) (i) The reference to the Lease for the nursing
facility located in New York at One Dig
Hanmarskjold [sic] on Schedule 4.6 is deleted
in its entirety.
(ii) The lease listed on Exhibit B to this
Amendment is added to Schedule 4.6.
(aa) The contracts set forth on Exhibit C to this
Amendment are added to Schedule 4.11.
(ab) The form of Convertible Note set forth on Exhibit A
to the Agreement is deleted in its entirety and replaced with the form of
Convertible Note set forth on Exhibit D to this Amendment.
(ac) The form of Nonconvertible Exchangeable Note set
forth on Exhibit B to the Agreement is deleted in its entirety and replaced
with the form of Nonconvertible Exchangeable Note set forth on Exhibit E to
this Amendment.
3. Effectiveness of Amendment. This Amendment shall be deemed to
be an amendment to the Agreement in accordance with Section 17.2 (Amendment) of
the Agreement. The parties hereto agree that except as specifically amended
above, the Agreement shall continue in full force and effect and is hereby
ratified and confirmed in all respects. Nothing contained herein shall be
deemed to modify any provision of the Agreement except as otherwise expressly
provided herein. Each reference in the Agreement to "this Agreement",
"hereunder", "hereof", "herein" and words of similar import shall mean and be a
reference to the Agreement, as amended hereby.
4. Benefit of the Amendment. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
5. Headings. the headings used in this Amendment are for
convenience of reference only and shall not be deemed to limit, characterize or
in any way affect the interpretation of any provision of this Amendment.
6. Counterparts. This Amendment may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS
(WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISION OR ILLINOIS LAW); EXCEPT WITH
RESPECT TO MATTERS OF LAW CONCERNING THE INTERNAL CORPORATE AFFAIRS OF SELLER
AND BUYER OR THEIR AFFILIATES, AND AS TO THOSE MATTERS, THE LAW OF THE
JURISDICTION UNDER WHICH THE RESPECTIVE ENTITY DERIVES ITS POWERS SHALL GOVERN.
8
<PAGE> 62
8. Corporate Authorization. Each of Buyer, CII and Seller
represents and warrants to the other parties hereto that (a) it has full
corporate power and authority to enter into this Amendment and to perform its
obligation hereunder, and (b) this Amendment has been duly authorized, executed
and delivered by such party, and constitutes the valid and binding obligations
of such party, enforceable in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect that affect
creditors' rights, and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
* * * * * *
9
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to the Asset Sale and Note Purchase Agreement as of the date
first above written.
CAREMARK INC.
By:_________________________
Name:
Title:
CAREMARK INTERNATIONAL INC.
By:_________________________
Name:
Title:
CORAM HEALTHCARE CORPORATION
By:_________________________
Name:
Title:
S-1
<PAGE> 1
EXECUTION COPY
______________________________________________________________________________
CREDIT AGREEMENT
Dated as of April 6 , 1995,
Among
CORAM HEALTHCARE CORPORATION,
CORAM, INC.,
THE LENDERS NAMED HEREIN
and
CHEMICAL BANK,
as Administrative Agent,
as Collateral Agent
and as Fronting Bank
______________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Terms Generally . . . . . . . . . . . . . . . . . . . . 32
ARTICLE II
The Credits
SECTION 2.01. Commitments . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.02. Loans . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.03. Borrowing Procedure . . . . . . . . . . . . . . . . . . 35
SECTION 2.04. Evidence of Debt; Repayment of Loans . . . . . . . . . 35
SECTION 2.05. Fees . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.06. Interest on Loans . . . . . . . . . . . . . . . . . . . 37
SECTION 2.07. Default Interest . . . . . . . . . . . . . . . . . . . 38
SECTION 2.08. Alternate Rate of Interest . . . . . . . . . . . . . . 38
SECTION 2.09. Termination and Reduction of Commitments . . . . . . . 38
SECTION 2.10. Conversion and Continuation of Borrowings . . . . . . . 39
SECTION 2.11. Repayment of Term Borrowings . . . . . . . . . . . . . 41
SECTION 2.12. Prepayment . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 2.13. Reserve Requirements; Change in Circumstances . . . . . 43
SECTION 2.14. Change in Legality . . . . . . . . . . . . . . . . . . 45
SECTION 2.15. Indemnity . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 2.16. Pro Rata Treatment . . . . . . . . . . . . . . . . . . 46
SECTION 2.17. Sharing of Setoffs . . . . . . . . . . . . . . . . . . 46
SECTION 2.18. Payments . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 2.19. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 2.20. Actions to Mitigate . . . . . . . . . . . . . . . . . . 51
SECTION 2.21. Letters of Credit . . . . . . . . . . . . . . . . . . . 51
SECTION 2.22. Assignment of Commitments under Certain
Circumstances . . . . . . . . . . . . . . . . . . . . 56
<PAGE> 3
2
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers . . . . . . . . . . . . . . . . . 57
SECTION 3.02. Authorization . . . . . . . . . . . . . . . . . . . . . 57
SECTION 3.03. Enforceability . . . . . . . . . . . . . . . . . . . . 58
SECTION 3.04. Governmental Approvals . . . . . . . . . . . . . . . . 58
SECTION 3.05. Financial Statements . . . . . . . . . . . . . . . . . 58
SECTION 3.06. No Material Adverse Change . . . . . . . . . . . . . . 59
SECTION 3.07. Title to Properties; Possession Under Leases . . . . . 59
SECTION 3.08. Subsidiaries and Joint Ventures . . . . . . . . . . . . 59
SECTION 3.09. Litigation; Compliance with Laws . . . . . . . . . . . 59
SECTION 3.10. Agreements . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 3.11. Federal Reserve Regulations . . . . . . . . . . . . . . 60
SECTION 3.12. Investment Company Act; Public Utility
Holding Company Act . . . . . . . . . . . . . . . . 61
SECTION 3.13. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 61
SECTION 3.14. Tax Returns . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 3.15. No Material Misstatements . . . . . . . . . . . . . . . 61
SECTION 3.16. Employee Benefit Plans . . . . . . . . . . . . . . . . 61
SECTION 3.17. Environmental Matters . . . . . . . . . . . . . . . . . 62
SECTION 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 3.19. Security Documents . . . . . . . . . . . . . . . . . . 63
SECTION 3.20. Location of Real Property and Leased Premises . . . . . 64
SECTION 3.21. Solvency . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 3.22. Labor Matters . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events . . . . . . . . . . . . . . . . . . . 65
SECTION 4.02. First Credit Event . . . . . . . . . . . . . . . . . . 66
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties . . . . . . . . . 71
SECTION 5.02. Insurance . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 5.03. Obligations and Taxes . . . . . . . . . . . . . . . . . 72
SECTION 5.04. Financial Statements, Reports, etc. . . . . . . . . . . 73
<PAGE> 4
3
SECTION 5.05. Litigation and Other Notices . . . . . . . . . . . . . 76
SECTION 5.06. Employee Benefits . . . . . . . . . . . . . . . . . . . 76
SECTION 5.07. Maintaining Records; Access to Properties
and Inspections . . . . . . . . . . . . . . . . . . . 77
SECTION 5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 77
SECTION 5.09. Compliance with Environmental Laws . . . . . . . . . . 77
SECTION 5.10. Preparation of Environmental Reports . . . . . . . . . 77
SECTION 5.11. Audits . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 5.12. Further Assurances . . . . . . . . . . . . . . . . . . 78
SECTION 5.13. Interest Rate Protection Agreements . . . . . . . . . . 79
SECTION 5.14. Cash Concentration Account; Cash Management
Systems . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 5.15. Compliance Procedures . . . . . . . . . . . . . . . . . 80
SECTION 5.16. Transition to Holding Company Structure . . . . . . . . 80
SECTION 5.17. Subordinated Debt Payments . . . . . . . . . . . . . . 80
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness . . . . . . . . . . . . . . . . . . . . . 80
SECTION 6.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 6.03. Sale and Lease-Back Transactions . . . . . . . . . . . 86
SECTION 6.04. Investments, Loans and Advances . . . . . . . . . . . . 86
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions . . . . . . . . . . . . . . . . . . . . 89
SECTION 6.06. Dividends and Distributions . . . . . . . . . . . . . . 90
SECTION 6.07. Transactions with Affiliates . . . . . . . . . . . . . 91
SECTION 6.08. Business of Borrower and Subsidiaries . . . . . . . . . 92
SECTION 6.09. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 6.10. Other Indebtedness and Agreements . . . . . . . . . . . 92
SECTION 6.11. Capital Expenditures . . . . . . . . . . . . . . . . . 94
SECTION 6.12. Coverage Ratio . . . . . . . . . . . . . . . . . . . . 94
SECTION 6.13. Total Debt Ratio . . . . . . . . . . . . . . . . . . . 95
SECTION 6.14. Cash Interest Expense Coverage Ratio . . . . . . . . . 96
SECTION 6.15. EBITDA . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 6.16. Lease Expense . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE VII
Events of Default
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
<PAGE> 5
4
ARTICLE VIII
The Administrative Agent and the Collateral Agent
The Administrative Agent and the Collateral Agent . . . . . . . . . . . . 101
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 9.02. Survival of Agreement . . . . . . . . . . . . . . . . . 104
SECTION 9.03. Binding Effect . . . . . . . . . . . . . . . . . . . . 105
SECTION 9.04. Successors and Assigns . . . . . . . . . . . . . . . . 105
SECTION 9.05. Expenses; Indemnity . . . . . . . . . . . . . . . . . . 108
SECTION 9.06. Right of Setoff . . . . . . . . . . . . . . . . . . . . 110
SECTION 9.07. Applicable Law . . . . . . . . . . . . . . . . . . . . 111
SECTION 9.08. Waivers; Amendment . . . . . . . . . . . . . . . . . . 111
SECTION 9.09. Interest Rate Limitation . . . . . . . . . . . . . . . 112
SECTION 9.10. Entire Agreement . . . . . . . . . . . . . . . . . . . 112
SECTION 9.11. Waiver of Jury Trial . . . . . . . . . . . . . . . . . 113
SECTION 9.12. Severability . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.13. Counterparts . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.14. Headings . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.15. Jurisdiction; Consent to Service of Process . . . . . . 113
SECTION 9.16. Confidentiality . . . . . . . . . . . . . . . . . . . . 114
Schedule 1.01 Assets Held for Sale
Schedule 2.01 Commitments
Schedule 3.02 No-Conflict Exceptions
Schedule 3.04 Governmental Approvals
Schedule 3.08 Subsidiaries, Designated Subsidiaries and Joint Ventures
Schedule 3.09 Litigation
Schedule 3.18 Insurance
Schedule 3.19(b) Filing Offices
Schedule 3.19(c) Intellectual Property Security Filing Offices
Schedule 3.20(a) Owned Real Property
Schedule 3.20(b) Leased Real Property
Schedule 3.22 Labor Matters
Schedule 4.02(f) Subsidiaries Not Subject to Pledge
Schedule 5.16 Assets and Operations of Coram
Schedule 6.01(a) Indebtedness
Schedule 6.01(d) Conversion Tests for Junior PIK Notes
<PAGE> 6
5
Schedule 6.01(o) Joint Venture Indebtedness
Schedule 6.02 Liens
Schedule 6.04(g) Investments
Schedule 6.07 Transactions with Affiliates
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E Form of Parent Guarantee Agreement
Exhibit F Form of Pledge Agreement
Exhibit G Form of Security Agreement
Exhibit H Form of Intellectual Property Security Agreement
Exhibit I Form of Subsidiary Guarantee Agreement
Exhibit J-1 Form of Opinion of Brobeck, Phleger & Harrison,
Counsel for Coram, the Borrower and the Subsidiaries
Exhibit J-2 Form of Opinion of Brobeck, Phleger & Harrison,
Counsel for Coram, the Borrower and the Subsidiaries
Exhibit J-3 Form of Opinion of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A., Local Counsel for
HealthInfusion
Exhibit K-1 Form of Borrowing Base Certificate
Exhibit K-2 Supplemental Borrowing Base Information
Exhibit L Form of Location Update
<PAGE> 7
CREDIT AGREEMENT dated as of April 6, 1995, among CORAM HEALTHCARE
CORPORATION, a Delaware corporation ("Coram"), CORAM, INC., a Delaware
corporation (the "Borrower") and a wholly owned subsidiary of Coram, the
financial institutions listed on Schedule 2.01 (the "Lenders") and
CHEMICAL BANK, a New York banking corporation, as agent (in such capacity,
the "Administrative Agent") for the Lenders, as collateral agent (in such
capacity, the "Collateral Agent") for the Lenders and as fronting bank
(the "Fronting Bank").
The Borrower will acquire from Caremark (such term and each other
capitalized term used but not defined in this preamble having the meaning
assigned thereto in Article I) in the Acquisition the Acquired Business for
consideration consisting of (a) not more than $210,000,000 in cash and (b) the
issuance by Coram to Caremark of (i) not more than $25,000,000 principal amount
of the Junior PIK Notes and (ii) not more than $90,000,000 principal amount of
the Convertible PIK Notes. Simultaneously with the consummation of the
Acquisition, (a) the Borrower will issue to DLJ $150,000,000 principal amount
of the Subordinated Bridge Notes, (b) Coram and the Borrower will make the
Contribution and (c) Coram and the Subsidiaries will repay their indebtedness
under the Existing Credit Agreement. All the foregoing actions are referred to
collectively as the "Acquisition Transactions".
The Borrower has requested the Lenders to extend credit in the form of
(a) Term Loans on the Closing Date, in an aggregate principal amount not in
excess of $200,000,000, and (b) Revolving Loans at any time and from time to
time prior to the Revolving Credit Maturity Date, in an aggregate principal
amount at any time outstanding not in excess of the difference between (i) the
lesser of (A) $100,000,000 and (B) the Borrowing Base at such time and (ii) the
L/C Exposure at such time. The Borrower has also requested the Fronting Bank
to issue Letters of Credit for the Borrower's account at any time and from time
to time prior to the Revolving Credit Maturity Date, in an aggregate stated
amount at any time outstanding not in excess of $20,000,000. The proceeds of
the Term Loans will be used by the Borrower solely (a) to pay the cash portion
of the purchase price to be paid in connection with the Acquisition, (b) to
repay indebtedness of Coram and its Subsidiaries under the Existing Credit
Agreement and (c) to pay related fees and expenses not in excess of $26,000,000
(such fees and expenses, the "Acquisition Costs"). The proceeds of Revolving
Loans will be used for general corporate purposes, including payment of all or
a portion of the Restructuring Charges. Letters of Credit will be used by
Coram, the Borrower or the Subsidiary Guarantors solely for ordinary course
purposes.
The Lenders are willing to extend such credit to the Borrower and the
Fronting Bank is willing to issue letters of credit for the account of the
Borrower, in
<PAGE> 8
2
each case on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at
a rate determined by reference to the Alternate Base Rate in accordance with
the provisions of Article II.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Account" shall mean any right to payment for goods sold or leased or
for services rendered, whether or not earned by performance.
"Account Debtor" shall mean, with respect to any Account, the obligor
with respect to such Account.
"Accounts Turnover" shall mean, at any date, the product of (a) an
amount equal to (i) the aggregate amount of Accounts outstanding as of the
first day of the most recently ended fiscal month of Coram prior to such date
for which a Borrowing Base Certificate and the other information required
pursuant to Section 5.04(d) shall have been delivered to the Lenders divided by
(ii) the aggregate amount of cash payments received by Coram, the Borrower and
the Subsidiaries during such month in respect of all Accounts and (b) 30 days.
"Acquired Business" shall mean substantially all the assets of
Caremark's home health infusion business, as set forth in the Asset Purchase
Agreement.
"Acquisition" shall mean the acquisition by the Borrower from Caremark
of the Acquired Business, as set forth in the Asset Purchase Agreement.
<PAGE> 9
3
"Acquisition Costs" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Acquisition Transactions" shall have the meaning assigned to such
term in the preamble to this Agreement.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate
in effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such
term in Section 2.05(b).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount
of the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate
or both for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) or (c), or both, of the immediately preceding sentence, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate
shall be effective on the effective date of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"Annualized EBITDA" shall have the meaning assigned to such term in
Section 6.13(a).
<PAGE> 10
4
"Applicable Commitment Fee Percentage" shall mean for any date the
applicable percentage set forth below based on the Total Consolidated Debt
Ratio and the Consolidated Interest Coverage Ratio as of the last day of the
Borrower's most recently ended fiscal quarter:
<TABLE>
<CAPTION>
Ratios Percentage
<S> <C>
Total Consolidated Debt Ratio greater than 2.30 .500%
or Consolidated Interest Coverage Ratio less
than 4.60
Total Consolidated Debt Ratio less than or .500%
equal to 2.30 but greater than 1.95 and
Consolidated Interest Coverage Ratio greater
than or equal to 4.60 but less than 5.45
Total Consolidated Debt Ratio less than or .375%
equal to 1.95 and
Consolidated Interest Coverage Ratio greater
than or equal to 5.45
</TABLE>
For purposes of the foregoing, (a) the Applicable Commitment Fee
Percentage at any time shall be determined by reference to the Total
Consolidated Debt Ratio and the Consolidated Interest Coverage Ratio as of the
last day of the fiscal quarter most recently ended prior to such time and for
the period for which such last day is the measuring date and (b) any change in
the Applicable Margin shall become effective for all purposes on and after the
date of delivery to the Administrative Agent of the certificate described in
Section 5.04(c) relating to such fiscal quarter; provided, however, that if the
proceeds of any Borrowing are used to finance a Permitted Business Acquisition
and the Total Consolidated Debt Ratio and the Consolidated Interest Coverage
Ratio after giving effect to such Permitted Business Acquisition would result
in a change in the Applicable Commitment Fee Percentage, such change shall
become effective for all purposes simultaneously with such Borrowing.
Notwithstanding the foregoing, (a) at any time during which the Borrower has
failed to deliver the certificate described in Section 5.04(c) with respect to
a fiscal quarter in accordance with the provisions thereof, the Total
Consolidated Debt Ratio and the Consolidated Interest Coverage Ratio shall be
deemed, solely for the purposes of this definition and until such time as the
Borrower shall deliver such certificate in accordance with the provisions of
Section 5.04(c), to be the Total Consolidated Debt Ratio and the Consolidated
Interest Coverage Ratio, respectively, in effect immediately prior to the
failure to deliver such certificate, and (b) until the Borrower shall have
delivered such certificate in respect of the fiscal quarter ending June 30,
<PAGE> 11
5
1995, the Total Consolidated Debt Ratio shall be deemed to be greater than 2.30
and the Consolidated Interest Coverage Ratio shall be deemed to be less than
4.60.
"Applicable Margin" shall mean for any date, with respect to the Loans
comprising any Eurodollar Borrowing or ABR Borrowing, as the case may be, the
applicable spread set forth below based on the Total Consolidated Debt Ratio
and the Consolidated Interest Coverage Ratio as of the last day of the
Borrower's most recently ended fiscal quarter:
<TABLE>
<CAPTION>
Ratios LIBOR Margin ABR Margin
<S> <C> <C>
Total Consolidated Debt Ratio 2.500% 1.500%
greater than 2.30 or Consolidated
Interest Coverage Ratio less than
4.60
Total Consolidated Debt Ratio 2.000% 1.000%
less than or equal to 2.30 but
greater than 1.95 and
Consolidated Interest Coverage
Ratio greater than or equal to
4.60 but less than 5.45
Total Consolidated Debt Ratio 1.500% 0.500%
less than or equal to 1.95 and
Consolidated Interest Coverage
Ratio greater than or equal to
5.45
</TABLE>
For purposes of the foregoing, (a) the Applicable Margin at any
time shall be determined by reference to the Total Consolidated Debt Ratio and
the Consolidated Interest Coverage Ratio as of the last day of the fiscal
quarter most recently ended prior to such time and for the period for which
such last day is the measuring date and (b) any change in the Applicable Margin
shall become effective for all purposes on and after the date of delivery to
the Administrative Agent of the certificate described in Section 5.04(c)
relating to such fiscal quarter and shall apply (i) in the case of the ABR
Margin, to ABR Loans outstanding on such delivery date or made on and after
such delivery date and (ii) in the case of the LIBOR Margin, to Eurodollar
Loans made on and after such delivery date (including pursuant to any
conversion or continuation pursuant to Section 2.10); provided, however, that
if the proceeds of any Borrowing are used to finance a Permitted Business
Acquisition and
<PAGE> 12
6
the Total Consolidated Debt Ratio and the Consolidated Interest Coverage Ratio
after giving effect to such Permitted Business Acquisition would result in a
change in the Applicable Margin, such change shall become effective for all
purposes simultaneously with such Borrowing. Notwithstanding the foregoing,
(a) at any time during which the Borrower has failed to deliver the certificate
described in Section 5.04(c) with respect to a fiscal quarter in accordance
with the provisions thereof, the Total Consolidated Debt Ratio and the
Consolidated Interest Coverage Ratio shall be deemed, solely for the purposes
of this definition and until such time as the Borrower shall deliver such
certificate in accordance with the provisions of Section 5.04(c), to be the
Total Consolidated Debt Ratio and the Consolidated Interest Coverage Ratio,
respectively, in effect immediately prior to the failure to deliver such
certificate, and (b) until the Borrower shall have delivered such certificate
in respect of the fiscal quarter ending June 30, 1995, the Total Consolidated
Debt Ratio shall be deemed to be greater than 2.30 and the Consolidated
Interest Coverage Ratio shall be deemed to be less than 4.60.
"Applicable Percentage" of any Revolving Credit Lender at any time
shall mean the percentage of the Total Revolving Credit Commitment represented
by such Lender's Revolving Credit Commitment. In the event the Revolving
Credit Commitments shall have expired or been terminated, the Applicable
Percentages shall be determined on the basis of the Revolving Credit
Commitments most recently in effect.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Administrative Agent as the then current net annual assessment rate that will
be employed in determining amounts payable by the Administrative Agent to the
Federal Deposit Insurance Corporation (or any successor) for insurance by such
Corporation (or such successor) of time deposits made in Dollars at the
Administrative Agent's domestic offices.
"Asset Purchase Agreement" shall mean the Asset Sale and Note Purchase
Agreement dated as of January 29, 1995, among Coram, Caremark and Caremark
International Inc., as amended from time to time in accordance with Section
6.10.
"Assets Held for Sale" shall mean the assets set forth on Schedule
1.01.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Available Revolving Credit Commitment" shall mean, at any time, the
excess of (a) the lesser of (i) the Total Revolving Credit Commitment at such
time and
<PAGE> 13
7
(ii) the Borrowing Base at such time over (b) the Aggregate Revolving Credit
Exposure at such time.
"Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrower Junior PIK Notes Exchange Transaction" shall mean the
exchange of Junior PIK Notes for Junior PIK Refinancing Notes of the Borrower
following the second anniversary of the Closing Date in accordance with Section
7 of the Junior PIK Notes.
"Borrower Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of April [ ] , 1995, among the Borrower, Coram and
DLJ providing for the purchase and sale of the Subordinated Bridge Notes and
the issuance of the Subordinated Rollover Notes, as such agreement may be
amended from time to time in accordance with the provisions hereof.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Base" shall mean, with respect to the Borrower at any
time, an amount equal to the product of (a) 85% and (b) an amount equal to (i)
Eligible Accounts Receivable at such time less (ii) the Dilution Reserve at
such time. The Borrowing Base shall be computed monthly in accordance with
Section 5.04(d). The Borrowing Base at any time in effect shall be determined
by reference to the Borrowing Base Certificate most recently delivered in
accordance with Section 5.04(d).
"Borrowing Base Certificate" shall have the meaning assigned to such
term in Section 5.04(d).
"Borrowing Request" shall mean a request by the Borrower in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit C.
"Business Day" shall mean any day other than a Saturday, Sunday or day
on which banks in New York City and Denver, Colorado, are authorized or
required by law to close; provided, however, that when used in connection with
a Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditures" shall mean, for any person in respect of any
period, the sum of (a) the aggregate of all expenditures incurred by such
person during such
<PAGE> 14
8
period that, in accordance with GAAP, are or should be included in "additions
to property, plant or equipment" or similar items reflected in the statement of
cash flows of such person and (b) to the extent not covered by clause (a)
above, the aggregate of all expenditures by such person to acquire by purchase
or otherwise the business, property or fixed assets of, or stock or other
evidence of beneficial ownership of, any other person; provided, however, that
Capital Expenditures shall not include (i) expenditures of proceeds of
insurance settlements in respect of lost, destroyed or damaged assets,
equipment or other property to the extent such expenditures are made to replace
or repair all or any part of such lost, destroyed or damaged assets, equipment
or other property within 12 months of the receipt of such proceeds, (ii)
expenditures made to make any Permitted Other Acquisition or any Permitted
Stock Acquisition or (iii) expenditures in respect of Permitted Business
Acquisitions made pursuant to the proviso to clause (b) of the definition of
the term "Net Proceeds"; and provided further, however, that for the purposes
of Sections 6.12 and 6.14, the term "Capital Expenditures" shall not include
expenditures in respect of Permitted Business Acquisitions made pursuant to
Section 6.04(d).
"Capital Lease Obligations" of any person shall mean the obligations
of such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Caremark" shall mean Caremark Inc., a California corporation.
"Cash Concentration Account" shall mean (a) prior to the date on which
the Borrower has complied with the provisions of Section 5.14(a)(ii), the cash
concentration account maintained by the Borrower with Wells Fargo Bank, N.A. in
San Francisco, California (account no. 4896044377), and the cash concentration
account maintained by the Borrower with The First National Bank of Chicago in
Chicago, Illinois (account no. 55-34364), and (b) the cash concentration
account maintained by the Borrower with Chemical Bank in New York, New York.
"Cash Concentration Agreement" shall have the meaning assigned to
such term in the Security Agreement.
A "Change in Control" shall be deemed to have occurred if:
(a) any Person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on the date hereof)
shall own directly or indirectly, beneficially or of record, shares
representing 30% or more of the aggregate ordinary voting power
represented by the issued and
<PAGE> 15
9
outstanding capital stock of Coram, other than Caremark as a result of
conversion of Convertible PIK Notes;
(b) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted Coram's
Board of Directors (together with any new directors whose election to
Coram's Board of Directors or whose nomination for election to Coram's
Board of Directors by Coram's shareholders was approved by a vote of
at least two-thirds of Coram's directors then still in office who
either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of Coram's directors then in
office;
(c) any change in control with respect to Coram, the Borrower or
any Subsidiary (or similar event, however denominated) shall occur
under and as defined in the indenture or other agreement providing for
the issuance of the Subordinated Bridge Notes, any Subordinated
Rollover Notes, any Refinancing Notes or the Subordinated Seller Notes
or in any other indenture or agreement in respect of Indebtedness to
which Coram, the Borrower or any Subsidiary is party;
(d) Coram shall cease to own and control directly, of record and
beneficially, 100% of each class of outstanding capital stock of the
Borrower free and clear of all Liens (other than any Lien under the
Security Documents); or
(e) the Borrower or any of the Subsidiaries shall issue any
class of capital stock (or security convertible into any of its
capital stock) that is not pledged to the Collateral Agent for the
ratable benefit of the Secured Parties.
"Chemical Cash Concentration Account" shall mean the Cash
Concentration Account described in clause (b) of the definition of the term
"Cash Concentration Account".
"Closing Date" shall mean the date of the first Borrowing hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document and shall also include any Mortgaged Properties.
"Collection Deposit Account" shall mean any account maintained by
Coram, the Borrower or any of the Subsidiaries in accordance with the terms of
the Security
<PAGE> 16
10
Agreement for the purpose of receiving deposits consisting of payments from
customers in the ordinary course of business.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment and Term Loan Commitment and, with respect to the
Fronting Bank, its L/C Commitment.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.05(a).
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower dated February 1995, delivered to the
Lenders in connection with this Agreement.
"Consolidated Cash Interest Expense" shall mean, with respect to
Coram, the Borrower and the Subsidiaries on a consolidated basis for any
period, Consolidated Interest Expense for such period less the sum of (a)
pay-in-kind Consolidated Interest Expense, (b) to the extent included in
Consolidated Interest Expense, the amortization of fees paid by Coram, the
Borrower or any Subsidiary on or prior to the Closing Date in connection with
the Transactions and (c) the amortization of debt discounts, if any, or fees in
respect of Interest Rate Protection Agreements.
"Consolidated Current Assets" shall mean, with respect to Coram, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all assets (other than cash and Permitted Investments or other
cash equivalents) that would, in accordance with GAAP, be classified on a
consolidated balance sheet of Coram, the Borrower and the Subsidiaries as
current assets at such date of determination.
"Consolidated Current Liabilities" shall mean, with respect to Coram,
the Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all liabilities (other than the current portion of long-term
Indebtedness) that would, in accordance with GAAP, be classified on a
consolidated balance sheet of Coram, the Borrower and the Subsidiaries as
current liabilities at such date of determination.
"Consolidated Interest Coverage Ratio" shall mean, as of any date, the
ratio of (a) EBITDA for the period of four consecutive fiscal quarters (or such
lesser number of fiscal quarters as shall have been completed since the Closing
Date) ending on the last day of the fiscal quarter most recently ended to (b)
Consolidated Interest Expense for the period of four consecutive fiscal
quarters (or such lesser number of fiscal quarters as shall have been completed
since the Closing Date) ending on the last day of the fiscal quarter most
recently ended.
<PAGE> 17
11
"Consolidated Interest Expense" shall mean, with respect to Coram, the
Borrower and the Subsidiaries on a consolidated basis for any period, interest
accrued or paid by Coram, the Borrower and the Subsidiaries during such period
in respect of Total Debt determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Assets" shall mean, with respect to Coram, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all assets that would, in accordance with GAAP, be classified on
a consolidated balance sheet of Coram, the Borrower and the Subsidiaries as
assets at such date of determination, net of all liabilities that would, in
accordance with GAAP, be classified on a consolidated balance sheet of Coram,
the Borrower and the Subsidiaries as liabilities at such date of determination.
"Consolidated Working Capital" shall mean, with respect to Coram, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, Consolidated Current Assets at such date of determination minus
Consolidated Current Liabilities at such date of determination.
"Contribution" shall mean, collectively, the contribution by Coram to
the Borrower of all the outstanding capital stock of each direct subsidiary of
Coram and the contribution by the Borrower to Curaflex of the Acquired
Business.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and the terms"Controlling" and "Controlled" shall have meanings
correlative thereto.
"Convertible PIK Notes" shall mean (a) the convertible junior
subordinated pay-in-kind notes of Coram issued to Caremark on the Closing Date
in accordance with the terms of this Agreement and the Asset Purchase Agreement
and (b) any convertible junior subordinated pay-in-kind notes of Coram issued
as payment of interest on the notes referred to in clause (a) of this
definition in accordance with their terms.
"Coram Junior PIK Notes Exchange Transaction" shall mean the exchange
of Junior PIK Notes for Refinancing Notes of Coram during the 90-day period
following the second anniversary of the Closing Date in accordance with Section
5.1 of the Junior PIK Notes.
"Credit Event" shall have the meaning assigned to such term in Article
IV.
"Curaflex" shall mean Curaflex Health Services, Inc., a Delaware
corporation.
<PAGE> 18
12
"Debt Service" shall mean, with respect to Coram, the Borrower and the
Subsidiaries on a consolidated basis for any period, the sum of (a)
Consolidated Cash Interest Expense of Coram, the Borrower and the Subsidiaries
for such period, (b) scheduled principal amortization of Total Debt of Coram,
the Borrower and the Subsidiaries for such period (whether or not such payments
are made) and (c) the amortization of fees in respect of Interest Rate
Protection Agreements.
"Default" shall mean any event or condition that upon notice, lapse of
time or both would constitute an Event of Default.
"Designated Subsidiary" shall mean at any time any Subsidiary that has
assets with a total market value not in excess of $10,000 at such time and
either (a) has not conducted any business or other operations during the
12-month period prior to such time or (b) has, as a result of a group
restructuring or asset disposition involving one or more Subsidiaries, in each
case permitted by this Agreement, become inactive at such time and will after
such time no longer conduct any business or other operations. The Designated
Subsidiaries in existence on the date hereof are set forth on Schedule 3.08.
"Dilution Factors" shall mean, with respect to Coram, the Borrower and
the Subsidiaries, the Dollar amount of any (a) credit memos plus (b) bad debt
write-offs plus (c) other noncash credits or adjustments, in each case applied
to an Account Debtor's balance.
"Dilution Ratio" shall mean, at any date, an amount (expressed as a
percentage) obtained by dividing (a) the aggregate amount of the Dilution
Factors for the five most recently ended fiscal months of Coram prior to such
date for which a Borrowing Base Certificate and the other information required
pursuant to Section 5.04(d) shall have been delivered to the Lenders by (b) the
total gross credit billings of Coram, the Borrower and the Subsidiaries on a
consolidated basis for such five fiscal months; provided, however, that (i) to
the extent that Accounts Turnover for each of the three most recently ended of
such fiscal months shall be less than or equal to 120 days, the Dilution Ratio
shall be calculated by reference to the four most recently ended such fiscal
months and (ii) to the extent that Accounts Turnover for each of such three
most recently ended fiscal months shall be less than or equal to 90 days, the
Dilution Ratio shall be calculated by reference to such three fiscal months.
"Dilution Reserve" shall mean, at any date, an amount obtained by
multiplying (a) the Dilution Ratio at such date by (b) Eligible Accounts
Receivable for the most recently ended fiscal month of Coram prior to such date
for which a Borrowing Base Certificate and the other information required
pursuant to Section 5.04(d) shall have been delivered to the Lenders.
<PAGE> 19
13
"DLJ" shall mean Coram Funding, Inc.
"Dollars" or "$" shall mean lawful money of the United States of
America.
"Earn-out Obligations" shall mean any obligations, whether contingent
or matured, to pay additional consideration in connection with the acquisition
by Coram, the Borrower or any Subsidiary of any capital stock or assets.
"EBITDA" shall mean, with respect to Coram, the Borrower and the
Subsidiaries on a consolidated basis for any period, the consolidated net
income of such corporation and its subsidiaries on a consolidated basis for
such period plus, to the extent deducted in computing such consolidated net
income, the sum of (a) income tax expense, (b) interest expense, (c)
depreciation and amortization expense, (d) any extraordinary losses and (e) any
restructuring charges (whether cash or noncash) in such period in connection
with Permitted Business Acquisitions or the Acquisition, including relocation,
retraining and transition costs associated with the Acquisition, minus (i) to
the extent added in computing such consolidated net income, any extraordinary
gains, all as determined on a consolidated basis with respect to such
corporation and its subsidiaries in accordance with GAAP, (ii) any cash
payments made in respect of Earn-out Obligations, (iii) any Restructuring
Charges to the extent that the aggregate Restructuring Charges for the period
following the Closing Date exceed $90,000,000 and (iv) any cash expenditures in
such period that constitute restructuring charges in respect of Permitted
Business Acquisitions.
"Eligible Accounts Receivable" shall mean at the time of any
determination thereof the aggregate face amount of all Accounts that meet the
following criteria at the time of creation and continue to meet the same at the
time of such determination: (a) the date of such determination is not later
than 120 days after the date of the original invoice with respect to such
Account (provided that the Accounts of any Account Debtor with original invoice
dates that are less than 120 days prior to such date of determination shall be
reduced by the amount of net credit balances of such Account Debtor the dates
of which are more than 120 days prior to such date of determination); provided,
however, that, from the period commencing on the Closing Date and ending on the
last day of the twelfth completed fiscal month following the Closing Date, with
respect to (i) any Account acquired in connection with the Acquisition and (ii)
any other Account so long as the average of the Accounts Turnover for the three
most recently ended fiscal months is more than 90 days, the date of
determination shall be not later than 150 days after the date of the original
invoice with respect to such Account; (b) such Account is denominated in
Dollars; (c) such Account (i) arose from a completed, outright and lawful sale
of goods or from the completed performance and acceptance of services (other
than management services) in the ordinary course of business by the Borrower or
a Guarantor and (ii) the related invoice, claim form and any other necessary
supporting documentation has been filed with or submitted to the Account
Debtor; provided, however, that 50%
<PAGE> 20
14
of all Accounts in respect of which an invoice shall not have been submitted as
of the end of any calendar month shall constitute Eligible Accounts Receivable
so long as the net increase in the Borrowing Base as a result of such inclusion
does not exceed $5,000,000; (d) such Account (i) is owned solely by the
Borrower or a Guarantor (other than any Subsidiary that is not a Wholly Owned
Subsidiary or any Joint Venture), (ii) is subject to a perfected first priority
security interest in favor of the Collateral Agent for the benefit of the
Secured Parties pursuant to the Security Documents (except to the extent the
Account Debtor with respect to such Account is the United States Medicare or
Medicaid Program) and (iii) is not subject to any other Lien (including, in the
case of any Account owed by an Account Debtor that is a Federal Governmental
Authority, any Lien pursuant to the Federal Assignment of Claims Act, unless
the Collateral Agent shall have received an assignment of claims in form and
substance satisfactory to it within 60 days of the creation of such Account);
(e) such Account arose in the ordinary course of business of the Borrower or a
Guarantor and, to the best knowledge of the Borrower and the Guarantors, no
event of death, bankruptcy, insolvency or inability to pay creditors generally
of the Account Debtor thereunder has occurred, and no notice thereof has been
received; (f) such Account complies in all material respects with the
requirements of all applicable laws and regulations, whether Federal, state or
local; (g) with respect to such Account, the Account Debtor (i) is a United
States person (or, if such person is not a United States person, such Account
is supported by a letter of credit approved by the Administrative Agent in
favor of the Borrower or a Guarantor), (ii) is not an Affiliate or Subsidiary
of the Borrower or an Affiliate of any of the Subsidiaries and (iii) is not a
natural person; (h) such Account constitutes an "account" or "chattel paper" or
a "general intangible" within the meaning of the Uniform Commercial Code of the
state in which the Account is located; (i) such Account is in full force and
effect and constitutes a legal, valid and binding obligation of the Account
Debtor enforceable in accordance with its terms; and (j) the Account Debtor
with respect to such Account has not asserted that such Account is, and neither
the Borrower nor any of its Subsidiaries is aware of any basis upon which such
Account could be, subject to any defense, offset, deduction, credit or dispute,
other than in the ordinary course of business.
"Employee Loan" means a loan by Coram, the Borrower or of any of the
Subsidiaries (a) to one of its employees who has moved more than 50 miles to
take or continue employment with Coram, the Borrower or such Subsidiary, as the
case may be, 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 the sale by
such employee of his or her residence prior to such move and (b) to one of its
employees representing payment for any capital stock of Coram or representing
payment of the exercise price of options to purchase capital stock of Coram.
<PAGE> 21
15
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action by, or on behalf of, any Governmental Authority or any
person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution or any adverse
effect on the environment, in each case caused by any Hazardous Material, or
for fines, penalties or restrictions, resulting from or based upon: (a) the
existence, or the continuation of the existence, of a Release (including sudden
or non- sudden, accidental or non-accidental Releases); (b) exposure to any
Hazardous Material; (c) the presence, use, handling, transportation, storage,
treatment or disposal of any Hazardous Material; or (d) the violation or
alleged violation of any Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable current and
future treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources or human exposure
to or the management or Release or threatened Release of any Hazardous
Material.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414 (b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or
Eurodollar Term Loan.
<PAGE> 22
16
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in
Article VII.
"Excess Cash Flow" shall mean, with respect to the Borrower and the
Subsidiaries on a consolidated basis for any fiscal year, EBITDA of the
Borrower and the Subsidiaries on a consolidated basis for such fiscal year,
minus (a) Debt Service of the Borrower and the Subsidiaries on a consolidated
basis for such fiscal year, (b) any prepayments of Term Loans during such
fiscal year, (c) permitted Capital Expenditures by the Borrower and the
Subsidiaries on a consolidated basis during such fiscal year that are paid in
cash, (d) taxes paid in cash by the Borrower and the Subsidiaries on a
consolidated basis during such fiscal year, (e) an amount equal to any increase
in Consolidated Working Capital of the Borrower and the Subsidiaries during
such fiscal year and (f) the amount of any loans made, dividends paid or
distributions made to Coram during such fiscal year pursuant to Section
6.01(h), 6.06(c) or 6.06(g) to the extent added in determining EBITDA, all
items that did not result from a cash payment to the Borrower and the
Subsidiaries on a consolidated basis during such fiscal year plus (i) an amount
equal to any decrease in Consolidated Working Capital during such fiscal year
and (ii) to the extent subtracted in determining EBITDA, all items that did not
result from a cash payment by the Borrower and the Subsidiaries on a
consolidated basis during such fiscal year.
"Existing Cash Concentration Accounts" shall mean the Cash
Concentration Accounts described in clause (a) of the definition of the term
"Cash Concentration Account".
"Existing Credit Agreement" shall mean the Amended and Restated Credit
Agreement dated as of February 10, 1995, by and among Coram, Curaflex,
HealthInfusion, Medisys, HMSS and T2, Toronto Dominion (Texas), Inc., the
Co-Agents named therein and the financial institutions party thereto.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations
<PAGE> 23
17
for the day of such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by it.
"Fee Letter" shall mean the Fee Letter dated January 24, 1995,
between Coram and the Administrative Agent.
"Fees" shall mean the Commitment Fees, the Administrative Agent Fees,
the L/C Participation Fees and the Fronting Bank Fees.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, treasurer or controller of such
corporation.
"Fronting Bank Fees" shall have the meaning assigned to such term in
Section 2.05(c).
"GAAP" shall mean generally accepted accounting principles applied on
a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of
such person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness of the payment of
such Indebtedness or (c) to maintain working capital, equity capital or any
other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness; provided, however, that
the term "Guarantee" shall not include endorsements for collection or deposit
in the ordinary course of business.
"Guarantee Agreements" shall mean the Parent Guarantee Agreement and
the Subsidiary Guarantee Agreement.
"Guarantors" shall mean Coram and the Subsidiary Guarantors.
"Hazardous Materials" shall mean all explosive or radioactive
substances or wastes, hazardous or toxic substances or wastes, pollutants,
solid, liquid or gaseous wastes, including petroleum or petroleum distillates,
asbestos or asbestos-containing materials, polychlorinated biphenyls ("PCBs")
or PCB-containing materials or
<PAGE> 24
18
equipment, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.
"Health Care Law" shall mean any and all applicable current and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by the Food and Drug Administration, the Health Care Financing
Administration, the Department of Health and Human Services ("HHS"), the Office
of Inspector General of HHS, the Drug Enforcement Administration, any other
Governmental Authority or the Health Industry Manufacturers Association or any
other industry organization, including any state and/or local professional
licensing laws, certificate of need laws and state reimbursement laws, the
Physician Self-Referral Laws, relating in any way to the manufacture,
distribution, marketing, sale or other disposition of any product or service of
Coram, the Borrower or any Subsidiary, the conduct of the business of Coram,
the Borrower or any Subsidiary, the provision of health care services
generally, or to any relationship among Coram, the Borrower and its
Subsidiaries, on the one hand, and their suppliers and customers and patients
and other end-users of their products and services, on the other hand.
"HealthInfusion" shall mean HealthInfusion, Inc., a Florida
corporation.
"HMSS" shall mean H.M.S.S., Inc., a Delaware corporation.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid (excluding operating leases
and trade accounts payable and accrued obligations incurred in the ordinary
course of business), (d) all obligations of such person under conditional sale
or other title retention agreements relating to property or assets purchased by
such person, (e) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding trade accounts
payable and accrued obligations incurred in the ordinary course of business but
including any Earn-out Obligations), (f) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such person of Indebtedness of others, (h) all Capital Lease
Obligations of such person, (i) all net obligations of such person in respect
of interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements, (j) all obligations of
such person as an account party in respect of letters of credit and bankers'
acceptances and (k) all obligations in respect of Reverse Repurchase
Agreements. The Indebtedness of any person shall include the Indebtedness of
any partnership in which such person is a general partner.
<PAGE> 25
19
For purposes of determining compliance with the covenants set forth in Sections
6.12, 6.13, 6.14 and 6.15, the term "Indebtedness" shall not include (a) any
Earn-out Obligations unless and until such Earn-out Obligations have been fully
earned or (b) Indebtedness of any partnership in which such person is a
partner, the financial results of which are not consolidated with those of
Coram.
"Indemnitee" shall have the meaning assigned to such term in Section
9.05(b).
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among the Borrower, the Subsidiary Guarantors and the Collateral
Agent.
"Intellectual Property Security Agreement" shall mean the Intellectual
Property Security Agreement, substantially in the form of Exhibit H, among
Coram, the Borrower and certain Subsidiaries, as grantors, and the Collateral
Agent for the benefit of the Secured Parties.
"Interest Payment Date" shall mean, (a) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each day that would have been an
Interest Payment Date had successive Interest Periods of three months' duration
been applicable to such Borrowing, and, in addition, the date of any conversion
of such Borrowing with or to a Borrowing of a different Type and (b) with
respect to any ABR Loan, the last day of each calendar quarter.
"Interest Period" shall mean, with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing or on the last
day of the immediately preceding Interest Period applicable to such Borrowing,
as the case may be, and ending on the numerically corresponding day (or, if
there is no numerically corresponding day, on the last day) in the calendar
month that is 1, 2, 3, 6 or, if available to all the Lenders, 9 or 12 months
thereafter, as the Borrower may elect, and the date any Eurodollar Borrowing is
converted to an ABR Borrowing in accordance with Section 2.10 or repaid or
prepaid in accordance with Section 2.11 or 2.12; provided, however, that if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Interest Rate Protection Agreement" shall mean any interest rate cap,
swap, collar or floor agreement or other agreement or arrangement satisfactory
to the
<PAGE> 26
20
Administrative Agent entered into by the Borrower designed to protect the
Borrower against fluctuations in interest rates.
"Joint Venture" shall mean the partnerships listed in Schedule 3.08
and any other person that is not a Wholly Owned Subsidiary and in which Coram,
the Borrower or any of the Subsidiaries directly or indirectly holds an
ownership interest pursuant to a partnership agreement or other joint venture
documents.
"Junior PIK Notes" shall mean (a) the junior subordinated pay-in-kind
notes of Coram issued to Caremark on the Closing Date in accordance with the
terms of this Agreement and the Asset Purchase Agreement and (b) any junior
subordinated pay-in-kind notes of Coram issued as payment of interest on the
notes referred to in clause (a) of this definition in accordance with their
terms.
"Junior PIK Notes Exchange Transactions" shall mean the Borrower
Junior PIK Notes Exchange Transaction and the Coram Junior PIK Notes Exchange
Transaction.
"Junior PIK Refinancing Notes" shall mean the senior subordinated
notes of Coram or the Borrower issued in the Coram Junior PIK Notes Exchange
Transaction or the Borrower Junior PIK Notes Exchange Transaction,
respectively.
"L/C Collateral Account" shall have the meaning assigned to such term
in the Security Agreement.
"L/C Commitment" shall mean the commitment of the Fronting Bank to
issue Letters of Credit pursuant to Section 2.21.
"L/C Disbursement" shall mean a payment or disbursement made by the
Fronting Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate principal amount of all L/C Disbursements that have not yet been
reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at
any time shall mean its Applicable Percentage of the aggregate L/C Exposure at
such time.
"L/C Participation Fee" shall have the meaning assigned to such term
in Section 2.05(c).
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.21.
<PAGE> 27
21
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing, the
rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar
deposits approximately equal in principal amount to, the Administrative Agent's
portion of such Eurodollar Borrowing and for a maturity comparable to such
Interest Period are offered to the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset and (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset
(but excluding any financing statement filed by a lessor under an operating
lease not intended to be a secured financing).
"Loan Documents" shall mean this Agreement, the Letters of Credit, the
Guarantee Agreements, the Security Documents and the Indemnity, Subrogation and
Contribution Agreement.
"Loan Parties" shall mean Coram, the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a materially adverse effect on
(a) the business, assets, operations, properties, financial condition or
prospects of Coram and its subsidiaries taken as a whole, (b) the ability of
Coram or the Borrower or the collective ability of the other Loan Parties to
perform its or their obligations under the Loan Documents and (c) the validity
or enforceability of any of the Loan Documents.
"Medisys" shall mean Medisys, Inc., a Delaware corporation.
"Model" shall mean the financial model, including financial
projections concerning the Acquired Business, Coram, the Borrower and the
Transactions, delivered to the Lenders and contained in the Confidential
Information Memorandum.
"Mortgaged Properties" shall mean the owned real properties of the
Loan Parties in respect of which a Mortgage is delivered pursuant to Section
5.12.
"Mortgages" shall mean the mortgages, deeds of trust, leasehold
mortgages, assignments of leases and rents, modifications and other security
documents delivered pursuant to Section 5.12, in form satisfactory to the
Collateral Agent.
<PAGE> 28
22
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o)
of Code Section 414) is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Net Proceeds" shall mean:
(a) the cash proceeds received in respect of insurance
settlements and condemnation awards in any fiscal year of the Borrower
in excess of $500,000 (other than insurance proceeds in connection
with the T2 Litigation and other proceeds of insurance
settlements not arising from any casualty to any asset) from any loss,
damage, destruction or condemnation of any asset or assets of
Coram, the Borrower or any Subsidiary and cash proceeds in excess of
$2,000,000 in any fiscal year in respect of sales and other
dispositions of equipment, supplies, vehicles and materials that are
obsolete or no longer useful in the operation of Coram, the Borrower
and the Subsidiaries, net of, in the case of any insurance settlement
or condemnation award, (i) expenses of the Borrower or any Subsidiary
associated with such insurance settlement or condemnation award
(including reasonable consultant's fees or commissions, reasonable
legal costs and the Borrower's good-faith estimate of income taxes
incurred in connection with the receipt of such insurance settlements
or condemnation awards), (ii) the payment of any Indebtedness secured
by a Lien on any asset that is required by its terms to be repaid in
connection with the receipt of such insurance settlement or
condemnation award and (iii) the amount of any reasonable reserve
established in accordance with GAAP against any liabilities (other
than any taxes deducted pursuant to clause (i) above) associated with
the receipt of such insurance settlement or condemnation award,
provided that the amount of any subsequent reduction of such reserve
(other than in connection with a payment in respect of any such
liability) shall be deemed to be Net Proceeds received as of the date
of such reduction; provided, however, that the amount of cash proceeds
calculated as provided above in this paragraph (a) shall be reduced by
the amount of such cash proceeds that the Borrower has used (or
intends to use within 12 months of the date of receipt of such cash
proceeds) to repair, rebuild or replace all or any part of the assets
in respect of which such cash proceeds were received, it being
understood that any portion of such cash proceeds that has not been so
used within such 12-month period shall be deemed to be Net Proceeds
received on the last day of such 12-month period;
(b) the cash proceeds (including cash proceeds subsequently
received in respect of noncash consideration initially received after
the Closing Date and amounts initially placed in escrow that
subsequently become available) from
<PAGE> 29
23
any sale, transfer or other disposition of any asset or assets of
Coram, the Borrower or any Subsidiary after the Closing Date (other
than (i) the sale of inventory and other assets in the ordinary course
of business, (ii) sales of Permitted Investments and other readily
marketable investment securities in the ordinary course of business,
(iii) leases and subleases in the ordinary course of business, (iv)
sales and other transfers between or among Coram, the Borrower and the
Subsidiaries, (v) sales and other dispositions of assets included in
paragraph (a) of this definition and (vi) sales of assets by any Joint
Venture (other than a sale of all or substantially all its assets or a
complete liquidation of such Joint Venture)) to any person in any
transaction or series of related transactions, for an aggregate
purchase price of $2,500,000 or more for the period following the
Closing Date, net of (A) selling expenses of the Borrower or any
Subsidiary (including reasonable broker's or consultant's fees or
commissions, reasonable legal costs, transfer and similar taxes and
the Borrower's good faith estimate of income taxes incurred in
connection with the receipt of such cash proceeds), (B) the payment of
any Indebtedness secured by a Lien on such asset that is required by
its terms to be repaid in connection with the sale of such asset, (C)
cash payments required to be made in respect of accrued employee
benefits, (D) the amount of any reasonable reserve established in
accordance with GAAP against any liabilities (other than any taxes
deducted pursuant to clause (A) above) associated with the assets sold
or disposed of or retained by Coram, the Borrower or any of the
Subsidiaries, provided that the amount of any subsequent reduction of
such reserve (other than in connection with a payment in respect of
any such liability) shall be deemed to be Net Proceeds received as of
the date of such reduction and (E) to the extent required to be made
pursuant to the terms of the agreement establishing such Joint Venture
in the case of the sale of a Joint Venture, distributions or other
payments to minority interests or any partner in a Joint Venture;
provided, however, that except as provided below, the amount of cash
proceeds calculated as provided above in this paragraph (b) shall be
reduced by the lesser of (x) 75% of the amount of such cash proceeds
and (y) the amount of such cash proceeds that the Borrower has used
(or intends to use within 18 months of the date of receipt of such
cash proceeds) to pay the purchase price in connection with any
Permitted Business Acquisition, it being understood that (1) 25% of
the cash proceeds calculated as provided above in this paragraph (b)
shall be deemed to be Net Proceeds on the date on which such cash
proceeds are received and (2) any remaining portion of such cash
proceeds that has not been used within the above-referenced 18-month
period shall be deemed to be Net Proceeds received on the last day of
such 18-month period; provided further, that so long as any
Subordinated Bridge Notes or Subordinated Rollover Notes remain
outstanding, the amount of cash proceeds calculated as provided above
in this paragraph (b) shall be reduced by the lesser of (x) 75% of the
amount of such cash proceeds in respect of Assets Held for Sale and
(y) the amount of such cash proceeds that the Borrower has
<PAGE> 30
24
used (or intends to use prior to the third Business Day prior to the first
anniversary of the Closing Date) to pay the purchase price in connection with
any Permitted Business Acquisition permitted pursuant to Section 6.8(c) of the
Borrower Securities Purchase Agreement, it being understood that (1) 25% of the
cash proceeds in respect of Assets Held for Sale calculated as provided above
in this paragraph (b) shall be deemed to be Net Proceeds on the date on which
such cash proceeds are received and (2) any remaining portion of such cash
proceeds that has not been used shall be deemed to be Net Proceeds received on
the third Business Day prior to the first anniversary of the Closing Date;
(c) the cash proceeds from the incurrence, issuance or sale by
Coram, the Borrower or any Subsidiary of any Indebtedness of Coram,
the Borrower or any Subsidiary (other than Indebtedness permitted
under Section 6.01), net of all taxes and customary fees, commissions,
costs and other expenses incurred in connection with such issuance or
sale; and
(d) 50% of an amount equal to (i) the cash proceeds from the
issuance or sale by Coram, the Borrower or any Subsidiary (other than
(A) any issuance or sale to Coram, the Borrower or any Subsidiary and
(B) any issuance or sale to any employee pursuant to any stock option
plan or other employee benefit or compensation plan) of any equity
security of Coram, the Borrower or any Subsidiary, net of all taxes
and customary fees, commissions costs and other expenses incurred in
connection with such issuance or sale, minus (ii) the portion of such
cash proceeds that, pursuant to the Borrower Securities Purchase
Agreement, either (x) is applied to the prepayment of the Subordinated
Bridge Notes or any Subordinated Rollover Notes or (y) would have been
applied to the prepayment of the Subordinated Bridge Notes or any
Subordinated Rollover Notes had the holders thereof not been
prohibited from receiving such payment pursuant to Section 5(b) of the
Subordinated Bridge Notes and the Subordinated Rollover Notes.
"Obligations" shall mean all obligations defined as "Obligations" in
the Guarantee Agreements and the Security Documents.
"Parent Guarantee Agreement" shall mean the Parent Guarantee
Agreement, substantially in the form of Exhibit E, made by Coram in favor of
the Collateral Agent for the benefit of the Secured Parties.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.
"Perfection Certificate" shall mean each Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
<PAGE> 31
25
"Permitted Business Acquisition" shall mean any acquisition of all or
substantially all the assets of, or shares or other equity interests in, a
person or division or line of business of a person (or any subsequent
investment made in a previously acquired Permitted Business Acquisition),
provided that (a) such assets, person, division or line of business to be
acquired is in a substantially similar line of business as Coram, the Borrower
or any of the Subsidiaries, (b) in the case of any Significant Business
Acquisition, the Lenders shall have received reasonably adequate financial
information regarding the assets or business to be acquired, including the most
recent audited financial statements, if available, but in any case the most
recently prepared balance sheet and statement of income for the assets or
business to be acquired and pro forma projected financial statements showing
the effect of the acquisition of the assets or business, including a balance
sheet for Coram and its consolidated subsidiaries as of the time of the
acquisition and projected statements of income for Coram and its consolidated
subsidiaries through at least the Revolving Credit Maturity Date, (c) all
transactions related thereto shall be consummated in accordance with applicable
laws and (d) immediately after giving effect thereto: (i) no Default or Event
of Default shall have occurred and be continuing or would result therefrom,
(ii) at least 100% of the capital stock of any acquired or newly formed
corporation, partnership, association or other business entity are owned
directly by the Borrower or a Wholly Owned Subsidiary and all actions required
to be taken, if any, with respect to such acquired or newly formed subsidiary
under Section 5.12 shall have been taken, (iii) in the case of acquisitions
where any portion of or all the consideration consists of cash, the Available
Revolving Credit Commitment shall be equal to at least $25,000,000 (without
altering or otherwise changing the Borrower's historical business practices in
managing its working capital accounts) and (iv)(A) Coram shall be in
compliance, on a pro forma basis after giving effect to such acquisition or
formation, with the covenants contained in Sections 6.12, 6.13, 6.14, 6.15 and
6.16 recomputed as at the last day of the most recently ended fiscal quarter of
Coram as if such acquisition had occurred on the first day of each relevant
period for testing such compliance, and, in the case of any Significant
Business Acquisition, the Borrower shall have delivered to the Administrative
Agent an officers' certificate to such effect, together with all relevant
financial information for such subsidiary or assets, and (B) any acquired or
newly formed subsidiary shall not be liable for any Indebtedness (except for
Indebtedness permitted by Section 6.01).
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations
are backed by the full faith and credit of the United States of
America), in each case maturing within 90 days from the date of
acquisition thereof;
<PAGE> 32
26
(b) investments in commercial paper maturing within 90 days from
the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from Standard &
Poor's Ratings Group or from Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 90 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any
commercial bank organized under the laws of the United States of
America or any State thereof that (i) has a combined capital and
surplus and undivided profits of not less than $250,000,000 and (ii)
is rated (or the senior debt securities of the holding company of such
commercial bank are rated) in one of the three highest grades by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc., or
another nationally recognized rating agency if neither of such two
named rating agencies shall rate such bank;
(d) other investment instruments approved in writing by the
Required Lenders (whether on an individual basis or pursuant to an
approval of any investment policy of the Borrower); and
(e) the investments permitted pursuant to Section 6.04(j).
"Permitted Liens" shall have the meaning assigned to such term in
Section 3.07.
"Permitted Other Acquisition" shall mean a Permitted Business
Acquisition in respect of which the Borrower shall on or prior to the making of
such acquisition have delivered to the Administrative Agent a certificate of a
Responsible Officer of the Borrower designating such acquisition as a Permitted
Other Acquisition for purposes of this Agreement.
"Permitted Stock Acquisition" shall have the meaning assigned to such
term in Section 6.04(f).
"person" shall mean any natural person, corporation, business trust,
Joint Venture, association, company, partnership or government, or any agency
or political subdivision thereof.
"Physician Self-Referral Laws" shall mean 42 U.S.C. Section 1320a-7b
and Section 1395nn, as from time to time amended, modified or supplemented,
and any successor or similar law, rule, regulation, code, ordinance, order,
decree, judgment, injunction, notice or binding agreement of any Governmental
Authority that imposes restrictions on the right of Coram, the Borrower or any
of the Subsidiaries to bill any
<PAGE> 33
27
Governmental Authority if the physician ordering the applicable service has an
ownership, investment or other financial interest in Coram, the Borrower or any
of the Subsidiaries or receives compensation from Coram, the Borrower or any of
the Subsidiaries, including, by way of example, California Labor Code Section
139 and California Business & Professions Code Sections 650.01 and 650.02, in
each case as from time to time amended, modified or supplemented.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code that is maintained for current or former employees, or any
beneficiary thereof, of Coram, the Borrower or any ERISA Affiliate.
"Pledge Agreement" shall mean the Subsidiary Pledge Agreement,
substantially in the form of Exhibit F, among Coram, the Borrower and certain
Subsidiaries, as pledgors, and the Collateral Agent for the benefit of the
Secured Parties.
"Prepayment Account" shall have the meaning assigned to such term in
the Security Agreement.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective on the date such change is publicly announced as being
effective.
"Principal Subsidiaries" shall mean the Borrower, Curaflex, HealthInfusion,
Medisys, T2 and HMSS.
"Projections" shall mean the financial projections delivered to the
Administrative Agent and the Lenders from time to time in accordance with
Section 5.04(e).
"Properties" shall have the meaning assigned to such term in Section
3.17(a).
"Refinancing Note Indenture" shall have the meaning assigned to such
term in Section 6.01.
"Refinancing Notes" shall mean one or more series of subordinated
notes issued by Coram or the Borrower (a) the Net Proceeds of which are used to
repay the Subordinated Bridge Notes or any Subordinated Rollover Notes or (b)
the Net Proceeds of which are used to repay the Refinancing Notes described in
clause (a) of this definition.
"Register" shall have the meaning given such term in Section 9.04(d).
<PAGE> 34
28
"Regulation G" shall mean Regulation G of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing, dispersing, emanating or migrating of any Hazardous
Material in, into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is
defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions
required by any Governmental Authority or voluntarily undertaken to: (i)
cleanup, remove, treat, abate or in any other way address any Hazardous
Material in the environment; (ii) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Material so it does not migrate
or endanger or threaten to endanger public health, welfare or the environment;
or (iii) perform studies and investigations in connection with, or as a
precondition to, (i) or (ii) above.
"Repayment Date" shall have the meaning given such term in Section
2.11.
"Reportable Event" shall mean any reportable event as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having Loans, L/C
Exposures and unused Commitments representing more than 50% of the sum of all
Loans outstanding and L/C Exposures and unused Commitments in effect at such
time.
"Responsible Officer" of any corporation shall mean any executive
officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obligations
of such corporation in respect of this Agreement.
"Restructuring Charges" shall mean, for any period, cash restructuring
charges paid by Coram, the Borrower or any Subsidiary during such period in
connection with Coram's 1994 restructuring plan and with the Acquisition and
the integration of Coram's existing operations and the Acquired Business.
<PAGE> 35
29
"Reverse Repurchase Agreements" shall mean sales by the Borrower of
its assets consisting of marketable securities with a concurrent agreement by
the Borrower to repurchase the same assets at a later date at a fixed price.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of
Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the commitment of such Lender to make Revolving Loans hereunder as set forth in
Section 2.01(b), or in the Assignment and Acceptance pursuant to which such
Lender assumed its Revolving Credit Commitment, as applicable, as the same may
be reduced from time to time pursuant to Section 2.09 and pursuant to
assignments by such Lender pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any Lender at
any time, the aggregate principal amount at such time of all outstanding
Revolving Credit Loans of such Lender plus the aggregate amount at such time of
such Lender's L/C Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Credit Maturity Date" shall mean the fifth anniversary of
the Closing Date.
"Revolving Loans" shall mean the revolving loans made by the Lenders
to the Borrower pursuant to Section 2.01. Each Revolving Loan shall be a
Eurodollar Revolving Loan or an ABR Revolving Loan.
"Secured Parties" shall have the meaning assigned to such term in the
Security Agreement.
"Security Agreement" shall mean the Security Agreement, substantially
in the form of Exhibit G, among Coram, the Borrower and certain Subsidiaries,
as grantors, and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages (if any), the Security
Agreement, the Pledge Agreement, the Intellectual Property Security Agreement
and each of the security agreements, mortgages and other instruments and
documents executed and delivered pursuant to any of the foregoing or pursuant
to Section 5.12.
"Significant Business Acquisition" shall mean any Permitted Business
Acquisition or related series of Permitted Business Acquisitions in respect of
which the aggregate amount of consideration (whether cash or property, as
valued at the
<PAGE> 36
30
time each such investment is made), including the amount of all liabilities
assumed or, in the case of an acquisition of a corporation or partnership, the
amount of liabilities shown on a balance sheet of such corporation or
partnership at the time of acquisition, equals or exceeds $5,000,000.
"Significant Subsidiary" shall mean at any time any Subsidiary that is
not a Designated Subsidiary at such time.
"Statutory Reserves" shall mean 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
any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board and any other banking authority, domestic or
foreign, to which the Administrative Agent or any Lender (including any branch,
Affiliate, or other Funding Office making or holding a Loan) is subject (a)
with respect to the Base CD Rate (as such term is used in the definition of the
term "Alternate Base Rate"), for new negotiable nonpersonal time deposits in
Dollars of over $100,000 with maturities approximately equal to three months,
and (b) with respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities
(as defined in Regulation D of the Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar Loans shall be
deemed to constitute Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"Subordinated Bridge Notes" shall mean the senior subordinated
increasing rate notes of the Borrower issued on the Closing Date pursuant to
the Borrower Securities Purchase Agreement in accordance with the terms of this
Agreement.
"Subordinated Guarantees" shall mean, collectively, any subordinated
guarantees of the Guarantors entered into in accordance with the terms of this
Agreement to guarantee the repayment of the Subordinated Bridge Notes, any
Subordinated Rollover Notes and any Refinancing Notes.
"Subordinated Rollover Notes" shall have the meaning assigned to such
term in Section 6.01(b).
"Subordinated Seller Notes" shall mean the Junior PIK Notes and the
Convertible PIK Notes.
"subsidiary" shall mean, with respect to any person (herein referred
to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the
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31
equity or more than 50% of the ordinary voting power or more than 50% of the
general partnership interests are, at the time any determination is being made,
owned, controlled or held, or (b) that is, at the time any determination is
made, otherwise Controlled, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.
"Subsidiary" shall mean each subsidiary of the Borrower.
"Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit H, made by the Subsidiary
Guarantors in favor of the Collateral Agent for the benefit of the Secured
Parties.
"Subsidiary Guarantor" shall mean each Subsidiary that is or becomes a
party to the Subsidiary Guarantee Agreement.
"T2" shall mean T2 Medical, Inc., a Delaware corporation.
"T2 Litigation" shall mean the litigation described under the heading
"T2 Stockholder Litigation" in Schedule 3.09.
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Loan Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Term Loans hereunder as set forth in Section
2.01(a), as the same may be reduced from time to time pursuant to Section 2.09.
"Term Loan Maturity Date" shall mean the fifth anniversary of the
Closing Date.
"Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to Section 2.01(a). Each Term Loan shall be a Eurodollar
Term Loan or an ABR Term Loan.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m., New York City
time, on such day (or, if such day shall not be a Business
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32
Day, on the next preceding Business Day) by the Administrative Agent from three
New York City negotiable certificate of deposit dealers of recognized standing
selected by it.
"Total Consolidated Debt Ratio" shall mean, as of any date, the ratio
of (a) Total Debt as of the last day of the fiscal quarter most recently ended
to (b)(i) prior to March 31, 1996, Annualized EBITDA for the period of one, two
or three consecutive fiscal quarters commencing on the Closing Date and ending
on the last day of the fiscal quarter most recently ended and (ii) for any
fiscal quarter thereafter, EBITDA for the period of four consecutive fiscal
quarters ending on the last day of the fiscal quarter most recently ended.
"Total Debt" shall mean, with respect to Coram, the Borrower and the
Subsidiaries on a consolidated basis at any time, all Indebtedness of Coram,
the Borrower and the Subsidiaries as determined on a consolidated basis in
accordance with GAAP; provided, however, that, for purposes of determining
compliance at any time with the covenant set forth in Section 6.13, the term
"Total Debt" shall exclude the aggregate principal amount of any Subordinated
Seller Notes (or Junior PIK Refinancing Notes) outstanding at such time to the
extent Coram is the issuer of such Subordinated Seller Notes (or Junior PIK
Refinancing Notes) and the Borrower has no liability in respect thereof.
"Total Revolving Credit Commitment" shall mean, at any time, the
aggregate amount of the Revolving Credit Commitments, as in effect at such
time.
"Transactions" shall have the meaning assigned to such term in Section
3.02.
"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, the term "Rate" shall
include the Adjusted LIBO Rate and the Alternate Base Rate.
"Wholly Owned Subsidiary" shall mean any Subsidiary in which any
combination of the Borrower and the other Wholly Owned Subsidiaries shall own
100% of the outstanding common stock.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed
<PAGE> 39
33
to be followed by the phrase "without limitation". All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Except as otherwise expressly provided
herein, (a) any reference in this Agreement to any Loan Document shall mean
such document as amended, restated, supplemented or otherwise modified from
time to time and (b) all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided,
however, that if the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any covenant in Article VI to eliminate the effect of
any change in GAAP on the operation of such covenant (or if the Administrative
Agent notifies the Borrower that the Required Lenders wish to amend Article VI
for such purpose), then compliance with such covenant shall be determined on
the basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Borrower and the Required Lenders.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, (a) to make a Term Loan to the Borrower on
the Closing Date in a principal amount not to exceed the Term Loan Commitment
set forth opposite its name on Schedule 2.01, as the same may be reduced from
time to time pursuant to Section 2.09, and (b) to make Revolving Loans to the
Borrower, at any time and from time to time on or after the date hereof, and
until the earlier of the Revolving Credit Maturity Date and the termination of
the Revolving Credit Commitment of such Lender in accordance with the terms
hereof, in an aggregate principal amount at any time outstanding that will not
result in (i) such Lender's Revolving Credit Exposure exceeding (ii) the lesser
of (x) such Lender's Revolving Credit Commitment set forth opposite its name on
Schedule 2.01, as the same may be reduced from time to time pursuant to Section
2.09 and (y) such Lender's Applicable Percentage of the Borrowing Base in
effect at such time.
Within the limits set forth in clause (b) of the preceding sentence,
the Borrower may borrow, pay or prepay and reborrow Revolving Loans on or after
the Closing Date and prior to the Revolving Credit Maturity Date, subject to
the terms, conditions and limitations set forth herein. Amounts paid or
prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their applicable
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34
Commitments; provided, however, that the failure of any Lender to make any Loan
shall not in itself relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible
for the failure of any other Lender to make any Loan required to be made by
such other Lender). The Loans comprising any Borrowing shall be in an
aggregate principal amount that is (i) an integral multiple of $1,000,000 and
not less than $5,000,000 or (ii) equal to the remaining available balance of
the applicable Commitments.
(b) Subject to Sections 2.08 and 2.14, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan, provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement. Borrowings of more than one Type may be outstanding at the
same time; provided, however, that the Borrower shall not be entitled to
request any Borrowing that, if made, would result in more than ten Eurodollar
Borrowings outstanding hereunder at any time. For purposes of the foregoing,
Borrowings having different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate Borrowings.
(c) Each Lender shall make each Loan to be made by it hereunder on
the proposed date thereof by wire transfer to such account as the
Administrative Agent may designate in federal funds not later than 1:00 p.m.,
New York City time, and the Administrative Agent shall by 2:00 p.m., New York
City time, credit the amounts so received to the general deposit account of the
Borrower with the Administrative Agent or to such other account as shall be
designated by the Borrower in the applicable Borrowing Request, which account
must be in the name of the Borrower or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
<PAGE> 41
35
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, a rate determined by the Administrative Agent
to represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Revolving Credit Borrowing if the
Interest Period requested with respect thereto would end after the Revolving
Credit Maturity Date.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing,
the Borrower shall hand deliver or telecopy to the Administrative Agent a duly
completed Borrowing Request substantially in the form of Exhibit C (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time,
three Business Days before a proposed Borrowing, and (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, on the date of a
proposed Borrowing; provided, however, that Borrowing Requests with respect to
Borrowings to be made on the Closing Date may, at the discretion of the
Administrative Agent, be delivered later than the times specified above. Each
Borrowing Request shall be irrevocable, signed by or on behalf of the Borrower
and shall specify the following information: (i) whether the Borrowing then
being requested is to be a Term Borrowing or a Revolving Credit Borrowing, and
whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing;
(ii) the date of such Borrowing (which shall be a Business Day), (iii) the
number and location of the account to which funds are to be disbursed (which
shall be an account that complies with the requirements of Section 2.02(c));
(iv) the amount of such Borrowing; and (v) if such Borrowing is to be a
Eurodollar Borrowing, the Interest Period with respect thereto; provided,
however, that, notwithstanding any contrary specification in any Borrowing
Request, each requested Borrowing shall comply with the requirements set forth
in Section 2.02. If no election as to the Type of Borrowing is specified in
any such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. The Administrative Agent shall promptly (and
in any event on the same day that the Administrative Agent receives such
notice, if received by 1:00 p.m., New York City time, on such day) advise the
applicable Lenders of any notice given pursuant to this Section 2.03 (and the
contents thereof), of each Lender's portion of the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The
outstanding principal balance of each Loan shall be payable (i) in the case of
a Revolving Loan, on the Revolving Credit Maturity Date and (ii) in the case
of a Term Loan, as
<PAGE> 42
36
provided in Section 2.11. Each Loan shall bear interest from the date of the
first Borrowing hereunder on the outstanding principal balance thereof as set
forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness to such Lender resulting
from each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid such Lender from time to time under
this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type of each Loan made
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) and (c) of this Section 2.04 shall, to the extent permitted by applicable
law, be prima facie evidence of the existence and amounts of the obligations
therein recorded; provided, however, that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not
in any manner affect the obligations of the Borrower to repay the Loans in
accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the
event any Lender shall request and receive a Note payable to such Lender and
its registered assigns, the interests represented by that Note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 9.04) be represented by one or more Notes payable to the payee named
therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender,
through the Administrative Agent, on the Closing Date, on the last day of
March, June, September and December in each year, and on the date on which all
the Commitments of such Lender shall be terminated as provided herein, a
commitment fee (a "Commitment Fee") equal to the Applicable Commitment Fee
Percentage on the average daily unused amount of the Commitments of such Lender
during the preceding quarter (or other period commencing with the date of
acceptance by the Borrower of the Commitment of such Lender or ending with the
date on which the last of the Commitments of such Lender shall be terminated).
All Commitment Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. The Commitment Fee due to each Lender shall
commence to accrue on the date of acceptance by the Borrower of the Commitment
of such Lender and shall cease to accrue on the date on which the last of the
Commitments of such Lender shall be terminated as provided herein.
<PAGE> 43
37
(b) The Borrower agrees to pay to the Administrative Agent, for its
own account, the fees set forth in the Fee Letter at the times specified
therein (the "Administrative Agent Fees").
(c) The Borrower agrees to pay (i) to each Revolving Credit Lender,
through the Administrative Agent, on the last day of March, June, September and
December of each year and on the date on which the Revolving Credit Commitment
of such Lender shall be terminated as provided herein, a fee (an "L/C
Participation Fee") on such Lender's Applicable Percentage of the average daily
aggregate L/C Exposure (excluding the portion thereof attributable to
unreimbursed L/C Disbursements) during the preceding quarter (or shorter period
commencing with the date hereof or ending with the Revolving Credit Maturity
Date or the date on which the Revolving Credit Commitment of such Lender shall
be terminated) at a rate per annum for each day in such period equal to the
Applicable Margin in effect for such day with respect to Eurodollar Loans and
(ii) to the Fronting Bank, through the Administrative Agent, on the last day of
March, June, September and December of each year, a fronting fee of .25% per
annum on the average daily aggregate L/C Exposure (excluding the portion
thereof attributable to unreimbursed L/C Disbursements) during the preceding
quarter (or shorter period commencing with the date hereof or ending with the
Revolving Credit Maturity Date) and, with respect to each Letter of Credit, any
other fees agreed upon by the Borrower and the Fronting Bank plus, in
connection with the issuance, amendment or transfer of any Letter of Credit or
any L/C Disbursement, the Fronting Bank's customary documentary and processing
charges (collectively, the "Fronting Bank Fees"). All L/C Participation Fees
and Fronting Bank Fees shall be computed on the basis of the actual number of
days elapsed in a year of 360 days.
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Fronting Bank Fees shall be paid directly to
the Fronting Bank. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
paragraph (c) below and Section 2.07, the Loans comprising each ABR Borrowing
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when determined by
reference to the Prime Rate and over a year of 360 days at all other times) at
a rate per annum equal to the Alternate Base Rate plus the Applicable Margin at
the time in effect.
(b) Subject to the provisions of paragraph (c) below and Section
2.07, the Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Margin at the time in
effect.
<PAGE> 44
38
(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, the Borrower shall on
demand from time to time pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date of actual payment (after as
well as before judgment) (a) in the case of overdue principal of or interest on
any Loan, at the rate otherwise applicable to such Loan pursuant to Section
2.06 plus 2.00% and (b) in all other cases, at a rate per annum (computed on
the same basis as the interest in respect of an ABR Loan) equal to the sum of
the Alternate Base Rate, plus the Applicable Margin from time to time in effect
for purposes of determining the interest rate on Revolving Credit Borrowings
comprised of ABR Loans pursuant to Section 2.06 plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such dollar deposits are being offered will
not adequately and fairly reflect the cost to any Lender of making or
maintaining its Eurodollar Loan during such Interest Period, or that reasonable
means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative
Agent shall, as soon as practicable thereafter, give written or telecopy notice
of such determination to the Borrower and the Lenders. In the event of any
such determination, until the Administrative Agent shall have advised the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant
to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing.
Each determination by the Administrative Agent hereunder shall be conclusive
absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The
Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City
time, on the Closing Date. The Revolving Credit Commitments shall
automatically terminate on the Revolving Credit Maturity Date.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Term
<PAGE> 45
39
Loan Commitments or the Revolving Credit Commitments; provided, however, that
(i) each partial reduction of the Commitments shall be in an integral multiple
of $1,000,000 and (ii) the Total Revolving Credit Commitment shall not be
reduced to an amount that is less than the Aggregate Revolving Credit Exposure
at the time.
(c) The Revolving Credit Commitments shall be automatically and
permanently reduced by an amount equal to any amount applied under paragraph
(d) or (e) of Section 2.12 to prepay Revolving Credit Borrowings (or that would
have been required to be so applied if Revolving Credit Borrowings equal to
such amount had been outstanding).
(d) Each reduction in the Commitments hereunder shall be made ratably
among the Lenders in accordance with their respective applicable Commitments.
The Borrower shall pay to the Administrative Agent for the account of the
Lenders, on the date of each termination or reduction, the Commitment Fees on
the amount of the Commitments so terminated or reduced accrued to the date of
such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The
Borrower shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 11:00 a.m., New York City time, on the
date of conversion, to convert any Eurodollar Borrowing into an ABR Borrowing,
(b) not later than 11:00 a.m., New York City time, three Business Days prior to
conversion or continuation, to convert any ABR Borrowing into a Eurodollar
Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for
an additional Interest Period, and (c) not later than 10:00 a.m., New York City
time, three Business Days prior to conversion, to convert the Interest Period
with respect to any Eurodollar Borrowing to another permissible Interest
Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata among
the Lenders in accordance with the respective principal amounts of the
Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting
Borrowing shall satisfy the limitations specified in Sections 2.02(a)
and (b) regarding the principal amount and maximum number of
Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender by
recording for the account of such Lender the new Loan of such Lender
resulting from such conversion and reducing the Loan (or portion
thereof) of such Lender being converted by an equivalent principal
amount; accrued interest on a Loan (or
<PAGE> 46
40
portion thereof) being converted shall be paid by the Borrower at the
time of conversion;
(iv) if any Eurodollar Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower
shall pay, upon demand, any amounts due to the Lenders pursuant to
Section 2.15;
(v) any portion of a Borrowing maturing or required to be repaid
in less than one month may not be converted into or continued as a
Eurodollar Term Borrowing;
(vi) any portion of a Eurodollar Term Borrowing that cannot be
converted into or continued as a Eurodollar Borrowing by reason of the
immediately preceding clause shall be automatically converted at the
end of the Interest Period in effect for such Borrowing into an ABR
Borrowing; and
(vii) no Interest Period may be selected for any Eurodollar Term
Borrowing that would end later than a Repayment Date occurring on or
after the first day of such Interest Period if, after giving effect to
such selection, the aggregate outstanding amount of (A) the Eurodollar
Term Borrowings with Interest Periods ending on or prior to such
Repayment Date and (B) the ABR Term Borrowings would not be at least
equal to the principal amount of Term Borrowings to be paid on such
Repayment Date.
Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity (including whether
such Borrowing is a Term Borrowing or a Revolving Credit Borrowing) and amount
of the Borrowing that the Borrower requests be converted or continued, (ii)
whether such Borrowing is to be converted to or continued as a Eurodollar
Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (iv) if such
Borrowing is to be converted to or continued as a Eurodollar Borrowing, the
Interest Period with respect thereto. If no Interest Period is specified in
any such notice with respect to any conversion to or continuation as a
Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest
Period of one month's duration. The Administrative Agent shall advise the
other Lenders of any notice given pursuant to this Section 2.10 and of each
Lender's portion of any converted or continued Borrowing. If the Borrower
shall not have given notice in accordance with this Section 2.10 to continue
any Borrowing into a subsequent Interest Period (and shall not otherwise have
given notice in accordance with this Section 2.10 to convert such Borrowing),
such Borrowing shall, at the end of the Interest Period applicable thereto
(unless repaid pursuant to the terms hereof), automatically be continued into a
new Interest Period as an ABR Borrowing.
<PAGE> 47
41
SECTION 2.11. Repayment of Term Borrowings. (a) The Term Borrowings
shall be payable as to principal in consecutive installments payable on the
dates (each, a "Repayment Date") and in the amounts set forth below:
<TABLE>
<CAPTION>
Repayment Date Amount
<S> <C>
September 30, 1995 $10,000,000
December 31, 1995 $10,000,000
March 31, 1996 $10,600,000
June 30, 1996 $10,600,000
September 30, 1996 $10,600,000
December 31, 1996 $10,600,000
March 31, 1997 $10,600,000
June 30, 1997 $10,600,000
September 30, 1997 $10,600,000
December 31, 1997 $10,600,000
March 31, 1998 $10,600,000
June 30, 1998 $10,600,000
September 30, 1998 $10,600,000
December 31, 1998 $10,600,000
March 31, 1999 $10,600,000
June 30, 1999 $10,600,000
September 30, 1999 $10,600,000
December 31, 1999 $10,600,000
Term Loan Maturity Date $10,400,000
</TABLE>
(b) Each prepayment of principal of the Term Borrowings pursuant to
paragraph (a) of Section 2.12 shall (i) first, be applied in the order of
maturity against the scheduled payments of principal of Term Borrowings due on
Repayment Dates occurring during the twelve-month period commencing on the date
of such prepayment and (ii) second, be applied pro rata against the remaining
scheduled payments of principal due under Section 2.11(a) after the date of
such prepayment. Each prepayment of principal of the Term Borrowings pursuant
to paragraph (d) or (e) of Section 2.12 shall be applied to Term Borrowings
ratably in accordance with the respective amounts thereof and shall reduce
scheduled payments of principal due under Section 2.11(a) after the date of
such prepayment in the inverse order of maturity. To the extent not previously
paid, all Term Borrowings shall be due and payable on the Term Loan Maturity
Date. Each payment of Term Borrowings pursuant to this Section 2.11 shall be
accompanied by accrued interest on the principal amount paid to but excluding
the date of payment.
SECTION 2.12. Prepayment. (a) The Borrower shall have the right at
any time and from time to time to prepay any Borrowing, in whole or in part,
upon at least three Business Days' prior written or telecopy notice (or
telephone notice
<PAGE> 48
42
promptly confirmed by written or telecopy notice) to the Administrative Agent
before 11:00 a.m., New York City time; provided, however, that each partial
prepayment shall be in an amount that is an integral multiple of $1,000,000.
(b) In the event of any termination of the Revolving Credit
Commitments, the Borrower shall repay or prepay all its outstanding Revolving
Credit Borrowings on the date of such termination. In the event of any partial
reduction of the Revolving Credit Commitments, then (i) at or prior to the
effective date of such reduction, the Administrative Agent shall notify the
Borrower and the Revolving Credit Lenders of the Aggregate Revolving Credit
Exposure and (ii) if the Aggregate Revolving Credit Exposure would exceed the
Total Revolving Credit Commitment after giving effect to such reduction, then
the Borrower shall, on the date of such reduction, apply an amount equal to
such excess first, to prepay the then outstanding Revolving Loans (if any) and
second, to the extent of any remaining excess (after the prepayment of
Revolving Loans), to replace outstanding Letters of Credit and/or deposit an
amount in cash in the L/C Collateral Account.
(c) If on any date the Aggregate Revolving Credit Exposure shall
exceed the lesser of (i) the Total Revolving Credit Commitment and (ii) the
Borrowing Base in effect on such date, the Borrower shall on such date apply an
amount equal to such excess first, to prepay the then outstanding Revolving
Loans (if any) and second, to the extent of any remaining excess (after the
prepayment of Revolving Loans), to replace outstanding Letters of Credit and/or
deposit an amount in cash in the L/C Collateral Account.
(d) The Borrower shall apply all Net Proceeds promptly upon receipt
thereof (or, if applicable, promptly upon any amounts being deemed to
constitute Net Proceeds as provided in the definition of such term) to prepay
Term Borrowings (and, after the Term Loans have been paid in full, Revolving
Credit Borrowings) outstanding at the time of such receipt. The Borrower will
deliver to the Administrative Agent (i) at the time of each prepayment required
under this paragraph (d), a certificate signed by a Financial Officer of the
Borrower setting forth in reasonable detail the calculation of the amount of
such prepayment and (ii) no later than the later of (A) the date on which a
Responsible Officer of the Borrower becomes aware that such prepayment will be
made and (B) the date that is five Business Days prior to the date of such
prepayment, a notice of such prepayment. Such certificate shall also describe
in reasonable detail the facts and circumstances giving rise to the applicable
prepayment event and a reasonably detailed calculation of the Net Proceeds
therefrom.
(e) Not later than 90 days after the end of each fiscal year of the
Borrower, commencing with the fiscal year ending December 31, 1995, the
Borrower shall (i) calculate Excess Cash Flow for such fiscal year and shall
apply 75% of Excess Cash Flow to prepay Term Borrowings (and, after the Term
Loans have been paid in
<PAGE> 49
43
full, Revolving Credit Borrowings) and (ii) deliver to the Administrative Agent
a certificate signed by any Financial Officer of the Borrower setting forth the
amount, if any, of Excess Cash Flow for such fiscal year and the calculation
thereof in reasonable detail.
(f) Each notice of prepayment shall specify the prepayment date and
the principal amount of each Borrowing (or portion thereof) to be prepaid,
shall be irrevocable and shall commit the Borrower to prepay such Borrowing by
the amount stated therein on the date stated therein. All prepayments under
this Section 2.12 shall be subject to Section 2.15 but otherwise without
premium or penalty. All prepayments under this Section 2.12 shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of payment.
(g) Any prepayments to be applied to Revolving Loans pursuant to this
Section 2.12 shall be applied first, to repay outstanding ABR Revolving Loans
and second, to repay Eurodollar Revolving Loans or, at the option of the
Borrower, to make a deposit in the Prepayment Account. The Administrative
Agent shall apply any cash deposited in the Prepayment Account that is
allocable to Revolving Loans to repay Eurodollar Revolving Loans on the last
date of their respective Interest Periods (or, at the direction of the
Borrower, on any earlier date) until all outstanding Revolving Loans have been
repaid or until all the allocable cash on deposit with respect to such Loans
has been exhausted.
(h) Any prepayments to be applied to Term Loans pursuant to this
Section 2.12 shall be applied first, to repay outstanding ABR Term Loans and
second, to repay Eurodollar Term Loans or, at the option of the Borrower, make
a deposit in the Prepayment Account. The Administrative Agent shall apply any
cash deposited in the Prepayment Account that is allocable to Term Loans to
repay Eurodollar Term Loans on the last date of their respective Interest
Periods (or, at the direction of the Borrower, on any earlier date) until all
outstanding Term Loans have been repaid or until all the allocable cash on
deposit with respect to such Loans has been exhausted.
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a) If
after the date of this Agreement any change in applicable law or regulation or
in the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof (whether or not
having the force of law) shall change the basis of taxation of payments to any
Lender or the Fronting Bank of the principal of or interest on any Eurodollar
Loan made by such Lender or any Fees or other amounts payable hereunder (other
than changes in respect of taxes imposed on the overall net income of such
Lender or the Fronting Bank by the jurisdiction in which such Lender or the
Fronting Bank has its principal office or by any political subdivision or
taxing authority therein), or shall impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits
with or for the account of or credit extended by such Lender or the Fronting
Bank (except
<PAGE> 50
44
any such reserve requirement that is reflected in the Adjusted LIBO Rate) or
shall impose on such Lender or the Fronting Bank or the London interbank market
any other condition affecting this Agreement or Eurodollar Loans made by such
Lender or any Letter of Credit or participation therein, and the result of any
of the foregoing shall be to increase the cost to such Lender or the Fronting
Bank of making or maintaining any Eurodollar Loan or of issuing or maintaining
any Letter of Credit or purchasing or maintaining a participation therein or to
reduce the amount of any sum received or receivable by such Lender or the
Fronting Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Fronting Bank to be material, then the
Borrower will pay to such Lender or the Fronting Bank, as the case may be, in
accordance with Section 2.13(c), such additional amount or amounts as will
compensate such Lender or the Fronting Bank, as the case may be, for such
additional costs incurred or reduction suffered.
(b) If any Lender or the Fronting Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in
any such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Fronting Bank or any Lender's or the
Fronting Bank's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Authority
has or would have the effect of reducing the rate of return on such Lender's or
the Fronting Bank's capital or on the capital of such Lender's or the Fronting
Bank's holding company, if any, as a consequence of this Agreement or the Loans
made or participations in Letters of Credit purchased by such Lender pursuant
hereto or the Letters of Credit issued by the Fronting Bank pursuant hereto to
a level below that which such Lender or the Fronting Bank or such Lender's or
the Fronting Bank's holding company could have achieved but for such
applicability, adoption, change or compliance (taking into consideration such
Lender's or the Fronting Bank's policies and the policies of such Lender's or
the Fronting Bank's holding company with respect to capital adequacy) by an
amount deemed by such Lender or the Fronting Bank to be material, then from
time to time the Borrower shall pay to such Lender or the Fronting Bank, as the
case may be, such additional amount or amounts as will compensate such Lender
or the Fronting Bank or such Lender's or the Fronting Bank's holding company,
in accordance with Section 2.13(c), for any such reduction suffered.
(c) A certificate of a Lender or the Fronting Bank setting forth the
amount or amounts necessary to compensate such Lender or the Fronting Bank or
its holding company, as applicable, as specified in paragraph (a) or (b) above
shall be delivered to the Borrower, shall specify in reasonable detail the
basis therefor and shall be conclusive absent manifest error. The Borrower
shall pay each Lender or the
<PAGE> 51
45
Fronting Bank the amount shown as due on any such certificate delivered by such
Lender or the Fronting Bank within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender or the Fronting Bank
to demand compensation for any increased costs or reduction in amounts received
or receivable or reduction in return on capital shall not constitute a waiver
of such Lender's or the Fronting Bank's right to demand such compensation. The
protection of this Section 2.13 shall be available to each Lender and the
Fronting Bank regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, agreement, guideline or other
change or condition that shall have occurred or been imposed.
SECTION 2.14. Change in Legality. (a) Notwithstanding any other
provision herein, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it
unlawful for any Lender to make or maintain any Eurodollar Loan or to give
effect to its obligations as contemplated hereby with respect to any Eurodollar
Loan, then, by written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not
thereafter (for the duration of such unlawfulness or impracticability)
be made by such Lender hereunder, whereupon any request for a
Eurodollar Borrowing, shall, as to such Lender only, be deemed a
request for an ABR Loan unless such declaration shall be subsequently
withdrawn (or, if a Loan to the Borrower cannot be made for the
reasons specified above, such request shall be deemed to have been
withdrawn); and
(ii) such Lender may require that all outstanding Eurodollar
Loans made by it be converted to ABR Loans, in which event all such
Eurodollar Loans shall be automatically converted to ABR Loans as of
the effective date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by
any Lender shall be effective as to each Eurodollar Loan, if lawful, on the
last day of the Interest Period currently applicable to such Eurodollar Loan;
in all other cases such notice shall be effective on the date of receipt by the
Borrower.
<PAGE> 52
46
SECTION 2.15. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender may sustain or incur as a
consequence of (a) any event, other than a default by such Lender in the
performance of its obligations hereunder, that results in (i) such Lender
receiving or being deemed to receive any amount on account of the principal of
any Loan prior to the end of the Interest Period in effect therefor or (ii) any
Loan to be made by such Lender (including any Loan to be made pursuant to a
conversion or continuation under Section 2.10) not being made after notice of
such Loan shall have been given by the Borrower hereunder (any of the events
referred to in this clause (a) being called a "Breakage Event") or (b) any
default in the making of any payment or prepayment required to be made
hereunder. In the case of any Breakage Event, such loss shall include an
amount equal to the excess, as reasonably determined by such Lender, of (a) its
cost of obtaining funds for the Loan that is the subject of such Breakage Event
for the period from the date of such Breakage Event to the last day of the
Interest Period in effect (or that would have been in effect) for such Loan
over (b) the amount of interest likely to be realized by such Lender in
redeploying the funds released or not utilized by reason of such Breakage Event
for such period. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section 2.15
(and the calculation thereof in reasonable detail) shall be delivered to the
Borrower and shall be conclusive absent manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under Section
2.14, each Borrowing, each payment or prepayment of principal of any Borrowing,
each payment of interest on the Loans, each payment of the Commitment Fees,
each reduction of the Term Loan Commitments or the Revolving Credit Commitments
and each conversion of any Borrowing to or continuation of any Borrowing as a
Borrowing of any Type shall be allocated pro rata among the Lenders in
accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). Each Lender agrees
that in computing such Lender's portion of any Borrowing to be made hereunder,
the Administrative Agent may, in its discretion, round each Lender's percentage
of such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrower, or pursuant to a secured claim under Section 506 of Title
11 of the United States Code or other security or interest arising from, or in
lieu of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by any other
means, obtain payment (voluntary or involuntary) in respect of any Loan or
Loans or L/C Disbursement as a result of which the unpaid principal portion of
its Loans and participations in L/C Disbursements shall be proportionately less
than the unpaid principal portion of the Loans and participations in L/C
Disbursements of any other Lender, it shall be
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47
deemed simultaneously to have purchased from such other Lender at face value,
and shall promptly pay to such other Lender the purchase price for, a
participation in the Loans and L/C Exposure of such other Lender, so that the
aggregate unpaid principal amount of the Loans and L/C Exposure and
participations in Loans and L/C Exposure held by each Lender shall be in the
same proportion to the aggregate unpaid principal amount of all Loans and L/C
Exposure then outstanding as the principal amount of its Loans and L/C Exposure
prior to such exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all Loans and L/C Exposure outstanding prior to
such exercise of banker's lien, setoff or counterclaim or other event;
provided, however, that, if any such purchase or purchases or adjustments shall
be made pursuant to this Section and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrower expressly consents to the
foregoing arrangements and agrees that any Lender holding a participation in a
Loan or L/C Disbursement deemed to have been so purchased may exercise any and
all rights of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Borrower to such Lender by reason thereof as fully as if
such Lender had made a Loan directly to the Borrower in the amount of such
participation.
SECTION 2.18. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any L/C Disbursement or
any Fees or other amounts) hereunder and under any other Loan Document not
later than 12:00 (noon), New York City time, on the date when due in
immediately available funds. Each such payment (other than Fronting Bank Fees,
which shall be paid directly to the Fronting Bank) shall be made to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York.
Each such payment shall be made in Dollars.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by the Borrower
hereunder and under any other Loan Document shall be made, in accordance with
Section 2.18, free and clear of and without deduction for any and all current
or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding (i) income taxes imposed on the
net income of the Administrative Agent, any Lender or the Fronting Bank (or any
transferee or assignee thereof, including a participation holder (any such
entity a "Transferee")) and (ii) franchise taxes imposed on the net income of
the Administrative Agent, any
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48
Lender or the Fronting Bank (or Transferee), in each case by the jurisdiction
under the laws of which the Administrative Agent, such Lender or the Fronting
Bank (or Transferee) is organized or any political subdivision thereof (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, being called "Taxes"). If the
Borrower shall be required to deduct any Taxes from or in respect of any sum
payable hereunder or under any other Loan Document to the Administrative Agent,
any Lender or the Fronting Bank (or any Transferee), (i) the sum payable shall
be increased by the amount (an "additional amount") necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.19) the Administrative Agent, such Lender or
the Fronting Bank (or Transferee), as the case may be, shall receive an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower agrees to pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies (including mortgage recording taxes and similar fees) that arise
from any payment made hereunder or under any other Loan Document or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document ("Other Taxes").
(c) The Borrower will indemnify the Administrative Agent, each Lender
and the Fronting Bank (or Transferee) for the full amount of Taxes and Other
Taxes paid by the Administrative Agent, such Lender or the Fronting Bank (or
Transferee), as the case may be, and any liability (including penalties,
interest and expenses (including reasonable attorney's fees and expenses))
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability
prepared by the Administrative Agent, a Lender or the Fronting Bank (or
Transferee), or the Administrative Agent on its behalf, absent manifest error,
shall be final, conclusive and binding for all purposes. Such indemnification
shall be made within 30 days after the date the Administrative Agent, any
Lender or the Fronting Bank (or Transferee), as the case may be, makes written
demand therefor.
(d) If the Administrative Agent, a Lender or the Fronting Bank (or
Transferee) shall become aware that it is entitled to claim a refund from a
Governmental Authority in respect of Taxes or Other Taxes as to which it has
been indemnified by the Borrower, or with respect to which the Borrower has
paid additional amounts, pursuant to this Section 2.19, it shall promptly
notify the Borrower of the availability of such refund claim and shall, within
30 days after
<PAGE> 55
49
receipt of a request by the Borrower, make a claim to such Governmental
Authority for such refund at the Borrower's expense. If the Administrative
Agent, a Lender or the Fronting Bank (or Transferee) receives a refund
(including pursuant to a claim for refund made pursuant to the preceding
sentence) in respect of any Taxes or Other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section 2.19, it shall within 30 days from
the date of such receipt pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 2.19 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Administrative Agent,
such Lender or the Fronting Bank (or Transferee) and without interest (other
than interest paid by the relevant Governmental Authority with respect to such
refund); provided, however, that the Borrower, upon the request of the
Administrative Agent, such Lender or the Fronting Bank (or Transferee), agrees
to repay the amount paid over to the Borrower (plus penalties, interest or
other charges) to the Administrative Agent, such Lender or the Fronting Bank
(or Transferee) in the event the Administrative Agent, such Lender or the
Fronting Bank (or Transferee) is required to repay such refund to such
Governmental Authority.
(e) As soon as practicable after the date of any payment of Taxes or
Other Taxes by the Borrower to the relevant Governmental Authority, the
Borrower will deliver to the Administrative Agent, at its address referred to
in Section 9.01, the original or a certified copy of a receipt issued by such
Governmental Authority evidencing payment thereof.
(f) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest on all Loans
made hereunder, the expiration or cancellation of all Letters of Credit and the
reimbursement of all draws thereunder.
(g) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender
delivers a Form W-8, a certificate representing that such Non-U.S. Lender is
not a bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming
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50
complete exemption from, or reduced rate of, U.S. Federal withholding tax on
payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of a Transferee that is a
participation holder, on or before the date such participation holder becomes a
Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender
changes its applicable lending office by designating a different lending office
(a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver such
forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Notwithstanding any other provision of this
Section 2.19(g), a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 2.19(g) that such Non-U.S. Lender is not legally able
to deliver.
(h) The Borrower shall not be required to indemnify any Non-U.S.
Lender or to pay any additional amounts to any Non-U.S. Lender, in respect of
United States Federal withholding tax pursuant to paragraph (a) or (c) above to
the extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Lender became
a party to this Agreement (or, in the case of a Transferee that is a
participation holder, on the date such participation holder became a Transferee
hereunder) or, with respect to payments to a New Lending Office, the date such
Non-U.S. Lender designated such New Lending Office with respect to a Loan;
provided, however, that this paragraph (h) shall not apply to any Transferee or
New Lending Office that becomes a Transferee or New Lending Office as a result
of an assignment, participation, transfer or designation made at the request of
the Borrower; and provided further, however, that this paragraph (h) shall not
apply to the extent the indemnity payment or additional amounts any Lender (or
Transferee), acting through a New Lending Office, would be entitled to receive
(without regard to this paragraph (h)) do not exceed the indemnity payment or
additional amounts that the person making the assignment, participation or
transfer to such Lender (or Transferee) making the designation of such New
Lending Office would have been entitled to receive in the absence of such
assignment, participation, transfer or designation or (ii) the obligation to
pay such additional amounts would not have arisen but for a failure by such
Non-U.S. Lender to comply with the provisions of paragraph (g) above.
(i) Any Lender or Fronting Bank (or Transferee) claiming any
indemnity payment or additional amounts payable pursuant to this Section 2.19
shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document reasonably requested in
writing by the Borrower or to change the jurisdiction of its applicable lending
office if the making of such a filing or change would avoid the need for or
reduce the amount of any such indemnity payment or additional amounts that may
thereafter accrue and would not, in the sole determination of such Lender or
Fronting Bank (or Transferee), be otherwise disadvantageous to such Lender or
Fronting Bank (or Transferee).
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(j) Nothing contained in this Section 2.19 shall require any Lender
or the Fronting Bank (or any Transferee) or the Administrative Agent to make
available any of its tax returns (or any other information that it deems to be
confidential or proprietary).
SECTION 2.20. Actions to Mitigate. If (a) any Lender or the Fronting
Bank shall request compensation under Section 2.13, (b) any Lender or the
Fronting Bank delivers a notice described in Section 2.14 or (c) the Borrower
is required to pay any additional amount to any Lender or the Fronting Bank or
any Governmental Authority on account of any Lender or the Fronting Bank,
pursuant to Section 2.19, then, such Lender or the Fronting Bank shall exercise
reasonable efforts (which shall not require such Lender or the Fronting Bank to
incur an unreimbursed loss or unreimbursed cost or expense or otherwise take
any action inconsistent with its internal policies or suffer any disadvantage
or burden deemed by it to be significant) to assign its rights and delegate and
transfer its obligations hereunder to another of its offices, branches or
affiliates, if such assignment would reduce its claims for compensation under
Section 2.13 or enable it to withdraw its notice pursuant to Section 2.14 or
would reduce amounts payable pursuant to Section 2.19, as the case may be, in
the future. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender or the Fronting Bank in connection with any
such assignment, delegation and transfer.
SECTION 2.21. Letters of Credit. (a) General. The Borrower may
request the issuance of a Letter of Credit, in a form reasonably acceptable to
the Administrative Agent and the Fronting Bank, appropriately completed, for
the account of the Borrower, at any time and from time to time while the
Revolving Credit Commitments remain in effect. This Section 2.21 shall not be
construed to impose an obligation upon the Fronting Bank to issue any Letter of
Credit that is inconsistent with the terms and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to
amend, renew or extend an existing Letter of Credit), the Borrower shall hand
deliver or telecopy to the Fronting Bank and the Administrative Agent
(reasonably in advance of the requested date of issuance, amendment, renewal or
extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date
of issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) below), the amount
of such Letter of Credit, the name and address of the beneficiary thereof and
such other information as shall be necessary to prepare such Letter of Credit.
Following receipt of such notice and prior to the issuance of the requested
Letter of Credit or the applicable amendment, renewal or extension, the
Administrative Agent shall notify the Borrower and the Fronting Bank of the
amount of the Aggregate Revolving Credit Exposure after giving effect to (i)
the issuance, amendment, renewal
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or extension of such Letter of Credit, (ii) the issuance or expiration of any
other Letter of Credit that is to be issued or will expire prior to the
requested date of issuance of such Letter of Credit and (iii) the borrowing or
repayment of any Revolving Credit Loans that (based upon notices delivered to
the Administrative Agent by the Borrower) are to be borrowed or repaid prior to
the requested date of issuance of such Letter of Credit. A Letter of Credit
shall be issued, amended, renewed or extended only if, and upon issuance,
amendment, renewal or extension of each Letter of Credit the Borrower shall be
deemed to represent and warrant that, after giving effect to such issuance,
amendment, renewal or extension (A) the L/C Exposure shall not exceed
$20,000,000, and (B) the Aggregate Revolving Credit Exposure shall not exceed
the lesser of (x) the Total Revolving Credit Commitment and (y) the Borrowing
Base in effect at such time.
(c) Expiration Date. (i) Each Letter of Credit shall expire at the
close of business on the earlier of the date 12 months after the date of the
issuance of such Letter of Credit and the date that is five Business Days prior
to the Revolving Credit Maturity Date, unless such Letter of Credit expires by
its terms on an earlier date, provided that a Letter of Credit shall not be
issued (nor shall a Letter of Credit be amended, renewed or extended) that
would result in the Aggregate Revolving Credit Exposure exceeding the lesser of
(A) the Total Revolving Credit Commitment and (B) the Borrowing Base in effect
at such time. Compliance with the foregoing proviso shall be determined based
upon the assumption that (1) each Letter of Credit remains outstanding and
undrawn in accordance with its terms until its expiration date (taking into
account any rights of renewal or extension that do not require written notice
by or consent of the Fronting Bank, in its sole discretion, in order to effect
such renewal or extension), (2) the Revolving Credit Commitments will not be
reduced voluntarily pursuant to Section 2.09(b) and (3) the Borrowing Base in
effect on the proposed date of issuance, amendment, renewal or extension will
not change.
(ii) Each Letter of Credit may, in the absolute discretion of
the Fronting Bank, include a provision whereby such Letter of Credit shall be
renewed automatically for additional consecutive periods of 12 months or less
(but not beyond the date that is five Business Days prior to the Revolving
Credit Maturity Date) unless the Fronting Bank notifies the beneficiary thereof
at least 60 days prior to the then-applicable expiry date that such Letter of
Credit will not be renewed.
(d) Participations. By the issuance of a Letter of Credit and
without any further action on the part of the Fronting Bank or the Lenders, the
Fronting Bank hereby grants to each Lender, and each such Lender hereby
acquires from the applicable Fronting Bank, a participation in such Letter of
Credit equal to such Lender's Applicable Percentage of the aggregate amount
available to be drawn under such Letter of Credit, effective upon the issuance
of such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the
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Fronting Bank, such Lender's Applicable Percentage of each L/C Disbursement
made by the Fronting Bank and not reimbursed by the Borrower (or, if
applicable, another party pursuant to its obligations under any other Loan
Document) forthwith on the date due as provided in paragraph (e) below. Each
Lender acknowledges and agrees that its obligation to acquire participations
pursuant to this paragraph in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Reimbursement. If the Fronting Bank shall make any L/C
Disbursement in respect of a Letter of Credit, the Borrower shall pay to the
Administrative Agent, not later than two hours after the Borrower shall have
received notice of such L/C Disbursement (or, if the Borrower shall have
received such notice later than 10:00 a.m., New York City time, on any Business
Day, not later than 10:00 a.m., New York City time, on the immediately
following Business Day), an amount equal to such L/C Disbursement. If the
Borrower shall fail to pay any amount required to be paid under this paragraph
on or prior to the time required therefor by the preceding sentence (or to
cause payment thereof when due pursuant to a Borrowing as contemplated by
paragraph (h) below), then (i) the Administrative Agent shall notify the
Fronting Bank and the Lenders thereof, (ii) each Lender shall comply with its
obligation under paragraph (d) above by wire transfer of immediately available
funds, in the same manner as provided in Section 2.02(c) with respect to Loans
made by such Lender (and (A) Section 2.02(d) shall apply, mutatis mutandis, to
the payment obligations of the Lenders and (B) such payments shall be deemed to
be ABR Loans made by such Lender) and (iii) the Administrative Agent shall
promptly pay to the Fronting Bank amounts so received by it from the Lenders.
The Administrative Agent shall promptly pay to the Fronting Bank any amounts
received by it from the Borrower pursuant to this paragraph prior to the time
that any Lender makes any payment pursuant to paragraph (d) above; any such
amounts received by the Administrative Agent thereafter shall be promptly
remitted by the Administrative Agent to the Lenders that shall have made such
payments and to the Fronting Bank, as their interests may appear. If any
Lender shall not have made its Applicable Percentage of such L/C Disbursement
available to the Fronting Bank as provided above, such Lender shall pay
interest on such amount, for each day from and including the date such amount
is required to be paid in accordance with this subsection to but excluding the
date an amount equal to such amount is paid to the Administrative Agent for
prompt payment to the Fronting Bank, at (i) for the first such day, the Federal
Funds Effective Rate and (ii) for each day thereafter, the Alternate Base Rate.
(f) Obligations Absolute. The Borrower's obligations to reimburse
L/C Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and
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irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under any and all circumstances whatsoever, and irrespective
of:
(i) any lack of validity or enforceability of any Letter of
Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit or any Loan
Document;
(iii) the existence of any claim, setoff, defense or other
right that the Borrower, any other party guaranteeing, or otherwise
obligated with, the Borrower, any Subsidiary or other Affiliate
thereof or any other person may at any time have against the
beneficiary under any Letter of Credit, the Fronting Bank, the
Administrative Agent or any Lender or any other person, whether in
connection with this Agreement, any other Loan Document or any other
related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
(v) payment by the Fronting Bank under a Letter of Credit
against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of
the Fronting Bank, the Lenders, the Administrative Agent or any other
person or any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of the
Borrower's obligations hereunder.
(g) Disbursement Procedures. The Fronting Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Fronting Bank shall as
promptly as possible give telephonic notification, confirmed by telecopy, to
the Administrative Agent and the Borrower of such demand for payment and
whether the Fronting Bank has made or will make an L/C Disbursement thereunder,
provided that any failure to give or delay in giving such notice shall not
relieve the Borrower of its obligation to reimburse the Fronting Bank and the
Lenders with respect to any such L/C Disbursement. The Administrative Agent
shall promptly give each Lender notice thereof.
(h) Interim Interest. If the Fronting Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the Borrower shall
reimburse such L/C
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Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Fronting Bank, for each day from and including
the date of such L/C Disbursement, to but excluding the earlier of the date of
payment or the date on which interest shall commence to accrue thereon as
provided in paragraph (e) above, at the rate per annum that would apply to such
amount if such amount were an ABR Loan.
(i) Liability of the Fronting Bank. Without limiting the generality
of paragraph (f) above, it is expressly understood and agreed that the absolute
and unconditional obligation of the Borrower hereunder to reimburse L/C
Disbursements will not be excused by the gross negligence or wilful misconduct
of the Fronting Bank. However, the foregoing shall not be construed to excuse
the Fronting Bank from liability to the Borrower to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are
hereby waived by the Borrower to the extent permitted by applicable law)
suffered by the Borrower that are caused by the Fronting Bank's gross
negligence or wilful misconduct in determining whether drafts and other
documents presented under a Letter of Credit comply with the terms thereof. It
is understood that the Fronting Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary and, in making any
payment under any Letter of Credit (i) the Fronting Bank's exclusive reliance
on the documents presented to it under such Letter of Credit as to any and all
matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and
whether or not any other statement or any other document presented pursuant to
such Letter of Credit proves to be forged or invalid or any statement therein
proves to be inaccurate or untrue in any respect whatsoever and (ii) any
noncompliance in any immaterial respect of the documents presented under such
Letter of Credit with the terms thereof shall, in each case, be deemed not to
constitute wilful misconduct or gross negligence of the Fronting Bank.
(j) Resignation or Removal of the Fronting Bank. (i) The Fronting
Bank may resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Fronting Bank, the Administrative Agent
and the Lenders. Subject to paragraph (ii) below, upon the acceptance of any
appointment as the Fronting Bank hereunder by a successor Fronting Bank, such
successor shall succeed to and become vested with all the interests, rights and
obligations of the retiring Fronting Bank and the retiring Fronting Bank shall
be discharged from its obligations to issue additional Letters of Credit
hereunder. At the time such removal or resignation shall become effective, the
Borrower shall pay all accrued and unpaid fees pursuant to Section 2.05(c)(ii).
The acceptance of any appointment as the Fronting
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Bank hereunder by a successor Lender shall be evidenced by an agreement entered
into by such successor, in a form satisfactory to the Borrower and the
Administrative Agent, and, from and after the effective date of such agreement,
(i) such successor Lender shall have all the rights and obligations of the
previous Fronting Bank under this Agreement and the other Loan Documents and
(ii) references herein and in the other Loan Documents to the term "Fronting
Bank" shall be deemed to refer to such successor or to any previous Fronting
Bank, or to such successor and all previous Fronting Banks, as the context
shall require.
(ii) After the resignation or removal of the Fronting Bank
hereunder, the retiring Fronting Bank shall remain a party hereto and shall
continue to have all the rights and obligations of a Fronting Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
(k) Cash Collateralization. If any Event of Default shall occur and
be continuing, the Borrower shall, on the Business Day it receives notice from
the Administrative Agent or the Required Lenders that the maturity of the Loans
has been accelerated and of the amount to be deposited (or, in the case of an
Event of Default described in paragraph (g) or (h) of Article VII,
immediately), deposit in the L/C Collateral Account an amount in cash equal to
the L/C Exposure as of such date. Moneys in the L/C Collateral Account shall
(i) automatically be applied by the Administrative Agent to reimburse the
Fronting Bank for L/C Disbursements for which it has not been reimbursed, (ii)
be held for the satisfaction of the reimbursement obligations of the Borrower
in respect of the L/C Exposure at such time and (iii) subject to the consent of
Revolving Credit Lenders holding participations in outstanding Letters of
Credit representing greater than 50% of the aggregate undrawn amount of all
outstanding Letters of Credit, be applied to satisfy the Obligations. If the
Borrower is required to provide an amount of cash collateral in accordance with
this Section 2.21(k), such amount (to the extent not applied as aforesaid)
shall be returned to the Borrower within three Business Days after all Events
of Default have been cured or waived and the acceleration of the maturity of
the Loans rescinded.
SECTION 2.22. Assignment of Commitments under Certain Circumstances.
In the event that (a) any Lender (i) shall have delivered a notice or
certificate pursuant to Section 2.13 or (ii) shall become subject to the
provisions of Section 2.14 or (b) the Borrower shall be required to make
additional payments to any Lender under Section 2.19 (or would be required to
make such additional payments with respect to the interest payment that would
be made on the next succeeding Interest Payment Date), the Borrower shall have
the right, but not the obligation, at its own expense, upon notice to such
Lender and the Administrative Agent, to replace such Lender with an assignee
(in accordance with and subject to the restrictions contained in Section
9.04(b)), and such Lender hereby agrees to transfer and assign without
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recourse (in accordance with and subject to the restrictions contained in
Section 9.04(b)) all its interests, right and obligations under this Agreement
to such assignee; provided, however, that (A) no such assignment shall conflict
with any law or any rule, regulation or order of any Governmental Authority,
(B) such assignee shall pay to the affected Lender in immediately available
funds on the date of such assignment the principal amount of the Loans made by
such Lender hereunder, and (C) the Borrower shall pay to the affected Lender in
immediately available funds on the date of such assignment the interest accrued
to the date of payment on the Loans made by such Lender hereunder and all other
amounts accrued for such Lender's account or owed to it hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of Coram and the Borrower represents and warrants to each of the
Lenders that:
SECTION 3.01. Organization; Powers. Each of Coram, the Borrower and
the Subsidiaries (a) is a corporation or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority, and has in effect all
the requisite permits, approvals and other authorizations from all applicable
Governmental Authorities, to own its property and assets and to carry on its
business as now conducted and as proposed to be conducted, except where the
failure to have any such power or authority could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, (c) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify could not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect, and (d) in the case of the Loan Parties, has the corporate power and
authority to execute, deliver and perform its obligations under each of the
Loan Documents and each other agreement or instrument contemplated thereby to
which it is or will be a party and, in the case of the Borrower, to borrow
hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance
by each of Coram, the Borrower and the other Loan Parties of each of the Loan
Documents to which it is party, the borrowings hereunder and the Acquisition
Transactions (collectively, the "Transactions") (a) have been duly authorized
by all requisite corporate and, if required, stockholder action and (b) will
not (i) violate (A) any provision of law, statute, rule or regulation, or of
the certificate or articles of incorporation or other constitutive documents or
by-laws of Coram, the Borrower or any Loan Party, (B) any order of any
Governmental Authority or (C) except as set forth on Schedule 3.02, any
provision of any indenture, agreement or other
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instrument to which Coram, the Borrower or any Subsidiary is a party or by
which any of them or any of their property is or may be bound, except, in the
case of this clause (C), to the extent any such violations could not reasonably
be expected, individually or in the aggregate, to result in a Material Adverse
Effect or to adversely affect the Administrative Agent, the Collateral Agent,
the Fronting Bank or the Lenders in any material respect, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice or lapse of
time or both) a default under any such indenture, agreement or other instrument
that is material to any Loan Party or (iii) result in the creation or
imposition of any Lien upon or with respect to any property or assets now owned
or hereafter acquired by Coram, the Borrower or any Subsidiary, other than the
Liens created by the Loan Documents.
SECTION 3.03. Enforceability. This Agreement has been duly executed
and delivered by Coram and the Borrower and constitutes, and each other Loan
Document when executed and delivered by the Borrower and each other Loan Party
thereto will constitute, a legal, valid and binding obligation of the Borrower
and such Loan Party enforceable against the Borrower and such Loan Party in
accordance with its terms.
SECTION 3.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except
for (a) the filing of Uniform Commercial Code financing statements and filings
with the United States Patent and Trademark Office and the United States
Copyright Office (if any), (b) such as are set forth on Schedule 3.04, which
approvals the Borrower reasonably expects to obtain within six months following
the Closing Date, (c) such as have been made or obtained and are in full force
and effect and (d) such other approvals that will be set forth on a schedule to
be delivered to the Lenders pursuant to Section 5.04(j) and that the Borrower
reasonably expects to obtain within six months following the Closing Date.
SECTION 3.05. Financial Statements. The Borrower has heretofore
furnished to the Lenders (a) the consolidated balance sheets and statements of
income and changes in financial condition of Coram as of and for each of the
fiscal years ended December 31, 1992, 1993 and 1994, respectively, audited by
and accompanied by the opinion of Ernst & Young LLP, independent public
accountants (it being understood that the balance sheet as of December 31, 1992
shall not be audited) and (b) the consolidated balance sheets and statements of
income and changes in financial condition of the Acquired Business as of and
for each of the fiscal years ended December 31, 1992, 1993 and 1994,
respectively, audited by and accompanied by the opinion of Price Waterhouse
LLP, independent public accountants (it being understood that the balance sheet
as of December 31, 1992 shall not be audited). Such financial statements
present fairly the financial condition and results of operations of Coram and
its consolidated subsidiaries or the Acquired Business, as applicable, as of
such dates and for such periods. Such balance sheets and the notes
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thereto disclose all material liabilities, direct or contingent, of Coram and
its consolidated subsidiaries or the Acquired Business, as applicable, as of
the dates thereof. Such financial statements were prepared in accordance with
GAAP applied on a consistent basis, except as otherwise indicated in the notes
thereto.
SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, properties, financial
condition or prospects of Coram, the Borrower and the Subsidiaries, taken as a
whole, or the Acquired Business, in each case since December 31, 1994.
SECTION 3.07. Title to Properties; Possession Under Leases. (a)
Each of Coram, the Borrower and the Significant Subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets, except for minor defects in title that do not interfere
with its ability to conduct its business as currently conducted or to utilize
such properties and assets for their intended purposes. All such material
properties and assets are free and clear of Liens, other than Liens expressly
permitted by Section 6.02 ("Permitted Liens").
(b) Each of Coram, the Borrower and the Significant Subsidiaries has
complied with all obligations under all leases to which it is a party and all
such leases are in full force and effect, except for any instances of
noncompliance and such failures of such leases to be in full force and effect
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. Each of Coram, the Borrower and the
Subsidiaries enjoys peaceful and undisturbed possession under all such leases
except to the extent that the failure to enjoy such peaceful and undisturbed
possession could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.08. Subsidiaries and Joint Ventures. After giving effect
to the Contribution on the Closing Date, (a) Coram shall directly own 100% of
the capital stock of the Borrower and shall not own directly any equity
interest in any other person and (b) Schedule 3.08 sets forth as of the Closing
Date a list of all the Subsidiaries, Designated Subsidiaries and Joint Ventures
and the direct or indirect percentage ownership interest of the Borrower
therein.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set
forth on Schedule 3.09, there are not any actions, suits or proceedings at law
or in equity or by or before any Governmental Authority now pending or, to the
knowledge of Coram or the Borrower, threatened against or affecting Coram, the
Borrower or any Subsidiary or any business, property or rights of any such
person (i) that involve any Loan Document or the Transactions or (ii) as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, could, individually or in the aggregate, result in a
Material Adverse Effect.
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(b) None of Coram, the Borrower or any of the Subsidiaries nor any of
their respective properties or assets is in violation of, nor is the continued
operation of their material properties and assets as currently conducted
reasonably expected to violate, any law, rule or regulation (including any
Health Care Law, any zoning, building, Environmental Law, ordinance, code or
approval or any building permits), or is in default with respect to any
judgment, writ, injunction or decree of any Governmental Authority, where such
violation or default could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(c) Except as set forth on Schedule 3.09, there currently exists (i)
no assertion of any claim of material violation by Coram, the Borrower or any
of the Subsidiaries of the Physician Self-Referral Laws, and (ii) no active
inquiry, investigation or audit with respect to the compliance of Coram, the
Borrower or any of the Subsidiaries with the Physician Self-Referral Laws, in
either case that could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
SECTION 3.10. Agreements. (a) None of Coram, the Borrower or any of
the Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or to
materially adversely affect the rights, remedies and benefits available to the
Administrative Agent, the Collateral Agent, the Fronting Bank or any Lender
under any Loan Document.
(b) None of Coram, the Borrower or any of its Subsidiaries is in
default in any manner under any provision of any indenture or other agreement
or instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or to
materially adversely affect the rights, remedies and benefits available to the
Administrative Agent, the Collateral Agent, the Fronting Bank or any Lender
under any Loan Document.
SECTION 3.11. Federal Reserve Regulations. (a) None of Coram, the
Borrower or any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately,
(i) to buy or carry Margin Stock or to extend credit to others for the purpose
of buying or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose that entails a violation of,
or is inconsistent with, the provisions of the Regulations of the Board,
including Regulation G, U or X.
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SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower nor any Subsidiary is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of
the Loans and will request the issuance of Letters of Credit only for the
purposes specified in the preamble to this Agreement (including in the case of
Revolving Loans, for Permitted Business Acquisitions and, in the case of
Letters of Credit, on behalf of Coram (but only in the ordinary course of
business in connection with its workers compensation insurance) and the
Subsidiaries).
SECTION 3.14. Tax Returns. Each of Coram, the Borrower and the
Subsidiaries has filed or caused to be filed all Federal, state and local tax
returns required to have been filed by it and has paid or caused to be paid all
taxes due and payable by it and all assessments received by it, except for (a)
state and local taxes, fees and assessments that could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
or to materially adversely affect the rights, remedies and benefits available
to the Administrative Agent, the Collateral Agent, the Fronting Bank or any
Lender under any Loan Document and (b) taxes that are being contested in good
faith by appropriate proceedings and for which the Borrower shall have set
aside on its books adequate reserves.
SECTION 3.15. No Material Misstatements. The Confidential
Information Memorandum and the other written information, reports, financial
statements, exhibits and schedules furnished by or on behalf of the Borrower to
the Administrative Agent or any Lender in connection with the negotiation of
any Loan Document or included therein or delivered pursuant thereto, taken as a
whole, did and do not contain any material misstatement of fact or did and do
not omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not misleading, provided that to the extent any such information, report,
financial statement, exhibit or schedule was based upon or constitutes a
forecast or projection, the Borrower represents only that it acted in good
faith and utilized reasonable assumptions and due care in the preparation of
such information, report, financial statement, exhibit or schedule (it being
understood that forecasts and projections by their nature involve
approximations and uncertainties).
SECTION 3.16. Employee Benefit Plans. Each of Coram, the Borrower
and its ERISA Affiliates is in compliance in all material respects with the
applicable provisions of ERISA and the Code and the regulations and published
interpretations thereunder. No Reportable Event has occurred in respect of any
Plan of Coram, the Borrower or any ERISA Affiliate. The present value of all
benefit liabilities under each Plan (based on those assumptions used to fund
such Plan) did not, as of the last
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annual valuation date applicable thereto, materially exceed the value of the
assets of such Plan. Neither Coram, the Borrower nor any ERISA Affiliate has
incurred any Withdrawal Liability that could reasonably be expected to have a
Material Adverse Effect. Neither Coram, the Borrower nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in reorganization
or has been terminated, within the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated, where such reorganization or termination has resulted or can
reasonably be expected to result in an increase in the contributions required
to be made to such Plan that could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.17. Environmental Matters. (a) The properties owned or
operated by Coram, the Borrower and the Subsidiaries (the "Properties") do not
contain any Hazardous Materials in amounts or concentrations that (i)
constitute, or constituted a violation of, or (ii) could give rise to liability
under, Environmental Laws, which violations and liabilities, in the aggregate,
could reasonably be expected to result in a liability to Coram, the Borrower
and the Subsidiaries in excess of $5,000,000.
(b) The Properties and all operations of Coram, the Borrower and the
Subsidiaries are in compliance, and in all prior periods have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent that such
non-compliance or failure to obtain any necessary permits, in the aggregate,
could not reasonably be expected to result in a a liability to Coram, the
Borrower and the Subsidiaries in excess of $5,000,000.
(c) There have been no Releases or threatened Releases at, from, under
or proximate to the Properties or otherwise in connection with the operations
of Coram, the Borrower or the Subsidiaries, which Releases or threatened
Releases, in the aggregate, could reasonably be expected to result in a
liability to Coram, the Borrower and the Subsidiaries in excess of $5,000,000.
(d) None of Coram, the Borrower or any of the Subsidiaries has
received any notice of an Environmental Claim in connection with the Properties
or the operations of the Borrower or the Subsidiaries or with regard to any
person whose liabilities for environmental matters Coram, the Borrower or the
Subsidiaries has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, that, in the aggregate, could reasonably be
expected to result in a liability to Coram, the Borrower and the Subsidiaries
in excess of $5,000,000, nor do Coram, the Borrower or the Subsidiaries have
reason to believe that any such notice will be received or is being threatened.
(e) Hazardous Materials have not been transported from the Properties,
nor have Hazardous Materials been generated, treated, stored or disposed of at,
on or
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under any of the Properties in a manner that could give rise to liability under
any Environmental Law, nor have any of Coram, the Borrower or the Subsidiaries
retained or assumed any liability, contractually, by operation of law or
otherwise, with respect to the generation, treatment, storage or disposal of
Hazardous Materials, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate, could
reasonably be expected to result in a liability to Coram, the Borrower and the
Subsidiaries in excess of $5,000,000.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete
and correct description of all insurance maintained by Coram or the Borrower or
by Coram or the Borrower for its subsidiaries as of the date hereof and the
Closing Date. As of each such date, such insurance is in full force and effect
and all premiums have been duly paid. Coram, the Borrower and the Significant
Subsidiaries have insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit
of the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Collateral is
delivered to the Collateral Agent and financing statements in appropriate form
are filed in the offices of the Secretary of State in each state in which the
pledgors of such Collateral are located, the Pledge Agreement shall constitute
a fully perfected first priority Lien on, and security interest in, all right,
title and interest of the pledgors thereunder in such Collateral and the
proceeds thereof, in each case prior and superior in right to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreements) and, when financing statements in appropriate form are
filed in the offices specified on Schedule 3.19(b) or in such other locations
as are set forth in a written notice from the Borrower to the Administrative
Agent, such security interest shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the grantors thereunder
in such Collateral and the proceeds thereof, in each case prior and superior in
right to any other person, other than with respect to Permitted Liens.
(c) The Intellectual Property Security Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Intellectual Property Security Agreement), and when the
Intellectual Property Security Agreement is filed in the United States Patent
and Trademark Office and the United States Copyright Office and when financing
statements in appropriate form are filed in the offices specified in Schedule
3.19(c), such security interest shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan
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Parties in such Collateral to the extent that such security interest can be
perfected by such filings in such offices, in each case prior and superior in
right to any other person (it being understood that subsequent recordings in
the United States Patent and Trademark Office and the United States Copyright
Office may be necessary to perfect a lien on registered trademarks, trademark
applications and copyrights acquired by the Loan Parties after the date
hereof).
SECTION 3.20. Location of Real Property and Leased Premises. (a)
Schedule 3.20(a) lists completely and correctly as of the Closing Date all real
property owned by the Borrower and the Subsidiaries and the addresses thereof.
The Borrower and the Subsidiaries own in fee all the real property set forth on
Schedule 3.20(a).
(b) Schedule 3.20(b) lists completely and correctly as of the Closing
Date all real property leased by the Borrower and the Subsidiaries and the
addresses thereof. The Borrower and the Subsidiaries have valid leases in all
the real property set forth on Schedule 3.20(b), except where the failure to
have a valid lease could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 3.21. Solvency. (a) Immediately after the consummation of
the Acquisition Transactions and the other Transactions to occur on the Closing
Date and immediately following the making of each Loan to be made on the
Closing Date and after giving effect to the application of the proceeds of such
Loans, (i) the fair value of the assets of Coram, the Borrower and the
Subsidiaries on a consolidated basis, at a fair valuation, will exceed the
debts and liabilities, subordinated, contingent or otherwise, of Coram, the
Borrower and the Subsidiaries on a consolidated basis; (ii) the present fair
saleable value of the property of Coram, the Borrower and the Subsidiaries on a
consolidated basis will be greater than the amount that will be required to pay
the probable liability of Coram, the Borrower and the Subsidiaries on a
consolidated basis on their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute
and matured; (iii) Coram, the Borrower and the Subsidiaries on a consolidated
basis will be able to pay their debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and matured; and
(iv) Coram, the Borrower and the Subsidiaries on a consolidated basis will not
have unreasonably small capital with which to conduct the businesses in which
they are engaged as such businesses are now conducted and are proposed to be
conducted following the Closing Date.
(b) The Borrower does not intend to, and will not permit any
Subsidiary to, and does not believe that it or any Subsidiary will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it or any such Subsidiary and
the timing of the amounts of cash to
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be payable on or in respect of its Indebtedness or the Indebtedness of any such
Subsidiary.
SECTION 3.22. Labor Matters. Except as set forth in Schedule 3.22,
there are no strikes pending or, to the best knowledge of Coram and the
Borrower, threatened against the Borrower or any Subsidiary that could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect. The hours worked and payment made to employees and
the Subsidiaries have not been in violation of the Fair Labor Standards Act or
any other applicable law dealing with such matters, and all payments due from
the Borrower or any Subsidiary or for which any claim may be made against the
Borrower or any Subsidiary, on account of wages and employee health and welfare
insurance and other benefits have been paid or accrued as a liability on the
books of the Borrower or such Subsidiary, except to the extent that any such
violation, or any failure to make such payment or accrual, could not reasonably
be expected, individually or in the aggregate, to result in a Material Adverse
Effect.
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans and of the Fronting Bank
to issue Letters of Credit hereunder (each, a "Credit Event") are subject to
the satisfaction of the following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing and
on the date of each issuance of a Letter of Credit:
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with the last paragraph of Section 2.03) or, in the case of
the issuance of a Letter of Credit, the Fronting Bank and the Administrative
Agent shall have received a notice requesting the issuance of such Letter of
Credit as required by Section 2.21(b).
(b) The representations and warranties set forth in Article III
hereof shall be true and correct in all material respects on and as of the date
of such Credit Event with the same effect as though made on and as of such
date, except to the extent such representations and warranties expressly relate
to an earlier date, and on the Closing Date such representations and warranties
shall be true and correct at the time of and immediately after consummation of
the Acquisition Transactions.
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(c) At the time of and immediately after such Credit Event or
issuance of such Letter of Credit, as the case may be, no Event of Default or
Default shall have occurred and be continuing.
(d) In the case of each Revolving Credit Borrowing or issuance of a
Letter of Credit, (i) the Administrative Agent shall have received a Borrowing
Base Certificate in accordance with Section 5.04(d) and (ii) at such time, the
Aggregate Revolving Credit Exposure (after giving effect to such Credit Event)
shall not exceed the then-current Borrowing Base.
Each Credit Event shall be deemed to constitute a representation and warranty
by the Borrower on the date of such Credit Event as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Fronting Bank, a favorable written opinion of (i)
Brobeck, Phleger & Harrison, counsel for Coram, the Borrower and the Principal
Subsidiaries, substantially to the effect set forth in Exhibit J-1 and (ii)
Brobeck, Phleger & Harrison, counsel for Coram, the Borrower and the Principal
Subsidiaries, substantially to the effect set forth in Exhibit J-2, and (iii)
local counsel for HealthInfusion, substantially to the effect set forth in
Exhibit J-3, in each case (A) dated the Closing Date, (B) addressed to the
Fronting Bank, the Administrative Agent and the Lenders, and (C) covering such
other matters relating to the Loan Documents and the Transactions as the
Administrative Agent shall reasonably request, and the Borrower hereby
instructs such counsel to deliver such opinions.
(b) All legal matters incident to this Agreement, the borrowings and
extensions of credit hereunder and the other Loan Documents shall be
satisfactory to the Lenders, to the Fronting Bank and to Cravath, Swaine &
Moore, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto, of
each Loan Party, certified as of a recent date with respect to Coram and the
Principal Subsidiaries, and as of a date within one year prior to the Closing
Date, for all other Loan Parties by the Secretary of State of the state of its
organization, and a certificate as to the good standing of each of them
certified as of a recent date with respect to Coram and the Principal
Subsidiaries, and as of a date within one year prior to the Closing Date for
all other Loan Parties, from such Secretary of State; (ii) a certificate of the
Secretary or Assistant Secretary of each of them dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of its by-laws
as in effect on the Closing Date and at all times since a date prior to the
date of the resolutions described in
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clause (B) below, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by its Board of Directors authorizing the execution,
delivery and performance of the Loan Documents to which such person is a party
and, in the case of the Borrower, the Borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that its certificate or articles of incorporation have not been
amended since the date of the last amendment thereto shown on the certificate
of good standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing any Loan Document
or any other document delivered in connection herewith on behalf of such
person; (iii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; and (iv) such other documents as the
Lenders, the Fronting Bank or Cravath, Swaine & Moore, counsel for the
Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by a Financial Officer of the Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b) and (c) of
Section 4.01.
(e) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder or under any other
Loan Document.
(f) The Pledge Agreement shall have been duly executed by the parties
thereto and delivered to the Collateral Agent and shall be in full force and
effect, and all the outstanding capital stock of the Borrower and each
Subsidiary Guarantor (other than those specified on Schedule 4.02(f)) shall
have been duly and validly pledged thereunder to the Collateral Agent for the
ratable benefit of the Secured Parties and certificates representing such
shares, accompanied by instruments of transfer and stock powers endorsed in
blank, shall be in the actual possession of the Collateral Agent.
(g) The Security Agreement and the Intellectual Property Security
Agreement shall have been duly executed by the parties thereto and delivered to
the Collateral Agent and shall be in full force and effect and each document
(including each Uniform Commercial Code financing statement) required by law or
reasonably requested by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the Collateral Agent for the benefit of
the Secured Parties a valid, legal and perfected first-priority security
interest in and lien on the Collateral described in such agreement (subject to
any Permitted Lien) shall have been delivered to the Collateral Agent.
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(h) The Collateral Agent shall have received the results of a search
of the Uniform Commercial Code filings (or equivalent filings) made with
respect to the Loan Parties in the states (or other jurisdictions) in which the
chief executive office of each such person is located, any offices of such
persons in which records have been kept relating to Accounts and the other
jurisdictions in which Uniform Commercial Code filings (or equivalent filings)
are to be made pursuant to the preceding paragraph, together with copies of the
financing statements (or similar documents) disclosed by such search, and
accompanied by evidence satisfactory to the Administrative Agent that the Liens
indicated in any such financing statement (or similar document) would be
permitted under Section 6.02 or either have been released or termination
statements with respect thereto in form satisfactory to the Administrative
Agent have been, or promptly following the Closing will be, furnished by the
Borrower to the Administrative Agent.
(i) The Collateral Agent shall have received a Perfection Certificate
with respect to each Loan Party dated the Closing Date and duly executed by a
Responsible Officer of the Borrower.
(j) The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by Section
5.02 and the applicable provisions of the Security Documents, each of which
shall be endorsed or otherwise amended to include a "standard" or "New York"
lender's loss payable endorsement and to name the Collateral Agent as
additional insured, in form and substance satisfactory to the Administrative
Agent.
(k) The Acquisition Transactions shall have been consummated or shall
be consummated simultaneously with the initial Borrowing hereunder in
accordance with applicable law and on other terms reasonably satisfactory to
the Lenders, and the Lenders shall be reasonably satisfied (i) with the
capitalization and structure of Coram, the Borrower and the Subsidiaries after
giving effect to the Acquisition Transactions and the consummation of the other
Transactions, (ii) that all aspects of the Acquisition Transactions are
consistent in all material respects with the Model and (iii) that the aggregate
level of fees and expenses to be paid in connection with the Acquisition
Transactions and the other Transactions shall not exceed $26,000,000.
(l) The Borrower shall have received $150,000,000 in cash proceeds
from the issuance of the Subordinated Bridge Notes and shall have issued to
Caremark the Subordinated Seller Notes. The terms of the Subordinated Bridge
Notes, the Subordinated Rollover Notes, the Borrower Securities Purchase
Agreement and the Subordinated Seller Notes shall be satisfactory in all
respects to the Lenders (including terms relating to the interest rate, fees,
maturity, subordination, covenants, events of defaults, remedies and, in the
case of the Subordinated Seller Notes, the pay-in-kind period). Without
limiting the generality of the foregoing, it is understood and agreed that the
Subordinated Seller Notes will permit the payment of interest in
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the form of additional Subordinated Seller Notes, in lieu of cash, (i) for a
period of two years after the Closing Date and (ii) at any time at which Coram
is unable to satisfy the financial performance tests set forth in Schedule
6.01(d).
(m) After giving effect to the Acquisition Transactions and the
consummation of the other Transactions, (i) the Borrower and Subsidiaries shall
not have any Indebtedness or preferred stock outstanding, other than
Indebtedness under the Loan Documents, Indebtedness for borrowed money set
forth on Schedule 6.01(a), Capital Lease Obligations set forth on Schedule
6.01(a) and other Indebtedness permitted hereunder, and (ii) Coram shall not
have any Indebtedness or preferred stock outstanding, other than the
Subordinated Notes, the Subordinated Seller Notes, its obligations under the
Parent Guarantee Agreement and other Indebtedness permitted hereunder.
(n) The Lenders shall be reasonably satisfied in all respects with
the tax position and the contingent tax liabilities and other liabilities of
Coram, the Borrower, Curaflex and their respective subsidiaries and the
Acquired Business and the plans of Coram and the Borrower with respect thereto.
(o) The Lenders shall be reasonably satisfied with the restructuring
plans of Coram and the Borrower with respect to the Acquired Business,
including the consistency of such plans with the cost projections previously
provided by Coram to the Lenders.
(p) The Lenders shall be reasonably satisfied as to the amount and
nature of any environmental and employee health and safety exposures to which
Coram, the Borrower and the Subsidiaries may be subject and the plans of Coram
and the Borrower with respect thereto.
(q) The Lenders shall be reasonably satisfied with the sufficiency of
amounts available under the Revolving Credit Commitments to meet the ongoing
working capital requirements of the Borrower and the Subsidiaries after giving
effect to the Acquisition Transactions and the consummation of the other
Transactions.
(r) The Lenders shall have received an audit, satisfactory in form
and substance to the Administrative Agent, of the receivables of the Borrower
and the Subsidiaries after giving effect to the Acquisition Transactions and
the consummation of the other Transactions.
(s) The Lenders shall have received a solvency letter, in form and
substance and from an independent valuation firm satisfactory to the Lenders,
together with such other evidence reasonably requested by the Lenders of the
solvency of Coram and its subsidiaries on a consolidated basis after giving
effect to the Acquisition Transactions and the consummation of the other
Transactions.
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(t) There shall be no litigation or administrative proceedings,
governmental investigations or other legal or regulatory developments, actual
or threatened, that, in the reasonable judgment of the Lenders, could
reasonably be expected to have a material adverse effect on (i) the business,
assets, operations, properties, financial condition, contingent liabilities,
prospects or material agreements of Coram, the Borrower and the Subsidiaries,
taken as a whole, (ii) the ability of Coram, the Borrower or any of the other
Loan Parties to perform its obligations under this Agreement, (iii) the ability
of Caremark or any Loan Party to consummate the Acquisition Transactions or the
other Transactions or (iv) the validity or enforceability of the Loan Documents
or the rights, remedies and benefits available to the Agent and the other
Lenders under the Loan Documents.
(u) The Lenders shall have received and shall be reasonably satisfied
with (i) the financial statements referred to in Section 3.05 and (ii) pro
forma consolidated and consolidating balance sheets and income statements of
Coram and its subsidiaries as of December 31, 1994, together with a certificate
of Coram's chief financial officer to the effect that such pro forma statements
fairly present the pro forma financial position and results of operations of
Coram and its subsidiaries in accordance with GAAP, except as otherwise
indicated in the notes to such financial statements and subject, in the case of
unaudited statements, to changes resulting from year-end audit adjustments.
The Lenders shall be reasonably satisfied that such statements, the Acquisition
Transactions and the other Transactions are consistent in all material respects
with the Model.
(v) Except as set forth on Schedule 3.04, all requisite Governmental
Authorities and third parties shall have approved or consented to the
Acquisition Transactions and the other Transactions to the extent required, all
applicable appeal periods shall have expired and there shall be no governmental
or judicial action, actual or threatened, that has or could have a reasonable
likelihood of restraining, preventing or imposing burdensome conditions on the
Acquisition Transactions or the other Transactions.
(w) Concurrently with the consummation of the transactions
contemplated hereby on the Closing Date, Coram and the Subsidiaries parties
thereto shall have repaid in full the principal of all loans outstanding,
interest thereon and other invoiced amounts due under the Existing Credit
Agreement and under each other agreement related thereto and the Administrative
Agent shall have received duly executed documentation either evidencing or
necessary for (i) the termination of the Existing Credit Agreement and each
other agreement related thereto, (ii) the cancellation of all commitments
thereunder and (iii) the termination of all related agreements and guarantees
and security interests granted by Coram, the Borrower or any Subsidiary or any
other person in connection therewith and the discharge of all obligations or
interests thereunder.
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(x) There shall have been no material adverse change in the
business, assets, operations, properties, financial condition, contingent
liabilities, prospects or material agreements of Coram, the Borrower and the
Subsidiaries, taken as a whole, or the Acquired Business, in each case since
December 31, 1994.
(y) The Cash Concentration Agreement shall have been executed by
the Borrower and Chemical Bank and shall be in full force and effect.
(z) Each of the Parent Guarantee Agreement and the Subsidiary
Guarantee Agreement shall have been duly executed by the parties thereto and
delivered to the Collateral Agent and shall be in full force and effect.
ARTICLE V
AFFIRMATIVE COVENANTS
Each of Coram and the Borrower covenants and agrees with each Lender
that so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document shall have
been paid in full and all Letters of Credit have been cancelled or have expired
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, Coram and the Borrower
will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.05.
(b) (i) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names necessary for the conduct of its business; (ii) maintain and operate such
business prudently in accordance with applicable industry practice; (iii)
comply with all applicable laws, rules, regulations (including any Health Care
Law, any zoning or building law, any Environmental Law and any ordinance, code
or approval) and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and (iv) at all times maintain and preserve all property
necessary for the conduct of its business and keep such property in good
repair, working order and condition and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times, except, in the
case of clauses (i), (iii) and (iv), to the extent that the failure to comply
with such covenants
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could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 5.02. Insurance. (a) With respect to the Significant
Subsidiaries, keep its insurable properties adequately insured at all times by
financially sound and reputable insurers; maintain such other insurance, to
such extent and against such risks, including fire and other risks insured
against by extended coverage, as is customary with companies in the same or
similar businesses operating in the same or similar locations, including (i)
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by it and (ii) business interruption
insurance; and maintain such other insurance as may be required by law.
(b) All such insurance policies that insure real or personal property
of the Loan Parties shall include a standard form lender's loss payee
endorsement, naming the Collateral Agent as loss payee for the benefit of the
Lenders. All such insurance policies that insure liability shall name the
Administrative Agent as additional insureds for the benefit of the
Administrative Agent and each Lender.
(c) If at any time after Coram, the Borrower or any Subsidiary shall
have been required to grant Mortgages on its Properties in accordance with
Section 5.12, any area in which the material properties of Coram, the Borrower
and the Subsidiaries are located is designated a "flood hazard area" in any
Flood Insurance Rate Map published by the Federal Emergency Management Agency
(or any successor agency), obtain flood insurance in such total amount as the
Administrative Agent, the Collateral Agent or the Required Lenders may from
time to time reasonably require, and otherwise comply with the National Flood
Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as
it may be amended from time to time.
(d) Notify the Administrative Agent and the Collateral Agent promptly
whenever any separate insurance concurrent in form or contributing in the event
of loss with that required to be maintained under this Section 5.02 is taken
out by the Borrower; and promptly deliver to the Administrative Agent and the
Collateral Agent a duplicate original copy of such policy or policies.
SECTION 5.03. Obligations and Taxes. Pay and discharge promptly when
due (a) all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits or in respect of its property, before the same
shall become delinquent or in default and (b) all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, could reasonably be
expected to give rise to a Lien upon such properties or any part thereof that
would not constitute a Permitted Lien hereunder; provided, however, that such
payment and discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as the validity
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or amount thereof shall be contested in good faith by appropriate proceedings
and the Borrower shall have set aside on its books adequate reserves with
respect thereto and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge and enforcement of a Lien.
SECTION 5.04. Financial Statements, Reports, etc. In the case of
Coram, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, (i) its
consolidated and consolidating balance sheets and related statements
of operations, stockholders' equity and cash flows showing the
financial condition of Coram and its consolidated subsidiaries as of
the close of such fiscal year and the results of its operations and
the operations of such subsidiaries during such year, all audited by
Ernst & Young LLP or other independent public accountants of
recognized national standing acceptable to the Required Lenders and
accompanied by an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such
consolidated financial statements fairly present the financial
condition and results of operations of Coram on a consolidated basis
in accordance with GAAP consistently applied and (ii) a comparison of
such annual results to (A) in the case of the fiscal year ending
December 31, 1995, the projected results for such year set forth in
the Model and (B) in the case of each fiscal year thereafter, the
budget prepared by the Borrower with respect to such fiscal year;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, (i) its consolidated and
consolidating balance sheets and related statements of operations,
stockholders' equity and cash flows showing the financial condition of
Coram and its consolidated subsidiaries as of the close of such fiscal
quarter and the results of its operations and the operations of such
subsidiaries during such fiscal quarter and the then-elapsed portion
of the fiscal year, all certified by one of its Financial Officers as
fairly presenting the financial condition and results of operations of
the Borrower on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and
(ii) a comparison of such quarterly results to (A) in the case of any
quarter occurring in the fiscal year ending December 31, 1995, the
projected results for such quarter set forth in the Model and (B) in
the case of any quarter occurring in any fiscal year thereafter, the
projected results for such quarter set forth in the budget prepared by
the Borrower with respect to such fiscal year;
(c) concurrently with any delivery of financial statements
under (a) or (b) above, a certificate of the accounting firm or
Financial Officer opining on or certifying such statements (which
certificate, when furnished by an accounting firm, may be limited to
accounting matters and disclaim
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responsibility for legal interpretations) (i) certifying that no Event
of Default or Default has occurred or, if such an Event of Default or
Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto
and (ii) setting forth computations in reasonable detail satisfactory
to the Administrative Agent (A) demonstrating compliance with the
covenants contained in Sections 6.11, 6.12, 6.13, 6.14, 6.15 and 6.16
and (B) setting forth a calculation of the Total Consolidated Debt
Ratio and the Consolidated Interest Coverage Ratio as of the last day
of the fiscal quarter (or such longer period ending on the last day of
such fiscal quarter) in respect of which such financial statements
have been prepared.
(d) (i) within 25 days after the end of each calendar month
ending on or prior to the first anniversary of the Closing Date and
within 15 days after the end of each calendar month thereafter, (ii)
on the date of the first Revolving Credit Borrowing or issuance of any
Letter of Credit, if such Credit Event shall occur prior to the
delivery of a Borrowing Base Certificate pursuant to clause (i), and
(iii) no later than April 14, 1995, (A) a certificate in the form of
Exhibit K-1 (a "Borrowing Base Certificate") and reasonably acceptable
to the Administrative Agent showing the Borrowing Base as of the close
of business on the last day of such calendar month or, in the case of
clause (ii), as of the date of the most recent receivables report
available to the Borrower, which shall be January 31, 1995, or, in the
case of clause (iii), as of February 28, 1995, each such Certificate
to be certified as complete and correct on behalf of the Borrower by a
Financial Officer of the Borrower, (B) such information as is required
to be delivered pursuant to Exhibit K-2 and is reasonably available to
the Borrower, any such deviations from Exhibit K-2 to be approved by
the Administrative Agent (it being agreed that at a minimum the
Lenders shall receive the information set forth in Items 1, 2(a), 3, 4
and 10 of Exhibit K-2) and (C) such other supporting documentation and
additional reports with respect to the Borrowing Base as the
Administrative Agent may reasonably request;
(e) not later than thirty days after the commencement of each
fiscal year, (i) the budget for such fiscal year prepared by the
Borrower and (ii) financial projections of Coram and its consolidated
subsidiaries through the Term Loan Maturity Date, containing
substantially the same information as set forth in Section 5 of the
Confidential Information Memorandum (including the specification of
the underlying assumptions), all certified by the chief financial
officer of Coram to be a good faith estimate of the forecasted
financial performance of Coram and its consolidated subsidiaries for
such period;
(f) upon the earlier of (i) 90 days after the end of each
fiscal year of Coram and (ii) the date on which the financial
statements in respect of such
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period are delivered pursuant to paragraph (a) above, a certificate of
the chief financial officer of Coram setting forth, in detail
reasonably satisfactory to the Agent, the amount of Excess Cash Flow,
if any, for such period;
(g) not later than 30 days after the end of each fiscal
quarter, a certificate of a Financial Officer of Coram setting forth
(i) a specification of the Designated Subsidiaries as of the end of
such fiscal quarter, (ii) a specification of Joint Ventures as of the
end of such fiscal quarter, (iii) the amount of Net Proceeds received
(or deemed to have been received) during such fiscal quarter and (iv)
a description of any Permitted Business Acquisitions consummated
during such fiscal quarter and the amount and type of consideration
paid with respect thereto;
(h) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other
materials filed by it with the Securities and Exchange Commission, or
any governmental authority succeeding to any of or all the functions
of said Commission, or with any national securities exchange, or
distributed to its shareholders generally, as the case may be (with
the exhibits relating thereto to be provided, at the Borrower's
expense, upon the request of the Administrative Agent or any Lender);
(i) (i) at the time the same is provided to the holders of the
Subordinated Bridge Notes or the Subordinated Rollover Notes, any
information provided to such holders pursuant to Section 6.1 of the
Borrower Securities Purchase Agreement and (ii) promptly, from time to
time, such other information regarding the operations, business
affairs and financial condition of the Borrower or any Subsidiary, or
compliance with the terms of any Loan Document, as the Administrative
Agent or any Lender may reasonably request; and
(j) promptly, and in any event no later than one month
following the Closing Date, prepare and provide to the Lenders the
schedule referred to in Section 3.04(d).
Copies of all reports delivered as provided in subsection (h) above that
include the information required in subsections (a) and (b) above shall to that
extent be deemed to satisfy the requirements of such subsections (a) and (b).
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SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent and each Lender prompt (but in any event within five
Business Days thereof) written notice of the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against the Borrower or any Affiliate thereof
that could reasonably be expected to result in a Material Adverse
Effect; and
(c) any other development that has resulted in, or could
reasonably be expected to result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects
with the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within 30
days after any Responsible Officer of Coram, the Borrower or any ERISA
Affiliate knows or has reason to know that, any Reportable Event has occurred
that alone or together with any other Reportable Event could reasonably be
expected to result in liability of Coram, the Borrower or any ERISA Affiliate
to the PBGC in an aggregate amount exceeding $250,000, a statement of a
Financial Officer setting forth details as to such Reportable Event and the
action that the Borrower proposes to take with respect thereto, together with a
copy of the notice, if any, of such Reportable Event given to the PBGC, (ii)
promptly after receipt thereof, a copy of any notice that Coram, the Borrower
or any ERISA Affiliate may receive from the PBGC relating to the intention of
the PBGC to terminate any Plan or Plans (other than a Plan maintained by an
ERISA Affiliate that is considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Code Section 414) or to appoint a trustee to
administer any such Plan, (iii) within 10 days after the due date for filing
with the PBGC pursuant to Section 412(n) of the Code a notice of failure to
make a required installment or other payment with respect to a Plan, a
statement of a Financial Officer setting forth details as to such failure and
the action that the Borrower proposes to take with respect thereto, together
with a copy of any such notice given to the PBGC and (iv) promptly and in any
event within 30 days after receipt thereof by Coram, the Borrower or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice
received by Coram, the Borrower or any ERISA Affiliate concerning (A) the
imposition of Withdrawal Liability or (B) a determination that a Multiemployer
Plan is, or is expected to be, terminated or in reorganization, both within the
meaning of Title IV of ERISA.
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SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by any Lender to visit and inspect the financial
records and the properties of any Loan Party at reasonable times and intervals
and as often as reasonably requested and to make extracts from and copies of
such financial records, and permit any representatives designated by any Lender
to discuss the affairs, finances and condition of Coram, the Borrower or any
Subsidiary with the officers thereof and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and
request the issuance of Letters of Credit only for the purposes set forth in
the preamble to this Agreement (including, in the case of Revolving Loans, for
Permitted Business Acquisitions and, in the case of Letters of Credit, on
behalf of Coram (but only in the ordinary course in connection with its workers
compensation insurance) and the Subsidiaries).
SECTION 5.09. Compliance with Environmental Laws. Comply, and cause
all lessees and other persons occupying its Properties to comply, in all
material respects with all Environmental Laws and Environmental Permits
applicable to its operations and Properties; obtain and renew all material
Environmental Permits necessary for its operations and Properties; and conduct
any Remedial Action in accordance with Environmental Laws, except to the extent
that any failure to comply with the foregoing could not reasonably be expected,
individually or in the aggregate, to result in a liability to Coram, the
Borrower and the Subsidiaries in excess of $5,000,000.
SECTION 5.10. Preparation of Environmental Reports. If a default
caused by reason of a breach of Section 3.17 or 5.09 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to Lenders within 45 days (or such longer period as shall
reasonably be required, so long as the Required Lenders do not object thereto)
after such request, at the expense of the Borrower, an environmental site
assessment report for the Properties that are the subject of such default
prepared by an environmental consulting firm acceptable to the Administrative
Agent, indicating the presence or absence of Hazardous Materials and a good
faith estimate of the cost of any compliance or Remedial Action in connection
with such Properties.
SECTION 5.11. Collateral Reviews. (a) From time to time upon the
reasonable request of the Administrative Agent, permit the Administrative Agent
or professionals (including investment bankers, consultants, accountants,
lawyers and appraisers) retained by the Administrative Agent to conduct
evaluations and appraisals of (i) the Borrower's practices in the computation
of the Borrowing Base and (ii) the assets included in the Collateral, and pay
the reasonable fees and expenses of such professionals in accordance with
Section 9.05(a).
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(b) In connection with any evaluation and appraisal relating to the
computation of the Borrowing Base, make such other adjustments to its
parameters for including Eligible Accounts Receivable in the Borrowing Base and
for calculating the Dilution Reserve and make such other adjustments to the
Borrowing Base as the Administrative Agent shall reasonably require based upon
the results of such evaluation and appraisal.
SECTION 5.12. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or which the Required Lenders, the Administrative Agent or the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and priority of the security interests created or intended
to be created by the Security Documents. In addition, from time to time,
Coram, the Borrower and the Subsidiaries will, at their cost and expense,
contemporaneously with the acquisition by Coram, the Borrower or any Subsidiary
of any new subsidiary or other assets or as otherwise expressly provided below,
promptly secure the Obligations by causing the following to occur: (a) (i)
promptly upon creating or acquiring any additional Subsidiary (other than any
Joint Venture), the capital stock of such Subsidiary will be pledged pursuant
to the Pledge Agreement, to the extent permitted by applicable law, and (ii)
such Subsidiary (other than any Joint Venture) will become a party to the
Security Agreement, the Pledge Agreement (if such Subsidiary owns capital stock
of any subsidiary), the Intellectual Property Security Agreement, the
Subsidiary Guarantee Agreement and the Indemnity, Subrogation and Contribution
Agreement as contemplated under each such agreement; (b) with respect to the
acquisition of any other assets, on a quarterly basis, except in connection
with a Permitted Business Acquisition, in which case promptly upon acquiring
such assets, the Borrower shall notify the Collateral Agent (in the case of
assets located in a jurisdiction in which Uniform Commercial Code financing
statements have not previously been filed pursuant to this Agreement or the
other Loan Documents) by describing such assets in a notice in the form of
Exhibit L and furnish thereafter such documents and instruments as may be
necessary to grant or confirm to the Collateral Agent a perfected Lien on or
security interest in such other assets, subject to Permitted Liens, as the
Collateral Agent shall reasonably request; and (c) if at any time Coram, the
Borrower or any Subsidiary (other than a Joint Venture) shall have owned for a
period of at least six months real property that is located in the United
States that has an aggregate fair market value (net of deduction from such
value of the principal amount of any Indebtedness secured by any Liens on such
real property) equal to at least $5,000,000, promptly, but in any event within
30 days after the end of such six-month period, enter into and deliver to the
Collateral Agent a Mortgage in respect of such property, to the extent
permitted by applicable law, any existing Lender holding a Lien thereon and, in
the case of any Joint Venture, the partnership or other
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relevant documentation, in form and substance reasonably satisfactory to the
Collateral Agent. All such security interests and Liens will be created under
the Security Documents and other instruments and documents in form and
substance reasonably satisfactory to the Collateral Agent, and the Loan Parties
shall deliver or cause to be delivered to the Administrative Agent all such
instruments and documents (including legal opinions and lien searches) as the
Required Lenders shall reasonably request to evidence compliance with this
Section 5.12. The Borrower agrees to provide such evidence as the Collateral
Agent shall reasonably request as to the perfection and priority status of each
such security interest and Lien.
SECTION 5.13. Interest Rate Protection Agreements. In the case of
the Borrower, enter into on or prior to the date that is 60 days following the
Closing Date, and thereafter maintain in full force and effect, Interest Rate
Protection Agreements at rates, in form and with parties reasonably acceptable
to the Administrative Agent, the effect of which shall be to limit through the
third anniversary of the Closing Date the interest payable by the Borrower on
Term Loans in an amount not less than 50%, as determined from time to time, of
the aggregate amount of the Term Loans outstanding.
SECTION 5.14. Cash Concentration Accounts; Cash Management Systems.
(a) In the case of the Borrower, (i) maintain the Existing Cash Concentration
Accounts and provide the Collateral Agent for the benefit of the Secured
Parties with a first-priority security interest in the Existing Cash
Concentration Accounts and (ii) (A) cause the Chemical Cash Concentration
Account to be established and maintained with Chemical Bank in New York, New
York and (B) as soon as reasonably practicable and in any event within six
months following the Closing Date (it being understood that the Borrower shall
use its best efforts to cause such events to occur within three months
following the Closing Date), close the Existing Cash Concentration Accounts and
cause any amounts on deposit therein to be transferred to the Chemical Cash
Concentration Account.
(b) (i) Within nine months following the Closing Date (it being
understood that the Borrower shall use its best efforts to cause such events to
occur as soon as reasonably practicable following the Closing Date), establish
and maintain cash management systems, including "lockbox" accounts, reasonably
satisfactory to the Administrative Agent, including entering into "lockbox
agreements" and taking such other actions and delivering such opinions as shall
be required by the Required Lenders, the Administrative Agent or the Collateral
Agent in accordance with Section 5.12 of this Agreement and Section 6.05 of the
Security Agreement, and (ii) without limiting the generality of clause (i)
above, cause to be transferred to the Cash Concentration Account on each
Business Day, in accordance with the provisions of the Security Agreement, all
available amounts on deposit in each Collection Deposit Account (or account
that shall be established in lieu thereof in accordance with clause (i) above)
in excess of $5,000 on such Business Day.
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SECTION 5.15. Compliance Procedures. At all times comply in all
material respects with applicable Physician Self-Referral Laws and maintain
adequate internal audit procedures to assure substantial compliance with
applicable Physician Self-Referral Laws.
SECTION 5.16. Transition to Holding Company Structure. In the case
of Coram, transfer within six months of the Closing Date all the assets and
operations described on Schedule 5.16 to the Borrower or to a Wholly Owned
Subsidiary.
SECTION 5.17. Subordinated Debt Payments. In the case of the
Borrower, (a) make interest payments on the Subordinated Bridge Notes in
additional Subordinated Bridge Notes to the fullest extent that it is permitted
to do so under the Borrower Securities Purchase Agreement, (b) in the event
that the Subordinated Bridge Notes shall not have been refinanced or repaid in
full at or prior to their stated maturity, issue Subordinated Rollover Notes in
exchange for any remaining Subordinated Bridge Notes to the fullest extent that
it is permitted to do so under the Borrower Securities Purchase Agreement and
(c) make interest payments on the Subordinated Rollover Notes in additional
Subordinated Rollover Notes to the fullest extent that it is permitted to do so
under the Borrower Securities Purchase Agreement.
ARTICLE VI
NEGATIVE COVENANTS
Each of Coram and the Borrower covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each
Loan, all Fees and all other expenses or amounts payable under any Loan
Document have been paid in full and all Letters of Credit have been cancelled
or have expired and all amounts drawn thereunder have been reimbursed in full,
unless the Required Lenders (or, in the case of Section 6.10(b)(i), all the
Lenders) shall otherwise consent in writing, Coram and the Borrower will not,
and will not cause or permit any of the Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except:
(a) in the case of Coram, the Borrower, each Wholly Owned
Subsidiary and each Subsidiary that is not a Joint Venture,
Indebtedness for borrowed money existing on the date hereof and set
forth in Schedule 6.01(a) (and any extensions, renewals or
replacements of such Indebtedness to the extent that (i) the aggregate
principal amount of such Indebtedness is not at any time increased,
(ii) no material terms applicable to such Indebtedness shall be more
favorable to the extending, renewing or replacement lenders than the
terms that are applicable to the holders of such Indebtedness on the
date hereof and
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(iii) the interest rate applicable to such Indebtedness shall be a
market interest rate as of the time of such extension, renewal or
replacement);
(b) (i) in the case of the Borrower, Subordinated Bridge
Notes, or senior subordinated increasing rate rollover notes issued in
exchange therefor in accordance with the Borrower Securities Purchase
Agreement (the "Subordinated Rollover Notes") in an aggregate
principal amount not to exceed $150,000,000 and (ii) in the case of
Coram or the Borrower, Refinancing Notes in an aggregate principal
amount at any time outstanding not to exceed the sum of (A)
$150,000,000 and (B) the aggregate principal amount of Subordinated
Bridge Notes or Subordinated Rollover Notes issued after the Closing
Date in payment of interest thereon pursuant to the terms thereof
(less the amount of any Subordinated Bridge Notes, Subordinated
Rollover Notes and Refinancing Notes that are repaid after the Closing
Date other than with the proceeds of Refinancing Notes);
(c) in the case of Coram, (i) the Junior PIK Notes in an
aggregate principal amount not to exceed the sum of (A) $25,000,000
and (B) the aggregate principal amount of Junior PIK Notes issued
after the Closing Date in payment of interest thereon pursuant to the
terms thereof (less the principal amount of any Junior PIK Notes that
are repaid after the Closing Date), and (ii) the Convertible PIK Notes
in an aggregate principal amount not to exceed the sum of (A)
$90,000,000 and (B) the aggregate principal amount of Convertible PIK
Notes issued after the Closing Date in payment of interest thereon
pursuant to the terms thereof (less the principal amount of any
Convertible PIK Notes that are repaid or converted into common stock
of Coram after the Closing Date);
(d) (i) in the case of Coram, Junior PIK Refinancing Notes
that are issued in exchange for Junior PIK Notes in the Coram Junior
PIK Notes Exchange Transaction, provided that such Junior PIK
Refinancing Notes shall have the same terms and conditions as the
Junior PIK Notes except that they shall be issued on a pari passu
basis with any Refinancing Notes issued by Coram in connection with
the Acquisition, and (ii) in the case of the Borrower, Junior PIK
Refinancing Notes that are issued in exchange for Junior PIK Notes in
the Borrower Junior PIK Notes Exchange Transaction, provided that such
Junior PIK Refinancing Notes shall have the same terms and conditions
as the Junior PIK Notes except that the obligor thereon shall be the
Borrower, and provided further, that such transaction shall be subject
to satisfaction by the Borrower of the financial tests set forth on
Schedule 6.01(d);
(e) in the case of the Guarantors, the guarantees under the
Guarantee Agreements and the Subordinated Guarantees;
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(f) in the case of the Borrower, (i) Interest Rate Protection
Agreements, in form and with parties reasonably acceptable to the
Administrative Agent, entered into in order to hedge the interest
payable on up to 100% of the aggregate principal amount of the Loans
outstanding as of the date on which the most recent such Interest Rate
Protection Agreement is entered into and (ii) any other Interest Rate
Protection Agreements entered into in order to hedge against the risks
associated with fluctuations in interest rates on terms and with
parties reasonably satisfactory to the Administrative Agent;
(g) in the case of the Borrower, (i) Indebtedness created
hereunder and (ii) Indebtedness in respect of Letters of Credit issued
hereunder;
(h) intercompany Indebtedness between (i) the Borrower and any
of the Wholly Owned Subsidiaries, (ii) any Wholly Owned Subsidiaries
of the Borrower and (iii) between Coram and the Borrower or any Wholly
Owned Subsidiary (A) for the purposes set forth in Section 6.06(c)(i),
not exceeding at any time during any fiscal year $2,000,000 minus the
amount of any dividends or distributions previously paid to Coram in
such fiscal year pursuant to Section 6.06(c)(i), (B) for the purposes
set forth in Section 6.06(c)(ii), not exceeding for the period
following the Closing Date $3,000,000 minus the amount of any
dividends or distributions previously paid to Coram during such period
pursuant to Section 6.06(c)(ii) and (C) for the purposes set forth in
Section 6.06(c)(v), not exceeding for the period following the Closing
Date $7,000,000 minus the amount of any dividends or distributions
previously paid to Coram during such period pursuant to Section
6.06(c)(v);
(i) Indebtedness consisting of Earn-out Obligations not in
excess of $5,000,000 at any time outstanding;
(j) in the case of the Borrower, Guarantees issued for the
benefit of any Wholly Owned Subsidiary in respect of obligations under
operating leases and other obligations in the ordinary course of
business;
(k) Reverse Repurchase Agreements permitted under Section
6.04(i);
(l) Indebtedness owing by a Subsidiary existing at the time
such Subsidiary was acquired (or assumed by the Borrower or such
Subsidiary at the time assets of such Subsidiary were acquired) in a
Permitted Business Acquisition (and any extensions, renewals or
replacements of such Indebtedness to the extent that (i) the aggregate
principal amount of such Indebtedness is not at any time increased,
(ii) no material terms applicable to such Indebtedness shall be more
favorable to the extending, renewing or replacement lenders than the
terms that are applicable to the holders of such Indebtedness on the
date hereof and (iii) the interest rate applicable to such
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Indebtedness shall be a market interest rate as of the time of such
extension, renewal or replacement), provided such Indebtedness was not
incurred or created in connection with or in contemplation of such
Permitted Business Acquisition;
(m) Indebtedness of the Borrower issued or incurred as part of
the consideration payable in connection with any Permitted Business
Acquisition, provided that (i) the aggregate principal amount of all
Indebtedness issued or incurred pursuant to this paragraph (m) does
not exceed $50,000,000 at any time outstanding and (ii) such
Indebtedness shall be subordinated in all respects to the Indebtedness
under this Agreement on terms no less favorable to the Lenders than
those contained in the Subordinated Seller Notes;
(n) Indebtedness of any Joint Venture owing to Coram, the
Borrower or any other Subsidiary to the extent permitted by Section
6.04(g);
(o) in the case of any Joint Venture or any Subsidiary that is
not a Wholly Owned Subsidiary, (i) Indebtedness for borrowed money and
Capital Lease Obligations existing on the date hereof and set forth in
Schedule 6.01(o) (and any extensions, renewals or replacements of such
Indebtedness to the extent that (A) the aggregate principal amount of
such Indebtedness is not at any time increased, (B) no material terms
applicable to such Indebtedness shall be more favorable to the
extending, renewing or replacement lenders than the terms that are
applicable to the holders of such Indebtedness on the date hereof and
(C) the interest rate applicable to such Indebtedness shall be a
market interest rate as of the time of such extension, renewal or
replacement), and (ii) other Indebtedness not in excess of $5,000,000
at any time outstanding; and
(p) in the case of the Borrower (and with respect to
Indebtedness incurred in connection with the type of Liens permitted
by Section 6.02(j), any Subsidiary), Indebtedness in addition to that
permitted by paragraphs (a) through (o) above in an aggregate
principal amount not in excess of $40,000,000 at any time outstanding,
so long as such Indebtedness is created under agreements or
instruments imposing covenants on the Borrower no less favorable to
the Borrower than the covenants imposed under this Agreement.
Notwithstanding the foregoing, at any time that the Subordinated Bridge Notes
or any Subordinated Rollover Notes shall remain outstanding or any amounts
shall be outstanding or unpaid thereon, neither Coram, the Borrower nor any
Subsidiary shall incur, create, assume or permit to exist any Indebtedness that
is not permitted in accordance with Section 6.4 of the Borrower Securities
Purchase Agreement.
Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, no Refinancing Notes shall be issued unless: (i) concurrently with
the
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issuance of such Refinancing Notes, Subordinated Bridge Notes, Subordinated
Rollover Notes or Refinancing Notes in a principal amount equal to the
principal amount of such Refinancing Notes shall have been repaid, at a price
not in excess of 100% of the principal amount thereof (plus interest accrued to
the date of repayment and not paid in cash); (ii) the terms of the Refinancing
Notes and the indenture or other agreement (the "Refinancing Note Indenture")
providing for the issuance thereof (and the related Subordinated Guarantees, if
any) shall be satisfactory in all material respects to the Required Lenders
(including terms and conditions relating to the interest rate, fees,
amortization, maturity, subordination, covenants, events of default and
remedies); (iii) the interest rate applicable to the Refinancing Notes shall be
a fixed, non- increasing market interest rate per annum on a principal amount
not in excess of the gross proceeds of the sale thereof and shall be payable
semiannually; and (iv) the Refinancing Notes shall mature not earlier than the
maturity date of the Subordinated Rollover Notes.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any
Lien on any property or assets (including stock or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its
Subsidiaries existing on the date hereof and set forth in Schedule
6.02, provided that (subject to the provisions of subsection (l)
below) such Liens shall secure only those obligations that they secure
on the date hereof;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary, provided that
(i) such Lien is not created in contemplation of or in connection with
such acquisition and (ii) such Lien does not apply to any other
property or assets of the Borrower or any Subsidiary;
(d) Liens for taxes not yet due or that are being contested in
compliance with Section 5.03;
(e) carriers', warehousemen's, mechanic's, materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations that are not due and payable or that
are being contested in compliance with Section 5.03;
(f) pledges and deposits made in the ordinary course of
business in compliance with workmen's compensation, unemployment
insurance and other social security laws or regulations;
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(g) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital
Lease Obligations), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(h) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances
incurred in the ordinary course of business that, in the aggregate,
are not substantial in amount and do not materially detract from the
value of the property subject thereto or interfere with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;
(i) any Lien existing or arising by operation of law in the
ordinary course of business of Coram, the Borrower and the
Subsidiaries, such as banker's Liens or similar rights of offset;
(j) (i) Liens placed upon real or personal property acquired
or held in the ordinary course of business at the time of acquisition
or improvement of such property to secure the purchase price thereof
or incurred solely to finance the acquisition or improvement of such
property, provided that (A) such Liens do not cover property other
than the property acquired or improved and (B) the Indebtedness
secured by such Liens does not in any case exceed the lesser of the
cost or fair market value of such property at the time of such
acquisition, and (ii) liens incurred in connection with Capital Lease
Obligations, so long as the aggregate principal amount of Indebtedness
secured by the Liens permitted pursuant to this paragraph (j) is
permitted pursuant to Section 6.01(p);
(k) attachment or judgment Liens not in excess of $2,500,000
in the aggregate and any other immaterial attachment or judgment Lien
discharged within 30 days of the entry of judgment or the expiry of
stay;
(l) Liens incurred in connection with the extension, renewal
or refinancing of the Indebtedness secured by the Liens described in
paragraphs (a), (c) and (j) above, provided that (i) any extension,
renewal or replacement Lien is limited to the property encumbered by
the existing Lien and the principal amount of the Indebtedness being
extended, renewed or refinanced is not increased and (ii) the
extension, renewal or refinancing of such Indebtedness is permitted
pursuant to Section 6.01; and
(m) other consensual Liens that do not encumber any accounts
or notes receivable securing Indebtedness and other liabilities not
exceeding $5,000,000 in the aggregate at any time outstanding.
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SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property that it intends to use for substantially the same
purpose or purposes as the property being sold or transferred, except that the
Borrower or any Subsidiary may enter into any such arrangement with respect to
computer equipment and motor vehicles so long as the aggregate amount of
Indebtedness incurred in connection with such arrangements does not exceed
$5,000,000 at any time outstanding.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of Indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist
any investment or any other interest in, any other person (each, an
"Investment"), except:
(a) (i) Investments by the Borrower or any Subsidiary
Guarantor in any Subsidiary Guarantor or in any person that,
immediately after the making of such Investment, is a Subsidiary
Guarantor, (ii) Investments by Coram in the capital stock of the
Borrower, (iii) Investments by the Borrower or any Subsidiary
Guarantor made on or prior to the Closing Date in any Joint Venture
that is in existence as of the Closing Date and described on Schedule
3.08, (iv) Investments by the Borrower or any Subsidiary Guarantor
made after the Closing Date in any Joint Venture that is in existence
as of the Closing Date and described on Schedule 3.08 to purchase any
portion of or all the ownership interest of any partner or co-owner in
such Joint Venture in an aggregate amount not in excess of $25,000,000
for the period following the Closing Date and (v) Investments by the
Borrower or any Subsidiary Guarantor (A) made after the Closing Date
in any Joint Venture that is described on Schedule 3.08 (other than
Investments made pursuant to clause (iv) above), (B) in any Joint
Venture acquired after the Closing Date in connection with any
Permitted Business Acquisition or (C) in any Joint Venture created or
entered into after the Closing Date, provided that the aggregate
amount of additional investments in Joint Ventures pursuant to this
clause (v) shall not exceed $25,000,000 for the period following the
Closing Date;
(b) Permitted Investments;
(c) in the case of the Borrower, Interest Rate Protection
Agreements permitted pursuant to Section 6.01(f);
(d) Investments constituting Permitted Business Acquisitions
(i) made as Capital Expenditures pursuant to Section 6.11, provided
that the aggregate amount of consideration (whether cash or property,
as valued at the time such
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investment is made), 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 of such
corporation or partnership at the time of acquisition, for all such
Permitted Business Acquisitions in any fiscal year shall not exceed
50% of the amount set forth for such fiscal year in Section 6.11, or
(ii) made in accordance with the second proviso to paragraph (b) of
the definition of the term "Net Proceeds";
(e) Investments constituting Permitted Other Acquisitions,
provided that the aggregate amount of consideration (whether cash or
property, as valued at the time each such Investment is made),
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 of such corporation or
partnership at the time of acquisition, for all such Permitted Other
Acquisitions shall not exceed (i) $25,000,000 in any fiscal year and
(ii) $50,000,000 for the period following the Closing Date, minus in
each case the amount of Investments made in such fiscal year or
following the Closing Date, as the case may be, pursuant to paragraphs
(a)(v) above and (f) below;
(f) Investments in Permitted Business Acquisitions in which
the sole consideration given by Coram, the Borrower or any Subsidiary
is common stock of Coram ("Permitted Stock Acquisitions"), provided
that the aggregate amount of consideration (based upon the fair market
value of the Coram common stock, as determined in a manner reasonably
satisfactory to the Required Lenders), 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 of such corporation or partnership at the time of acquisition,
paid in respect of all such Permitted Stock Acquisitions shall not
exceed (i) $25,000,000 in any fiscal year and (ii) $50,000,000 for the
period following the Closing Date, minus in each case the amount of
Investments made in such fiscal year or following the Closing Date, as
the case may be, pursuant to paragraphs (a)(v) and (e) above;
(g) (i) Investments by Coram, the Borrower or any of the
Subsidiaries consisting of loans at arms' length terms to any person
in which Coram, directly or indirectly, owns more than a 20% equity
interest (but that is not a Wholly Owned Subsidiary) existing on the
Closing Date and set forth in Schedule 6.04(g), and any extensions,
renewals or replacements of the same, provided that the aggregate
principal amount of such loans are not at any time increased, and (ii)
additional such Investments, provided that (A) at all times the
Collateral Agent has a perfected security interest in all of Coram's,
the Borrower's or such Subsidiary's rights to repayment thereof and
security therefor, to the extent and in the manner required by the
Security Agreement, (B) the aggregate principal amount of such loans
outstanding at any time, when
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added to the aggregate amount of Investments made pursuant to clause
(k) below, shall not exceed $5,000,000 and (C) any such loans entered
into after the Closing Date shall be evidenced by a promissory note;
(h) Employee Loans not exceeding $4,000,000 in aggregate
principal amount at any time outstanding;
(i) Reverse Repurchase Agreements maturing within 30 days of
the date of purchase, provided that the aggregate amount of such
Reverse Repurchase Agreements at any time shall not exceed 75% of all
short-term Investments of Coram, the Borrower and the Subsidiaries;
(j) Investments consisting of readily marketable securities
held as of the date hereof in custody account no. 320-116266 with
Wells Fargo Bank, N.A. and in custody account no. 06-15753 with Morgan
Stanley & Co. Incorporated, provided that the Collateral Agent has a
perfected, first priority security interest in each such account;
(k) other Investments not exceeding $5,000,000 in the
aggregate at any time outstanding;
(l) acquisitions constituting a transaction permitted by
Section 6.05(d) or 6.05(f);
(m) Investments arising from transactions by the Borrower or
any of the Subsidiaries with customers or suppliers in the ordinary
course of business, including debt obligations and other investments
received in connection with the bankruptcy or reorganization of
customers and suppliers and in settlement of delinquent obligations
of, and other disputes with, customers or suppliers, arising in the
ordinary course of business and in the exercise of the reasonable
business judgment of the Borrower or any Subsidiary; and
(n) promissory notes, contingent payment obligations and
equity interests (i) held by Coram, the Borrower or any Subsidiary as
of the Closing Date and pledged to the Collateral Agent for the
benefit of the Secured Parties pursuant to the Pledge Agreement and
(ii) received or accepted in connection with any disposition of assets
permitted under Section 6.05, provided that the aggregate amount of
such promissory notes, contingent payment obligations and equity
interests received pursuant to this clause (ii) does not exceed
$10,000,000 at any time outstanding.
Notwithstanding the foregoing, at any time that the Subordinated Bridge Notes
or any Subordinated Rollover Notes shall remain outstanding or any amounts
shall remain outstanding or unpaid thereon, neither Coram, the Borrower nor any
Subsidiary shall
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make any of the foregoing investments except as may be permitted in accordance
with Sections 6.8 and 6.10 of the Borrower Securities Purchase Agreement.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other person, or permit any
other person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
any substantial part of its assets (whether now owned or hereafter acquired) or
any capital stock of any Subsidiary, or purchase, lease or otherwise acquire
(in one transaction or a series of transactions) all or any substantial part of
the assets of any other person, except that:
(a) the Borrower and any Subsidiary may purchase and sell
inventory and other property and services in the ordinary course of
business;
(b) the Borrower may sell (i) readily marketable securities
(A) in the ordinary course of business, (B) described in Section
6.04(j) and (C) in connection with Reverse Repurchase Agreements
permitted pursuant to Section 6.04(i) and (ii) if at the time thereof
and immediately after giving effect thereto no Default or Event of
Default shall have occurred and be continuing, assets (other than
readily marketable securities) to the extent that the aggregate gross
cash proceeds therefrom do not exceed $50,000,000 for the period
following the Closing Date, provided that (x) a Financial Officer of
the Borrower certifies on behalf of the Borrower that any such sale of
assets is estimated by the Borrower in good faith to be at a price
equal to or greater than the then fair market value of such asset and
(y) in the case of sales of assets in respect of which the book value
is greater than $10,000,000, such sale shall have been approved by the
Board of Directors of the Borrower;
(c) the Borrower may sell, transfer, dissolve, liquidate or
otherwise dispose of shares of stock or securities of any Designated
Subsidiary;
(d) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be
continuing (i) any Wholly Owned Subsidiary may merge into the Borrower
in a transaction in which the Borrower is the surviving corporation
and no Person other than the Borrower or a Wholly Owned Subsidiary
receives any consideration, (ii) any Subsidiary may merge into or
consolidate with any other Wholly Owned Subsidiary in a transaction in
which the surviving entity is a Wholly Owned Subsidiary and no Person
other than the Borrower or a Wholly Owned Subsidiary receives any
consideration and (iii) the Borrower or any Subsidiary may make any
investment permitted by Section 6.04;
(e) the Borrower and any Subsidiary may lease and sublease
assets in the ordinary course of business;
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(f) the Borrower and any Subsidiary may sell, assign, pledge
or otherwise transfer any of its assets to the Borrower or any other
Subsidiary; and
(g) any Joint Venture may sell or otherwise dispose of any of
its assets (other than in a sale of all or substantially all its
assets or in a complete liquidation of such Joint Venture).
Notwithstanding the foregoing, at any time that the Subordinated Bridge Notes
or any Subordinated Rollover Notes shall remain outstanding or any amounts
shall remain outstanding or unpaid thereon, neither Coram, the Borrower nor any
Subsidiary shall conduct any of the foregoing activities set forth in this
Section 6.05 except in accordance with Section 6.5 of the Borrower Securities
Purchase Agreement.
SECTION 6.06. Dividends and Distributions. Declare or pay, directly
or indirectly, any dividend or make any other distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, with respect to any shares of its capital stock or directly or
indirectly redeem, purchase, retire or otherwise acquire for value (or permit
any Subsidiary to purchase or acquire) any shares of any class of its capital
stock or set aside any amount for any such purpose; provided, however, that:
(a) Coram may declare or distribute dividends payable solely
in its common stock;
(b) any Subsidiary may declare and pay dividends or make
other distributions to (i) the Borrower, (ii) any Subsidiary Guarantor
and (iii) in the case of any Subsidiary (other than a Joint Venture)
that is not a Wholly Owned Subsidiary, any other shareholder if such
dividends or distributions are paid pro rata to all holders of the
capital stock of such Subsidiary;
(c) so long as no Event of Default or Default shall have
occurred and be continuing, the Borrower may declare and pay dividends
or make other distributions to Coram in order to enable Coram to pay
(i) any taxes or expenses required to be paid by Coram in the ordinary
course of business, so long as the aggregate amount of such dividends
or other distributions (other than any such dividends or other
distributions made for the purposes of paying taxes), together with
the aggregate principal amount of any loans made pursuant to Section
6.01(h)(iii)(A), does not exceed $2,000,000 in any fiscal year, (ii)
any other charges or expenses, so long as the aggregate amount of such
dividends or other distributions, together with the aggregate
principal amount of any loans made pursuant to Section
6.01(h)(iii)(B), does not exceed $3,000,000 for the period following
the Closing Date, (iii) interest required to
<PAGE> 97
91
be paid in cash in respect of the Subordinated Seller Notes, to the
extent permitted to be paid under Section 6.10, (iv) any expenses
required to be paid by Coram in connection with complying with its
obligations under Section 5.16 and any other expenses incurred by
Coram in the ordinary course of its business prior to complying with
such Section, so long as the aggregate amount of such dividends or
other distributions, together with the aggregate principal amount of
any loans made pursuant to Section 6.01(h)(iii)(C), does not exceed
$7,000,000 for the period following the Closing Date and (v) any
amount payable by Coram pursuant to Section 2.1(d)(ii)(x) of the Asset
Purchase Agreement so long as such amount does not exceed $5,000,000;
(d) so long as no Default or Event of Default shall result,
(i) Coram may repurchase shares of its common stock from its current
or former officers, employees and directors at a price 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 held
by its current or former officers, employees or directors, provided
that the aggregate amount expended by the Borrower pursuant to this
paragraph (d) shall not exceed $1,000,000 in any fiscal year or
$5,000,000 during the period following the Closing Date;
(e) 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
resale of any common stock purchased from employees or issue of new
shares of its common stock;
(f) on the Closing Date, the Borrower may distribute a portion
of the proceeds of Term Loans to Coram, but only to the extent
necessary to pay Acquisition Costs and to repay the indebtedness under
the Existing Credit Agreement; and
(g) any Joint Venture may make distributions to its owners.
Notwithstanding the foregoing, at any time that the Subordinated Bridge Notes
or any Subordinated Rollover Notes shall remain outstanding or any amounts
shall remain outstanding or unpaid thereon, neither Coram, the Borrower nor any
Subsidiary shall conduct any of the foregoing activities set forth in this
Section 6.06 except in accordance with Section 6.15 of the Borrower Securities
Purchase Agreement.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
that so long as no Default or Event of Default shall have occurred and be
continuing, the Borrower or any Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or
<PAGE> 98
92
such Subsidiary than could be obtained on an arm's-length basis from unrelated
third parties, as determined in good faith by the Board of Directors of Coram,
the Borrower or such Subsidiary, as the case may be; provided, however, that no
determination of any such Board of Directors shall be required with respect to
(a) any such transactions entered into in the ordinary course of business, (b)
any such transactions entered into with any Lender or any Affiliate of any
Lender or (c) transactions with directors, shareholders and employees pursuant
to agreements existing as of the Closing Date and other compensation
arrangements in the ordinary course of business, except that Coram, the
Borrower or any Subsidiary may engage in any transaction described on Schedule
6.07.
SECTION 6.08. Business of Borrower and Subsidiaries. Engage at any
time in any business or business activity other than (a) in the case of the
Borrower and the Subsidiaries, the business currently conducted by it or a
business substantially similar thereto or, in the case of Curaflex, by the
Acquired Business, and business activities reasonably incidental thereto and
(b) in the case of Coram, the ownership of all the outstanding common stock of
the Borrower and business activities reasonably incidental thereto.
SECTION 6.09. Fiscal Year. Change the end of its fiscal year from
December 31 to any other date.
SECTION 6.10. Other Indebtedness and Agreements. (a) Permit any
waiver, supplement, modification, amendment, termination or release of (i) (A)
the Subordinated Bridge Notes, any Subordinated Rollover Notes or the Borrower
Securities Purchase Agreement, (B) any Refinancing Notes or any Refinancing
Note Indenture as in effect on the date of issuance of such Refinancing Notes
or entry into such Refinancing Note Indenture, (C) any Junior PIK Refinancing
Notes or any indenture (the "Junior PIK Refinancing Note Indenture") providing
for the issuance thereof as in effect on the date of issuance of such Junior
PIK Refinancing Notes or entry into such Junior PIK Refinancing Note Indenture,
(D) the Junior PIK Notes, (E) the Convertible PIK Notes or (F) the Subordinated
Guarantees, in each case to the extent that such waiver, supplement,
modification, amendment, termination or release would be adverse to the Lenders
in any respect or (ii) any other instrument or agreement pursuant to which any
other Indebtedness of Coram, the Borrower or any Subsidiary is outstanding in
an aggregate outstanding principal amount in excess of $250,000 to the extent
that any such waiver, supplement, modification, amendment, termination or
release would be adverse to the Lenders in any material respect.
(b) Permit any waiver, supplement, modification, amendment,
termination or release of the Asset Purchase Agreement (i) on or prior to the
Closing Date, to the extent that any such waiver, supplement, modification,
amendment, termination or release would be adverse to the Lenders in any
respect without the consent of each Lender and (ii) after the Closing Date, to
the extent that any such waiver,
<PAGE> 99
93
supplement, modification, amendment, termination or release would be adverse to
the Lenders in any material respect without the consent of the Required
Lenders.
(c) Make any distribution, whether in cash, property, securities or a
combination thereof, other than scheduled payments of principal and interest as
and when due (to the extent not prohibited by applicable subordination
provisions), in respect of, or pay, or offer to commit to pay, or directly or
indirectly redeem, repurchase, retire or otherwise acquire for consideration,
or set apart any sum for the aforesaid purposes, any of the Subordinated Bridge
Notes, any Subordinated Rollover Notes, the Refinancing Notes, the Junior PIK
Refinancing Notes, the Junior PIK Notes, the Convertible PIK Notes, the
Subordinated Guarantees or any other Indebtedness for borrowed money (other
than intercompany Indebtedness) of Coram, the Borrower or any Subsidiary in an
outstanding principal amount exceeding $1,000,000 ("Other Debt"), except for
(i) the issuance of Junior PIK Notes (or any Junior PIK Refinancing Notes)
after the Closing Date as payment of interest on the Junior PIK Notes pursuant
to the terms thereof, (ii) the issuance of Convertible PIK Notes after the
Closing Date as payment of interest on the Convertible PIK Notes pursuant to
the terms thereof, (iii) the issuance by Coram of its common stock upon
conversion of (A) the Convertible PIK Notes in accordance with the terms
thereof and (B) other convertible Indebtedness outstanding in the form of debt
securities and permitted pursuant to this Agreement (including any convertible
Refinancing Notes) in accordance with its terms; (iv) the issuance of
Subordinated Rollover Notes in satisfaction of outstanding Subordinated Bridge
Notes pursuant to the Borrower Securities Purchase Agreement; (v) the repayment
of the Subordinated Bridge Notes, any Subordinated Rollover Notes or the
Refinancing Notes with the proceeds from the issuance of Refinancing Notes in
accordance with Section 6.01; (vi) the prepayment of Subordinated Bridge Notes
or Subordinated Rollover Notes with the proceeds from the issuance or sale by
Coram, the Borrower or any Subsidiary (other than the issuance or sale to
Coram, the Borrower or any Subsidiary) of any equity security of Coram, the
Borrower or any Subsidiary to the extent that such prepayment contemplated by
this clause (vi) is required by the Borrower Securities Purchase Agreement;
(vii) the Junior PIK Notes Exchange Transactions; (viii) the refinancing of
other Indebtedness in the ordinary course of business; and (ix) the making by
Coram of any payment required by Section 2.1(d)(ii) of the Asset Purchase
Agreement.
(d) Make any cash interest payment on or in respect of the
Subordinated Seller Notes (i) prior to the second anniversary of the Closing
Date, (ii) at any time at which the financial tests set forth on Schedule
6.01(d) shall not be satisfied or (iii) at any other time when payment in the
form of additional Subordinated Seller Notes would be permitted in accordance
with the terms thereof.
(e) Permit any Subsidiary Guarantor to enter into any agreement or
investment that by its terms restricts the payment of dividends or the making
of cash
<PAGE> 100
94
advances by such Subsidiary to the Borrower or any Subsidiary that is a direct
or indirect parent of such Subsidiary.
Notwithstanding the foregoing, at any time that the Subordinated Bridge Notes
or any Subordinated Rollover Notes shall remain outstanding or any amounts
shall remain outstanding or unpaid thereon, neither Coram, the Borrower nor any
Subsidiary shall conduct any of the activities set forth in paragraphs (c) or
(d) above except in accordance with Section 6.15 of the Borrower Securities
Purchase Agreement.
SECTION 6.11. Capital Expenditures. Permit the aggregate amount of
Capital Expenditures (including Permitted Business Acquisitions made pursuant
to Section 6.04(d)) made by Coram, the Borrower and the Subsidiaries in any
fiscal year to exceed the amount set forth below opposite such year:
<TABLE>
<CAPTION>
Fiscal Year Amount
<S> <C>
1995 $30,000,000
1996 $20,000,000
1997 $25,000,000
1998 $25,000,000
1999 $25,000,000
</TABLE>
The amount of permitted Capital Expenditures set forth above in
respect of any fiscal year shall be increased by 50% of the unused permitted
Capital Expenditures for the immediately preceding fiscal year (less an amount
equal to any unused Capital Expenditures carried forward to such preceding
fiscal year).
SECTION 6.12. Coverage Ratio. Permit the ratio of (a) EBITDA of
Coram, the Borrower and the Subsidiaries minus the sum of (i) Capital
Expenditures of Coram, the Borrower and the Subsidiaries and (ii) to the extent
required to be paid in cash in the applicable period, taxes to (b) the
aggregate amount paid in cash by Coram, the Borrower and the Subsidiaries in
respect of Debt Service (i) for the fiscal quarter ended June 30, 1995, to be
less than 1.20 to 1.00, (ii) for the two-fiscal-quarter period ending September
30, 1995, to be less than 1.20 to 1.00, (iii) for the three-fiscal-quarter
period ending December 31, 1995, to be less than 1.20 to 1.00 or
<PAGE> 101
95
(iv) for any four-fiscal-quarter period ending on a date set forth below to be
less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
<S> <C>
March 31, 1996 1.20 to 1.00
June 30, 1996 1.20 to 1.00
September 30, 1996 1.20 to 1.00
December 31, 1996 1.20 to 1.00
March 31, 1997 1.20 to 1.00
June 30, 1997 1.20 to 1.00
September 30, 1997 1.20 to 1.00
December 31, 1997 1.20 to 1.00
March 31, 1998 1.20 to 1.00
June 30, 1998 1.20 to 1.00
September 30, 1998 1.20 to 1.00
December 31, 1998 1.20 to 1.00
March 31, 1999 1.20 to 1.00
June 30, 1999 1.20 to 1.00
September 30, 1999 1.20 to 1.00
December 31, 1999 1.20 to 1.00
Term Loan Maturity Date 1.20 to 1.00
</TABLE>
SECTION 6.13. Total Debt Ratio. (a) Permit (i) the ratio of (A)
Total Debt as of June 30, 1995, to (B) Annualized EBITDA for the fiscal quarter
ended June 30, 1995, to be in excess of 4.00 to 1.00, (ii) permit the ratio of
(A) Total Debt as of September 30, 1995, to (B) Annualized EBITDA for the
two-fiscal-quarter period ended September 30, 1995, to be in excess of 4.00 to
1.00 or (iii) permit the ratio of (A) Total Debt as of December 31, 1995, to
(B) Annualized EBITDA for the three-fiscal-quarter period ending on December
31, 1995, to be in excess of 3.25 to 1.00. For purposes of the foregoing, the
term "Annualized EBITDA" shall mean (i) with respect to the fiscal quarter
ended June 30, 1995, the EBITDA of Coram, the Borrower and the Subsidiaries on
a consolidated basis divided by .25, (ii) with respect to the two-
fiscal-quarter period ended September 30, 1995, the EBITDA of Coram, the
Borrower and the Subsidiaries on a consolidated basis for such period divided
by .50 and (iii) with respect to the three-fiscal-quarter period ended December
31, 1995, the EBITDA of Coram, the Borrower and the Subsidiaries on a
consolidated basis for such period divided by .75.
(b) Permit the ratio of (i) Total Debt as of any date set forth below
to (ii) EBITDA of Coram, the Borrower and the Subsidiaries for the
four-fiscal-quarter period ending on such date to be in excess of the ratio set
forth below opposite such date:
<PAGE> 102
96
<TABLE>
<CAPTION>
Date Ratio
<S> <C>
March 31, 1996 2.75 to 1.00
June 30, 1996 2.75 to 1.00
September 30, 1996 2.50 to 1.00
December 31, 1996 2.50 to 1.00
March 31, 1997 2.50 to 1.00
June 30, 1997 2.50 to 1.00
September 30, 1997 2.25 to 1.00
December 31, 1997 2.25 to 1.00
March 31, 1998 2.00 to 1.00
June 30, 1998 2.00 to 1.00
September 30, 1998 2.00 to 1.00
December 31, 1998 2.00 to 1.00
March 31, 1999 2.00 to 1.00
June 30, 1999 2.00 to 1.00
September 30, 1999 2.00 to 1.00
December 31, 1999 2.00 to 1.00
Term Loan Maturity Date 2.00 to 1.00
</TABLE>
SECTION 6.14. Cash Interest Expense Coverage Ratio. Permit the ratio
of (a) EBITDA of Coram, the Borrower and the Subsidiaries minus Capital
Expenditures of Coram, the Borrower and the Subsidiaries to (b) the aggregate
amount of Consolidated Cash Interest Expense (i) for the two-fiscal-quarter
period ending September 30, 1995, to be less than 1.75 to 1.00, (ii) for the
three-fiscal-quarter period ending December 31, 1995, to be less than 2.00 to
1.00 or (iii) for any four-fiscal-quarter period ending on a date set forth
below to be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
<S> <C>
March 31, 1996 2.50 to 1.00
June 30, 1996 2.75 to 1.00
September 30, 1996 3.25 to 1.00
December 31, 1996 3.25 to 1.00
March 31, 1997 3.25 to 1.00
June 30, 1997 3.50 to 1.00
September 30, 1997 3.50 to 1.00
December 31, 1997 3.75 to 1.00
March 31, 1998 4.00 to 1.00
June 30, 1998 4.00 to 1.00
September 30, 1998 4.00 to 1.00
December 31, 1998 4.00 to 1.00
March 31, 1999 4.00 to 1.00
</TABLE>
<PAGE> 103
97
<TABLE>
<S> <C>
June 30, 1999 4.00 to 1.00
September 30, 1999 4.00 to 1.00
December 31, 1999 4.00 to 1.00
Term Loan Maturity Date 4.00 to 1.00
</TABLE>
SECTION 6.15. EBITDA. Permit EBITDA of Coram, the Borrower and the
Subsidiaries for any four-fiscal-quarter period (a) ending on or after March
31, 1996, and before March 31, 1997, to be less than $140,000,000 and (b)
ending on or after March 31, 1997, to be less than $155,000,000.
SECTION 6.16. Lease Expense. Permit the aggregate amount of payments
under operating leases in any fiscal year to exceed $25,000,000.
ARTICLE VII
EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in or
in connection with any Loan Document or the borrowings or issuances of
Letters of Credit hereunder, or any representation, warranty,
statement or information contained in any report, certificate,
financial statement or other instrument furnished in connection with
or pursuant to any Loan Document, shall prove to have been false or
misleading in any material respect when so made, deemed made or
furnished;
(b) default shall be made in the payment of any principal of
any Loan or the reimbursement with respect to any L/C Disbursement
when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Loan or any Fee or L/C Disbursement or any other amount (other
than an amount referred to in (b) above) due under any Loan Document,
when and as the same shall become due and payable, and such default
shall continue unremedied for a period of five days;
(d) default shall be made in the due observance or performance
by Coram, the Borrower or any Subsidiary of any covenant, condition or
agreement contained in Section 5.01(a), 5.05, 5.08, 5.10 and 5.17 or
in Article VI;
<PAGE> 104
98
(e) default shall be made in the due observance or performance
by Coram, the Borrower or any Subsidiary of any covenant, condition or
agreement contained in any Loan Document (other than those specified
in (b), (c) or (d) above) and such default shall continue unremedied
for a period of 30 (or, if any Subordinated Bridge Notes or
Subordinated Rollover Notes remain outstanding, 25) days (except that
with respect to Section 5.02, such period shall be 15 days) after
written notice thereof from the Administrative Agent or any Lender to
the Borrower;
(f) Coram, the Borrower or any Subsidiary shall (i) fail to
pay any principal or interest, regardless of amount, due in respect of
any Indebtedness in a principal amount in excess of $5,000,000 when
and as the same shall become due and payable, or (ii) fail to observe
or perform any other term, covenant, condition or agreement contained
in any agreement or instrument evidencing or governing any such
Indebtedness if the effect of any failure referred to in this clause
(ii) is to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf (with or without the
giving of notice, the lapse of time or both) to cause, such
Indebtedness to become due prior to its stated maturity;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of Coram, the Borrower or
any Subsidiary, or of a substantial part of the property or assets of
Coram, the Borrower or a Subsidiary, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law,
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Coram, the Borrower or any
Subsidiary or for a substantial part of the property or assets of
Coram, the Borrower or a Subsidiary or (iii) the winding-up or
liquidation of Coram, the Borrower or any Subsidiary; and such
proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(h) Coram, the Borrower or any Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner,
any proceeding or the filing of any petition described in (g) above,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Coram,
the Borrower or any Subsidiary or for a substantial part of the
property or assets of Coram, the Borrower or any Subsidiary, (iv) file
an answer admitting the material
<PAGE> 105
99
allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take any action for the purpose of
effecting any of the foregoing;
(i) one or more judgments for the payment of money in an
aggregate amount that is not covered by insurance in excess of
$5,000,000 shall be rendered against Coram, the Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to levy upon assets or properties
of Coram, the Borrower or any Subsidiary to enforce any such judgment;
(j) (i) a Reportable Event or Reportable Events, or a failure
to make a required installment or other payment (within the meaning of
Section 412(n)(1) of the Code), shall have occurred with respect to
any Plan or Plans that reasonably could be expected to result in
liability of Coram or the Borrower to the PBGC or to a Plan in an
aggregate amount exceeding $5,000,000 and, within 30 days after the
reporting of any such Reportable Event to the Administrative Agent or
after the receipt by the Administrative Agent of a statement required
pursuant to Section 5.06(b)(iii) hereof, the Administrative Agent
shall have notified the Borrower in writing that (A) the Required
Leaders have made a reasonable determination that, on the basis of
such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds for the termination of
such Plan or Plans by the PBGC, the appointment by the appropriate
United States district court of a trustee to administer such Plan or
Plans or the imposition of a lien in favor of a Plan and (B) as a
result thereof an Event of Default exists hereunder; or (ii) a trustee
shall be appointed by a United States district court to administer any
such Plan or Plans; or (iii) the PBGC shall institute proceedings
(including giving notice of intent thereof) to terminate any such Plan
or Plans;
(k) (i) Coram, the Borrower or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that it has
incurred Withdrawal Liability to such Multiemployer Plan, (ii) Coram,
the Borrower or such ERISA Affiliate does not have reasonable grounds
for contesting such Withdrawal Liability or is not contesting such
Withdrawal Liability in a timely and appropriate manner and (iii) the
amount of such Withdrawal Liability specified in such notice, when
aggregated with all other amounts required to be paid to Multiemployer
Plans in connection with Withdrawal Liabilities
<PAGE> 106
100
(determined as of the date or dates of such notification), either (A)
exceeds $5,000,000 or requires payments exceeding $1,000,000 in any
year or (B) is less than $5,000,000 but any Withdrawal Liability
payment remains unpaid 30 days after such payment is due;
(l) Coram, the Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, if solely as a result of such
reorganization or termination the aggregate annual contributions of
Coram, the Borrower and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or have been or are being
terminated have been or will be increased over the amounts required to
be contributed to such Multiemployer Plans for their most recently
completed plan years by an amount exceeding $5,000,000.
(m) any security interest in any Collateral having,
individually or in the aggregate, a fair market value in excess of
$2,500,000 purported to be created by any Security Document shall
cease to be, or shall be asserted by the Borrower or any other Loan
Party not to be, a valid, perfected, first priority (except as
otherwise expressly provided in this Agreement or such Security
Document) security interest in the securities, assets or properties
covered thereby, except to the extent that any such loss of perfection
or priority results from the failure of the Collateral Agent to
maintain possession of certificates representing securities pledged
under the Pledge Agreements and except to the extent that such loss is
covered by a lender's title insurance policy and the related insurer
promptly after such loss shall have acknowledged in writing that such
loss is covered by such title insurance policy;
(n) there shall have occurred a Change in Control; or
(o) either of the Parent Guarantee Agreement or the Subsidiary
Guarantee Agreement shall cease to be, or shall be asserted by Coram
or by any Subsidiary Guarantor, as applicable, not to be, in full
force and effect and enforceable in accordance with its terms (in any
case other than to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (whether enforcement is sought in
a proceeding in equity or at law));
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders, shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the
<PAGE> 107
101
Commitments, (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrower accrued hereunder and
under any other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein or in any
other Loan Document to the contrary notwithstanding, (iii) require the posting
of cash collateral in accordance with Section 2.21(k) and (iv) exercise any
remedies available under any Loan Document or otherwise; and in any event with
respect to the Borrower described in paragraph (g) or (h) above, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other
Loan Document to the contrary notwithstanding.
ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
In order to expedite the transactions contemplated by this Agreement,
Chemical Bank is hereby appointed to act as Administrative Agent and Collateral
Agent on behalf of the Lenders and the Fronting Bank (for purposes of this
Article VIII, the Administrative Agent and the Collateral Agent are referred to
collectively as the "Agents"). Each of the Lenders and each assignee of any
such Lender, hereby irrevocably authorizes the Agents to take such actions on
behalf of such Lender or assignee or the Fronting Bank and to exercise such
powers as are specifically delegated to the Agents by the terms and provisions
hereof and of the other Loan Documents, together with such actions and powers
as are reasonably incidental thereto. The Administrative Agent is hereby
expressly authorized by the Lenders and the Fronting Bank, without hereby
limiting any implied authority, (a) to receive on behalf of the Lenders and the
Fronting Bank all payments of principal of and interest on the Loans, all
payments in respect of L/C Disbursements and all other amounts due to the
Lenders hereunder, and promptly to distribute to each Lender or the Fronting
Bank its proper share of each payment so received; (b) to give notice on behalf
of each of the Lenders to the Borrower of any Event of Default specified in
this Agreement of which the Administrative Agent has actual knowledge acquired
in connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by
the Borrower pursuant to this Agreement as received by the Administrative
Agent. Without limiting the generality of the foregoing, the Agents are
hereby expressly authorized to
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execute any and all documents (including releases) with respect to the
Collateral and the rights of the Secured Parties with respect thereto, as
contemplated by and in accordance with the provisions of this Agreement and the
Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by
the Borrower or any other Loan Party of any of the terms, conditions, covenants
or agreements contained in any Loan Document. The Agents shall not be
responsible to the Lenders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement or any other Loan Documents
or other instruments or agreements. The Agents shall in all cases be fully
protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the
absence of knowledge to the contrary, be entitled to rely on any instrument or
document believed by it in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. Neither the Agents nor
any of their respective directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Loan Party on account of the
failure of or delay in performance or breach by any Lender or the Fronting Bank
of any of its obligations hereunder or to any Lender or the Fronting Bank on
account of the failure of or delay in performance or breach by any other
Lender, the Fronting Bank, the Borrower or any other Loan Party of any of their
respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. Each of the Agents may execute any and all
duties hereunder by or through agents or employees and shall be entitled to
rely upon the advice of legal counsel selected by it with respect to all
matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be under any
duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement unless it shall be requested in writing to do
so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as
provided below, either Agent may resign at any time by notifying the Lenders
and the Borrower. Upon any such resignation, the Required Lenders shall have
the right to appoint a successor, subject to the Borrower's approval, which
shall not be unreasonably withheld. If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring
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Agent gives notice of its resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a bank with an office
in the United States of America, having a combined capital and surplus of at
least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of
any appointment as Agent hereunder by a successor bank, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent shall be discharged from its
duties and obligations hereunder. After the Agent's resignation hereunder, the
provisions of this Article and Section 9.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the
amount of its pro rata share (based on its Commitments hereunder) of any
expenses incurred for the benefit of the Lenders by the Agents, including
counsel fees and compensation of agents and employees paid for services
rendered on behalf of the Lenders, that shall not have been reimbursed by the
Borrower and (b) to indemnify and hold harmless each Agent and any of its
directors, officers, employees or agents, on demand, in the amount of such pro
rata share, from and against any and all liabilities, taxes, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by or asserted against it in its capacity as Agent or any of them in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by it or any of them under this Agreement or any other
Loan Document, to the extent the same shall not have been reimbursed by the
Borrower, provided that no Lender shall be liable to an Agent for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or wilful misconduct of such Agent or any of its directors,
officers, employees or agents.
Each Lender acknowledges that it has, independently and without
reliance upon the Agents or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any
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other Loan Document, any related agreement or any document furnished hereunder
or thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as
follows:
(a) if to the Borrower, to it c/o Coram Healthcare
Corporation, 1125 Seventeenth Street, Suite 1500, Denver, Colorado
80202, Attention of Sam R. Leno (Telecopy No. (303) 298-0043);
(b) if to the Administrative Agent or the Fronting Bank, to
Chemical Bank Agency Services Corporation, Grand Central Tower, 140
East 45th Street, New York, New York 10017, Attention of Janet Belden
(Telecopy No. (212) 622-0002), with a copy to Chemical Bank, at 270
Park Avenue, New York 10017, Attention of Robert L. Parker (Telecopy
No. (212) 270-3279); and
(c) if to a Lender, to it at its address (or telecopy number)
set forth in the Administrative Questionnaire delivered to the
Administrative Agent by such Lender in connection with the execution
of this Agreement or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Fronting Bank and shall survive
the making by the Lenders of the Loans and the issuance of Letters of Credit by
the Fronting Bank, regardless of any investigation made by the Lenders or the
Fronting Bank or on their behalf, and
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shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any Fee or any other amount payable under this
Agreement or any other Loan Document is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof that,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the Borrower, the
Administrative Agent, the Fronting Bank or the Lenders that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion
of its interests, rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender or an
Affiliate of a Lender, the Borrower and the Administrative Agent (and, in the
case of any assignment of a Revolving Credit Commitment, the Fronting Bank)
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender, the amount of the Commitment of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 (or, if less, the
entire Commitment of the assigning Lender), (iii) the parties to each such
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, together with a processing and recordation fee of $3,500 and
(iv) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire. Upon acceptance and
recording pursuant to paragraph (e) of this Section 9.04, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least five Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Agreement and (B) the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease
to be a
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106
party hereto but shall continue to be entitled to the benefits of Sections
2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account and
not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and
that its Term Loan Commitment and Revolving Credit Commitment, and the
outstanding balances of its Term Loans and Revolving Loans, in each case
without giving effect to assignments thereof that have not become effective,
are as set forth in such Assignment and Acceptance, (ii) except as set forth in
(i) above, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, any other Loan Document or any other instrument or document
furnished pursuant hereto, or the financial condition of the Borrower or any
Subsidiary or the performance or observance by the Borrower or any Subsidiary
of any of its obligations under this Agreement, any other Loan Document or any
other instrument or document furnished pursuant hereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; (iv) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.04 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (v) such assignee will
independently and without reliance upon the Administrative Agent, the
Collateral Agent, such assigning Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (vi) such assignee appoints and authorizes the Administrative Agent
and the Collateral Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to the
Administrative Agent and the Collateral Agent, respectively, by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations that by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its offices in
The City of New York a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders,
and the Commitment of, and principal amount of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries
in the Register shall be conclusive and the Borrower, the Administrative Agent,
the Fronting Bank, the Collateral Agent and the Lenders may treat each person
whose name is recorded in
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the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower, the Fronting Bank,
the Collateral Agent and any Lender, at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in paragraph (b) above and, if required, the written consent of the Borrower,
the Fronting Bank and the Administrative Agent to such assignment, the
Administrative Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Lenders and the Fronting Bank. No assignment shall be
effective unless it has been recorded in the Register as provided in this
paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Fronting
Bank or the Administrative Agent sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided, however, that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
participating banks or other entities shall be entitled to the benefit of the
cost protection provisions contained in Sections 2.13, 2.15 and 2.19 to the
same extent as if they were Lenders and (iv) the Borrower, the Administrative
Agent, the Fronting Bank and the Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right
to enforce the obligations of the Borrower relating to the Loans or L/C
Disbursements and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
decreasing any fees payable hereunder or the amount of principal of or the rate
at which interest is payable on the Loans, extending any scheduled principal
payment date or date fixed for the payment of interest on the Loans or changing
or extending the Commitments or releasing any material portion of any
Collateral under the Security Documents).
(g) Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower, provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such
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confidential information on terms no less restrictive than those applicable to
the Lenders pursuant to Section 9.16.
(h) Any Lender may at any time assign all or any portion of its
rights under this Agreement to a Federal Reserve Bank to secure extensions of
credit by such Federal Reserve Bank to such Lender, provided that no such
assignment shall release a Lender from any of its obligations hereunder or
substitute any such Bank for such Lender as a party hereto. In order to
facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at
the request of the assigning Lender, duly execute and deliver to the assigning
Lender a promissory note or notes evidencing the Loans made to the Borrower by
the assigning Lender hereunder.
(i) The Borrower shall not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Administrative Agent,
the Fronting Bank and each Lender, and any attempted assignment without such
consent shall be null and void.
(j) In the event that Standard & Poor's Ratings Group, Moody's
Investors Service, Inc. and Thompson's BankWatch (or Insurance Watch Ratings
Service, in the case of Lenders that are insurance companies (or Best's
Insurance Reports, if such insurance company is not rated by Insurance Watch
Ratings Service)) shall, after the date that any Lender becomes a Lender,
downgrade the long-term certificate of deposit ratings of such Lender, and the
resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of a
Lender that is an insurance company (or B, in the case of an insurance company
not rated by Insurance Watch Ratings Service)), respectively, then the Fronting
Bank shall have the right, but not the obligation, at its own expense, upon
notice to such Lender and the Administrative Agent, to replace (or to request
the Borrower to use its reasonable efforts to replace) such Lender with an
assignee (in accordance with and subject to the restrictions contained in
paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i)
no such assignment shall conflict with any law, rule and regulation or order of
any Governmental Authority and (ii) the Fronting Bank or such assignee, as the
case may be, shall pay to such Lender in immediately available funds on the
date of such assignment the principal of and interest accrued to the date of
payment on the Loans made by such Lender hereunder and all other amounts
accrued for such Lender's account or owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay
all reasonable out-of-pocket expenses incurred by the Administrative Agent, the
Collateral Agent and the Fronting Bank in connection with the preparation and
administration of this Agreement and the other Loan Documents or in connection
with
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any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby contemplated shall be consummated) or
incurred by the Administrative Agent, the Collateral Agent or any Lender in
connection with the enforcement or protection of their rights (including in
connection with any debt restructuring or "work-outs") in connection with this
Agreement and the other Loan Documents or in connection with the Loans made or
Letters of Credit issued hereunder, including the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent,
the Collateral Agent and the Fronting Bank, and, in connection with any such
enforcement or protection, the fees, charges and disbursements of any other
counsel for the Administrative Agent, the Collateral Agent or any Lender (it
being understood that, so long as no Event of Default shall have occurred and
be continuing, the Borrower shall not be obligated to pay any costs or expenses
incurred by any Lender in connection with visiting and inspecting the financial
records and properties of any Loan Party pursuant to Section 5.07). The
Borrower shall also reimburse the Administrative Agent for the out-of-pocket
expenses incurred by the Administrative Agent in connection with, and on a
fully allocated basis for the Administrative Agent's reasonable internal costs
in connection with, any evaluation and appraisal relating to the computation of
the Borrowing Base.
(b) The Borrower agrees to indemnify the Administrative Agent, the
Collateral Agent, each Lender and the Fronting Bank, each Affiliate of any of
the foregoing persons and each of their respective directors, officers,
employees and agents (each such person being called an "Indemnitee") against,
and to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, charges
and disbursements, incurred by or asserted against any Indemnitee arising out
of, in any way connected with, or as a result of (i) the execution or delivery
of this Agreement or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby, (ii) the use of the proceeds of
the Loans or issuance of Letters of Credit, (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not
any Indemnitee is a party thereto, or (iv) any actual or alleged presence or
Release of Hazardous Materials on any property owned or operated by the
Borrower or any of the Subsidiaries, or any Environmental Claim related in any
way to the Borrower or the Subsidiaries, provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or wilful misconduct of such Indemnitee. If any proceeding,
including any governmental investigation, shall be instituted involving any
Indemnitee, in respect of which indemnity may be sought against the Borrower,
such Indemnitee shall promptly notify the Borrower in writing, and the Borrower
shall assume the defense thereof on behalf of such Indemnitee
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including the employment of counsel (reasonably satisfactory to such
Indemnitee) and payment of all reasonable expenses. Any Indemnitee shall have
the right to employ separate counsel in any such proceeding and participate in
the defense thereof, but the fees and expenses of such separate counsel shall
be at the expense of such Indemnitee unless (i) the employment of such separate
counsel has been specifically authorized by the Borrower or (ii) the named
parties to any such action (including any impleaded parties) include such
Indemnitee and the Borrower and such Indemnitee shall have been advised by its
counsel that there may be one or more legal defenses available to such
Indemnitee that are different from or in addition to those available to the
Borrower (in which case the Borrower shall not have the right to assume the
defense of such action on behalf of such Indemnitee). At any time after the
Borrower has assumed the defense of any proceeding involving any Indemnitee in
respect of which indemnity has been sought against the Borrower in accordance
with this Section, such Indemnitee may elect, by written notice to the
Borrower, to withdraw its request for indemnity and thereafter the defense of
such proceeding shall be maintained by counsel of the Indemnitee's choosing and
at the Indemnitee's expense. No Indemnitee shall consent to any settlement in
connection with any proceeding for which indemnification is sought without the
prior written consent of the Borrower (which shall not be unreasonably
withheld).
(c) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the
expiration of any Letter of Credit, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Administrative Agent, the Collateral
Agent, any Lender or the Fronting Bank. All amounts due under this Section
9.05 shall be payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement and
other Loan Documents held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. Any Lender exercising
such right of setoff shall promptly notify the Borrower thereof (it being
understood that any failure to so notify the Borrower shall not affect such
Lender's right to set off such amounts). The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) that such Lender may have.
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SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER
LOAN DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH
LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM
CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL
CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO
MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or the Fronting Bank in
exercising any power or right hereunder or under any Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Collateral Agent, the Fronting Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver
of any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders; provided, however, that
no such agreement shall (i) decrease the principal amount of, or extend the
maturity of or any scheduled principal payment date or date for the payment of
any interest on any Loan or any date for reimbursement of an L/C Disbursement,
or waive or excuse any such payment or any part thereof, or decrease the rate
of interest on any Loan or L/C Disbursement, without the prior written consent
of each Lender affected thereby, (ii) change or extend the Commitment or
decrease the Fees of any Lender without the prior written consent of such
Lender, (iii) amend or modify the provisions of Section 2.11(b), Section 2.16,
Section 6.10(b)(i), the provisions of this Section 9.08(b), the definition of
the term "Required Lenders" or "Super-majority Lenders" without the prior
written consent of each Lender, (iv) permit Coram, the Borrower or any
Subsidiary to grant or otherwise create any Lien on any material portion of the
Collateral that is pari passu with or senior to the Liens created under
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the Security Documents in order to secure the obligations of Coram, the
Borrower or any Subsidiary under any Subordinated Bridge Note, Subordinated
Rollover Note, Refinancing Note or Subordinated Guarantee or any extension,
renewal or refinancing of any thereof without the prior written consent of the
Super-majority Lenders or (v) release any material portion of the Collateral
(except in connection with asset sales permitted pursuant to Section 6.05(b)),
release Coram from its obligations under the Parent Guarantee Agreement or
release any of the Principal Subsidiaries from its obligations under the
Subsidiary Guarantee Agreement without the prior written consent of each
Lender; provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent, the
Collateral Agent or the Fronting Bank hereunder or under any other Loan
Document without the prior written consent of the Administrative Agent, the
Collateral Agent or the Fronting Bank. For purposes of the foregoing,
"Super-majority Lenders" shall mean, at any time, Lenders having outstanding
Loans, L/C Exposures and unused Commitments representing at least 75% of the
sum of all outstanding Loans, L/C Exposures and unused Commitments at such
time.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan
or participation in any L/C Disbursement, together with all fees, charges and
other amounts that are treated as interest on such Loan or participation in
such L/C Disbursement under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan or
participation in accordance with applicable law, the rate of interest payable
in respect of such Loan or participation hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Loan or participation but were not payable as a result of the operation
of this Section 9.09 shall be cumulated and the interest and Charges payable to
such Lender in respect of other Loans or participations or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated
amount, together with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by such Lender.
SECTION 9.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
<PAGE> 119
113
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 9.03. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each
of Coram and the Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan Documents, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and
<PAGE> 120
114
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Borrower or its properties in the courts of any
jurisdiction.
(b) Each of Coram and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Confidentiality. The Administrative Agent, the
Collateral Agent, the Fronting Bank and each of the Lenders agrees to keep
confidential (and to use its best efforts to cause its respective agents and
representatives to keep confidential) the Information and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Administrative Agent, the Collateral Agent, the Fronting Bank or any Lender
shall be permitted to disclose Information (a) to such of its respective
officers, directors, employees, agents, representatives and Affiliates as need
to know such Information, (b) to the extent requested by any regulatory
authority, (c) to the extent otherwise required by applicable laws and
regulations or by any subpoena or similar legal process or (d) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Agreement or (ii) becomes available to the Administrative Agent,
the Fronting Bank, any Lender or the Collateral Agent on a nonconfidential
basis from a source other than the Borrower. For the purposes of this Section,
"Information" shall mean all financial statements, certificates, reports,
agreements and information (including all analyses, compilations and studies
prepared by the Administrative Agent, the Collateral Agent, the Fronting Bank
or any Lender based on any of the foregoing) that are received from Coram, the
Borrower, any Subsidiary or any of their respective agents or representatives
and related to Coram, the Borrower, any Subsidiary, any shareholder of Coram,
any Joint Venture or any employee, customer or supplier of Coram, the Borrower
or any Subsidiary, other than any of the foregoing that were available to the
Administrative Agent, the Collateral Agent, the Fronting Bank or any Lender on
a nonconfidential basis prior to its disclosure thereto by the Borrower, and
<PAGE> 121
115
that are, in the case of Information provided after the date hereof, clearly
identified at the time of delivery as confidential. The provisions of this
Section 9.16 shall remain operative and in full force and effect regardless of
the expiration and term of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
CORAM HEALTHCARE CORPORATION,
by /s/ Sam R. Leno
------------------------------
Name: Sam R. Leno
Title: Chief Financial Officer
CORAM, INC.,
by /s/ Sam R. Leno
------------------------------
Name: Sam R. Leno
Title: Chief Financial Officer
CHEMICAL BANK, individually and as
Administrative Agent, Collateral Agent and
Fronting Bank,
by /s/ Beth F. Herman
------------------------------
Name: Beth F. Herman
Title: Vice President
<PAGE> 122
116
BANK OF AMERICA NT & SA,
by /s/ Wyatt R. Ritchie
------------------------------
Name: Wyatt R. Ritchie
Title: Vice President
BANK OF IRELAND GRAND CAYMAN,
by /s/ Roger M. Burns
------------------------------
Name: Roger M. Burns
Title: Vice President
THE BANK OF NOVA SCOTIA,
by /s/ Dana Maloney
------------------------------
Name: Dana Maloney
Title: Relationship Manager
BERLINER HANDELS- UND
FRANKFURTER BANK GRAND CAYMAN BRANCH,
by /s/ Evon Contos
------------------------------
Name: Evon Contos
Title: Vice President
by /s/ Dan Dobrjanskyj
------------------------------
Name: Dan Dobrjanskyj
Title: Assistant Treasurer
<PAGE> 123
117
CHL HIGH YIELD LOAN PORTFOLIO
(a Unit of Chemical Bank),
by /s/ James P. Ferguson
--------------------------------
Name: James P. Ferguson
Title: Managing Director
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH,
by /s/ Xavier Ratouis
--------------------------------
Name: Xavier Ratouis
Title: Authorized Signature
THE FIRST NATIONAL BANK OF BOSTON,
by /s/ Oscar Jazdowski
--------------------------------
Name: Oscar Jazdowski
Title: Managing Director
THE FIRST NATIONAL BANK OF
CHICAGO,
by /s/ Catherine V. Frank
--------------------------------
Name: Catherine V. Frank
Title: Officer
FIRST UNION NATIONAL
BANK OF NORTH CAROLINA,
by /s/ Tess Whelpley
--------------------------------
Name: Tess Whelpley
Title: Vice President
<PAGE> 124
118
THE MITSUBISHI BANK, LIMITED
CHICAGO BRANCH,
by /s/ Noboru Kobayashi
--------------------------------
Name: Noboru Kobayashi
Title: Joint General Manager
NBD BANK,
by /s/ Robert Lawrence
--------------------------------
Name: Robert Lawrence
Title: Vice President
NATIONSBANK of TEXAS, N.A.
by /s/ Frank T. Hundley
--------------------------------
Name: Frank T. Hundley
Title: Senior Vice President
<PAGE> 1
SECURITIES PURCHASE AGREEMENT
DATED AS OF
APRIL 6, 1995
AMONG
CORAM, INC.,
AS ISSUER,
CORAM FUNDING, INC.,
AS INITIAL PURCHASER
AND
CORAM HEALTHCARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Accounting Terms and Determinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II
PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.1. Commitments to Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.2. The Closing; Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.1. Corporate Existence and Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.2. Authorization, Execution and Enforceability of Material
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.3. Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.4. Non-Contravention of Laws or Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.5. Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.9. Not an Investment Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.11. Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.12. Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.13. Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.14. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.15. Solicitation; Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.16. Absence of any Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.17. Prior Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.18. Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DLJ BRIDGE . . . . . . . . . . . . . . . . . . . 18
SECTION 4.1. Purchase for Investment; Authority; Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.2. Solicitation by DLJ Bridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.1. Conditions to Purchaser's Obligations at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.2. Conditions to Issuer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.1. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.2. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.3. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.4. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.5. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.6. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.7. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.8. Mergers, Consolidations and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.9. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.10. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.11. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.12. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.13. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.14. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.15. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.16. Appointment of Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.17. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.18. Supplemental Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.19. No Senior or Pari Passu Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.20. Permanent Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.21. Restrictions on Certain Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.22. Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.23. Fee Due in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.24. Environmental Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.25. Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.26. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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SECTION 6.27. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.28. Sale and Lease-Back Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.29. Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.30. Restrictions on Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
THE SUBORDINATED ROLLOVER NOTES . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.1. Issuance of Subordinated Rollover Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.2. Conditions Precedent to Issuance of Subordinated Rollover Notes . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.3. Sale and Purchase of Subordinated Rollover Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.4. Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII
TRANSFER OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.1. Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.2. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.3. Notice of Proposed Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.4. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.2. No Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.4. Expenses; Documentary Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.5. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.7. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.8. New York Law; Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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<PAGE> 5
DISCLOSURE SCHEDULES
Schedule 3.6 - Litigation
Schedule 3.7 - Taxes
Schedule 3.8 - Subsidiaries
Schedule 3.14 - Capitalization of Holdings and Issuer
Schedule 6.4(a) - Existing Debt
Schedule 6.5 - Assets Held for Sale/Designated Subsidiaries
Schedule 6.10(e) - Certain Investments
EXHIBITS
Exhibit A - Form of Subordinated Bridge Note
Exhibit B - Form of Subordinated Rollover Note
Exhibit C - Registration Rights for Subordinated Rollover Notes
Exhibit D - Form of Escrow Agreement
Exhibit E - Form of Warrant Agreement (with Form of Warrant attached)
Exhibit F - Form of Opinion of Latham & Watkins
Exhibit G - Form of Opinion of Counsel to Issuer and Guarantor
Exhibit H - Form of Holdings Guaranty
Exhibit I - Form of Subsidiary Guaranty
iv
<PAGE> 6
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of April 6, 1995, is
entered into among CORAM, INC., a Delaware corporation, CORAM FUNDING, INC., a
Delaware corporation, and CORAM HEALTHCARE CORPORATION, a Delaware corporation.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"ACQUIRED BUSINESS" means the assets of the alternative site
infusion, women's health care, home care management and utilization system
businesses acquired from Caremark International and Caremark.
"ADDITIONAL SUBORDINATED BRIDGE NOTES" means Subordinated Bridge
Notes issued in satisfaction of Issuer's obligations to pay interest on the
outstanding Subordinated Bridge Notes in accordance with the terms thereof.
"ADDITIONAL SUBORDINATED ROLLOVER NOTES" means Subordinated
Rollover Notes issued in satisfaction of Issuer's obligations to pay interest
on the outstanding Subordinated Rollover Notes in accordance with the terms
thereof.
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is under common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise. For purposes of this
Agreement, Subsidiaries purchased as part of the Acquired Business shall be
considered an Affiliate of Issuer.
"AGREEMENT" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"ASSET SALE" means (a) the sale, lease, conveyance or other
disposition of any asset (including by way of sale-and-leaseback), whether in
a single transaction or a series of related transactions, for net proceeds in
excess of $2,500,000, other than
<PAGE> 7
(i) in the ordinary course of business (including, without limitation, sales of
Permitted Investments, Reverse Repurchase Agreements (each as defined in the
Credit Agreement) and readily marketable securities in the ordinary course of
business), (ii) a disposition by a Subsidiary to Issuer or by Issuer or a
Subsidiary to a wholly owned Subsidiary and (iii) the disposition of shares of
stock or securities of any Designated Subsidiary, or (b) the issuance or sale
of equity securities of a Person, whether in a single transaction or a series
of related transactions, for net proceeds in excess of $1,000,000, other than
issuances of equity securities or options therefor to (i) Holdings, Issuer or
any Subsidiary or (ii) management and employees in the ordinary course of
business pursuant to incentive compensation plans.
"ASSETS HELD FOR SALE" means those businesses and other assets
set forth on Schedule 6.5 hereto.
"BRIDGE DOCUMENTS" means this Agreement, the Registration Rights,
the Escrow Agreement, the Securities, the Holdings Guaranty, the Subsidiary
Guaranty, the Warrant Agreement and the Warrants.
"BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or
required by law to close.
"CAPITAL EXPENDITURES" shall mean, for any Person in respect of
any period, the sum of (a) the aggregate of all expenditures incurred by such
Person during such period that, in accordance with GAAP, are or should be
included in "additions to property, plant or equipment" or similar items
reflected in the statement of cash flows of such Person and (b) to the extent
not covered by clause (a) above, the aggregate of all expenditures by such
Person to acquire by purchase or otherwise the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any other
Person; provided, however, that Capital Expenditures shall not include (i)
expenditures of proceeds of insurance settlements in respect of lost, destroyed
or damaged assets, equipment or other property to the extent such expenditures
are made to replace or repair all or any part of such lost, destroyed or
damaged assets, equipment or other property within twelve (12) months of the
receipt of such proceeds; and provided, further, that the term "Capital
Expenditures" shall include expenditures in respect of acquisitions made
pursuant to Section 6.8(d).
"CAREMARK" means Caremark, Inc., a California corporation and
wholly-owned subsidiary of Caremark International.
"CAREMARK INTERNATIONAL" means Caremark International Inc., a
Delaware corporation.
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<PAGE> 8
"CAREMARK COUNSEL" means Latham & Watkins.
"CASH EQUIVALENTS" means (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit, time deposits, overnight bank deposits, bankers' acceptances, money
market deposits and repurchase agreements of any commercial bank or trust
company which has capital and surplus in excess of $250,000,000 having
maturities of one year or less from the date of acquisition, (c) commercial
paper of an issuer rated at least A-1 by Standard & Poor's Corporation or P-1
by Moody's Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of commercial paper and (d) money market accounts or
funds with or issued by Qualified Issuers.
"CHANGE OF CONTROL" means the occurrence of any of the following
events: (a) Holdings shall cease to legally and beneficially own and control,
directly or indirectly, 100% of the outstanding voting stock of Issuer or shall
cease to have the power (regardless of whether such power is exercised) to
elect all of Issuer's board of directors (other than a director appointed by
DLJ Bridge hereunder); (b) except as otherwise permitted by Section 6.5(ii),
Issuer shall cease to legally and beneficially own and control, directly or
indirectly, 100% of the outstanding voting stock of each of the Subsidiary
Guarantors or shall cease to have the power (regardless of whether such power
is exercised) to elect 100% of each of the Subsidiary Guarantors' respective
boards of directors; (c) an event or series of events (including a merger or
consolidation) occurs as a result of which any "person" or "group" within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, together with their
Affiliates, holds or acquires, directly or indirectly, outstanding voting
shares of Holdings such that such person or group, together with such
Affiliates thereof, is or becomes the "beneficial owner" (within the meaning of
Rules 13d-3 and 13d-5 under the Exchange Act) of outstanding voting shares of
Holdings entitling such person or group, together with such Affiliates, to
exercise more than 20% of the total voting power of all classes of outstanding
voting shares of Holdings; or (d) during any period of two (2) consecutive
calendar years, individuals who at the beginning of such period constituted
Holdings' Board of Directors (together with any new directors whose election to
Holdings' Board of Directors or whose nomination for election to Holdings'
Board of Directors by Holdings' shareholders was approved by a vote of at least
two-thirds of Holdings' directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of Holdings' directors then in office.
"CLOSING" has the meaning set forth in Section 2.2(a).
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<PAGE> 9
"COMMISSION" means the Securities and Exchange Commission.
"CREDIT AGREEMENT" means the Credit Agreement dated as of April
6, 1995, among Holdings, Issuer, the lenders listed therein, and Chemical Bank
as agent for such lenders (Chemical Bank or any successor agent appointed in
accordance with the provisions of the Credit Agreement, in such capacity, the
"BANK AGENT"), as amended, supplemented or otherwise modified from time to
time. References to the Credit Agreement shall also include the exhibits and
schedules thereto and any credit agreement or agreements entered into by Issuer
to replace, extend, renew, increase, refund or refinance all or a portion of
the Debt under the Credit Agreement; provided that the aggregate principal
amount of Debt outstanding or available thereunder will not be increased except
to the extent permitted by Section 6.4.
"DEBT" of any Person means, at any date: (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices, and
non-interest bearing installment obligations and accrued liabilities incurred
in the ordinary course of business which are not more than 90 days past due) or
which is evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of such Person under financing leases, (c) all obligations of such
Person in respect of bankers' acceptances issued or created for the account of
such Person, (d) all Debt of the types described in the foregoing clauses (a),
(b) and (c) of any other Person secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof, (e) all Disqualified Stock and other preferred stock
of such Person, and (f) to the extent not otherwise included, any Guaranty by
such Person of any Debt of any other Person.
"DEFAULT" means any Event of Default or any event or condition
which, with the giving of notice or lapse of time or both, would, unless cured
or waived, become an Event of Default.
"DESIGNATED SENIOR DEBT" means all indebtedness or other
obligations under any Finance Document, including principal, premium, if any,
and interest thereon, including, without limitation, interest accruing after
filing of a petition under bankruptcy law at the rate provided for in the
Finance Documents whether or not allowable as a claim under such bankruptcy
law.
"DESIGNATED SUBSIDIARY" means at any time any Subsidiary that has
assets with a total market value not in excess of $10,000 at such time and
either (a) has not conducted any business or other operation during the 12
month period prior to such time or (b) has, as a result of a group
restructuring or asset disposition involving one or more Subsidiaries, in each
case permitted by this Agreement, become inactive at
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<PAGE> 10
such time and will after such time no longer conduct any business or other
operations. The Designated Subsidiaries in existence at the Time of Purchase
are set forth on Schedule 6.5.
"DESIGNATED TRANSACTION" means (i) the Permanent Financing, (ii)
the issuance of any other Debt by Holdings, Issuer or any of their Subsidiaries
(other than Debt permitted to be incurred pursuant to Section 6.4), and (iii)
any Asset Sale by Holdings, Issuer or any of their respective Subsidiaries.
"DISQUALIFIED STOCK" means any capital stock or other equity
interests that, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable, mandatorily or at the option of
the holder thereof), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date that is one year after the date on which the Securities are
scheduled to mature.
"DLJ AFFILIATE" means DLJ Bridge and DLJSC and/or any of their
respective Subsidiaries and Affiliates, excluding, however, Issuer, its
shareholders and its Subsidiaries.
"DLJ BRIDGE" means Coram Funding, Inc., a Delaware corporation,
and its successors.
"DLJSC" means Donaldson, Lufkin & Jenrette Securities
Corporation, a Delaware corporation, and its successors.
"EBITDA" means, for any Person in any fiscal period, the
consolidated net income of such Person (other than extraordinary items and
special one-time restructuring charges), (i) plus the amount of all interest
expense, income tax expense, depreciation and amortization, including
amortization of any goodwill or other intangibles, of such Person for such
period and (ii) plus or minus (as the case may be), to the extent included in
determining consolidated net income for such period, any other non-cash charges
which have been subtracted or added, as the case may be, in calculating
consolidated net income for such period, all determined in accordance with
GAAP.
"ENGAGEMENT LETTER" means the letter agreement, dated April 6,
1995, between Holdings and DLJSC in the form of Exhibit J attached hereto, as
it may be amended from time to time.
"ENVIRONMENTAL LAWS" means all applicable existing federal, state
and local laws and regulations relating to the protection of human health or
the environment or
5
<PAGE> 11
imposing liability or standards of conduct concerning any Hazardous Material.
"ESCROW AGENT" means Snoga, Inc., a Delaware corporation, in its
capacity as Escrow Agent under the Escrow Agreement, and its successors in such
capacity.
"ESCROW AGREEMENT" means an escrow agreement among Holdings,
Issuer, DLJ Bridge and the Escrow Agent, in substantially the form of Exhibit D
hereto, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"EVENT OF DEFAULT" means any event or condition specified as such
in the Subordinated Bridge Notes (or, if the Subordinated Rollover Notes shall
have been issued in exchange therefor, in the Subordinated Rollover Notes)
which shall have continued for the period of time, if any, therein designated
after the giving of notice, if any, therein designated.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINANCE DOCUMENTS" means, collectively, (a) the Credit Agreement
and all notes, collateral and security documents, guaranties, schedules,
exhibits and other documents delivered at any time in connection therewith, all
as amended, supplemented or otherwise modified from time to time in accordance
with their respective terms, and (b) any "Interest Rate Protection Agreement"
(as defined in the Credit Agreement) between Issuer and any Lender, whether now
outstanding or hereafter incurred.
"FINANCING LEASE" means any lease of property, real or personal,
the obligations of the lessee in respect of which are required in accordance
with generally accepted accounting principles to be capitalized on a balance
sheet of the lessee.
"GAAP" means generally accepted accounting principles and
practices as in effect in the United States of America from time to time,
consistently applied.
"GUARANTORS" means, collectively, Holdings and the Subsidiary
Guarantors.
"GUARANTY" of a Person means any agreement by which such Person
assumes, guarantees, endorses, contingently agrees to purchase or provide funds
for the payment of, or otherwise becomes liable upon, the obligation of any
other Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement or take-or-pay contract and shall include, without
limitation, the contingent liability of such Person in connection with any
application for a letter of credit or letter of
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<PAGE> 12
guaranty.
"HAZARDOUS MATERIAL" means (i) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended, (iii) any petroleum or petroleum
product, (iv) any polychlorinated biphenyl, and (v) any pollutant or
contaminant or hazardous, dangerous or toxic chemical, material, waste or
substance regulated under or within the meaning of any other Environmental Law.
"HOLDINGS" means Coram Healthcare Corporation, a Delaware
corporation, and its successors.
"HOLDINGS GUARANTY" means a senior subordinated guaranty by
Holdings of the Securities and Issuer's other obligations under the Bridge
Documents, substantially in the form of Exhibit H hereto.
"INVESTMENT" means any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
"ISSUER" means Coram, Inc., a Delaware corporation, and its
successors..
"ISSUER CORPORATE DOCUMENTS" means, collectively, the certificate
of incorporation and by-laws of Issuer.
"LENDERS" means the banks and other financial institutions from
time to time parties to the Credit Agreement.
"LIEN" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of the
foregoing (other than any option, call or similar right relating to treasury
shares of Holdings to the extent that such option, call or similar right is
granted (i) under any employee stock option plan, employee stock ownership plan
or similar plan or arrangement of Holdings, Issuer or their respective
Subsidiaries or (ii) in connection with the issuance of Debt permitted under
Section 6.4).
"MAJORITY HOLDERS" means (i) at any time prior to the issuance of
the Subordinated Bridge Notes, DLJ Bridge and (ii) at any time thereafter, the
holders of voting rights with respect to waivers, amendments and other actions
permitted or required to be taken by holders of the Securities under the terms
thereof constituting
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<PAGE> 13
a majority of such voting rights attributable to the aggregate outstanding
amount of the Securities at such time.
"MATERIAL ACQUISITION DOCUMENTS" means (a) the Purchase
Agreement, (b) the Engagement Letter, (c) the Finance Documents and (d) the
securities evidencing the Seller Sub Debt, all in such form as shall be
reasonably satisfactory to DLJ Bridge, such satisfaction to be evidenced by the
funding of the purchase of the Subordinated Bridge Notes at the Time of
Purchase.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, assets, operations, prospects or financial condition of Holdings,
Issuer and their respective Subsidiaries taken as a whole, (b) the
enforceability of any of the Bridge Documents or (c) the refinancing of the
Securities.
"NET CASH PROCEEDS" means the total amount of cash proceeds
received by Issuer, Holdings and/or any of their respective Subsidiaries after
the Time of Purchase as a result of any Designated Transaction, including any
cash proceeds derived from any non-cash proceeds from or in respect of any
Designated Transaction after the Time of Purchase, less (i) reasonable
underwriters' or placement agent's fees, brokerage discounts or commissions,
related professional fees and other customary out-of-pocket expenses payable by
such recipient(s) in connection with such Designated Transaction, (ii) in the
case of a disposition of assets, the amount of all income and other taxes
reasonably estimated to be payable by such recipient(s) as a result of such
disposition of assets, and (iii) in the case of a disposition of assets, the
amount of Debt secured by a Lien on the asset or assets disposed of and
required to be repaid by such recipient(s) in connection therewith and any
trade payables specifically relating to such asset or assets sold by
recipient(s) that are not assumed by the purchaser of such asset.
"PERMANENT FINANCING" means (i) the Convertible Subordinated
Notes due 2005 to be issued by Holdings, (ii) any other debt securities issued
or indebtedness incurred by Holdings, Issuer or any of their respective
Subsidiaries, or (iii) any equity securities issued by Holdings, Issuer or any
of their respective Subsidiaries, in each case, for the purpose of refinancing
the Securities.
"PERMITS" means all domestic licenses, permits and approvals
required for the full operation of the Acquired Business and the business of
Holdings, Issuer and their respective Subsidiaries, including, provincial,
state, federal, city and county permits and approvals.
"PERMITTED TRANSFEREE" means any Person that acquires any
Securities other than any Person who acquires such Securities (i) in a public
offering or (ii) in the open market, pursuant to sales under Rule 144 of the
Securities Act or otherwise.
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<PAGE> 14
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or any agency or political subdivision thereof) or other
entity of any kind. For purposes of this Agreement, the Acquired Business
shall be considered a Person.
"PURCHASE AGREEMENT" means the Asset Sale and Note Purchase
Agreement dated as of January 29, 1995 by and among Holdings, Caremark
International and Caremark with respect to the Acquired Business, and all
schedules and exhibits thereto.
"QUALIFIED ISSUER" means any commercial bank (a) which has
capital and surplus in excess of $250,000,000 and (b) the outstanding
short-term debt securities of which carry an investment-grade credit rating by
Standard & Poor's Corporation or Moody's Investors Service, Inc., or carry an
investment-grade credit rating from another nationally recognized rating agency
if both of the two named rating agencies cease publishing ratings of
investments.
"REGISTRATION RIGHTS" means the registration rights applicable to
the Subordinated Rollover Notes on the terms set forth in Exhibit C.
"RESTRICTED PAYMENT" means (a) any dividend or other distribution
on any shares of capital stock of Holdings or Issuer (except dividends payable
solely in shares of capital stock of the same class of Holdings or Issuer); (b)
any payment on account of the purchase, redemption, retirement or acquisition
of (1) any shares of Holdings or Issuer's capital stock or (2) any option,
warrant or other right to acquire shares of Holdings' or Issuer's capital
stock; or (c) any purchase, redemption, prepayment, defeasance or other
acquisition or retirement for value prior to maturity of the Seller Sub Debt or
any other Debt of Holdings or Issuer (other than the Securities or Debt
incurred pursuant to the Credit Agreement).
"ROLLOVER DATE" has the meaning set forth in Section 7.1.
"SECURITIES" means the Subordinated Bridge Notes or the
Subordinated Rollover Notes or both, as the context may require.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER SUB DEBT" means, collectively, up to $90,000,000 of 7%
Convertible Subordinated PIK Notes and the $25,000,000 12% Non-Convertible
Subordinated PIK Note issued to Caremark pursuant to the Purchase Agreement,
including, in each case, any such Convertible Subordinated PIK Notes issued as
payment of interest thereon.
9
<PAGE> 15
"SUBORDINATED BRIDGE NOTES" means Issuer's Senior Subordinated
Increasing Rate Notes substantially in the form set forth as Exhibit A hereto,
including any Additional Subordinated Bridge Notes.
"SUBORDINATED ROLLOVER NOTES" means Issuer's Senior Subordinated
Increasing Rate Rollover Notes substantially in the form set forth as Exhibit B
hereto, including any Additional Subordinated Rollover Notes.
"SUBSIDIARY" means, with respect to any Person, any corporation
or other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at the time
directly or indirectly owned by such Person.
"SUBSIDIARY GUARANTORS" means, collectively, each Subsidiary of
Issuer that is or becomes a guarantor of the obligations under the Credit
Agreement.
"SUBSIDIARY GUARANTY" means a senior subordinated guaranty by the
Subsidiary Guarantors of the Securities and Issuer's other obligations under
the Bridge Documents, substantially in the form of Exhibit I hereto.
"TIME OF PURCHASE" has the meaning set forth in Section 2.2(a).
"TRANSACTION" means, collectively, the issuance of the
Subordinated Bridge Notes and the Seller Sub Debt, the initial borrowings under
the Credit Agreement, the contribution of the stock of the Subsidiary
Guarantors to Issuer, and the acquisition of the Acquired Business pursuant to
the Purchase Agreement.
"TRANSFER" means any disposition of Securities that would
constitute a sale thereof under the Securities Act.
"VARIABLE RATE HOLDER" means DLJ Bridge, any Affiliate of DLJ
Bridge and any other holder of a Security which is designated as a Variable
Rate Holder by notice to Issuer and to such holder given by the previous holder
substantially contemporaneously with the transfer to such subsequent holder.
"WARRANT AGREEMENT" means a warrant agreement in substantially
the form of Exhibit E hereto, duly executed by DLJ Bridge and Holdings,
relating to the Warrants.
"WARRANTS" means warrants in substantially the form attached as
Exhibit E hereto representing 20% of the fully-diluted common stock of
Holdings, and placed in an escrow account on the date of issuance of the
initial Subordinated Bridge Notes,
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<PAGE> 16
exercisable at a nominal price for a period of seven years from the date the
last of such Warrants are actually released from escrow and will have customary
anti-dilution provisions and demand, drag-along, tag-along and "piggy back"
registration rights.
SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a consistent basis (except for changes concurred in by
Issuer's independent public accountants). For purposes of this Agreement,
references to assets, liabilities, revenues, costs or other similar items
relating to Holdings, Issuer and/or any of their respective Subsidiaries shall
be deemed to include, with respect to any joint operating agreement or
partnership agreement to which Holdings, Issuer or such Subsidiary is a party,
such portion, but only such portion, of the assets, liabilities, revenues,
costs or other similar items covered by such joint operating agreement or
partnership agreement as shall equal the then proportional interest of
Holdings, Issuer or such Subsidiary under such joint operating agreement or
partnership agreement, determined, where applicable, in accordance with the
rules for proportionate consolidation in accordance with generally accepted
accounting principles.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. Commitments to Purchase. (a) Subject to the terms
and conditions set forth herein and in reliance on the representations and
warranties of Issuer, the Guarantors and DLJ Bridge contained herein and in the
other Bridge Documents, Issuer agrees to issue and sell and DLJ Bridge agrees
to purchase, up to $150,000,000 aggregate principal amount of Subordinated
Bridge Notes. The purchase price for the Subordinated Bridge Notes shall be
100% of the principal amount thereof.
(b) The obligation of DLJ Bridge to purchase any
Subordinated Bridge Notes hereunder at the Closing will expire on the earliest
of (i) the completion of the Transaction without the use of any Subordinated
Bridge Notes, (ii) the termination of the Purchase Agreement in accordance with
the terms thereof, and (iii) 5:00 P.M. (New York City time) on April 13, 1995
if the closing of the Transaction has not occurred by such time.
SECTION 2.2. The Closing; Fees. (a) The purchase and sale of
the Subordinated Bridge Notes will take place at a closing (the "CLOSING") at
the offices
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of Latham & Watkins in New York City at 10:00 A.M. (New York City time) on
April 6, 1995 or such other date and in such other place as DLJ Bridge and
Issuer may agree in writing. The date and time of Closing is referred to
herein as the "TIME OF PURCHASE".
(b) Not later than the Time of Purchase, DLJ Bridge shall
deliver by wire transfer, to the account number of Issuer specified by Issuer
in writing no later than 2:00 P.M. (New York City time) two (2) Business Days
immediately preceding the Closing, immediately available funds in an amount
equal to the aggregate purchase price of the Subordinated Bridge Notes to be
purchased by DLJ Bridge hereunder, less the following amounts, each of which
shall be fully earned, non-refundable and retained by DLJ Bridge: (i) a
commitment fee in respect of the Subordinated Bridge Notes in an amount equal
to $2,250,000, (ii) a takedown fee in respect of the Subordinated Bridge Notes
in an amount equal to 1.50% of the aggregate principal amount of Subordinated
Bridge Notes purchased by DLJ Bridge hereunder, and (iii) reimbursement for all
reasonable out-of-pocket costs, expenses and other payments, including but not
limited to reasonable legal fees and disbursements incurred or made in
connection with the Transaction or this Agreement, and the preparation,
execution and delivery of the Bridge Documents that have been invoiced to
Issuer at least one (1) Business Day prior to the Time of Purchase.
(c) At the Closing, against payment as set forth in
subsection (b) above, Issuer shall deliver to DLJ Bridge a single Subordinated
Bridge Note representing the aggregate principal amount of Subordinated Bridge
Notes to be purchased at the Closing registered in the name of DLJ Bridge, or,
if requested by DLJ Bridge, separate Subordinated Bridge Notes in such other
denominations and registered in such name or names as shall be designated by
DLJ Bridge by notice to Issuer at least two (2) Business Days prior to the Time
of Purchase.
(d) On the 6th day of October 1995, and on the 6th day of
each of January, April and July, 1996, Issuer agrees to pay to DLJ Bridge in
arrears, in immediately available funds, a duration fee equal to 0.25% of the
average aggregate principal amount of the Securities outstanding during the
three-month period then ended (or, in the case of the payment due in October
1995, the six-month period then ended).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Holdings and Issuer represent and warrant to DLJ Bridge, as of
the Time of Purchase, as set forth below:
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SECTION 3.1. Corporate Existence and Power. Each of Holdings,
Issuer and each Subsidiary party to any Bridge Document is a corporation, duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its businesses as now conducted and as proposed to be conducted and
is duly qualified and in good standing as a foreign corporation or entity
registered to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such qualification
except where the failure to have such powers, licenses, authorizations,
consents and approvals or to be so qualified or in good standing could not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.2. Authorization, Execution and Enforceability of
Material Agreements. The execution, delivery and performance by Holdings,
Issuer and each Subsidiary of Issuer party to any Bridge Document, of each of
the Bridge Documents and Material Acquisition Documents to which it is a party
and the issuance by Issuer of the Securities have been duly authorized and are
within the corporate power of Holdings, Issuer or such Subsidiary, as the case
may be. Each of the Bridge Documents and Material Acquisition Documents to
which Holdings, Issuer or any Subsidiary of Issuer is a party has been duly
executed and delivered by Holdings, Issuer or such Subsidiary, as the case may
be, and constitutes legal, valid and binding obligations of each of them. When
executed and delivered by Issuer against payment therefor in accordance with
the terms hereof or (in the case of Additional Subordinated Bridge Notes) when
delivered by Issuer in accordance with the terms of the Subordinated Bridge
Notes then outstanding, the Subordinated Bridge Notes will constitute legal,
valid and binding obligations of Issuer. When executed by Issuer and delivered
in accordance with the terms of the Escrow Agreement in exchange for the
Subordinated Bridge Notes, or (in the case of any Additional Subordinated
Rollover Notes) when delivered by Issuer in accordance with the terms of the
Subordinated Rollover Notes then outstanding, the Subordinated Rollover Notes
will constitute legal, valid and binding obligations of Issuer.
SECTION 3.3. Governmental Authorization. The execution and
delivery by Holdings, Issuer and each Subsidiary of Issuer party thereto of
each of the Bridge Documents and of each of the Material Acquisition Documents
to which Holdings, Issuer or such Subsidiary, as the case may be, is a party,
did not and will not, the issuance and sale by Issuer of the Securities, will
not, and the consummation of the transactions contemplated hereby and thereby
will not, require any action by or in respect of, or filing with, any
governmental body, agency or governmental official except (a) such actions or
filings that have been undertaken or made prior to the Time of Purchase and
that will be in full force and effect on and as of the Time of Purchase or
which are not required to be filed on or prior to the Time of Purchase, (b)
such actions or filings that, if not obtained, would not in the aggregate
impose materially
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adverse conditions upon the Transaction, the Bridge Documents or the
Securities, and (c) solely with respect to the obligations from time to time of
Issuer to file a registration statement or statements with respect to public
offerings of such Securities, filings with the Commission or under the
securities or blue sky laws of the various states in connection with such
public offerings.
SECTION 3.4. Non-Contravention of Laws or Material Agreements.
The execution and delivery by Holdings, Issuer and each Subsidiary of Issuer
party thereto, of the Bridge Documents or any of the Material Acquisition
Documents to which Holdings, Issuer or such Subsidiary, as the case may be, is
a party, did not and will not, the issuance and sale by Issuer of the
Securities will not, and the consummation of the transactions contemplated
hereby and thereby will not, contravene or constitute a default under or
violation of (i) assuming the filings referred to in Section 3.3, any provision
of applicable law or regulation the violation of which would have a Material
Adverse Effect, (ii) its certificate of incorporation or bylaws, or (iii) any
agreement to which it is a party, judgment, injunction, order, decree or other
instrument binding upon it or any of its assets, the violation of which would
have a Material Adverse Effect or result in the creation or imposition of any
Lien on any asset of Holdings, Issuer or any of their respective Subsidiaries,
except pursuant to or as permitted or contemplated by the terms hereof or of
the Finance Documents.
SECTION 3.5. Financial Information. (a) The audited
consolidated financial statements of Holdings as of December 31, 1994, copies
of which have been delivered to DLJ Bridge, fairly present, in conformity with
GAAP, the consolidated financial position of Holdings and its Subsidiaries as
of such date and the results of their operations and cash flows for such fiscal
year then ended, (b) based on the assumptions set forth therein, the unaudited
pro forma balance sheets of Holdings and its Subsidiaries as of December 31,
1994, copies of which have been delivered to DLJ Bridge, fairly present, on a
pro forma basis, what the financial position of Holdings and its Subsidiaries
would have been as of such date and for the quarter ending on such date after
giving effect to the issuance of the Securities and the Seller Sub Debt, the
consummation of the Transaction and the consummation of each of the
transactions contemplated by the Material Acquisition Documents and such pro
forma financial statements were prepared by Holdings and Issuer in good faith,
and (c) since December 31, 1994, except as disclosed in the Purchase Agreement
or otherwise in writing to DLJ Bridge prior to the Time of Purchase, no event,
occurrence or development, or set of circumstances or facts, has occurred with
respect to Holdings or Issuer that could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.6. Litigation. Except as set forth in Schedule 3.6
hereto, there is no action, suit or proceeding (i) pending to which Holdings,
Issuer or any of their respective Subsidiaries is a party, (ii) to the
knowledge of Holdings or Issuer, which is threatened against Holdings, Issuer
or any such Subsidiary or (iii) to the knowledge
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of Holdings or Issuer, pending to which any other Person is a party or which is
threatened against any other Person, in each case, before any court or
arbitrator or any governmental body, agency or official and that could
reasonably be expected to result in an unfavorable ruling, judgment, decision
or other outcome that would have a Material Adverse Effect.
SECTION 3.7. Taxes. All United States federal income tax
returns and all other material tax returns which are required to be filed by or
on behalf of Holdings, Issuer and their respective Subsidiaries have been filed
and all taxes due pursuant to such returns or pursuant to any assessment
received by such taxpayer(s) have been paid, after giving effect to any
extensions of time to file duly obtained, except for (i) state and local taxes,
fees and assessments that could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect and (ii) those being contested
in good faith and by appropriate proceedings, all of which contested taxes and
proceedings are set forth in Schedule 3.7 hereto. The charges, accruals and
reserves on the books of Holdings or Issuer in respect of taxes or other
governmental charges have been established in accordance with GAAP.
SECTION 3.8. Subsidiaries. (a) After giving effect to the
Transaction, Holdings shall directly own 100% of the capital stock of Issuer
and shall not own directly any equity interest in any other Person. Schedule
3.8 hereto sets forth all of the Subsidiaries of Issuer and the direct or
indirect percentage ownership interest of Issuer therein.
(b) Neither Holdings nor Issuer owns, directly or indirectly,
any stock, partnership interest, joint venture or other security investments or
interest in any other corporation, organization or entity other than the
Subsidiaries set forth on Schedule 3.8 hereto.
SECTION 3.9. Not an Investment Company. None of Holdings,
Issuer or any of their respective Subsidiaries is an "investment company", or a
company "controlled by" an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 3.10. ERISA. To their knowledge, neither Holdings nor
Issuer nor any of their respective Subsidiaries has violated any safety or
similar law applicable to the business of any Person, nor any federal or state
law relating to discrimination in hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder, and none of them has engaged in any unfair
labor practice, in each case except as would not individually or in the
aggregate have a Material Adverse Effect.
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SECTION 3.11. Environmental. Each of Holdings, Issuer and their
respective Subsidiaries is in material compliance with all Environmental Laws,
except for such instances of noncompliance as would not, individually or in the
aggregate, have a Material Adverse Effect. To the best knowledge of Holdings
and Issuer, there is no alleged liability or potential liability (including,
without limitation, alleged or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) of Holdings, Issuer or any of their
respective Subsidiaries arising out of, based on or resulting from (i) the
presence or release into the environment of any Hazardous Material at any
location at which Holdings, Issuer or any of their respective Subsidiaries is
currently conducting any business whether or not owned by either of them, (ii)
any violation or alleged violation of any Environmental Law or (iii) any
violation or alleged violation of any applicable federal, state, or local
regulations governing the protection and use of public trust tidelands and
wetlands, except, in the case of each of clauses (i), (ii) and (iii), as would
not individually or in the aggregate have a Material Adverse Effect.
SECTION 3.12. Permits. (i) Each of Holdings, Issuer and their
respective Subsidiaries has all Permits as are necessary for the conduct of its
business as it has been carried on; (ii) all such Permits are in full force and
effect, and each of Holdings, Issuer and their respective Subsidiaries has
fulfilled and performed all material obligations with respect to such Permits;
(iii) as of the Time of Purchase, each of Holdings, Issuer and their respective
Subsidiaries has all Permits necessary for the full operation of the Acquired
Business and its Subsidiaries; (iv) no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination by the
issuer thereof or which results in any other material impairment of the rights
of the holder of any such Permits; and (v) Holdings and Issuer have no reason
to believe that any governmental body or agency is considering limiting,
suspending or revoking any such Permits; except, in each case, as would not
individually or in the aggregate have a Material Adverse Effect.
SECTION 3.13. Full Disclosure. The information heretofore
furnished by Holdings or Issuer to DLJ Bridge, and, to the best of Holdings'
and Issuer's knowledge, by Caremark International and Caremark or their
respective Subsidiaries to DLJ Bridge, in each case for purposes of or in
connection with the Transaction, this Agreement or any transaction contemplated
hereby does not, and all such information hereafter furnished by or on behalf
of such Persons to DLJ Bridge will not (in each case taken together with all
other such information and on the date as of which such information is
furnished), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they are made, not misleading;
provided, however, that with respect to any projections, forecasts or similar
information, the preceding standard shall be deemed to have been met if such
information was
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prepared in good faith. Holdings or Issuer has disclosed to DLJ Bridge any and
all facts which has had or may reasonably be expected to have a material and
adverse effect on the business, operations or financial condition of Holdings,
Issuer or the Guarantors or Holdings', Issuer's or any Subsidiary Guarantor's
ability to perform its respective obligations under the Bridge Documents.
SECTION 3.14. Capitalization. At the Time of Purchase after
giving effect to the Transaction, the authorized capital stock, the issued or
outstanding capital stock, or securities convertible into or exchangeable for,
or options to purchase capital stock, in each case, of Holdings or Issuer will
be as set forth on Schedule 3.14 hereto; and no other shares of capital stock
or securities convertible into or exchangeable for, or options to purchase
capital stock, in each case, of Holdings or Issuer will be outstanding. All of
the issued and outstanding shares of such capital stock will, at the Time of
Purchase after giving effect to the Transaction, be validly issued, fully paid
and nonassessable, and all of the issued and outstanding shares of capital
stock of Issuer are and will be free and clear of any Lien or other right or
claim and the holders thereof are not entitled to any preemptive or other
similar rights.
SECTION 3.15. Solicitation; Access to Information. No form of
general solicitation or general advertising was used by Holdings or Issuer or,
to the best of Holdings' and Issuer's knowledge, any other Person acting on
behalf of Holdings or Issuer, in respect of the Securities or in connection
with the offer and sale of the Securities. Neither Holdings nor Issuer nor, to
its knowledge, any Person acting on behalf of Holdings or Issuer has, either
directly or indirectly, sold or offered for sale to any Person any of the
Securities or any other similar security of Issuer except as contemplated by
this Agreement, and Holdings and Issuer represent that neither Holdings nor
Issuer nor any Person, to its knowledge, acting on behalf of Holdings or Issuer
other than DLJ Bridge and its Affiliates will sell or offer for sale to any
Person any such security to, or solicit any offers to buy any such security
from, or otherwise approach or negotiate in respect thereof with, any Person or
Persons so as thereby to bring the issuance or sale of any of the Securities
within the provisions of Section 5 of the Securities Act.
SECTION 3.16. Absence of any Undisclosed Liabilities. To the
knowledge of Holdings and Issuer, there are no liabilities of Holdings, Issuer
or any of their respective Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than (i) those liabilities provided for in the financial statements provided
pursuant to Section 3.5 and the notes thereto, (ii) liabilities which have
arisen after the date thereof in the ordinary course of business, (iii)
liabilities disclosed in the Finance Documents (including the schedules thereto
and (iv) other undisclosed liabilities which, individually or in the aggregate,
are not material to Holdings, Issuer or any of their respective Subsidiaries.
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SECTION 3.17. Prior Activities. Issuer has not engaged in any
activities or incurred any liabilities other than in connection with its
incorporation, each Material Acquisition Document to which it is a party, and
the transactions contemplated thereby.
SECTION 3.18. Governmental Regulation. None of Holdings, Issuer
nor any of their respective Subsidiaries is, or will be upon the issuance and
sale of the Securities and the use of the proceeds as described herein, subject
to regulation under the Public Utility Holding Company Act of 1935, as amended,
the Federal Power Act, the Interstate Commerce Act or to any federal or state
statute or regulation limiting its ability to issue and perform its obligations
hereunder or under any Material Acquisition Document to which it will be a
party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DLJ BRIDGE
SECTION 4.1. Purchase for Investment; Authority; Binding
Agreement. DLJ Bridge represents and warrants to Issuer that:
(a) DLJ Bridge is an Accredited Investor within the meaning
of Rule 501(a) of Regulation D under the Securities Act and the
Securities and Warrants to be acquired by it pursuant to this Agreement
and the Warrant Agreement are being acquired for its own account and not
with a view to their sale or distribution and DLJ Bridge will not offer,
sell, transfer, pledge, hypothecate or otherwise dispose of the
Securities or the Warrants unless pursuant to a transaction either
registered under, or exempt from registration under, the Securities Act;
(b) DLJ Bridge is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Delaware;
and the execution, delivery and performance of this Agreement and each
of the Bridge Documents to which it is a party and the purchase of the
Securities pursuant hereto and the Warrants pursuant to the Warrant
Agreement are within DLJ Bridge's corporate powers and have been duly
and validly authorized by all requisite corporate action;
(c) this Agreement has been duly executed and delivered by
DLJ Bridge;
(d) this Agreement constitutes a legal, valid and binding
agreement of DLJ Bridge; and
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(e) DLJ Bridge has such knowledge and experience in
financial and business matters so as to be capable of evaluating the
merits and risks of its investment in the Securities and the Warrants
and DLJ Bridge is capable of bearing the economic risks of such
investment.
SECTION 4.2. Solicitation by DLJ Bridge. No form of general
solicitation or general advertising was used by DLJ Bridge or, to the best of
its knowledge, any other Person acting on behalf of DLJ Bridge, in respect of
the Securities or Warrants or in connection with the purchase of the Securities
or the Warrants. Neither DLJ Bridge nor any Person acting on behalf of DLJ
Bridge has, either directly or indirectly, sold or offered for sale to any
Person any of the Securities or the Warrants or any other similar security of
Issuer or Holdings except as contemplated by this Agreement and the Warrant
Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.1. Conditions to Purchaser's Obligations at the
Closing. The obligation of DLJ Bridge to purchase the Subordinated Bridge
Notes to be issued and sold by Issuer hereunder is subject to the satisfaction
of the following conditions contemporaneously with the Time of Purchase:
(a) Simultaneously with the Time of Purchase, the
Transaction shall be consummated;
(b) Each of the Material Acquisition Documents and Issuer
Corporate Documents shall be in full force and effect, the Seller Sub
Debt shall have been issued on terms and conditions satisfactory to DLJ
Bridge and not more than $100,000,000 of such Seller Sub Debt shall be
outstanding at the Time of Purchase, and no term or condition of any
Material Acquisition Document shall have been materially amended, waived
or otherwise modified without the prior written consent of DLJ Bridge;
(c) All of the stock of each of the Subsidiary Guarantors
which are acquired as part of the Acquired Business shall have been
contributed by Holdings to Issuer;
(d) Issuer shall have initial cash common equity of not
less than $300,000,000;
(e) Issuer shall have entered into the Credit Agreement
providing for
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a bank credit facility consisting of a $200,000,000 5-year amortizing
term loan and a $100,000,000 5-year non-amortizing revolving credit
facility (of which not more than $20,000,000 may be drawn at the Time of
Purchase), the covenants and other terms and conditions of which, in
each case, are reasonably satisfactory to DLJ Bridge in all respects.
Issuer and its Subsidiaries shall have no indebtedness for borrowed
money other than that arising under the Credit Agreement, the
Subordinated Bridge Notes, guarantees of either of the foregoing, the
Seller Sub Debt and Debt existing on the date of the Closing permitted
under Section 6.4;
(f) DLJ Bridge, its accountants and its counsel shall have
completed its review of, and been satisfied with the results of such
review, of all business, accounting and legal (including litigation)
matters relating to the Acquired Business, Issuer and its Subsidiaries,
with such review not having disclosed anything which, in the opinion of
DLJ Bridge, is materially different from the facts and information
represented to DLJ Bridge through March 21, 1995, or which has or could
reasonably be expected to have a materially negative impact on the
Acquired Business or the value thereof or the business, operations,
financial conditions or prospects of Issuer and its Subsidiaries, taken
as a whole, or on the Transaction, and DLJ Bridge shall have received,
reviewed and been satisfied with the results of such review of all
materials relating to Issuer and/or its Subsidiaries which it shall
reasonably have requested;
(g) DLJ Bridge shall have received, in form and substance
satisfactory to it: (i) consolidated financial statements for each of
Holdings and the Acquired Business, including consolidated balance
sheets and income and cash flow statements, as of the end of and for
each of the last three fiscal years (which shall not differ materially
from the information supplied to date to DLJ Bridge), accompanied by an
opinion of independent public accountants of recognized national
standing as to the fair presentation in accordance with GAAP of such
financial statements;
(h) The corporate, tax, capital and ownership structure
(including the articles of incorporation and by-laws), shareholders
agreements and management of Holdings and its Subsidiaries before and
immediately after the Transaction shall be satisfactory to DLJ Bridge in
all respects;
(i) DLJ Bridge shall have received, in form and substance
reasonably satisfactory to it, consolidating pro forma balance sheets of
each of Holdings, Issuer and their respective Subsidiaries as of the
Time of Purchase, giving effect to the Transaction and the transactions
contemplated by the Purchase Agreement and this Agreement and reflecting
estimated purchase price accounting adjustments, prepared by independent
public accountants of
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recognized national standing;
(j) DLJ Bridge shall have received, in form and substance
reasonably satisfactory to it, and addressed to it, those solvency
letters and solvency certificates, if any, provided to, and, in form and
substance substantially the same as those provided to, the Bank Agent or
the Lenders under the Credit Agreement;
(k) DLJ Bridge shall have received evidence reasonably
satisfactory to it that all domestic and foreign governmental,
shareholder and third-party consents and approvals necessary or
desirable in connection with the Transaction and the related financings
and other transactions contemplated hereby and expiration of all
applicable waiting periods without any action being taken by any
competent authority that could restrain, prevent or impose any
materially adverse conditions on the Transaction or such other
transactions or that could seek or threaten any of the foregoing, and no
law or regulation shall be applicable which in the judgment of DLJ
Bridge could have any such effect;
(l) Except as disclosed in writing to DLJ Bridge, there
shall not have been any event, occurrence or development, or set of
circumstances or facts with respect to Holdings, Issuer or any of their
respective Subsidiaries, that has had, or that could reasonably be
expected to have, a Material Adverse Effect since December 31, 1994, and
DLJ Bridge shall have received a certificate from the Chief Financial
Officer of Holdings and, if different, Issuer certifying the absence of
any such event, occurrence, development or set of circumstances or
facts;
(m) Except as disclosed in writing to DLJ Bridge, there
shall not have been any event, occurrence or development, or set of
circumstances or facts with respect to the Acquired Business that has
had, or that could reasonably be expected to have, a material adverse
effect on the business, assets, operations, prospects or financial
condition thereof since December 31, 1994, and DLJ Bridge shall have
received a certificate from the Chief Financial Officer of Issuer
certifying the absence of any such event, occurrence, development or set
of circumstances or facts;
(n) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any court or before
any arbitrator or governmental instrumentality that purports to affect
the Transaction or the Subordinated Bridge Notes or any of the other
transactions contemplated by the Bridge Documents or the Material
Acquisition Documents or that could have a material adverse effect on
the Transaction or the Subordinated Bridge Notes or any of the other
transactions contemplated by the Bridge Documents or the
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Material Acquisition Documents;
(o) DLJ Bridge shall have received (i) an opinion, dated
the Time of Purchase, of counsel to Holdings, Issuer and the Principal
Subsidiaries (as defined in the Credit Agreement) and certain additional
Subsidiaries, substantially in the form of Exhibit G hereto, (ii) a
letter from Caremark Counsel, dated the Time of Purchase, permitting DLJ
Bridge to rely upon the opinion[s] of Caremark Counsel to be delivered
pursuant to the Purchase Agreement and the Credit Agreement, and (iii)
such corporate resolutions, certificates and other documents as DLJ
Bridge shall reasonably request in form and substance reasonably
satisfactory to DLJ Bridge;
(p) DLJ Bridge shall have received an opinion, dated the
Time of Purchase, of Latham & Watkins, special counsel to DLJ Bridge,
substantially in the form of Exhibit F hereto;
(q) There shall not exist any Event of Default or event
that with notice and/or the passage of time, could become an Event of
Default;
(r) There shall not exist any default or unmatured event of
default under the Credit Agreement, and all conditions precedent to the
closing thereunder (other than consummation of the Transaction) shall
have been satisfied or waived;
(s) The Engagement Letter shall have been executed and all
fees and reasonable expenses payable to DLJSC on or prior to the Time of
Purchase in connection with the Transaction as set forth in the
Engagement Letter or otherwise shall have been paid or duly provided for
in full;
(t) All fees and reasonable expenses payable to DLJ Bridge
at the Time of Purchase in connection with the purchase of the
Subordinated Bridge Notes or otherwise shall have been paid in full;
(u) The representations and warranties of each of the
Guarantors and Issuer contained in the Bridge Documents, and of Caremark
International, Caremark and their Affiliates contained in the Material
Acquisition Documents, shall be true and correct in all material
respects on and as of the Time of Purchase as if made on and as of such
time (except for such representations and warranties which are made only
as of a prior date), and Issuer and each of the Guarantors shall have
performed and complied in all material respects with all covenants and
agreements required by the Bridge Documents to be performed by it or
complied with by it at or prior to the Time of Purchase;
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(v) DLJ Bridge shall have received the Subordinated Bridge
Notes, duly executed by Issuer in the denominations and registered in
the names specified in or pursuant to Section 2.2;
(w) The Escrow Agreement shall have been executed and
delivered by the parties thereto, and the Subordinated Rollover Notes,
the Warrant Agreement and the Warrants shall have been duly executed by
the parties thereto and delivered to the Escrow Agent;
(x) There shall not have occurred any disruption or adverse
change in the financial or capital markets generally which DLJ Bridge
reasonably deems material in connection with the purchase of the
Subordinated Bridge Notes or the prospects for the Permanent Financing;
(y) DLJ Bridge shall have received consent from the Bank
Agent and the Lenders concerning the terms and conditions of the
Subordinated Bridge Notes and the Subordinated Rollover Notes, including
the application of the proceeds from any Permanent Financing;
(z) DLJ Bridge shall have received the Holdings Guaranty,
duly executed by Holdings, and the Subsidiary Guaranty, duly executed by
the Subsidiary Guarantors;
(aa) All other documentation relating to the Subordinated
Bridge Notes shall have been executed by each of the parties thereto and
delivered to DLJ Bridge in form and substance satisfactory to DLJ Bridge
and in compliance with all applicable laws and regulations;
(bb) DLJ Bridge shall have received all other such opinions,
certificates, instruments, agreements or other documents as DLJ Bridge
shall reasonably request;
(cc) DLJ Bridge shall have received and approved casualty
and liability insurance certificates in form and substance satisfactory
to DLJ Bridge;
(dd) Issuer's capital leases and other Debt (excluding Debt
under the Credit Agreement, the Seller Sub Debt and the Securities)
shall not exceed $21,000,000 in aggregate principal amount.
SECTION 5.2. Conditions to Issuer's Obligations. The
obligations of Issuer to issue and sell the Subordinated Bridge Notes pursuant
to this Agreement to DLJ Bridge are subject to the satisfaction, at or prior to
the Time of Purchase, of the
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following conditions:
(a) The representations and warranties of DLJ Bridge
contained herein shall be true and correct in all material respects on
and as of the Time of Purchase as if made on and as of such time and DLJ
Bridge shall have performed and complied in all material respects with
all agreements required by this Agreement to be performed or complied
with by DLJ Bridge at or prior to the Time of Purchase;
(b) The issuance and sale of the Subordinated Bridge Notes
by Issuer shall not be prohibited by any applicable law, court order or
governmental regulation;
(c) Each of the conditions to the parties' obligations
under the Material Acquisition Documents (other than payment of the
purchase consideration pursuant to the Purchase Agreement) shall be
satisfied or, with the prior written consent of Issuer, waived; and
(d) Contemporaneously therewith, Issuer shall have received
the purchase price for the Subordinated Bridge Notes in accordance with
Section 2.2(b).
ARTICLE VI
COVENANTS
Each of Holdings and Issuer hereby agrees that, from and after
the Time of Purchase and so long as any Securities remain outstanding and
unpaid or any other amount is owing to DLJ Bridge or the holders from time to
time of Subordinated Bridge Notes under this Agreement, and for the benefit of
DLJ Bridge and such holders:
SECTION 6.1. Information. Holdings and Issuer shall deliver to
DLJ Bridge:
(a) as soon as available and in any event within 90 days
after the end of each fiscal year of Holdings and Issuer, consolidated
balance sheets of Holdings and its Subsidiaries and Issuer and its
Subsidiaries, in each case, as of the end of such fiscal year and the
related consolidated and consolidating statements of income and a
consolidated statement of cash flows and stockholders' equity (deficit)
for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on without
qualification as to going concern, internal controls or the scope of its
audit, by
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Ernst & Young LLP or other independent public accountants of nationally
recognized standing;
(b) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year of
Holdings and Issuer, consolidated balance sheets of Holdings and its
Subsidiaries and Issuer and its Subsidiaries as of the end of such
quarter and the related consolidated and consolidating statements of
income and consolidated statement of cash flows and stockholders' equity
(deficit) for such quarter and for the portion of Holdings' and Issuer's
fiscal year ended at the end of such quarter, setting forth in each case
in comparative form the figures for the corresponding quarter and the
corresponding portion of Holdings' and Issuer's previous fiscal year,
all certified (subject to footnote presentation and normal year-end
adjustments) as to fairness of presentation, generally accepted
accounting principles and consistency by the chief financial officer or
the chief accounting officer of Holdings and Issuer;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) above, a
certificate of the chief financial officer or the chief accounting
officer of Issuer stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details
thereof and the action which Issuer is taking or propose to take with
respect thereto;
(d) not later than 60 days after the end of each fiscal
year of Holdings and Issuer, a copy of the projections by Holdings and
Issuer of the operating budget and cash flow budget of Holdings and
Issuer for the succeeding fiscal year, such projections to be
accompanied by a certificate of the chief financial officer of Holdings
and Issuer to the effect that (i) such projections were prepared by
Holdings and Issuer in good faith, (ii) Holdings and Issuer have a
reasonable basis for the assumptions contained in such projections and
(iii) such projections have been prepared according to such assumptions;
(e) within 5 days after any officer of Holdings or Issuer
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting
officer of Holdings or Issuer setting forth the details thereof and the
action which Holdings or Issuer is taking or proposes to take with
respect thereto;
(f) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which Holdings or any of
its Subsidiaries shall have filed with the
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Commission;
(g) promptly following the commencement of any litigation
or proceeding and at such time subsequent thereto during the course of
any litigation or proceeding when Holdings or Issuer shall have made the
determination referred to in this clause (h), notice and a description
in reasonable detail of any litigation or proceeding to which Holdings
or any of its Subsidiaries is a party that could reasonably be expected
to result in a Material Adverse Effect;
(h) promptly following the occurrence thereof, notice and a
description in reasonable detail of any material adverse change in the
business, operations, property, financial condition or prospects of
Holdings or any of its material Subsidiaries; and
(i) from time to time such additional information regarding
the financial position or business of Holdings, Issuer or their
respective Subsidiaries as DLJ Bridge may reasonably request.
SECTION 6.2. Use of Proceeds. The proceeds from the issuance
and sale of the Subordinated Bridge Notes by Issuer pursuant to this Agreement
shall be used to finance, in part, (i) the consummation of the Transaction and
(ii) the payment of certain transaction costs in connection therewith.
SECTION 6.3. Subsidiaries. Neither Holdings nor Issuer shall
form, create, acquire or otherwise suffer to exist any Subsidiaries except (i)
the Subsidiaries of Holdings and Issuer set forth on Schedule 3.8 hereto, and
(ii) other Subsidiaries permitted to be formed under the terms of the Credit
Agreement; provided that if any such Subsidiary shall have guaranteed any
obligation of Issuer under the Credit Agreement, such Subsidiary shall have
become a party to the Subsidiary Guaranty.
SECTION 6.4. Debt. Neither Holdings, Issuer nor any of their
respective Subsidiaries shall incur, create, assume or permit to exist any
Debt, except, without duplication:
(a) indebtedness for borrowed money (excluding capital
leases) existing on the date hereof and set forth in Schedule 6.4(a)
hereto;
(b) Debt created under the Finance Documents in an
aggregate principal amount at any time outstanding not to exceed
$300,000,000 (except as permitted by clause (i) of this Section 6.4);
(c) extensions, renewals and refinancings of the foregoing
so long as
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(i) the principal amount thereof is not increased (except to capitalize
premium or interest and fees and expenses associated therewith), (ii) no
material terms applicable to such Debt shall be more favorable to the
extending, renewing or replacement lenders than the terms that are
applicable to the holders of such Debt on the date hereof and (iii) the
interest rate applicable to such Debt shall be a market interest rate as
of the time of such extension, renewal or refinancing;
(d) Debt evidenced by the Securities or outstanding under
the Holdings Guaranty or the Subsidiary Guaranty;
(e) intercompany Debt between (i) Issuer and any of its
wholly owned Subsidiaries, (ii) any wholly owned Subsidiaries of Issuer
and (iii) between Holdings and Issuer or any wholly owned subsidiary (A)
for the purposes set forth in Section 6.15(b)(i), not exceeding at any
time during any fiscal year $2,000,000 minus the amount of any dividends
or distributions previously paid to Holdings in such fiscal year
pursuant to Section 6.15(b)(i), (B) for the purposes set forth in
Section 6.15(b)(ii), not exceeding for the period following the Time of
Purchase $3,000,000 minus the amount of any dividends or distributions
previously paid to Holdings during such period pursuant to Section
6.15(b)(ii), (C) for the purposes set forth in Section 6.15(b)(iii), not
exceeding for the period following the Time of Purchase $7,000,000 minus
the amount of any dividends or distributions previously paid to Holdings
during such period pursuant to Section 6.15(b)(iii) and (D) for the
purposes set forth in Section 6.15(b)(iv);
(f) the Seller Sub Debt; provided, however, that no cash
payment of interest shall be made thereon while any Securities are
outstanding;
(g) capital leases of Issuer or any of its Subsidiaries in
an aggregate principal amount at any time outstanding not to exceed
$25,000,000;
(h) "Interest Rate Protection Agreements" and "Reverse
Repurchase Agreements" permitted under and as defined in the Credit
Agreement;
(i) Debt owing by any Subsidiary existing at the time such
Subsidiary was acquired (or assumed by Issuer or such Subsidiary at the
time assets of such Subsidiary were acquired) in an acquisition
permitted by Section 6.8(f) (and any extensions, renewals or
replacements of such Debt to the extent that (i) the aggregate principal
amount of such Debt is not at any time increased, (ii) no material terms
applicable to such Debt shall be more favorable to the extending,
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renewing or replacement lenders than the terms that are applicable to
the holders of such Debt on the date hereof and (iii) the interest rate
applicable to such Debt shall be a market interest rate as of the time
of such extension, renewal or replacement); provided that (A) such Debt
was not incurred or created in connection with or in contemplation of
such permitted acquisition and (B) the aggregate amount of such Debt
shall not exceed $15,000,000 in the aggregate outstanding at any time;
(j) in the case of Issuer, guarantees issued for the
benefit of any of its wholly owned Subsidiaries in respect of
obligations under operating leases and other obligations in the ordinary
course of business;
(k) Debt of any Joint Venture (as defined in the Credit
Agreement) owing to Holdings, Issuer or any other Subsidiary to the
extent permitted by Section 6.10(e);
(l) Debt issued in satisfaction of Earn-out Obligations
(as defined in the Credit Agreement) existing as of the Time of Purchase
not in excess of $5,000,000 at any time outstanding; and
(m) other Debt of Issuer or any of its Subsidiaries (which
may, but need not, be incurred under the Finance Documents) in an
aggregate principal amount not in excess of $10,000,000 at any time
outstanding.
SECTION 6.5. Limitation on Asset Sales. Neither Holdings nor
Issuer will sell all or any portion of the outstanding capital stock of any of
its Subsidiaries, and neither Holdings nor Issuer will permit any of their
respective Subsidiaries to participate or engage in any other Asset Sale unless
(i) such Asset Sale is made for fair market value consideration and 80% of the
consideration therefor received by Holdings, Issuer or such Subsidiary shall be
in the form of cash or Cash Equivalents; provided, however, that the amount of
(A) any liabilities (as shown on Holdings' or Issuer's most recent consolidated
balance sheet or in the notes thereto), of Holdings, Issuer or any Subsidiary
(other than liabilities that are by their terms subordinated to the
Subordinated Bridge Notes) that are assumed by the transferee of any such
assets and (B) any notes or other obligations received by Holdings, Issuer or
any such Subsidiary from such transferee that are immediately converted by
Holdings, Issuer or such Subsidiary into cash, shall be deemed to be cash (to
the extent of the cash received) for purposes of this provision and (ii) in the
case of a sale of any of the Assets Held for Sale, in addition to the
foregoing, (A) the chief financial officer of Issuer certifies on behalf of
Issuer that any such sale of assets is estimated by Issuer in good faith to be
at a price equal to or greater than the then fair market value of such asset
and (B) in the case of sales of such assets in respect of which the book value
is greater than $10,000,000, such sale shall have been approved by the board
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of directors of Issuer.
SECTION 6.6. Conduct of Business and Maintenance of Existence.
Holdings, Issuer and their respective Subsidiaries shall continue to engage in
business of the same general type as now conducted, or proposed to be conducted
as of the Time of Purchase, by Issuer, the Acquired Business and their
respective Subsidiaries, and Holdings and Issuer shall, and shall cause each of
their respective Subsidiaries to, preserve, renew and keep in full force and
effect its respective corporate existence and all material rights, privileges
and franchises necessary or desirable in the normal conduct of business, except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect. Holdings shall not engage in any business other than ownership
of the outstanding capital stock of its Subsidiaries and business activities
reasonably incidental thereto.
SECTION 6.7. Transactions with Affiliates. Holdings and Issuer
shall not, nor shall they permit any of their respective Subsidiaries to,
directly or indirectly , pay any funds to or for the account of, make any
investment (whether by acquisition of stock or indebtedness, by loan, advance,
transfer of property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other
joint arrangement with, any Affiliate (other than Holdings or any Subsidiary of
Holdings or a DLJ Affiliate), except on terms to Holdings, Issuer or such
Subsidiary no less favorable than terms that could be obtained from a Person
that is not an Affiliate, as determined in good faith by the Board of Directors
of Holdings, Issuer or such Subsidiary, as the case may be; provided, however,
that no determination of any such Board of Directors shall be required with
respect to (i) any such transactions entered into in the ordinary course of
business, (ii) any such transactions entered into with a DLJ Affiliate, or
(iii) transactions with shareholders, directors and employees pursuant to
agreements existing as of the Time of Purchase and other compensation
arrangements in the ordinary course of business.
SECTION 6.8. Mergers, Consolidations and Acquisitions. Holdings
and Issuer shall not, and shall not permit any of their respective Subsidiaries
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or purchase, lease or otherwise acquire
(in one transaction or a series of transactions) all or any substantial part of
the assets of any other Person, except that:
(a) Issuer and any Subsidiary may purchase and lease
inventory, property and services in the ordinary course of business
(subject to Section 6.4(g) in the case of capital leases);
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(b) if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any
wholly-owned Subsidiary may liquidate and any Subsidiaries may merge
into Issuer in a transaction in which Issuer is the surviving
corporation and no Person other than Issuer or a wholly owned Subsidiary
receives any consideration and (ii) any Subsidiary may merge into or
consolidate with any other Subsidiary in a transaction in which the
surviving entity is a wholly owned Subsidiary and no Person other than
Issuer or a wholly owned Subsidiary receives any consideration;
(c) at any time prior to the first anniversary of the Time
of Purchase, Issuer may purchase or otherwise acquire assets with the
Net Cash Proceeds from the sale of any of the Assets Held for Sale
remaining after payment of any Designated Senior Debt required to be
made with such Net Cash Proceeds under the terms of the Credit Agreement
or any other agreement or instrument evidencing or relating to such
Designated Senior Debt; provided, however, that if at the time of the
receipt of any Net Cash Proceeds under this clause (c) any acquisitions
have been previously made pursuant to Section 6.8(d), the amount of such
Net Cash Proceeds otherwise available to make acquisitions hereunder
shall be applied (i) first, to reinstate the capital expenditure
limitation set forth in Section 6.30 to the extent previously reduced by
application of Section 6.8(d) and thereby reinstate the amount available
for capital expenditures thereunder and (ii) second, to make
acquisitions under this clause (c); provided, further, that such
acquisitions shall only be permitted if (A) the assets purchased have
generated a positive EBITDA for the twelve months immediately preceding
the month of the acquisition of such assets, and (B) Issuer shall be in
compliance with the financial covenants of the Credit Agreement at the
time of such purchase (without waiver or amendment thereof), and Issuer
shall have delivered to DLJ Bridge an officer's certificate to such
effect, together with all relevant financial information for such
assets;
(d) at any time prior to the first anniversary of the Time
of Purchase, if there are insufficient Net Cash Proceeds to make
acquisitions under Section 6.8(c), then Issuer may purchase or otherwise
acquire assets for cash as capital expenditures pursuant to Section
6.30, but only to the extent of such insufficiency; provided that (i)
the aggregate amount of cash consideration paid in respect of permitted
acquisitions under this clause (d) shall not exceed $15,000,000 (as
reduced by 50% of the amount of Capital Expenditures incurred by Issuer
in excess of $5,000,000 for the first fiscal quarter of 1995) for the
period from the Time of Purchase, (ii) the aggregate amount of cash
consideration paid in respect of acquisitions permitted under this
clause (d) shall be applied against the capital expenditure limitation
set forth in Section 6.30 and shall thereby reduce the amount available
for capital expenditures permitted thereunder, (iii) such acquisitions
shall only be permitted if (A) the assets
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purchased have generated a positive EBITDA for the twelve months
immediately preceding the month of the acquisition of such assets and
(B) Issuer shall be in compliance with the financial covenants of the
Credit Agreement at the time of such purchase (without waiver or
amendment thereof), and Issuer shall have delivered to DLJ Bridge an
officer's certificate to such effect, together with all relevant
financial information for such assets; and (iv) the aggregate amount of
consideration paid in respect of acquisitions permitted by Sections
6.8(c) and 6.8(d) shall not exceed $25,000,000 in the aggregate for the
period from the Time of Purchase;
(e) at any time prior to the first anniversary of the Time
of Purchase, Issuer may acquire minority partnership interests in the
lithotripsy business in an amount not to exceed $15,000,000 in the
aggregate for the period following the Time of Purchase; provided,
however, that in the event that Issuer is obligated to acquire such
minority partnership interests as a result of the valid exercise of put
options by the owners thereof and such acquisitions cause the aggregate
amount of all such acquisitions to exceed $15,000,000, then (i) the
amount of such acquisitions in excess of $15,000,000 shall be applied
against the Net Cash Proceeds limitation set forth in Section 6.8(c) and
thereby reduce the amount of Net Cash Proceeds available thereunder for
acquisitions permitted by such Section and (ii) notwithstanding the
limitation set forth in this Section 6.8(e), such required acquisitions
shall be permitted hereunder; and
(f) at any time prior to the first anniversary of the Time
of Purchase, Holdings and Issuer may make acquisitions in which the sole
consideration given by Holdings, Issuer or any Subsidiary is common
stock of Holdings; provided that: (i) the aggregate amount of
consideration (based upon the fair market value of the Holdings common
stock, as determined in a manner reasonably satisfactory to DLJ Bridge),
including the amount of all liabilities assumed or, in the case of an
acquisition or a corporation or partnership, plus the amount of
liabilities shown on the balance sheet of such corporation or
partnership at the time of acquisition, paid in respect of all such
permitted acquisitions shall not exceed $25,000,000 for the period from
the Time of Purchase and (ii) such acquisitions shall only be permitted
if:
(A) the assets purchased have generated a positive
EBITDA for the twelve months immediately preceding the month of
the acquisition of such assets;
(B) the ratio of total Debt assumed in such acquisition
to EBITDA generated by such assets for the twelve months
immediately preceding the month such acquisition is consummated
does not exceed: (x) 4.00 to 1.00, if such acquisition occurs on
or before September 30, 1995, (y) 3.25 to
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1.00 if such acquisition occurs after September 30, 1995 and on or
before December 31, 1995 and (z) 2.75 to 1.00 thereafter; and
(C) Issuer shall be in compliance with the financial
covenants of the Credit Agreement at the time of such purchase
(without waiver or amendment thereof);
and Issuer shall have delivered to DLJ Bridge an officer's certificate
with respect to each calculation hereunder, together with all relevant
financial information for such assets.
SECTION 6.9. Limitation on Liens. Holdings and Issuer shall not,
and shall not permit any of their respective Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, except
for:
(a) Liens on the assets of Holdings or the stock or assets of
Issuer and their respective Subsidiaries securing its obligations under
the Finance Documents and extensions, renewals and refinancings thereof
within the limitations specified in Section 6.4.;
(b) other Liens on the assets of Holdings, Issuer and/or on the
stock or assets of their respective Subsidiaries in existence at the
Time of Purchase and disclosed in the Purchase Agreement securing Debt
disclosed in the Purchase Agreement and refinancings thereof permitted
under Section 6.4; and
(c) other Liens permitted under the Credit Agreement as such
agreement is in effect at the time of Purchase and without regard to any
subsequent amendment thereto or waiver thereof.
SECTION 6.10. Investments. Holdings and Issuer shall not, and
shall not permit any of their respective Subsidiaries to, make or acquire any
Investment in any person except for:
(a) Investments in Subsidiaries existing as of the Time of
Purchase;
(b) Investments in Subsidiary Guarantors;
(c) Investments in Cash Equivalents;
(d) Permitted Investments (as such term is defined in the Credit
Agreement as such agreement is in effect at the Time of Purchase and
without regard to any subsequent amendment thereto or waiver thereof);
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(e) (i) Investments by Holdings, Issuer or any of their
Subsidiaries consisting of loans at arm's length terms to any Person in
which Holdings, directly or indirectly, owns more than a 20% equity
interests (but that is not a wholly owned Subsidiary) existing at the
Time of Purchase and set forth in Schedule 6.10(e), and any extensions,
renewals or replacements of the same provided that the aggregate
principal amount of such loans are not at any time increased, and (ii)
additional such Investments provided that (A) the aggregate principal
amount of such loans outstanding at any time shall not exceed $5,000,000
and (B) any such loans entered into after the Time of Purchase shall be
evidenced by a promissory note;
(f) Employee Loans (as defined in the Credit Agreement) not
exceeding $4,000,000 in aggregate principal amount at any time
outstanding;
(g) promissory notes, contingent payment obligations and equity
interests received or accepted in connection with any disposition of
assets permitted under Section 6.5, provided that the aggregate amount
of such promissory notes, contingent payment obligations and equity
interests received pursuant to this clause (g) does not exceed
$10,000,000 at any time outstanding; and
(h) acquisitions permitted by Section 6.8.
SECTION 6.11. Payment of Obligations. Holdings and Issuer shall,
and shall cause their respective Subsidiaries to, pay and discharge at or
before maturity all their material obligations and liabilities, including,
without limitation, tax liabilities, except where the same is being contested
in good faith by appropriate proceedings, and shall maintain, in accordance
with generally accepted accounting principles, appropriate reserves for the
accrual of any of the same.
SECTION 6.12. Compliance with Laws. Holdings and Issuer shall,
and shall cause their respective Subsidiaries to, comply in all material
respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities, except where compliance therewith is
contested in good faith by appropriate proceedings or where the failure to do
so could not reasonably be expected to have a Material Adverse Effect.
SECTION 6.13. Inspection of Property, Books and Records.
Holdings and Issuer shall, and shall cause each of their respective
Subsidiaries to, keep proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities, and shall permit representatives of DLJ Bridge,
at Issuer's expense, to visit and inspect any of their respective properties,
to examine and make abstracts from any of their respective books and records
and to discuss their respective affairs, finances and accounts with
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its executive officers and, subject to the right of Issuer's representatives to
participate in any such discussion, independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION 6.14. Investment Company Act. None of Holdings, Issuer
or any of their respective Subsidiaries will be or become an open-end
investment trust, unit investment trust or face-amount certificate company that
is or is required to be registered under Section 8 of the Investment Company
Act of 1940, as amended.
SECTION 6.15. Restricted Payments. Holdings and Issuer shall
not, and shall not permit any of their respective Subsidiaries to, declare or
make any Restricted Payment, except that:
(a) any Subsidiary of Issuer may declare and pay dividends
or make other distributions to (i) Issuer, (ii) any Subsidiary Guarantor
and (iii) in the case of any Subsidiary (other than a Joint Venture (as
defined in the Credit Agreement)) that is not a wholly owned subsidiary,
any other shareholder if such dividends or distributions are paid pro
rata to all holders of the capital stock of such Subsidiary;
(b) so long as no Default shall have occurred or be
continuing, Issuer may declare and pay dividends or make other
distributions to Holdings in order to enable Holdings to pay (i) any
taxes or expenses required to be paid by Holdings in the ordinary course
of business, so long as the aggregate amount of such dividends or
distributions (other than any such dividends or other distributions made
for the purposes of paying taxes), together with the aggregate principal
amount of any loans made pursuant to Section 6.4(e), does not exceed
$2,000,000 in any fiscal year, (ii) any other charges or expenses, so
long as the aggregate amount of such dividends or other distributions,
together with the aggregate principal amount of any loans made pursuant
to Section 6.4(e), does not exceed $3,000,000 for the period following
the Time of Purchase; (iii) any expenses required to be paid by Holdings
in connection with complying with its obligations under Section 5.16 of
the Credit Agreement and any other expenses incurred by Holdings in the
ordinary course of business prior to complying with such Section, so
long as the aggregate amount of such dividends or other distributions,
together with aggregate principal amount of any loans made pursuant to
Section 6.4(e), does not exceed $7,000,000 for the period following the
Time of Purchase; and (iv) any amounts required to be paid by Holdings
as a Purchase Price Adjustment as defined in and pursuant to the
Purchase Agreement;
(c) so long as no Default shall result therefrom, (i)
Holdings may repurchase shares of its common stock from its current or
former officers,
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employees and directors at a price not to exceed the then current market
value for such stock and (ii) Holdings may make other distributions or
payments in respect of its capital stock held by its current or former
officers, employees or directors, provided that the aggregate amount
expended by Issuer pursuant to this clause (c) shall not exceed
$1,000,000 during the period following the Time of Purchase;
(d) Holdings and Issuer may extend, renew and refinance
Debt in accordance with the terms of Section 6.4;
(e) Holdings may declare or distribute dividends payable
solely in its common stock;
(f) at the Time of Purchase, Issuer may distribute a
portion of the proceeds of any term loans under the Credit Agreement to
Holdings, but only to the extent necessary to pay Acquisition Costs (as
defined in the Credit Agreement) and repay Debt under the Existing
Credit Agreement (as defined in the Credit Agreement); and
(g) Holdings may issue its common stock upon conversion of
the Seller Sub Debt or any other convertible Debt existing at the Time
of Purchase, in each case in accordance with the terms of the instrument
evidencing such Debt.
Notwithstanding anything to the contrary contained herein, Holdings shall not
be permitted to make any cash payment on account of the Seller Sub Debt to the
holders thereof, whether for the payment of principal or interest thereon or
otherwise.
SECTION 6.16. Appointment of Director. If an Event of Default
shall have occurred and for so long as its continuing, Issuer and Holdings
shall provide DLJ Bridge with the right to appoint, in DLJ Bridge's sole
discretion, one additional Director to the Board of Directors of Issuer and/or
Holdings; provided that such right shall terminate at such time as DLJ Bridge
is no longer the holder of at least 50% of the aggregate outstanding principal
amount of the Subordinated Bridge Notes or the Subordinated Rollover Notes.
SECTION 6.17. Fiscal Year. Issuer shall not permit its fiscal
year to end on a day other than December 31.
SECTION 6.18. Supplemental Information. If at any time Issuer
or Holdings is not subject to the requirements of Section 13 or 15(d) of the
Exchange Act, Issuer and Holdings will promptly furnish at its expense, upon
request, for the benefit of holders from time to time of the Securities, to
holders of the Securities and prospective purchasers of the Securities,
information satisfying the requirements of
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subsection (d)(4)(i) of Rule 144A under the Securities Act.
SECTION 6.19. No Senior or Pari Passu Debt. Holdings and Issuer
will not, and will not permit any of their respective Subsidiaries to, create,
incur, assume or suffer to exist any Debt of Holdings, Issuer or such
Subsidiary that is subordinate in right of payment to any other Debt of
Holdings, Issuer or such Subsidiary unless such Debt by its terms or the terms
of the instrument creating or evidencing such Debt is subordinate in right of
payment with the Securities (and the Subsidiary Guaranty, as applicable) on
terms acceptable to DLJ Bridge.
SECTION 6.20. Permanent Financing. (a) Holdings and Issuer
will, and, as applicable, will cause each of their respective Subsidiaries to,
take all actions which, in the reasonable judgment of Holdings, Issuer and
DLJSC, are necessary or desirable to obtain Permanent Financing as soon as
practicable (i) through issuance of securities at such interest rates and terms
as are, in the opinion of DLJSC, prevailing for new issues of securities of
comparable size and credit rating in the United States capital markets at the
time such Permanent Financing is consummated and obtained in comparable
transactions made on an arm's-length basis between unaffiliated parties, or
(ii) if the Permanent Financing cannot be effected on the terms set forth in
clause (i) above, or such other terms as are then prevailing for new issues of
securities of comparable size and credit rating in the United States capital
markets, provided that, if in the reasonable judgment of DLJSC, warrants to
purchase common equity securities of Holdings need to be provided for the
consummation of Permanent Financing on the terms set forth in clause (i) above,
Holdings shall make available such warrants at a nominal purchase price with an
exercise price equal to the average closing market price during the preceding
10 trading days as is needed to facilitate the Permanent Financing on the terms
set forth in clause (i) above. The respective amounts to be financed by the
Permanent Financing shall be as determined by Holdings and Issuer, but shall be
in an amount at least sufficient to repay or redeem the Securities in full in
accordance with their terms. Holdings and Issuer hereby covenant and agree
that the net proceeds from the Permanent Financing shall be used to the extent
required to redeem in full the Securities in accordance with their terms.
(b) Holdings and Issuer covenant that they will enter into
such agreements as in the reasonable judgment of Holdings, Issuer and DLJSC are
customary in connection with any such Permanent Financing, make such filings
under the Securities Act, the Exchange Act, the Trust Indenture Act of 1939, as
amended, and State securities laws as in the reasonable judgment of Holdings,
Issuer and DLJSC shall be required to permit consummation of such Permanent
Financing and take such steps as in the reasonable judgment of Holdings, Issuer
and DLJSC are necessary to cause such filings to become effective or in the
reasonable judgment of Holdings, Issuer and DLJSC are otherwise required to
consummate such Permanent Financing; provided that Holdings and Issuer will not
be obligated to qualify to do business as a
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foreign corporation in any jurisdiction in which it is not then so qualified to
facilitate the Permanent Financing.
SECTION 6.21. Restrictions on Certain Amendments. Holdings and
Issuer will not amend, or suffer to be amended, any Holdings Corporate Document
or Issuer Corporate Document if such amendment would materially adversely
affect DLJ Bridge or the holders of the Securities, and will not amend the
notes evidencing the Seller Sub Debt without the prior written consent of DLJ
Bridge.
SECTION 6.22. Subsidiary Guaranty. Immediately after
consummation of the Transaction, Issuer shall cause each of the Subsidiary
Guarantors which was not a Subsidiary of Issuer immediately prior to the
Transaction and which is required to become a guarantor of the obligations
under the Credit Agreement to enter into the Subsidiary Guaranty.
SECTION 6.23. Fee Due in Certain Circumstances. If Issuer (a)
at any time or from time to time exercises its right to prepay or otherwise
redeem the Securities in whole or in part or (b) pays the Securities at their
stated maturity, in either case with or in anticipation of funds raised
directly or indirectly by any means other than a transaction in which DLJSC or
any of its Affiliates has acted as exclusive agent or sole underwriter or by
means of the Subordinated Rollover Notes (in the case of the maturity of the
Subordinated Bridge Notes), Issuer shall pay DLJ Bridge a fee equal to 3.00% of
the Securities so prepaid, redeemed or paid; provided, however, that (i) after
twelve months from the date of issuance of the Subordinated Bridge Notes, no
such fee shall be payable if the Bona Fide Proposal Condition has not been met
and (ii) no such fee shall be payable in the event that before the first
anniversary of the Time of Purchase (A) Issuer or Holdings has proposed to make
an acquisition that would otherwise be permitted by Section 6.8(f) of the
Agreement except that such acquisition would cause the aggregate amount of
consideration paid for all such acquisitions since the Time of Purchase to
exceed $25,000,000, (B) the Lenders shall have granted an express waiver under
the Credit Agreement to permit such acquisition and (C) DLJ Bridge shall have
notified Issuer or Holdings in writing, as the case may be, that it will not
consent to such acquisition, and Issuer exercises its right to prepay all, but
not less than all, of the aggregate principal amount of the Subordinated Bridge
Notes at a redemption price equal to 100% of the principal amount of the Notes
so prepaid without premium or penalty.
The "BONA FIDE PROPOSAL CONDITION" shall be deemed met if:
(a)(i) at any time during the twelve-month period following the issuance of the
Subordinated Bridge Notes, DLJSC has delivered to Issuer a proposal to market
securities of Issuer and/or one or more of its Subsidiaries to one or more
financially responsible institutional investors (or a commitment from DLJSC,
one of its Affiliates or another nationally recognized investment banking firm
to underwrite the public sale of such securities
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on a firm-commitment basis), on financial and other terms and conditions no
less favorable to Issuer or such Subsidiary or Subsidiaries than those
generally available in the United States capital markets to issuers of
securities having a credit worthiness comparable to that of Issuer or such
Subsidiary or Subsidiaries in an amount sufficient to redeem all the
Subordinated Bridge Notes outstanding at such time, and (ii) Issuer or such
Subsidiary or Subsidiaries did not authorize DLJSC or its applicable Affiliate
to offer securities of such issuer on terms substantially similar to those so
proposed, or (b) at any time during the twelve-month period following the
issuance of the Subordinated Bridge Notes: (i) DLJSC and Issuer have agreed, in
the exercise of their reasonable judgement, that no proposal of the type
described in clause (a)(i) above can be made on terms and conditions more
favorable to Issuer than those set forth in the Subordinated Rollover Notes;
provided that the Bona Fide Proposal Condition shall not be deemed met if DLJSC
or one of its Affiliates makes a proposal as described in clause (a)(i) that is
accepted by Issuer, as the case may be, and DLJSC or such Affiliate fails to
arrange for the sale of the proposed securities on terms and conditions
substantially similar to those contained in such proposal.
SECTION 6.24. Environmental Reports. Issuer shall deliver to
DLJ Bridge any environmental reports provided to the Lenders under the Credit
Agreement.
SECTION 6.25. Audits. To the extent Issuer receives copies of
any audits or appraisals performed by or for the benefit of the Lenders under
the Credit Agreement, it shall provide DLJ Bridge with copies thereof.
SECTION 6.26. Insurance. Holdings and Issuer shall, and shall
cause each of its Subsidiaries to, keep its insurable properties adequately
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and
other risks insured against by extended coverage, as is customary with
companies in the same or similar businesses operating in the same or similar
locations, including (i) public liability insurance against claims for Personal
injury or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by it and (ii)
business interruption insurance; and maintain such other insurance as may be
required by law.
SECTION 6.27. Employee Benefits. Holdings and Issuer shall, and
shall cause each of their respective Subsidiaries to, comply in all material
respects with the provisions of Section 5.06 of the Credit Agreement as such
agreement is in effect at the Time of Purchase and without regard to any
subsequent amendment thereto or waiver thereof.
SECTION 6.28. Sale and Lease-Back Transactions. Neither Holdings
nor Issuer shall, and neither shall permit any of respective Subsidiaries to,
enter into any
38
<PAGE> 44
arrangement, directly or indirectly, with any Person whereby it shall sell or
transfer any property, real or Personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property that it intends to use for substantially the same
purpose or purposes as the property being sold or transferred, except that
Issuer or any Subsidiary may enter into any such arrangement with respect to
computer equipment and motor vehicles so long as the aggregate amount of Debt
incurred in connection with such arrangements does not exceed $5,000,000 at any
time outstanding.
SECTION 6.29. Restrictions on Subsidiaries. Issuer shall not
permit any Subsidiary Guarantor to enter into any agreement or investment that
by its terms restricts the payment of dividends or the making of cash advances
by such Subsidiary to Issuer or any Subsidiary that is a direct or indirect
parent of such Subsidiary.
SECTION 6.30. Restrictions on Capital Expenditures. Holdings and
Issuer shall not, and shall not permit any of their respective Subsidiaries to,
permit the aggregate amount of Capital Expenditures (including acquisitions
made pursuant to Section 6.8(d)) made by Holdings, Issuer and the Subsidiaries
from the Time of Purchase through the first anniversary thereof to exceed
$30,000,000 (as reduced by the amount of Capital Expenditures incurred by
Issuer in excess of $5,000,000 for the first fiscal quarter of 1995) in the
aggregate.
ARTICLE VII
THE SUBORDINATED ROLLOVER NOTES
SECTION 7.1. Issuance of Subordinated Rollover Notes. (a)
Issuer shall have the option, in lieu of cash payment of the principal of the
Subordinated Bridge Notes at their stated maturity (the "ROLLOVER DATE"), to
issue Subordinated Rollover Notes in satisfaction of all (but not less than
all) outstanding Subordinated Bridge Notes. The exercise of such option may be
effected by Issuer in accordance with and subject to the provisions of this
Section and the Subordinated Bridge Notes.
(b) Issuer shall give DLJ Bridge and each holder of
Subordinated Bridge Notes five Business Days' notice of Issuer's election to
issue Subordinated Rollover Notes in satisfaction of the Subordinated Bridge
Notes. Any such notice given on the fifth day before the stated maturity date
of the Subordinated Bridge Notes shall remain effective for any extended
maturity date of the Subordinated Bridge Notes as contemplated by Section
7.2(a). On the Rollover Date, upon the simultaneous receipt of the
Subordinated Bridge Notes, Issuer shall cause to be released from escrow to DLJ
Bridge for the account of each holder of a Subordinated Bridge Note, a
Subordinated Rollover Note in a principal amount equal to the aggregate
principal amount of the Subordinated Bridge Notes of such holder.
39
<PAGE> 45
(c) A funding fee in an amount equal to 3.00% of the
principal amount of the Subordinated Rollover Notes will be payable in cash to
the holders of the Subordinated Rollover Notes upon issuance of the
Subordinated Rollover Notes.
SECTION 7.2. Conditions Precedent to Issuance of Subordinated
Rollover Notes. The obligation of each holder of a Subordinated Bridge Note to
accept Subordinated Rollover Notes in satisfaction of its Subordinated Bridge
Notes hereunder is subject to the satisfaction of the following conditions on
the Rollover Date:
(a) At the time of the issuance of the Subordinated Rollover
Notes, there shall exist no payment default or acceleration under the
Subordinated Bridge Notes; provided that if there shall exist a Default which
with notice or the passage of time could become an Event of Default with
respect to the Subordinated Bridge Notes, the maturity of the Subordinated
Bridge Notes and the Rollover Date will be automatically extended until the day
after the date on which such Default becomes an Event of Default; provided,
further, that if such Default shall be cured or waived prior to becoming an
Event of Default the Subordinated Bridge Notes shall mature and the Rollover
Date shall occur on the Business Day following the date upon which such Default
shall have been cured or waived;
(b) There shall have been no acceleration under the Credit
Agreement or in respect of any Debt of Holdings or any of its Subsidiaries in
an amount in excess of $2,000,000;
(c) All fees due to DLJ Bridge and DLJSC shall have been paid in
full; and
(d) No order, decree, injunction or judgment enjoining the
issuance of the Subordinated Rollover Notes shall be in effect.
SECTION 7.3. Sale and Purchase of Subordinated Rollover Notes.
(a) Subject to Article VIII, DLJ Bridge shall have the absolute
and unconditional right to resell the Subordinated Rollover Notes in compliance
with applicable law to any third parties.
(b) Issuer shall require Holdings to make available to DLJ
Bridge such equity of Holdings as shall be necessary to facilitate the resale
of the Subordinated Rollover Notes to third parties.
40
<PAGE> 46
SECTION 7.4. Warrants.
(a) In the event that the Subordinated Rollover Notes are
exchanged for Subordinated Bridge Notes, on the first day of each period
beginning on or after the issuance of the Subordinated Rollover Notes listed in
Column A below for so long as any Subordinated Rollover Notes are outstanding,
the holders of the Subordinated Rollover Notes shall be entitled to withdraw
from the escrow, and retain (on a pro rata basis), Warrants for the purchase of
the percentage of Holdings' fully-diluted common stock specified in Column B
below opposite such time period:
<TABLE>
<CAPTION>
A B
<S> <C>
0-89 days 0.50%
90-179 days 1.00%
180-269 days 1.00%
270-269 days 1.50%
360-449 days 2.00%
450-539 days 2.50%
540-629 days 2.50%
630-719 days 3.00%
720-809 days 3.00%
810 days and thereafter 3.00%
20.00%
=====
</TABLE>
(b) Any Warrants to which the holders of the Subordinated Bridge
Notes are not entitled as set forth above shall be returned to Holdings
following a determination thereof.
ARTICLE VIII
TRANSFER OF SECURITIES
SECTION 8.1. Restrictions on Transfer. From and after the Time
of Purchase and their respective dates of issuance, as the case may be, none of
the Securities shall be transferable except upon the conditions specified in
this Section 8.1 and in Sections 8.2 through 8.4, which conditions are intended
to ensure compliance with the provisions of the Securities Act in respect of
the Transfer of any of such Securities or any interest therein.
SECTION 8.2. Restrictive Legends. (a) Each certificate for the
Securities issued to DLJ Bridge or to a subsequent transferee shall (unless
otherwise permitted
41
<PAGE> 47
by the provisions of Section 8.2(b) or Section 8.3) include a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD
UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE
AND THEN ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 6, 1995, A COPY
OF WHICH MAY BE OBTAINED FROM ISSUER AT ITS PRINCIPAL EXECUTIVE OFFICE.
(b) Any holders of Securities registered pursuant to the
Securities Act and qualified under applicable state securities laws may
exchange such Securities on transfer for new securities that shall not bear the
legend set forth in clause (a) of this Section 8.2.
SECTION 8.3. Notice of Proposed Transfers. (a) Five Business
Days prior to any proposed Transfer (other than Transfers of Securities (i)
registered under the Securities Act, (ii) to a DLJ Affiliate or a general
partnership in which a DLJ Affiliate is one of the general partners, or (iii)
subject to Section 8.3(b), to be made in reliance on Rule 144A under the
Securities Act) of any Securities, the holder thereof shall give written notice
to Issuer of such holder's intention to effect such Transfer, setting forth the
manner and circumstances of the proposed Transfer, and shall be accompanied by
(A) an opinion of counsel reasonably satisfactory to Issuer addressed to Issuer
to the effect that the proposed Transfer of such Securities may be effected
without registration under the Securities Act, (B) such representation letters
in form and substance reasonably satisfactory to Issuer to ensure compliance
with the provisions of the Securities Act, and (C) such letters in form and
substance reasonably satisfactory to Issuer from each such transferee stating
such transferee's agreement to be bound by the terms of this Agreement. Such
proposed Transfer may be effected only if Issuer shall have received such
notice of transfer, opinion of counsel, representation letters and other
letters referred to in the immediately preceding sentence, whereupon the holder
of such Securities shall be entitled to Transfer such Securities in accordance
with the terms of the notice delivered by the holder to Issuer. Each
certificate evidencing the Securities transferred as above provided shall bear
the legend set forth in Section 8.2(a) except that such certificate shall not
bear such legend if the opinion of counsel referred to above is to the further
effect that neither such legend nor the restrictions on Transfer in Sections
8.1 through 8.4 are required in order to ensure compliance with the provisions
of the Securities Act.
(b) Five Business Days prior to any proposed Transfer of
any Securities to be made in reliance on Rule 144A under the Securities Act
("RULE 144A"), the
42
<PAGE> 48
holder thereof shall give written notice to Issuer of such holder's intention
to effect such Transfer, setting forth the manner and circumstances of the
proposed Transfer and certifying that such Transfer will be made (i) in full
compliance with Rule 144A and (ii) to a transferee that (A) such holder
reasonably believes to be a "qualified institutional buyer" within the meaning
of Rule 144A and (B) is aware that such Transfer will be made in reliance on
Rule 144A. Such proposed Transfer may be effected only if Issuer shall have
received such notice of transfer, whereupon the holder of such Securities shall
be entitled to Transfer such Securities in accordance with the terms of the
notice delivered by the holder to Issuer. Each certificate evidencing the
Securities transferred as above provided shall bear the legend set forth in
Section 8.2(a).
SECTION 8.4. Registration Rights. (a) Subject to Section
8.4(b), Issuer hereby grants DLJ Bridge and each Permitted Transferee,
Registration Rights with respect to the Subordinated Rollover Notes on the
terms set forth in Exhibit C.
(b) Issuer may satisfy its obligations to register the
Subordinated Rollover Notes as set forth in Section 8.4(a), by effecting an
exchange offer whereby Issuer would offer registered notes having terms
substantially identical to the Subordinated Rollover Notes ("SUBSTITUTE NOTES")
in exchange for all outstanding Subordinated Rollover Notes; provided that in
the opinion of counsel for both Issuer and DLJ Bridge, such Substitute Notes in
the hands of DLJ Bridge would be freely saleable by DLJ Bridge (assuming it is
not an affiliate of Issuer) without registration or requirement for delivery of
a current prospectus under the Securities Act.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices. All notices, demands and other
communications to any party hereunder shall be in writing (including telecopier
or similar writing) and shall be given to such party at its address set forth
on the signature pages hereof, or such other address as such party may
hereinafter specify in writing for the purpose (in the case of Issuer, by
notice to DLJ Bridge or in the case of DLJ Bridge, by notice to Issuer). Each
such notice, demand or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified on
the signature page hereof, (ii) if given by mail, four days after such
communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section.
SECTION 9.2. No Waivers; Amendments. (a) No failure or delay on
the part of any party in exercising any right, power or remedy hereunder shall
operate as
43
<PAGE> 49
a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein and in
the other Bridge Documents are cumulative and are not exclusive of any remedies
that may be available to any party at law or in equity or otherwise.
(b) Any provision of this Agreement may be amended,
supplemented or waived if, but only if, such amendment, supplement or waiver is
in writing and is signed by Issuer and the Majority Holders; provided that
without the consent of each holder of any Securities affected thereby, an
amendment, supplement or waiver may not (a) reduce the aggregate principal
amount of Securities whose holders must consent to an amendment, supplement or
waiver, (b) reduce the rate or extend the time for payment of interest on any
Securities, (c) reduce the principal amount of or extend the stated maturity of
any Security or (d) make any Security payable in money or property other than
as stated in the Subordinated Bridge Notes. In determining whether the holders
of the requisite principal amount of Securities have concurred in any
direction, consent, or waiver as provided in this Agreement or in the
Subordinated Bridge Notes, Securities which are owned by Issuer or any other
obligor on the Securities, or by any Person (other than a DLJ Affiliate)
controlling, controlled by, or under common control with any of the foregoing,
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination; and provided, further, that no such amendment, supplement
or waiver which affects the rights of DLJ Bridge, otherwise than solely in its
capacity as a holder of the Securities, shall be effective with respect to it
without its prior written consent. Notwithstanding the foregoing, Issuer and
DLJ Bridge may amend or supplement this Agreement or the Securities without any
notice to or consent of any holder of Securities to make any change that does
not adversely affect the rights of such holder of Securities.
SECTION 9.3. Indemnification. In consideration of the
commitment given by DLJ Bridge to Issuer pursuant to the Bridge Commitment
Letter between Issuer and DLJ Bridge (such Bridge Commitment Letter, is
referred to herein as the "COMMITMENT"), Issuer agrees to indemnify and hold
harmless DLJ Bridge, its affiliates, and each Person, if any, who controls DLJ
Bridge, or any of its affiliates within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended (a "CONTROLLING PERSON"), and
the respective partners, agents, employees, officers and directors of DLJ
Bridge, it affiliates, and any such Controlling Person (each an "INDEMNIFIED
PARTY" and collectively, the "INDEMNIFIED PARTIES" or the "DLJ BRIDGE GROUP"),
from and against any and all losses, claims, damages, liabilities and expenses
(including, without limitation and as incurred, reasonable costs of
investigating, preparing or defending any such claim or action, whether or not
DLJ Bridge Group is a party thereto; provided that Issuer shall not be
obligated to advance such costs to any Indemnified Party other than DLJ Bridge
unless it has received from such Indemnified Party an undertaking to repay to
Issuer the costs so advanced if it
44
<PAGE> 50
should be determined by final judgement of a court of competent jurisdiction
that such Indemnified Party was not entitled to indemnification hereunder with
respect to such costs) arising out of, or in connection with, any activities
contemplated by the Commitment or any other services rendered in connection
therewith, including, but not limited to, losses, claims, damages, liabilities
or expenses arising out of or based upon any untrue statement or any alleged
untrue statement of a material fact or any omission or any alleged omission to
state a material fact in any of the disclosure or offering or confidential
information documents (the "DISCLOSURE DOCUMENTS") pertaining to any of the
transactions or proposed transactions contemplated by the Commitment, including
any eventual resale or refinancing of the Subordinated Bridge Notes (as defined
in the Commitment) or resale or refinancing by DLJ Bridge of the Subordinated
Rollover Notes (as defined in the Commitment); provided that Issuer will not be
responsible for any claims, liabilities, losses, damages or expenses that are
(i) based upon an untrue statement or any alleged untrue statement in or
omission from any Disclosure Documents made in reliance upon and in conformity
with written information furnished to Issuer by DLJ Bridge Group expressly for
use therein or (ii) determined by final judgement of a court of competent
jurisdiction to result primarily from DLJ Bridge Group's gross negligence,
willful misconduct or bad faith. Issuer also agrees that DLJ Bridge Group
shall have no liability (except for breach of provisions of the Bridge
Commitment Letter) for claims, liabilities, damages, losses or expenses,
including legal fees, incurred by Issuer unless they are determined by final
judgment of a court of competent jurisdiction to result primarily from (a) DLJ
Bridge's use of Disclosure Documents not approved by Issuer or (b) the failure
of DLJ Bridge to furnish to any purchaser of securities any Disclosure Document
furnished to DLJ Bridge by Issuer which corrected any untrue statement of a
material act or omission to state a material fact contained in a Disclosure
Document previously furnished to such purchaser by DLJ Bridge, or (c) DLJ
Bridge Group's gross negligence, willful misconduct or bad faith.
In case any action shall be brought against DLJ Bridge Group with
respect to which indemnity may be sought against Issuer under this agreement,
DLJ Bridge Group shall promptly notify Issuer in writing and Issuer shall, if
requested by DLJ Bridge or if Issuer desires to do so, assume the defense
thereof, including the employment of counsel satisfactory to DLJ Bridge and
payment of all reasonable fees and expenses. The failure to so notify Issuer
shall not affect any obligations Issuer may have to DLJ Bridge Group under this
Commitment or otherwise unless Issuer is materially adversely affected by such
failure. DLJ Bridge Group shall have the right to employ separate counsel in
such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be the expense of DLJ Bridge Group, unless: (i) Issuer
has failed to assume the defense and employ counsel satisfactory to DLJ Bridge
or (ii) the named parties to any such action (including any impleaded parties)
include DLJ Bridge Group and Issuer, and DLJ Bridge Group shall have been
advised by counsel that there may be one or more legal defenses available to it
which
45
<PAGE> 51
are different from or additional to those available to Issuer, in which case,
if such Indemnified Party notifies Issuer in writing that it elects to employ
separate counsel at the expense of Issuer, Issuer shall not have the right to
assume the defense of such action or proceeding on behalf of such Indemnified
Party, provided, however, that Issuer shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the reasonable fees
and expenses of more than one such firm of separate counsel, in addition to any
local counsel, which counsel shall be designated by DLJ Bridge. Issuer shall
not be liable for any settlement of any such action affected without the
written consent of Issuer (which shall not be unreasonably withheld) and Issuer
agrees to indemnifying and hold harmless DLJ Bridge Group from and against any
loss or liability by reasons of settlement of any action effected with the
consent of Issuer. In addition, Issuer will not, without the prior written
consent of DLJ Bridge, settle or compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened action,
claim, suit or proceeding in respect to which indemnification or contribution
may sought hereunder (whether or not DLJ Bridge is a party thereto) unless such
settlement, compromise, consent or termination includes an express
unconditional release of DLJ Bridge and the other Indemnified Parties,
satisfactory in form and substance to DLJ Bridge, from all liability arising
out of such action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless, then
in lieu of indemnifying such Indemnified Party, Issuer shall contribute to the
amount paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by Issuer, on the one
hand, and by DLJ Bridge, on the other, from the Transaction contemplated by
this Agreement or (ii) if the allocation provided by clause (i) is not
permitted under applicable law, in such proportion as is appropriate to reflect
not only the relative benefits received by Issuer, on the one hand, and DLJ
Bridge, on the other, but also the relative fault of Issuer and DLJ Bridge as
well as any other relevant equitable considerations. Notwithstanding the
provisions of this Section 9.3, the aggregate contribution of all Indemnified
Parties shall not exceed the amount of fees actually received by DLJ Bridge
pursuant to the Commitment. It is hereby further agreed that the relative
benefits to Issuer on the one hand and DLJ Bridge on the other with respect to
any Transaction shall be deemed to be in the same proportion as (i) the total
value of the Transaction bears to (ii) the fees paid to DLJ Bridge with respect
to such Transaction. The relative fault of Issuer on the one hand and DLJ
Bridge on the other with respect to the Transaction shall be determined by
reference to, among other things, whether any untrue or alleged untrue
statement of material fact or the omission or alleged omission to state a
material fact related to information supplied by Issuer or by DLJ Bridge and
the parties' relative intent, knowledge, access
46
<PAGE> 52
to information and opportunity to correct or prevent such statement or
omission. No Indemnified Party shall have any liability to Issuer or any other
Person in connection with the services rendered pursuant to the Commitment
except for the liability for any claims, liabilities, losses or damages finally
determined by a court of competent jurisdiction to have resulted from action
taken or omitted to be taken by such Indemnified Party in bad faith or to be
due to such Indemnified Party's willful misconduct, or gross negligence. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations
set forth herein (i) shall be in addition to any liability Issuer may have to
any Indemnified Party at common law or otherwise, (ii) shall survive the
termination of the Commitment and (iii) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
DLJ Bridge or any other Indemnified Party.
SECTION 9.4. Expenses; Documentary Taxes. Issuer agrees to pay
all reasonable out-of-pocket costs, expenses and other payments in connection
with the purchase and sale of the Securities as contemplated by this Agreement
including without limitation (i) fees and disbursements of special counsel for
DLJ Bridge incurred in connection with the preparation of the Bridge Documents,
(ii) all out-of-pocket expenses of DLJ Bridge, including fees and disbursements
of counsel, in connection with any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder and (iii) if an Event of
Default occurs, all out-of-pocket expenses incurred by DLJ Bridge and each
holder of Securities, including fees and disbursements of counsel, in
connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom. In addition, Issuer
agrees to pay any and all stamp, transfer and other similar taxes, assessments
or charges payable in connection with the execution and delivery of this
Agreement or the issuance of the Securities, including compensation to DLJ
Bridge for withholding taxes of any kind.
SECTION 9.5. Payment. Issuer agrees that, so long as DLJ Bridge
shall own any Securities purchased by it from Issuer hereunder, Issuer will
make payments to DLJ Bridge of all amounts due thereon by wire transfer by
12:00 noon (New York City time) on the date of payment to such account as
specified beneath DLJ Bridge's name on the signature page hereof or to such
other account or in such other similar manner as DLJ Bridge may designate to
Issuer, in writing.
SECTION 9.6. Successors and Assigns. This Agreement shall be
binding upon Issuer and DLJ Bridge and DLJ Bridge's successors and assigns.
Issuer may not
47
<PAGE> 53
assign or otherwise transfer its rights or obligations under this Agreement to
any other Person without the prior written consent of the Majority Holders.
All provisions hereunder purporting to give rights to DLJ and its Affiliates or
to holders of Securities are for the express benefit of such Persons.
SECTION 9.7. Brokers. Issuer represents and warrants that,
except for DLJSC, it has not employed any broker, finder, financial advisor or
investment banker who might be entitled to any brokerage, finder's or other fee
or commission in connection with the Transaction or the sale of the Securities.
SECTION 9.8. New York Law; Submission to Jurisdiction; Waiver of
Jury Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 9.9. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
SECTION 9.10. 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.
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers, as of the date
first above written.
ISSUER: CORAM, INC.
By:
Name:
Title:
Coram, Inc.
1125 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Patrick J. Fortune
Telecopy: (303) 298-0043
HOLDINGS: CORAM HEALTHCARE CORPORATION
By:
Name:
Title:
Coram Healthcare Corporation
1125 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Patrick J. Fortune
Telecopy: (303) 298-0043
49
<PAGE> 55
DLJ BRIDGE: CORAM FUNDING, INC.
By:
Name:
Title:
140 Broadway
New York, New York 10005-1285
Attention: Robert C. Grien
Telecopy: (212) 504-4991
Account Number and Bank for
Payment: Citibank, N.A.
ABA # 021-000-089
DLJSC Account No. 3889-6041
For further credit to: Coram Funding, Inc.
Account No.: 275-002129
50
<PAGE> 56
EXHIBIT A
FORM OF SUBORDINATED BRIDGE NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD
UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN ONLY IN
COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF APRIL 6, 1995, A COPY OF WHICH MAY BE OBTAINED
FROM ISSUER AT ITS PRINCIPAL EXECUTIVE OFFICE.
No. __ $150,000,000
Issuance Date: _________, 19__
CORAM, INC.
Senior Subordinated Increasing Rate Note
Coram, Inc., a Delaware corporation (together with its successors,
"ISSUER"), for value received hereby promises to pay to
CORAM FUNDING, INC.
and registered assigns (i) the principal sum of
ONE HUNDRED FIFTY MILLION DOLLARS AND 00/100 CENTS
by wire transfer of immediately available funds to the Holder's account (the
"BANK ACCOUNT") at such bank in the United States as may be specified in
writing by the Holder (as defined below) to Issuer, in such coin or currency of
the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, on April 6, 1996; provided that if
on such date there shall exist a Default which with notice or the passage of
time could become an Event of Default with respect to this Note, the maturity
of this Note will be automatically extended
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until the day after the date on which such Default becomes an Event of Default;
provided, further, that if such Default shall be cured or waived prior to
becoming an Event of Default, the Notes shall mature on the Business Day
following the date upon which such Default shall have been cured or waived, and
(ii) to pay interest, quarterly in arrears, on the 30th day of March, June,
September and December (unless such day is not a Business Day, in which event
on the next succeeding Business Day) (each an "INTEREST PAYMENT DATE") of each
year in which this Note remains outstanding, commencing with the first Interest
Payment Date after the date of issuance set forth above, on the principal sum
hereof outstanding in like coin or currency, at the rates per annum set forth
below, by wire transfer of immediately available funds to the Bank Account from
the most recent Interest Payment Date to which interest has been paid on this
Note, or if no interest has been paid on this Note, from the date of issuance
set forth above until payment in full of the principal sum hereof has been
made.
The interest rate shall be a floating rate per annum (the
"INTEREST RATE") equal to the sum of (i) the Prime Rate in effect from time to
time plus (ii) 3.00% plus (iii) an additional percentage amount, equal to 1.00%
from and including October 6, 1995 and increasing by an additional 0.50%
effective from and including each quarterly anniversary of such date until the
principal amount hereof is paid in full; provided that such rate shall not
exceed 21% per annum.
If and to the extent that the amount of interest payable on any
Interest Payment Date exceeds the amount of interest on the Notes (as defined
below) which would have been payable on such Interest Payment Date if the
Interest Rate in effect at all times during the quarterly period then ended had
been 15.25% (the amount of such excess, if any, being hereinafter referred to
as the "EXCESS AMOUNT" for such period), then Issuer shall have the right, in
lieu of payment of the Excess Amount of interest in cash, to pay interest on
such Interest Payment Date through the issuance of additional Notes
("ADDITIONAL SUBORDINATED BRIDGE NOTES") in a principal amount equal to the
amount of such Excess Amount. Such Additional Subordinated Bridge Notes shall
otherwise be identical to the outstanding Notes and shall be issued to the
Holders of the Notes at the time outstanding in proportions such that each
Holder shall receive the same ratio of cash interest to Additional Subordinated
Bridge Notes on such Interest Payment Date. Such Additional Subordinated
Bridge Notes shall be issued only in denominations of $1,000 and multiples
thereof. Any interest otherwise payable in Additional Subordinated Bridge
Notes which cannot be so paid because an Additional Subordinated Bridge Note
would have a denomination less than $1,000 (or not be a multiple thereof) shall
be paid in cash.
Interest on this Note will be calculated on the basis of a
365-day year and paid for the actual number of days elapsed.
This Note is one of a duly authorized issue of Senior Subordinated
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Increasing Rate Notes of Issuer (including any Additional Subordinated Bridge
Notes referred to be above, the "NOTES") referred to in the Securities Purchase
Agreement dated as of April 6, 1995 between Issuer and Coram Funding, Inc.
("DLJ BRIDGE") (as the same may be amended from time to time in accordance with
its terms, the "AGREEMENT"). The Notes are transferable and assignable to one
or more purchasers (in minimum denominations of $5,000,000 or larger multiples
of $1,000,000, exclusive of Additional Subordinated Bridge Notes) in accordance
with the limitations set forth in the Agreement. Issuer agrees to issue from
time to time replacement Notes in the form hereof to facilitate such transfers
and assignments.
Pursuant to Article VII of the Agreement but subject to the terms
and conditions stated therein, Issuer may, at the maturity of the Notes, and in
lieu of cash payment of the principal of this Note, issue to the Holder a
Senior Subordinated Increasing Rate Rollover Note substantially in the form set
forth as Exhibit B to the Agreement (a "SUBORDINATED ROLLOVER NOTE") which
shall (i) be payable to the order of the Holder, (ii) be in a principal amount
equal to the outstanding principal amount of this Note, and (iii) mature on
October 6, 2000. Upon the issuance and delivery of such Subordinated Rollover
Note, the Holder shall deliver this Note to Issuer for cancellation.
Issuer shall keep at its principal office a register (the
"REGISTER") in which shall be entered the names and addresses of the registered
Holders of the Notes and particulars of the respective Notes held by them and
of all transfers of such Notes. References to the "HOLDER" or "HOLDERS" shall
mean the Person listed in the Register as the payee of any Note. The ownership
of the Notes shall be proven by the Register.
1. Certain Terms Defined. All terms defined in the
Agreement and not otherwise defined herein shall have for purposes hereof the
meanings provided for therein. The following additional term has the meaning
specified below.
"PRIME RATE" means, for any day, a rate per annum equal to the
rate of interest publicly announced by The Bank of New York (or its
successor) from time to time in The City of New York as its prime,
reference or base rate, it being understood that such rate is one of
such bank's base rates and serves as a basis upon which effective rates
of interest are calculated for those loans making reference thereto and
may not be the lowest of such bank's base rates.
2. Covenants. Unless the Majority Holders otherwise
consent in writing, Issuer covenants and agrees to observe and perform each of
its obligations and undertakings contained in Article VI of the Agreement,
which obligations and undertakings are expressly assumed herein by Issuer and
made for the benefit of the Holders.
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3. Events of Default.
(a) Event of Default Defined; Acceleration of Maturity; Waiver
of Default. In case one or more of the following Events of Default (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(i) default by Issuer in the payment of all or any part
of the principal or premium, if any, on any of the Notes as and when
the same shall become due and payable either at maturity, upon any
redemption, by declaration or otherwise; or
(ii) default by Issuer in the payment of any installment
of interest upon any of the Notes or any fees payable under the
Agreement or Section 4 hereof as and when the same shall become due
and payable, and continuance of such default for a period of 5
Business Days; or
(iii) failure on the part of Issuer duly to observe or
perform any other of the covenants or agreements contained in the
Bridge Documents to which it is a party (other than those covered by
clauses (i) and (ii) above) if such failure shall continue for a
period of 30 days after the date on which written notice specifying
such failure, stating that such notice is a "Notice of Default"
hereunder and demanding that Issuer remedy the same, shall have been
given by registered or certified mail, return receipt requested, to
Issuer by the Majority Holders; or
(iv) Issuer or any Guarantor shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action to authorize
any of the foregoing; or
(v) an involuntary case or other proceeding shall be
commenced against Issuer or any Guarantor seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
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part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against Issuer or any Guarantor
under the federal bankruptcy laws as now or hereafter in effect; or
(vi) the Subsidiary Guaranty or the Holdings Guaranty
shall cease to be in full force and effect or any Guarantor shall deny
its liability thereunder, except as contemplated by the terms of the
Subsidiary Guaranty and the Holdings Guaranty in the event that any
Subsidiary Guarantor or Holdings ceases to be a guarantor of the
obligations under the Credit Agreement;
(vii) failure on the part of any Guarantor to observe or
perform any covenant contained in the Bridge Documents (other than
such Guarantor's obligation to pay the Guaranteed Obligations referred
to in the Holdings Guaranty or the Subsidiary Guaranty, as applicable)
if such failure shall continue for a period of 30 days after the date
on which written notice specifying such failure, stating that such
notice is a "Notice of Default" hereunder and demanding that such
Guarantor remedy the same, shall have been given by registered or
certified mail, return receipt requested, to such Guarantor by the
Majority Holders;
(viii) there shall be a default in respect of any Debt of
Issuer or any of its Subsidiaries in an amount of more than $5,000,000
(any such Debt, a "MATERIAL DEBT") whether such Material Debt now
exists or shall hereafter be created if such default results in
acceleration of the maturity of such Material Debt; Issuer or any of
its Subsidiaries shall fail to pay within 5 days of its maturity, any
Material Debt whether such Material Debt now exists or shall hereafter
be created; or
(ix) final judgments for the payment of money which in
the aggregate at any one time, the uninsured portion of which exceeds
$5,000,000 shall be rendered against Issuer or any Guarantor or their
subsidiaries by a court of competent jurisdiction and shall remain
undischarged for a period (during which execution shall not be
effectively stayed) of 60 days after such judgment becomes final and
non-appealable; or
(x) any representation, warranty, certification or
statement made or deemed made by Issuer or any Guarantor in any Bridge
Document or which is contained in any certificate, document or
financial or other statement furnished at any time under or in
connection with any Bridge Document shall prove to have been incorrect
in any material respect on or as of the date made or deemed made; or
(xi) failure of Issuer, any Guarantor or any of their
respective
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Subsidiaries to comply with material portions of the Employee
Retirement Income Security Act of 1974, as amended, which results in
liability to Issuer in an amount in excess of $5,000,000; or
(xii) if at any time there shall occur a Change of
Control.
then, and in each and every such case (other than under clauses (iv) and (v)
with respect to Issuer), unless the principal of all the Notes shall have
already become due and payable, the Majority Holders, by notice in writing to
Issuer, may declare the entire principal amount of the Notes together with
accrued interest thereon to be, and upon Issuer's receipt of such notice the
entire principal amount of the Notes together with all accrued interest thereon
shall become, immediately due and payable. If an Event of Default specified in
clause (iv) or (v) above with respect to Issuer occurs, the principal of and
accrued interest on the Notes will be immediately due and payable without any
declaration or other act on the part of the Holders. The Majority Holders may,
on behalf of the Holders of all the Notes by written notice to Issuer, rescind
an acceleration and its consequences if all existing Events of Default have
been cured or waived, except nonpayment of principal or interest that has
become due solely because of the acceleration, and if the rescission would not
conflict with any judgment or decree then in effect; provided that any uncured
monetary defaults existing other than solely because of the acceleration may be
waived only by the Holders of all the Notes; and provided, further, for so long
as such Event of Default shall be continuing, DLJ Bridge shall have the right
to appoint, in DLJ Bridge's sole discretion, one additional Director to the
Board of Directors of Issuer and/or Holdings, which right shall terminate at
such time as DLJ Bridge is no longer the holder of at least 50% of the
aggregate outstanding principal amount of the Notes.
(b) Powers and Remedies Cumulative; Delay or Omission
Not Waiver of Default. No right or remedy herein or in any other Bridge
Document conferred upon or reserved to the Holders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or under the other Bridge Documents or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or
power accruing upon any Event of Default occurring and continuing as aforesaid
shall impair any such right or power or shall be construed to be a waiver of
any such Event of Default or an acquiescence therein; and every power and
remedy given by the Notes or by law may be exercised from time to time, and as
often as shall be deemed expedient, by the Holders.
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4. Prepayment of Note.
(a) Issuer at its option may, upon not less than 10 days'
written notice to the Holders, at any time, prepay all or any part of the
principal amount of the Notes at a redemption price equal to 100% of the
principal amount of the Notes so prepaid, together with accrued interest
through the date of prepayment and any prepayment fees due in accordance with
the terms of Section 6.23 of the Agreement. Notwithstanding the foregoing, in
the event that (i) Issuer or Holdings has proposed to make an acquisition that
would otherwise be permitted by Section 6.8(f) of the Agreement except that
such acquisition would cause the aggregate amount of consideration paid for all
such acquisitions since the Time of Purchase to exceed $25,000,000, (ii) the
Lenders shall have granted an express waiver under the Credit Agreement to
permit such acquisition and (iii) DLJ Bridge shall have notified Issuer or
Holdings in writing, as the case may be, that it will not consent to such
acquisition, then Issuer may, at its option, upon not less than 10 days'
written notice to the Holders, prepay all, but not less than all, of the
aggregate principal amount of the Notes at a redemption price equal to 100% of
the principal amount of the Notes so prepaid without premium or penalty.
(b) (i) Within five (5) days after its receipt of any
Net Cash Proceeds from an Asset Sale of the type described in clause (b) of the
definition thereof, Issuer shall prepay a principal amount of the Notes equal
to the amount of such Net Cash Proceeds;
(ii) Within five (5) days of its receipt of any
Net Cash Proceeds from an Asset Sale of the type described in clause (a) of the
definition thereof (other than the sale of any Assets Held for Sale), Issuer
shall prepay a principal amount of the Notes equal to such Net Cash Proceeds
remaining after payment of any Designated Senior Debt required to be made with
such Net Cash Proceeds under the terms of the Credit Agreement or any other
agreement or instrument evidencing or relating to such Designated Senior Debt;
and
(iii) On the Business Day immediately preceding
the first anniversary of the Time of Purchase, Issuer shall also prepay a
principal amount of the Notes equal to the amount of Net Cash Proceeds received
from any sale of the Assets Held for Sale less (A) the amount of such Net Cash
Proceeds required to be paid in respect of any Designated Senior Debt under the
terms of the Credit Agreement or any other agreement or instrument evidencing
or relating to such Designated Senior Debt and (B) the amount of such Net Cash
Proceeds actually reinvested as permitted by Section 6.8(c) of the Agreement;
in each case, at a redemption price equal to 100% of the principal amount of
the Notes so prepaid, together with accrued interest through the date of
prepayment and
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any prepayment fees due in accordance with the terms of Section 6.23 of the
Agreement; provided, that in the case of an Asset Sale described in clause (b)
of the definition thereof, no such prepayment of the principal amount of,
interest on and prepayment fee with respect to the Notes shall be required
(either at the time of Issuer's receipt of the related Net Cash Proceeds or at
any time thereafter) if at the time of Issuer's receipt of Net Cash Proceeds
therefrom, the Holders of the Notes are prohibited from receiving payment
thereon pursuant to Section 5(b).
(c) Any prepayment of the Notes pursuant to Section 4(a)
shall be in a minimum amount of at least $1,000,000 and multiples of $100,000,
unless less than $1,000,000 of the Notes remain outstanding in which case all
of the Notes must be prepaid. Any prepayment of the Notes pursuant to Section
4(b) shall be in a minimum amount which is a multiple of $1,000 times the
number of Holders at the time of such prepayment.
(d) Any partial prepayment shall be made so that the Notes
then held by each Holder shall be prepaid in a principal amount which shall
bear the same ratio, as nearly as may be, to the total principal amount being
prepaid as the principal amount of such Notes held by such Holder shall bear to
the aggregate principal amount of all Notes then outstanding. In the event of
a partial prepayment, upon presentation of any Note Issuer shall execute and
deliver to or on the order of the Holder, at the expense of Issuer, a new Note
in principal amount equal to the remaining outstanding portion of such Note.
5. Subordination. All obligations evidenced hereby
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full in cash or Cash
Equivalents of Designated Senior Debt. For purposes of this Section 5, the
obligations evidenced hereby shall include all principal of and interest
(including, without limitation, interest accruing after the filing of a
petition under any bankruptcy law, whether or not allowable as a claim
thereunder) on and all other amounts payable in respect of the Notes and all
amounts received pursuant to a claim for rescission or damages arising out of
or in respect of the Notes (including, without limitation, any liquidated
damages specified by applicable Registration Rights and any indemnification for
or contribution towards investment loss) under the Agreement, any related
documents or any applicable law (collectively, the "SUBORDINATED OBLIGATIONS").
(a) Notes Subordinated to Designated Senior Debt. Issuer for
itself and its successors, and each Holder, by its acceptance of the Notes,
agrees that the payment of the Subordinated Obligations by Issuer is
subordinated, to the extent and in the manner provided in this Section, to the
prior payment in full in cash or Cash Equivalents of Designated Senior Debt;
provided that the provisions of this Section do not apply to, and the Notes are
not subordinated in respect of, the proceeds of the Permanent Financing. This
Section will constitute a continuing offer to all Persons
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who, in reliance upon its provisions become holders of, or continue to hold,
Designated Senior Debt, and such provisions are made for the benefit of the
holders of Designated Senior Debt, and such holders are made obligees under
this Section and they and/or each of them may enforce its provisions.
(b) No Payment on Notes in Certain Circumstances.
(i) No direct or indirect payment will be made on account of
the Subordinated Obligations, or to acquire any of the Notes for cash
or property other than capital stock of Holdings, or on account of the
redemption provisions of the Notes (x) upon the maturity of any
Designated Senior Debt by lapse of time, acceleration or otherwise,
unless and until all such Designated Senior Debt shall first be paid
in full or provided for in cash or Cash Equivalents or duly provided
for in a manner satisfactory to the holders of such Designated Senior
Debt or (y) in the event that Issuer defaults in the payment of any
principal of or interest on or any other amounts payable on or due in
connection with any Designated Senior Debt when it becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise, unless and until such default has been cured
or waived in writing or has ceased to exist.
(ii) Upon the happening of any event of default (or if an
event of default would result upon any payment with respect to the
Subordinated Obligations) with respect to any Designated Senior Debt,
as such event of default is defined in the instruments evidencing such
Designated Senior Debt or under which it is outstanding, permitting
the holders thereof to accelerate its maturity (if the default is
other than default in payment of the principal of or interest on or
any other amount due in connection with such Designated Senior Debt)
upon written notice of the event of default given to Issuer by the
representative of the holders of such Designated Senior Debt, then,
unless and until such event of default has been cured or waived in
writing or has ceased to exist or such notice has been withdrawn by
such representative, no direct or indirect payment will be made by
Issuer with respect to the Subordinated Obligations or to acquire any
of the Notes for cash, property or securities other than capital stock
of Holdings or with regard to redemption of Notes; provided that this
clause (ii) will not prevent the making of any payment for a period of
more than 179 days after the date the written notice of the default is
given unless such Designated Senior Debt in respect of which such
event of default exists has been declared due and payable in its
entirety within that period and that declaration has not been
rescinded or annulled, unless Section 5(b)(i) hereof is then
applicable. If such Designated Senior Debt is not declared due and
payable within 179 days after the written notice of the default is
given, promptly after the end of the 179-day period Issuer will,
subject to Section 4(b) hereof, pay all sums not paid during the
179-day period because of this
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clause (ii) unless Section 5(b)(i) is then applicable. During any
360-day consecutive period only one such period during which payment
of principal of, or interest on, the Notes may not be made may
commence and the duration of such period may not exceed 179 days.
(iii) If any payment or distribution of assets of Issuer is
received by any Holder in respect of the Subordinated Obligations at a
time when that payment or distribution should not have been made
because of clause (i) or (ii), such payment or distribution will be
received and held in trust for and will be paid over to the holders of
Designated Senior Debt which is due and payable and remains unpaid or
unprovided for (pro rata as to each of such holders on the basis of
the respective amounts of Designated Senior Debt which is due and
payable held by them) until all such Designated Senior Debt has been
paid in full or provided for in cash or Cash Equivalents, after giving
effect to any concurrent payment or distribution or provision therefor
to the holders of such Designated Senior Debt.
(c) Notes Subordinated to Prior Payment of all Designated
Senior Debt on Dissolution, Liquidation or Reorganization. Upon any
distribution of cash, properties or securities upon any dissolution, winding
up, liquidation or reorganization of Issuer (whether voluntary or involuntary,
in bankruptcy, insolvency, receivership or similar proceeding related to Issuer
or its property or upon an assignment for the benefit of creditors or
otherwise):
(i) the holders of all Designated Senior Debt will first be
entitled to receive payment in full or provision for payment in full
in cash or Cash Equivalents of the principal of and interest due on
Designated Senior Debt and other amounts due in connection with
Designated Senior Debt (including interest accruing subsequent to an
event specified in Sections 3(a)(iv) or (v) at the rate provided for
in the documents governing such Designated Senior Debt, whether or not
such interest is an allowed claim enforceable against the debtor in
any proceeding contemplated by Sections 3(a)(iv) or (v)) before the
Holders are entitled to receive any direct of indirect payment or
distribution on account of the principal of or interest on the Notes;
(ii) any payment or distribution of assets of Issuer of any
kind or character, whether in cash, properties or securities, to which
the Holders would be entitled except for the provisions of this
Section will be paid by the liquidating trustee or agent or other
Person making such a payment or distribution directly to the holders
of Designated Senior Debt or their representatives to the extent
necessary to make payment in full or provision for payment in full in
cash or Cash Equivalents of all Designated Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution
or provision therefor to the holders of such Designated Senior Debt;
and
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(iii) if, notwithstanding the foregoing, any payment or
distribution of assets of Issuer of any kind or character, whether in
cash, property or securities is received by the Holders on account of
the Subordinated Obligations before all Designated Senior Debt is paid
in full or provided for in cash or Cash Equivalents, such payment or
distribution will be received and held in trust for and will be paid
over to the holders of the Designated Senior Debt remaining unpaid or
unprovided for or their representatives for application to the payment
of such Designated Senior Debt until all such Designated Senior Debt
has been paid in full in cash or Cash Equivalents, after giving effect
to any concurrent payment or distribution therefor to the holders of
such Designated Senior Debt.
Issuer will give prompt written notice to the Holders of any
dissolution, winding up, liquidation or reorganization of it or any assignment
for the benefit of its creditors and of any event of default in respect of
Designated Senior Debt.
(d) For purposes of this Section, the words "cash, property
or securities" shall (so long as the effect of this clause (d) is not to cause
the Notes to be treated in any case or proceeding or similar event described in
this Section as part of the same class of claims as the Designated Senior Debt
or any class of claims on a parity with or senior to the Designated Senior Debt
for any payment or distribution) not be deemed to include any payment or
distribution of securities (subordinated at least to the same extent as the
Notes to the payment of all Designated Senior Debt then outstanding) of Issuer
or any other corporation authorized by an order or decree giving effect, and
stating in such order or decree that effect has been given, to subordination of
the Notes to Designated Senior Debt and made by a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy,
insolvency or similar law; provided that (i) the Designated Senior Debt is
assumed by the new corporation, if any, resulting from any such reorganization
or readjustment, and (ii) the rights of the holders of the Designated Senior
Debt are not, without the consent of such holders, altered by such
reorganization or readjustment. For purposes of the Section, "payment on
account of the Subordinated Obligations" shall not include the issuance of the
Subordinated Rollover Notes, the Warrants, any shares of capital stock issued
in lieu of or upon exercise of the Warrants or any sale or transfer of any of
the foregoing.
(e) Holders to be Subrogated to Rights of Holders of
Designated Senior Debt. Following the payment in full in cash or Cash
Equivalents of all Designated Senior Debt, the Holders will be subrogated to
the rights of the holders of Designated Senior Debt to receive payments or
distributions of assets of Issuer applicable to the Designated Senior Debt
until all amounts owing on the Notes have been paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
Designated Senior Debt by or on behalf of Issuer or by or on behalf of the
Holders by virtue of this Section which otherwise would have been made to the
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Holders will, as between Issuer and the Holders, be deemed to be payment by
Issuer to or on account of the Designated Senior Debt, it being understood that
the provisions of this Section are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders
of Designated Senior Debt, on the other hand.
(f) Obligations of Issuer Unconditional. Nothing contained
in this Section or elsewhere in the Notes is intended to or will impair, as
between Issuer and the Holders, the obligations of Issuer, which are absolute
and unconditional, to pay to the Holders the Subordinated Obligations as and
when they become due and payable in accordance with their terms, or is intended
to or will affect the relative rights of the Holders and creditors of Issuer
other than the holders of the Designated Senior Debt, nor will anything herein
or therein prevent any Holder from exercising all remedies otherwise permitted
by applicable law upon default under this Note, subject to the rights if any,
under this Section of the holders of Designated Senior Debt in respect of cash,
property or securities of Issuer received upon the exercise of any such remedy.
(g) Subordination Rights not Impaired by Acts or Omissions of
Issuer or Holders of Designated Senior Debt. No right of any present or future
holders of any Designated Senior Debt to enforce subordination as provided
herein will at any time in any way be prejudiced or impaired by any act of
failure to act on the part of Issuer or by any act or failure to act by any
such holder, or by any noncompliance by Issuer with the terms of this Note,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. The holders of Designated Senior Debt may extend, renew,
modify or amend the terms of the Designated Senior Debt or any security
therefor and release, sell or exchange such security and otherwise deal freely
with Issuer, all without affecting the liabilities and obligations of the
parties to the document or the Holders. No amendment to these provisions will
be effective against the holders of the Designated Senior Debt who have not
consented thereto in writing.
(h) Not to Prevent Events of Default. The failure to make a
payment on account of the Subordinated Obligations by reason of any provision
of this Section will not be construed as preventing the occurrence of an Event
of Default.
(i) Authorization to File Claims. The representative for
holders of Designated Senior Debt is hereby irrevocably authorized and
empowered (in its own name or in the name of the holders of Designated Senior
Debt or otherwise), but shall have no obligation, to file claims and proofs of
claim in respect of the Notes and the other Subordinated Obligations in
proceedings referred to in Section (c) in the event such claims or proof of
claim have not been filed prior to 30 days before such filing would be barred.
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(j) Representative for Bank Debt. Any reference to a
representative for holders of Designated Senior Debt in this Section shall, so
long as there shall be Designated Senior Debt outstanding under the Credit
Agreement, be deemed to refer to the Bank Agent.
6. Modification of Notes. (a) The Notes may be
modified without prior notice to any Holder but with the written consent of the
Holders of a majority in principal amount of the Notes then outstanding.
However, without the consent of each Holder affected thereby, an amendment,
supplement or waiver may not (1) reduce the aggregate principal amount of Notes
whose Holders must consent to an amendment, supplement or waiver, (2) reduce
the rate or extend the time for payment of interest on any Note, (3) reduce the
principal amount of or extend the stated maturity of any Note or alter the
redemption provisions with respect thereto or (4) make any Note payable in
money or property other than as stated in the Notes. Notwithstanding the
foregoing, Issuer and DLJ Bridge may amend or supplement the Notes without any
notice to or consent of the Holders thereof to make any change that does not
adversely affect the rights of such Holders.
(b) Notwithstanding any other provisions in this Note to the
contrary, so long as any Designated Senior Debt is outstanding, no
modification, supplement or waiver of any provision of the Notes which would
adversely affect the holders of Designated Senior Debt (it being understood
that, without limitation, any shortening or maturity dates, increases in
interest rate (other than those provided for in the Notes) or prepayment or
other premium, change in subordination and related provisions and definitions,
change in this Section 6, or change adverse to Issuer in covenants or events of
default shall be deemed to adversely affect the holders of Designated Senior
Debt) shall be effective unless expressly agreed to in writing by the Bank
Agent (with the approval of the specified percentage of holders of Designated
Senior Debt required to consent thereto pursuant to the terms of the Credit
Agreement).
7. Miscellaneous. This Note shall be deemed to be a
contract under the laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of said State. The parties hereto,
including all endorsers hereof, hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note, except as specifically
provided herein, and assent to extensions of the time of payment, or
forbearance or other indulgence without notice. Issuer hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this Note.
Issuer irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been
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brought in an inconvenient forum. Issuer hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to
this Note.
The Holder of this Note by acceptance of this Note agrees to
be bound by the provisions of this Note which are expressly binding on such
Holder.
IN WITNESS WHEREOF, Issuer has caused this instrument to be
duly executed as of the date of issuance set forth above.
CORAM, INC.
By: _____________________
Name:
Title:
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EXHIBIT B
FORM OF SUBORDINATED ROLLOVER NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN
ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 6, 1995, A COPY OF WHICH MAY BE
OBTAINED FROM CORAM, INC. AT ITS PRINCIPAL EXECUTIVE OFFICE.
No. __ $__,000,000
Issuance Date: ____________, 19__
CORAM, INC.
Senior Subordinated Increasing Rate Rollover Note
CORAM, INC., a Delaware corporation (together with its
successors, "ISSUER"), for value received hereby promises to pay to
CORAM FUNDING, INC.
and registered assigns the principal sum of
_____ MILLION DOLLARS
by wire transfer of immediately available funds to the Holder's account (the
"BANK ACCOUNT") at such bank in the United States as may be specified in
writing by the Holder (as defined below) to Issuer, on October 6, 2000 in such
coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest, quarterly in arrears, on the last day of March, June, September and
December (unless such day is not a Business Day, in which event on the next
succeeding Business Day) (each, an "INTEREST PAYMENT DATE") of each year in
which this Note remains outstanding, commencing with _________ __, 199_ on the
principal sum hereof outstanding in like coin or currency, at the rates per
annum set forth below, by wire transfer of immediately
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available funds to the Bank Account from the most recent Interest Payment Date
to which interest has been paid on this Note, or if no interest has been paid
on this Note, from ________ __, 199_, until payment in full of the principal
sum hereof has been made.
The interest rate shall be a floating rate per annum (the
"INTEREST RATE") equal to the sum of the Applicable Base Rate plus the
Applicable Incremental Margin, each determined as set forth below; provided
that the Interest Rate shall at no time exceed 21.00% per annum; and provided,
further, that on and after the date of transfer of this Note to a Person other
than a Variable Rate Holder, the Interest Rate applicable to this Note shall be
the rate in effect on the date of such transfer and shall not thereafter be
subject to adjustment in accordance with the provisions hereof.
If and to the extent that the amount of interest payable on
any Interest Payment Date exceeds the amount of interest on the Notes (as
hereinafter defined) which could have been payable on such Interest Payment
Date if the Interest Rate in effect at all times during the quarterly period
then ended had been 17.25% (the amount of such excess, if any, being
hereinafter referred to as the "EXCESS AMOUNT" for such period), then Issuer
shall have the right, in lieu of payment of the Excess Amount of interest in
cash, to pay interest on such Interest Payment Date through the issuance of
additional Notes ("ADDITIONAL SUBORDINATED ROLLOVER NOTES") in principal amount
equal to the amount of such interest due. Such Additional Subordinated
Rollover Notes shall otherwise be identical to the outstanding Notes and shall
be issued to the Holders of the Notes at the time outstanding in proportions
such that each Holder shall receive the same ratio of cash interest to
Additional Subordinated Rollover Notes on such Interest Payment Date. Such
Additional Subordinated Rollover Notes shall be issued only in denominations of
$1,000 and multiples thereof. Any interest otherwise payable in Additional
Subordinated Rollover Notes which cannot be so paid because an Additional
Subordinated Rollover Note would have a denomination less than $1,000 (or not
be a multiple thereof) shall be paid in cash.
Interest on this Note will be calculated on the basis of a
365-day year and paid for the actual number of days elapsed.
This Note is one of a duly authorized issue of Senior
Subordinated Increasing Rate Rollover Notes of Issuer (including any Additional
Subordinated Rollover Notes referred to above, the "NOTES") referred to in the
Securities Purchase Agreement dated as of April 6, 1995 between Issuer and
Coram Funding, Inc. ("DLJ BRIDGE") (as the same may be amended from time to
time in accordance with its terms, the "AGREEMENT"). The Notes are
transferable and assignable to one or more purchasers (in minimum denominations
of $5,000,000 or larger multiples of $1,000,000, exclusive of Additional
Subordinated Rollover Notes), in accordance with the limitations set forth in
the Agreement. Issuer agrees to issue from time to time replacement Notes in
the form hereof to facilitate such transfers and assignments.
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Issuer shall keep at its principal office a register (the
"REGISTER") in which shall be entered the names and addresses of the registered
Holders of Notes and particulars of the respective Notes held by them and of
all transfers of such Notes. References to the "HOLDER" or "HOLDERS" shall
mean the Person listed in the Register as the payee of any Note. The ownership
of Notes shall be proven by the Register.
1. Certain Terms Defined. All terms defined in the
Agreement and not otherwise defined herein shall have for purposes hereof the
meanings provided for therein. The following additional terms have the
respective meanings specified below:
The "APPLICABLE BASE RATE" for purposes of computing the
amount of interest payable on any Interest Payment Date is whichever
of the following rates is the highest at the related Rate
Determination Date:
(a) the Prime Rate in effect from time to time plus 5.00%;
(b) the Treasury Rate (if any) plus 7.50%;
(c) the DLJ High Yield Index Rate plus 1.50%; and
(d) the Interest Rate under the Subordinated Bridge Notes in
effect at the Rollover Date plus 0.50%.
For purposes of determining which of the foregoing rates is the
highest at any Rate Determination Date, the Prime Rate for purposes of
clause (a) above shall be that in effect at such Rate Determination
Date; if the rate specified in clause (a) is the Applicable Base Rate,
the Prime Rate for purposes of calculating the amount of interest
payable shall be that in effect from time to time during the relevant
period.
"APPLICABLE INCREMENTAL MARGIN" means, for purposes of
calculating the amount of interest payable on any Interest Payment
Date, a percentage amount equal to the product of 0.25% times the
number of Rate Determination Dates which shall have occurred prior to
such Interest Payment Date. The Rollover Date shall constitute a Rate
Determination Date for the purposes of this calculation.
"DLJ HIGH YIELD INDEX RATE" means, for any day, the DLJ High
Yield Active Issues Index then most recently published by Donaldson,
Lufkin & Jenrette Securities Corporation in the "High Yield Weekly
Market Review".
"PRIME RATE" means, for any day, a rate per annum equal to the
rate of interest publicly announced by The Bank of New York (or its
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successor) from time to time in The City of New York as its prime,
reference or base rate, it being understood that such rate is one of
such bank's base rates and serves as a basis upon which effective
rates of interest are calculated for those loans making reference
thereto and may not be the lowest of such bank's base rates.
"RATE DETERMINATION DATE" means, in respect of any Interest
Payment Date, the immediately preceding Interest Payment Date (or, in
the case of the first Interest Payment Date, the Rollover Date).
"TREASURY RATE" means on any Rate Determination Date the yield
on a hypothetical United States Treasury security with a Treasury
constant maturity matching the then remaining average life to maturity
of the Notes. The hypothetical Treasury security is to be derived by
referring to the Federal Reserve Board's Statistical Release H.15
(519) (or its successor publication) most recently available next
preceding (by not more than 10 nor less than 5 Business Days) such
Rate Determination Date. If there is a Treasury constant maturity
listed in said Federal Reserve Release H.15 (519) with a maturity
equal to the then remaining average life to maturity of the Notes then
the yield on such Treasury security shall be the Treasury Rate. If no
such Treasury constant maturity exists, then the yield on such
Treasury security shall be linearly interpolated from the yields on
(a) the Treasury security with a constant maturity closest to and
greater than the then remaining average life to maturity of the Notes
and (b) the Treasury security with a constant maturity closest to and
less than the then remaining average life to maturity of the Notes.
If there shall be no Treasury security with a constant maturity less
than the then remaining average life to maturity of the Notes, then
Treasury Rate shall mean the yield on the Treasury security with the
shortest constant maturity.
2. Covenants. Unless the Majority Holders otherwise consent
in writing, Issuer covenants and agrees to observe and perform each of its
obligations and undertakings contained in Article VI of the Agreement, which
obligations and undertakings are expressly assumed herein by Issuer and made
for the benefit of the Holders.
3. Events of Default.
(a) Event of Default Defined; Acceleration of Maturity;
Waiver of Default. In case one or more of the following Events of Default
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have
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occurred and be continuing:
(i) default by Issuer in the payment of all or any part
of the principal or premium, if any, on any of the Notes as and when
the same shall become due and payable either at maturity, upon any
redemption, by declaration or otherwise; or
(ii) default by Issuer in the payment of any installment
of interest upon any of the Notes or any fees payable under the
Agreement or Section 4 hereof as and when the same shall become due
and payable, and continuance of such default for a period of 10 days
(or 30 days if DLJ Bridge or its affiliates no longer hold a majority
of the Notes); or
(iii) failure on the part of Issuer duly to observe or
perform any other of the covenants or agreements contained in the
Bridge Documents to which it is a party (other than those covered by
clauses (i) and (ii) above) if such failure shall continue for a
period of 30 days after the date on which written notice specifying
such failure, stating that such notice is a "Notice of Default"
hereunder and demanding that Issuer remedy the same, shall have been
given by registered or certified mail, return receipt requested, to
Issuer by the Majority Holders; or
(iv) Issuer or any Guarantor shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action to authorize
any of the foregoing; or
(v) an involuntary case or other proceeding shall be
commenced against Issuer or any Guarantor seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against, Issuer or any Guarantor under the
federal bankruptcy laws as now or hereafter in effect; or
(vi) the Subsidiary Guaranty or the Holdings Guaranty shall cease to
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be in full force and effect or any Guarantor shall deny its liability
thereunder, except as contemplated by the terms of the Subsidiary
Guaranty and the Holdings Guaranty in the event that any Subsidiary
Guarantor or Holdings ceases to be a guarantor of the obligations
under the Credit Agreement;
(vii) failure on the part of any Guarantor to observe or
perform any covenant contained in the Bridge Documents (other than
such Guarantor's obligation to pay the Guaranteed Obligations referred
to in the Holdings Guaranty or the Subsidiary Guaranty, as applicable)
if such failure shall continue for a period of 30 days after the date
on which written notice specifying such failure, stating that such
notice is a "Notice of Default" hereunder and demanding that such
Guarantor remedy the same, shall have been given by registered or
certified mail, return receipt requested, to such Guarantor by the
Majority Holders;
(viii) there shall be a default in respect of any Debt of
Issuer or any of its Subsidiaries in an amount of more than $5,000,000
(any such Debt, a "MATERIAL DEBT") whether such Material Debt now
exists or shall hereafter be created if such default results in
acceleration of the maturity of such Material Debt; Issuer or any of
its Subsidiaries shall fail to pay within 5 days of its maturity, any
Material Debt whether such Material Debt now exists or shall hereafter
be created; or
(ix) final judgments for the payment of money which in
the aggregate at any one time, the uninsured portion of which exceeds
$5,000,000 shall be rendered against Issuer or any Guarantor by a
court of competent jurisdiction and shall remain undischarged for a
period (during which execution shall not be effectively stayed) of 60
days after such judgment becomes final and non-appealable; or
(x) any representation, warranty, certification or
statement made or deemed made by Issuer or any Guarantor in any Bridge
Document or which is contained in any certificate, document or
financial or other statement furnished at any time under or in
connection with any Bridge Document shall prove to have been incorrect
in any material respect on or as of the date made or deemed made; or
(xi) failure of Issuer, any Guarantor or any of their
respective Subsidiaries to comply with material portions of the
Employee Retirement Income Security Act of 1974, as amended, which
results in liability to Issuer in an amount in excess of $5,000,000;
or
(xii) if at any time there shall occur a Change of
Control;
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then, and in each and every such case (other than under clauses (iv) and (v)
with respect to Issuer), unless the principal of all the Notes shall have
already become due and payable, the Holders of at least 33-1/3%, or a majority
where DLJ Bridge holds a majority of the aggregate principal amount of the
Notes then outstanding, in aggregate principal amount of the Notes then
outstanding, by notice in writing to Issuer, may declare the entire principal
amount of the Notes together with accrued interest thereon to be, and upon
Issuer's receipt of such notice the entire principal amount of the Notes
together with accrued interest thereon shall become, immediately due and
payable provided that so long as any Designated Senior Debt is outstanding,
such declaration shall not become effective until the earlier of five days
after delivery of the notice of acceleration or the acceleration of such
Designated Senior Debt. If an Event of Default specified in clause (iv) or (v)
above with respect to Issuer occurs, the principal of and accrued interest on
the Notes will be immediately due and payable without any declaration or other
act on the part of the Holders. The Holders of the majority in aggregate
principal amount of the Notes then outstanding may, on behalf of the Holders of
all the Notes by written notice to Issuer, rescind an acceleration and its
consequences if all existing Events of Default have been cured or waived,
except nonpayment of principal or interest that has become due solely because
of the acceleration, and if the rescission would not conflict with any
judgment or decree then in effect; provided that any uncured monetary defaults
existing other than solely because of the acceleration may be waived only by
the Holders of all the Notes; provided, further, for so long as such Event of
Default shall be continuing, DLJ Bridge shall have the right to appoint, in DLJ
Bridge's sole discretion, one additional Director to the Board of Directors of
Issuer and/or Holdings, which right shall terminate at such time as DLJ Bridge
is no longer the holder of at least 50% of the aggregate outstanding principal
amount of the Notes.
(b) Powers and Remedies Cumulative; Delay or Omission
Not Waiver of Default. No right or remedy herein or in any other Bridge
Document conferred upon or reserved to the Holders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
No delay or omission of the Holders to exercise any right or
power accruing upon any Event of Default occurring and continuing as aforesaid
shall impair any such right or power or shall be construed to be a waiver of
any such Event of Default or an acquiescence therein; and every power and
remedy given by the Notes or by law may be exercised from time to time, and as
often as shall be deemed expedient, by the Holders.
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4. Prepayment of Note.
(a) (i) For so long as any Notes are held by DLJ Bridge,
Issuer at its option may, upon ten days' written notice to the Holder thereof,
at any time, prepay all or any part of the principal amount of Notes so held at
a redemption price equal to 100% of the principal amount of Notes so prepaid,
together with accrued and unpaid interest through the date of prepayment and
(ii) if the Notes are sold to third-party purchasers on a fixed rate basis no
less favorable to Issuer than the then applicable rate of interest (it being
understood that, subject to the foregoing, DLJ Bridge shall have the right to
unilaterally fix the Interest Rate on the Notes in conjunction with such
third-party sales and it also being understood that no such third-party sales
shall take place unless Issuer has been given 10 days prior notice), the Notes
will be non-callable for two (2) years from the date of issuance and will be
callable thereafter at par plus accrued interest plus a premium (the
"REDEMPTION PREMIUM") equal to the coupon in effect on the date of issuance of
the Notes declining ratably to par one year prior to the maturity of the Notes.
(b) Issuer shall, within five days of its receipt of any Net
Cash Proceeds, prepay a principal amount of the Notes equal to (i) in the case
of an Asset Sale described in clause (b) of the definition thereof, the amount
of such Net Cash Proceeds, or (ii) in the case of an Asset Sale described in
clause (a) of the definition thereof, such Net Cash Proceeds remaining after
payment of any Designated Senior Debt required to be made with such Net Cash
Proceeds under the terms of the Credit Agreement or any other agreement or
instrument evidencing or relating to such Designated Senior Debt, in each case,
at a redemption price equal to 100% of the principal amount of the Notes so
prepaid, together with accrued interest through the date of prepayment and any
prepayment fees due in accordance with the terms of Section 6.23 of the
Agreement; provided, that in the case of an Asset Sale described in clause (b)
of the definition thereof, no such prepayment of the principal amount of,
interest on and prepayment fee with respect to the Notes shall be required
(either at the time of Issuer's receipt of the related Net Cash Proceeds or at
any time thereafter) if at the time of Issuer's receipt of Net Cash Proceeds
therefrom, the Holders of the Notes are prohibited from receiving payment
thereon pursuant to Section 5(b) hereof.
(c) Any prepayment of Notes pursuant to Section 4(a) shall be
in a minimum amount of at least $1,000,000 and multiples of $100,000, unless
less than $1,000,000 of Rollover Notes remain outstanding in which case all of
the Notes must be prepaid. Any prepayment of Notes pursuant to Section 4(b)
shall be in a minimum amount which is a multiple of $1,000 times the number of
Holders at the time of such prepayment.
(d) Any partial prepayment shall be made so that Notes
subject to prepayment (whether at the option of Issuer or by election of the
Holder) then held by a Holder shall be prepaid in a principal amount which
shall bear the same ratio, as
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nearly as may be, to the total principal amount being prepaid as the principal
amount of such Notes held by such Holder shall bear to the aggregate principal
amount of all Notes then subject to prepayment. In the event of a partial
prepayment, upon presentation of any Note Issuer shall execute and deliver to
or on the order of the Holder, at the expense of Issuer, a new Note in
principal amount equal to the remaining outstanding portion of such Note.
5. Subordination. All obligations evidenced hereby
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full in cash or Cash
Equivalents of Designated Senior Debt. For purposes of this Section 5, the
obligations evidenced hereby shall include all principal of and interest
(including, without limitation, interest accruing after the filing of a
petition under any bankruptcy law, whether or not allowable as a claim
thereunder) on and all other amounts payable in respect of the Notes and all
amounts received pursuant to a claim for rescission or damages arising out of
or in respect of the Notes (including, without limitation, any liquidated
damages specified by applicable Registration Rights and any indemnification for
or contribution towards investment loss) under the Agreement, any related
documents or any applicable law (collectively, the "SUBORDINATED OBLIGATIONS").
(a) Notes Subordinated to Designated Senior Debt. Issuer for
itself and its successors, and each holder, by its acceptance of the Notes,
agrees that the payment of the Subordinated Obligations by Issuer is
subordinated, to the extent and in the manner provided in this Section, to the
prior payment in full in cash or Cash Equivalents of Designated Senior Debt;
provided that the provisions of this Section do not apply to, and the Notes are
not subordinated in respect of, the proceeds of the Permanent Financing.
This Section will constitute a continuing offer to all Persons
who, in reliance upon its provisions become holders of, or continue to hold,
Designated Senior Debt, and such provisions are made for the benefit of the
holders of Designated Senior Debt, and such holders are made obligees under
this Section and they and/or each of them may enforce its provisions.
(b) No Payment on Notes in Certain Circumstances.
(i) No direct or indirect payment will be made on
account of the Subordinated Obligations, or to acquire any of the
Notes for cash or property other than capital stock of Holdings, or on
account of the redemption provisions of the Notes (x) upon the
maturity of any Designated Senior Debt by lapse of time, acceleration
or otherwise, unless and until all such Designated Senior Debt shall
first be paid in full or provided for in cash or Cash Equivalents or
duly provided for in a manner satisfactory to the holders of such
Designated Senior Debt or (y) in the event that Issuer defaults in the
payment
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of any principal of or interest on or any other amounts payable on or
due in connection with any Designated Senior Debt when it becomes due
and payable, whether at maturity or at a date fixed for prepayment or
by declaration or otherwise, unless and until such default has been
cured or waived in writing or has ceased to exist.
(ii) Upon the happening of any event of default (or if
an event of default would result upon any payment with respect to the
Subordinated Obligations) with respect to any Designated Senior Debt,
as such event of default is defined in the instruments evidencing such
Designated Senior Debt or under which it is outstanding, permitting
the holders thereof to accelerate its maturity (if the default is
other than default in payment of the principal of or interest on or
any other amount due in connection with such Designated Senior Debt)
upon written notice of the event of default given to Issuer by the
representative of the holders of such Designated Senior Debt, then,
unless and until such event of default has been cured or waived in
writing or has ceased to exist or such notice has been withdrawn by
such representative, no direct or indirect payment will be made by
Issuer with respect to the Subordinated Obligations or to acquire any
of the Notes for cash, property or securities other than capital stock
of Holdings or with regard to redemption of Notes; provided that this
clause (ii) will not prevent the making of any payment for a period of
more than 179 days after the date the written notice of the default is
given unless such Designated Senior Debt in respect of which such
event of default exists has been declared due and payable in its
entirety within that period and that declaration has not been
rescinded or annulled, unless Section 5(b)(i) is then applicable. If
such Designated Senior Debt is not declared due and payable within 179
days after the written notice of the default is given, promptly after
the end of the 179-day period Issuer will pay all sums not paid during
the 179-day period because of this clause (ii) unless Section 5(b)(i)
is then applicable. During any 360-day consecutive period only one
such period during which payment of principal of, or interest on, the
Notes may not be made may commence and the duration of such period may
not exceed 179 days.
(iii) If any payment or distribution of assets of Issuer
is received by any Holder in respect of the Subordinated Obligations
at a time when that payment or distribution should not have been made
because of clause (i) or (ii), such payment or distribution will be
received and held in trust for and will be paid over to the holders of
Designated Senior Debt which is due and payable and remains unpaid or
unprovided for (pro rata as to each of such holders on the basis of
the respective amounts of Designated Senior Debt which is due and
payable held by them) until all such Designated Senior Debt has been
paid in full or provided for in cash or Cash Equivalents, after giving
effect to any concurrent payment or distribution or provision therefor
to the holders of such
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Designated Senior Debt.
(c) Notes Subordinated to Prior Payment of all Designated
Senior Debt on Dissolution, Liquidation or Reorganization. Upon any
distribution of cash, properties or securities upon any dissolution, winding
up, liquidation or reorganization of Issuer (whether voluntary or involuntary,
in bankruptcy, insolvency, receivership or similar proceeding related to Issuer
or its property or upon an assignment for the benefit of creditors or
otherwise):
(i) the holders of all Designated Senior Debt will
first be entitled to receive payment in full or provision for payment
in full in cash or Cash Equivalents of the principal of and interest
due on Designated Senior Debt and other amounts due in connection with
Designated Senior Debt (including interest accruing subsequent to an
event specified in Sections 3(a)(iv) or (v) at the rate provided for
in the documents governing such Designated Senior Debt, whether or not
such interest is an allowed claim enforceable against the debtor in
any proceeding contemplated by Sections 3(a)(iv) or (v)) before the
Holders are entitled to receive any direct of indirect payment or
distribution on account of the principal of or interest on the Notes;
(ii) any payment or distribution of assets of Issuer of
any kind or character, whether in cash, properties or securities, to
which the Holders would be entitled except for the provisions of this
Section will be paid by the liquidating trustee or agent or other
Person making such a payment or distribution directly to the holders
of Designated Senior Debt or their representatives to the extent
necessary to make payment in full or provision for payment in full in
cash or Cash Equivalents of all Designated Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution
or provision therefor to the holders of such Designated Senior Debt;
and
(iii) if, notwithstanding the foregoing, any payment or
distribution of assets of Issuer of any kind or character, whether in
cash, property or securities is received by the Holders on account of
the Subordinated Obligations before all Designated Senior Debt is paid
in full or provided for in cash or Cash Equivalents, such payment or
distribution will be received and held in trust for and will be paid
over to the holders of the Designated Senior Debt remaining unpaid or
unprovided for or their representatives for application to the payment
of such Designated Senior Debt until all such Designated Senior Debt
has been paid in full in cash or Cash Equivalents, after giving effect
to any concurrent payment or distribution therefor to the holders of
such Designated Senior Debt.
Issuer will give prompt written notice to the Holders of any
dissolution, winding up, liquidation or reorganization of it or any assignment
for the benefit of its
B-11
<PAGE> 81
creditors and of any event of default in respect of Designated Senior Debt.
(d) For purposes of this Section, the words "cash, property
or securities" shall (so long as the effect of this clause (d) is not to cause
the Notes to be treated in any case or proceeding or similar event described in
this Section as part of the same class of claims as the Designated Senior Debt
or any class of claims on a parity with or senior to the Designated Senior Debt
for any payment or distribution) not be deemed to include (x) shares of capital
stock of Issuer as reorganized or readjusted, (y) securities of Issuer or any
other corporation provided for by a plan of reorganization or readjustment
which are subordinated, to at least the same extent as the Notes, to the
payment of all Designated Senior Debt then outstanding or (z) any payment or
distribution of securities of Issuer or any other corporation authorized by an
order or decree giving effect, and stating in such order or decree that effect
has been given, to subordination of the Notes to Designated Senior Debt and
made by a court of competent jurisdiction in a reorganization proceeding under
any applicable bankruptcy, insolvency or similar law. For purposes of the
Section, "payment on account of the Subordinated Obligations" shall not include
the issuance of the Subordinated Rollover Notes or any sale or transfer
thereof.
(e) Holders to be Subrogated to Rights of Holders of
Designated Senior Debt. Following the payment in full in cash or Cash
Equivalents of all Designated Senior Debt, the Holders will be subrogated to
the rights of the holders of Designated Senior Debt to receive payments or
distributions of assets of Issuer applicable to the Designated Senior Debt
until all amounts owing on the Notes have been paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
Designated Senior Debt by or on behalf of Issuer or by or on behalf of the
Holders by virtue of this Section which otherwise would have been made to the
Holders will, as between Issuer and the Holders, be deemed to be payment by
Issuer to or on account of the Designated Senior Debt, it being understood that
the provisions of this Section are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders
of Designated Senior Debt, on the other hand.
(f) Obligations of Issuer Unconditional. Nothing contained
in this Section or elsewhere in the Notes is intended to or will impair, as
between Issuer and the Holders, the obligations of Issuer, which are absolute
and unconditional, to pay to the Holders the Subordinated Obligations as and
when they become due and payable in accordance with their terms, or is intended
to or will affect the relative rights of the Holders and creditors of Issuer
other than the holders of the Designated Senior Debt, nor will anything herein
or therein prevent any Holder from exercising all remedies otherwise permitted
by applicable law upon default under this Note, subject to the rights if any,
under this Section of the holders of Designated Senior Debt in respect of cash,
property or securities of Issuer received upon the exercise of any such remedy.
B-12
<PAGE> 82
(g) Subordination Rights not Impaired by Acts or Omissions of
Issuer or Holders of Designated Senior Debt. No right of any present or future
holders of any Designated Senior Debt to enforce subordination as provided
herein will at any time in any way be prejudiced or impaired by any act of
failure to act on the part of Issuer or by any act or failure to act by any
such holder, or by any noncompliance by Issuer with the terms of this Note,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. The holders of Designated Senior Debt may extend, renew,
modify or amend the terms of the Designated Senior Debt or any security
therefor and release, sell or exchange such security and otherwise deal freely
with Issuer, all without affecting the liabilities and obligations of the
parties to the document or the Holders. No amendment to these provisions will
be effective against the holders of the Designated Senior Debt who have not
consented thereto in writing.
(h) Not to Prevent Events of Default. The failure to make a
payment on account of the Subordinated Obligations by reason of any provision
of this Section will not be construed as preventing the occurrence of an Event
of Default.
(i) Authorization to File Claims. The representative for
holders of Designated Senior Debt is hereby irrevocably authorized and
empowered (in its own name or in the name of the holders of Designated Senior
Debt or otherwise), but shall have no obligation, to file claims and proofs of
claim in respect of the Notes and the other Subordinated Obligations in
proceedings referred to in Section (c) in the event such claims or proof of
claim have not been filed prior to 30 days before such filing would be barred.
(j) Representative for Bank Debt. Any reference to a
representative for holders of Designated Senior Debt in this Section shall, so
long as there shall be Designated Senior Debt outstanding under the Credit
Agreement, be deemed to refer to the Bank Agent.
6. Modification of Notes. Notes may be modified
without prior notice to any Holder but with the written consent of the Holders
of a majority in principal amount of Notes then outstanding. However, without
the consent of each Holder affected thereby, an amendment, supplement or waiver
may not (1) reduce the aggregate principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver, (2) reduce the rate or extend
the time for payment of interest on any Note, (3) reduce the principal amount
of or extend the stated maturity of any Note or alter the redemption provisions
with respect thereto or (4) make any Note payable in money or property other
than as stated in the Notes. Notwithstanding the foregoing, Issuer and DLJ
Bridge may amend or supplement the Notes without any notice to or consent of
the Holders thereof to make any change that does not adversely affect the
rights of such Holders.
B-13
<PAGE> 83
7. Miscellaneous. This Note shall be deemed to be a
contract under the laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of said State. The parties hereto,
including all endorsers hereof, hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note, except as specifically
provided herein, and assent to extensions of the time of payment, or
forbearance or other indulgence without notice. Issuer hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this Note.
Issuer irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Issuer
hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Note.
The Holder of this Note by acceptance of this Note agrees to
be bound by the provisions of this Note which are expressly binding on such
Holder.
IN WITNESS WHEREOF, Issuer has caused this instrument to be
duly executed as of the date of issuance set forth above.
CORAM, INC.
By: _________________________
Name:
Title:
B-14
<PAGE> 1
THIS CONVERTIBLE SUBORDINATED NOTE ("NOTE") HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.
CORAM HEALTHCARE CORPORATION
7% CONVERTIBLE SUBORDINATED NOTE
DUE OCTOBER 1, 2005
$75,000,000 April 1, 1995
CORAM HEALTHCARE CORPORATION, a Delaware corporation (the
"Company"), for value received hereby promises to pay to CAREMARK INC., or its
registered assigns (the "Holder"), the principal sum of Seventy-Five Million
Dollars ($75,000,000), or such lesser amount as shall then equal the
outstanding principal amount hereof on the terms and conditions set forth
hereinafter. The principal hereof and any unpaid accrued interest hereon, as
set forth below, shall be due and payable on October 1, 2005. Payment for all
amounts due hereunder shall be made by mail to the registered address of the
Holder. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts (or pursuant to Section 1.2 hereof, in PIK Notes). If a payment
would otherwise be due on a legal holiday, payment may be made on the next
succeeding day that is not a legal holiday, and no interest shall accrue for
such intervening period. This Note is issued pursuant to Section 2.1(a) of
that certain Asset Sale and Note Purchase Agreement between the Company and
Holder dated as of January 29, 1995 (the "Purchase Agreement").
1. Interest.
1.1 Payment of Interest. Commencing on October 1, 1995, and
semi-annually on each April 1 and October 1 thereafter (each, an "Interest
Payment Date") until the outstanding principal of and interest on this Note
shall have been paid in full, the Company shall pay interest at the rate of
seven percent (7%) per annum (computed on the basis of a 360-day year, 30-day
month) on the principal of this Note outstanding during the period beginning on
the date of issuance of this Note (the "Issuance Date") and ending on the date
that the principal amount of this Note becomes due and payable (the "Maturity
Date"). In the event that the principal amount of this Note is not paid in
full on the Maturity Date, interest at the rate of eight percent (8%) per annum
(computed on the basis of a 360-day year, 30-day month) shall continue to
accrue on the balance of any unpaid principal until such balance is paid.
<PAGE> 2
1.2 PIK Payments.
1.2.1 The Company may, in its sole discretion, issue
additional notes (the "PIK Notes") in lieu of cash payment of any and all
interest due on any Interest Payment Date occurring:
(i) On or prior to the second anniversary of
the Issuance Date;
(ii) Prior to the date that is five years and
six months from the Issuance Date, if cash interest payments are not then
permitted to be paid under the performance tests (the "Performance Tests") set
forth in Schedule 6.01(d) to the Credit Agreement dated as of April 6, 1995
among the Company, Coram, Inc., Chemical Bank and the other parties named
therein (along with any refinancing or amendment thereof, the "Credit
Agreement") as in effect on the Issuance Date (the applicable provisions of the
Credit Agreement are attached hereto as Exhibit A); provided, however, that in
no event shall the Company issue PIK Notes in lieu of cash payments of interest
pursuant to this clause (ii), in whole or in part, on any Interest Payment Date
occurring on or after the earlier of: (X) 91 days after the date upon which
all amounts owing under the Credit Agreement have been repaid in full in cash;
and (Y) the date that is five years and six months from the Issuance Date;
(iii) Prior to the date that is five years and
six months from the Issuance Date, to the extent that cash dividends are not
then permitted to be paid under the financial tests set forth in the covenant
entitled "Restricted Payments" in the Indenture (along with any amendment or
supplement, the "Senior Note Indenture") to be entered into by Coram, Inc. and
the Company, as Guarantor, in connection with the issuance by Coram, Inc. of a
Senior Subordinated Note due 2005 (the "Senior Note"); as in effect on the date
of the Senior Note Indenture (the "Restricted Payments Tests") (the material
terms of the Restricted Payments Tests are attached hereto as Exhibit B);
provided, however, that in no event shall the Company issue PIK Notes in lieu
of cash payments of interest pursuant to this clause (iii), in whole or in
part, on any Interest Payment Date occurring on or after the earlier of: (X)
91 days after the date upon which all amounts owing under the Senior Note have
been repaid in full in cash; and (Y) the date which is five years and six
months from the Issuance Date; or
(iv) Prior to the date that is six years from
the Issuance Date, if on such date any Senior Subordinated Increasing Rate
Notes or Senior Subordinated Increasing Rate Rollover Notes (either or both,
the "Bridge Securities") issued pursuant to that certain Securities Purchase
Agreement dated as of April 6, 1995, among the Company, Coram, Inc. and Coram
Funding, Inc. are outstanding, provided, however, that in no event shall the
Company issue PIK Notes in lieu of cash payments of interest pursuant to this
clause (iv) on any Interest Payment Date occurring on or after the date that is
six years from the Issuance Date.
1.2.2 If the Company issues PIK Notes in lieu of cash
payments of interest, in whole or in part, pursuant to this section, it shall
issue the PIK Notes dated as of such Interest Payment Date in a principal
amount equal to the amount of interest not paid in cash on such Interest
Payment Date. Each issuance of PIK Notes in lieu of cash payments of interest
shall
2.
<PAGE> 3
be made pro rata with respect to any outstanding Notes prior to such issuance.
Any such PIK Notes shall be subject to the same terms (including the rate of
interest from time to time payable thereon) as this Note (except, as the case
may be, with respect to the Issuance Date and aggregate principal amount).
2. Events of Default. If any of the events specified in this
Section 2 shall occur (herein individually referred to as an "Event of
Default"), the Holder of this Note may, so long as such condition exists,
declare the entire principal and unpaid accrued interest hereon immediately due
and payable:
(i) Default in the payment of the principal
and unpaid accrued interest of this Note when due and payable if such default
is not cured by the Company within ten (10) days (whether or not such payment
is prohibited by the subordination provisions hereof); or
(ii) The institution by the Company of
proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or the filing by
it of a petition or answer or consent seeking reorganization or release under
the federal Bankruptcy Act, or any other applicable federal or state law, or
the consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee, or other similar official, of the
Company, or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate action by
the Company in furtherance of any such action;
(iii) If, within sixty (60) days after the
commencement of an action against the Company (and service of process in
connection therewith on the Company) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under any present
or future statute, law or regulation, such action shall not have been resolved
in favor of the Company or all orders or proceedings thereunder affecting the
operations or the business of the Company stayed, or if the stay of any such
order or proceeding shall thereafter be set aside, or if, within sixty (60)
days after the appointment without the consent or acquiescence of the Company
of any trustee, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company, such appointment shall not
have been vacated;
(iv) Any declared default of the Company under
any Senior Indebtedness (as defined below) that gives the holder thereof the
right to accelerate such Senior Indebtedness, and such Senior Indebtedness is
in fact accelerated by the holder; or
(v) If the Company fails to comply in all
material respects with any covenants contained herein, and such material
noncompliance is continued for sixty (60) days following the receipt of written
notice (which must specify the nature of the default, demand that it be
remedied and state that the notice is a "Notice of Default") of such
noncompliance;
3.
<PAGE> 4
provided, however, that no such acceleration may occur pursuant to
clauses (i), (iv) or (v) above unless and until all amounts outstanding under
the Credit Agreement, the Senior Notes and the Bridge Securities shall have
been declared immediately due and payable.
3. Subordination. The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all the Company's
Senior Indebtedness, as hereinafter defined.
3.1 Senior Indebtedness. As used in this Note, the term
"Senior Indebtedness" means the principal of (and premium, if any) and interest
(including, without limitation, interest accruing after the filing of a
petition under any bankruptcy law at the rate provided for in the documents
governing such senior indebtedness, whether or not allowable as a claim under
such bankruptcy law) on the following and any other payment due pursuant to any
agreement or instrument creating or evidencing the following, whether
outstanding at the date of execution of this Note or thereafter incurred or
created: (a) indebtedness of the Company for money borrowed, other than from a
subsidiary of the Company, or in respect of letters of credit issued for its
own account; (b) guarantees by the Company of indebtedness for money borrowed
by, payment or performance obligations due from, or reimbursement obligations
under letters of credit of any person or entity, including money borrowed and
reimbursement obligations under the Credit Agreement, the Senior Note
Indenture, the Senior Notes and the Bridge Securities; (c) purchase money
indebtedness evidenced by notes, lease purchase agreements, purchase contracts
or agreements, or similar instruments for the payment of which the Company is
responsible or liable, by guarantee or otherwise; (d) obligations of the
Company under any agreement to lease or any lease of, any real or personal
property which are required to be capitalized in accordance with generally
accepted accounting principles, or any other agreement to lease, or any lease
of, any real or personal property which, by the terms thereof, are expressly
designated as Senior Indebtedness; and (e) modifications, renewals, extensions,
refinancings and refundings of any such indebtedness, guarantees or
obligations, including any increases in principal amount; unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that such indebtedness, guarantees or
obligations, or such modifications, renewals, extensions, refinancings or
refundings thereof, or the obligations of the Company pursuant to such a
guarantee, are either (i) not superior in right of payment to this Note or (ii)
subordinate in right of payment to this Note.
3.2 Default on Senior Indebtedness. If this Note shall be
declared due and payable upon the occurrence of an event of default with
respect to any Senior Indebtedness, then (i) no amount shall be paid by the
Company in respect of the principal of or interest on this Note at the time
outstanding, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full in cash, and (ii) no claim
or proof of claim shall be filed with the Company and no other remedy shall be
exercised, by or on behalf of the Holder of this Note that shall assert any
right to receive any payments in respect of the principal of and interest on
this Note, except subject to the payment in full in cash of the principal of
and interest on all of the Senior Indebtedness then outstanding. If there
occurs an event of default that has been declared in writing with respect to
any Senior Indebtedness, or in the instrument under which
4.
<PAGE> 5
any Senior Indebtedness is outstanding, permitting the holder of such Senior
Indebtedness to accelerate the maturity thereof, then, unless and until such
event of default shall have been cured or waived or shall have ceased to exist,
or all Senior Indebtedness shall have been paid in full in cash, no payment
shall be made in respect of the principal of or interest on this Note. If,
notwithstanding the foregoing, any payment shall be received by the Holder of
this Note when such payment is prohibited by this section, such payment shall
be held in trust for the benefit of, and shall be paid over or delivered to,
the holders of Senior Indebtedness (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness then held by such holders).
3.3 Effect of Subordination. Subject to the rights, if any,
of the holders of Senior Indebtedness under this Section 3 to receive cash,
securities or other property otherwise payable or deliverable to the holder of
this Note, nothing contained in this Section 3 shall impair, as between the
Company and the Holder, the obligation of the Company, subject to the terms and
conditions hereof, to pay to the Holder the principal hereof and interest
hereon as and when the same become due and payable, or shall prevent the Holder
of this Note, upon default hereunder, from exercising all rights, powers and
remedies otherwise provided herein or by applicable law.
3.4 Subrogation. Subject to the prior payment in full in cash
of all Senior Indebtedness and until this Note shall be paid in full, the
Holder shall be subrogated to the rights of the holders of Senior Indebtedness
(to the extent of payments or distributions previously made to such holders of
Senior Indebtedness pursuant to the provisions of Section 3.2 above) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the Holder, be deemed to be a payment by the
Company to or on account of this Note; and for the purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
to which the Holder would be entitled except for the provisions of this Section
3 shall, as between the Company and its creditors, other than the holders of
Senior Indebtedness and the Holder, be deemed to be a payment by the Company to
or on account of the Senior Indebtedness.
3.5 Payment Over of Proceeds Upon Dissolution, Etc.
3.5.1 Upon any distribution of assets of, or payments
by, the Company of any kind or character (whether in cash, property or
securities) to creditors upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Company (whether voluntary or involuntary
or in bankruptcy, insolvency, receivership, composition, marshalling of assets
or other proceedings), all amounts due or to become due upon all Senior
Indebtedness (including, without limitation, interest accruing after the filing
of a petition under any bankruptcy law at the rate provided for in the
documents governing such Senior Indebtedness, whether or not allowable as a
claim under such bankruptcy law) shall first be paid in full in cash, or duly
provided for, before any payment or distribution is made on account of any
amount owing under this Note and before the Company shall, directly or
indirectly, prepay, repay, redeem, purchase, exchange or acquire this Note.
Upon any such dissolution, winding-up, liquidation or reorganization, any
payment or distribution of assets of, or payments by, the Company or any kind
or character (whether in cash, property or securities) to which the Holder of
this Note would be entitled
5.
<PAGE> 6
except for the provisions hereof, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Holder of this Note if received
by it, directly to the holders of Senior Indebtedness (pro rata to such holders
on the basis of the respective amounts of Senior Indebtedness then held by such
holders) for application to the payment of Senior Indebtedness remaining unpaid
until all such Senior Indebtedness has been paid in full in cash after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Indebtedness.
3.5.2 If, notwithstanding the foregoing, any
distribution of assets of, or payments by, the Company of any kind or character
(whether in cash, property or securities) shall be received by the Holder of
this Note when such payment or distribution is prohibited by Section 3.5.1,
such payment or distribution shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness then held by such holders), for applications to the payment of
Senior Indebtedness remaining unpaid until all such Senior Indebtedness has
been paid in full in cash, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior
Indebtedness.
3.6 Limitation on Exercise of Remedies. The Holder of this
Note agrees that it will not at any time (i) commence any suit or action to
enforce or collect on this Note (provided, however, that the Holder of this
Note shall be entitled to declare the indebtedness represented by this Note to
be due and payable if any indebtedness under the Credit Agreement, the Senior
Notes or the Bridge Securities shall have been declared to be due and payable)
or (ii) commence, or join with any other creditor in commencing, any
bankruptcy, reorganization or insolvency proceedings with respect to the
Company (provided, however, that the Holder of this Note shall be entitled to
file a proof of claim in respect of this Note in any such proceeding so long as
such proof of claim shall state that this Note is subordinated to the extent
and in the manner set forth in this Section 3).
3.7 Undertaking; Benefit. By its acceptance of this Note, the
Holder agrees to execute and deliver such documents as may be reasonably
requested from time to time by the Company or the lender of any Senior
Indebtedness in order to implement the foregoing provisions of this Section 3.
The provisions of this Section 3 are intended to be for the benefit of, and
shall be enforceable directly by, the holders of the Senior Indebtedness,
without any act or notice of acceptance hereof by such holders.
4. Redemption. Prior to three years following the initial
date of issuance of this Note, this Note may not be prepaid or redeemed except
with the express written consent of the Holder. Following such three year
period, upon twenty (20) days prior written notice to the Holder (which shall
identify the principal amount to be redeemed, the redemption date, the
redemption price and the manner in which the redemption will be conducted), the
Company may at any time redeem this Note, in whole or in part, at the following
redemption prices (expressed as a percentage of principal amount), plus all
accrued and unpaid interest to the redemption date:
6.
<PAGE> 7
<TABLE>
<CAPTION>
If redeemed during the twelve
month period beginning on the
anniversary of the Issuance Date in: Percentage
------------------------------------ ----------
<S> <C>
1998 104.67
1999 103.89
2000 103.11
2001 102.33
2002 101.56
2003 100.78
2004 100
</TABLE>
Once notice of redemption is mailed, the redemption price shall
become due and payable on the redemption date stated in the notice, and
interest shall cease to accrue on the principal amount of this Note or portion
thereof called for redemption unless the Company defaults in making the
redemption payment.
5. Conversion.
5.1 Conversion. The Holder of this Note has the right, at the
Holder's option, at any time subsequent to one year following the initial date
of issuance of this Note and prior to the Maturity Date, to convert the unpaid
principal amount of this Note, in accordance with the provisions of Section 5.2
hereof, in whole or in part, into fully paid and nonassessable shares of the
common stock, par value $.001 per share, of the Company (the "Common Stock").
The number of shares of Common Stock into which this Note may be converted
shall be determined by dividing the aggregate principal amount by the
Conversion Price (as defined below) in effect at the time of such conversion
("Conversion Shares"). The initial Conversion Price shall be $27.
5.2 Mechanics and Effect of Conversion. Before the Holder
shall be entitled to convert this Note into shares of Common Stock, it shall
surrender this Note, duly endorsed, at the office of the Company and shall give
written notice by mail, postage prepaid, to the Company at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. No fractional shares of Common Stock shall be issued
upon conversion of this Note. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Note, the Company shall pay to
the Holder the amount of outstanding principal that is not so converted, such
payment to be in the form as provided below. At its expense, the Company
shall, as soon as practicable thereafter, issue and deliver to such Holder at
such principal office a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled upon such conversion
(bearing such legends as may be required by applicable state and federal
securities laws in the opinion of counsel to the Company), together with any
other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to the
Holder for any cash amounts payable as described above. In the event of any
conversion of this Note, such conversion shall
7.
<PAGE> 8
be deemed to have been made immediately prior to the closing of the issuance
and sale of such Common Stock and on and after such date the Holder of this
Note entitled to receive the shares of such Common Stock issuable upon such
conversion shall be treated for all purpose as the record Holder of such
shares. Upon full conversion of this Note, the Company shall be forever
released from all its obligations and liabilities under this Note, except that
the Company shall be obligated to pay the Holder, within ten (10) days after
the date of such conversion, any interest accrued and unpaid or unconverted to
and including the date of such conversion, and no more. If this Note is
converted in part, the Company shall execute, reissue and deliver to the Holder
a new Note equal in principal amount to the unconverted portion of the Note
surrendered.
5.3 Delivery of Stock Certificates. As promptly as
practicable after the conversion of this Note, the Company at its expense will
issue and deliver to the Holder a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion.
6. Conversion Price Adjustments.
6.1 Adjustments for Stock Splits and Subdivisions. In the
event the Company should at any time or from time to time after the date of
issuance hereof fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares or Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of this Note shall be appropriately decreased so that the number of
shares of Common Stock issuable upon conversion of this Note shall be increased
in proportion to such increase of outstanding shares.
6.2 Adjustments for Reverse Stock Splits. If the number of
shares of Common Stock outstanding at any time after the date hereof is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion Price for this
Note shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion hereof shall be decreased in proportion to such
decrease in outstanding shares.
6.3 Adjustments for Other Distributions. In case the Company
shall distribute to all or substantially all holders of its Common Stock any
shares of capital stock of the Company (other than Common Stock) or evidences
of its indebtedness, cash, other securities or other assets, or shall
distribute to all or substantially all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its securities (excluding (i)
those rights and warrants referred to in Section 6.4 below; (ii) those
dividends, distributions, subdivisions and combinations referred to in Section
6.1 above; and (iii) dividends and distributions paid in cash
8.
<PAGE> 9
from retained earnings in an aggregate amount that, combined together with (A)
all other such cash distributions made within the preceding 12 months in
respect of which no adjustment has been made under this Section 6.3 and (B) the
excess of (1) the fair market value of consideration payable in respect of any
repurchases (including by way of tender offers) by the Company or any employee
benefit plan for the benefit of employees of the Company (a "Company Benefit
Plan"), of Common Stock concluded within the preceding 12 months over (2) the
applicable Current Market Price determined as of the date such purchase is
consummated (as defined in Section 6.6 below), in each case in respect of which
no adjustment has been made under this Section 6.3, does not exceed 20% of the
Company's market capitalization as of the record date for such distribution),
then in each such case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution or purchase by a fraction of
which the numerator shall be the Current Market Price per share (as defined in
Section 6.6 below) of the Common Stock on the record date mentioned below less
the fair market value on such record date (as determined by the Board of
Directors of the Company, whose determination shall be conclusive evidence of
such fair market value) of the portion of the capital stock or evidences of
indebtedness, securities or assets so distributed or of such rights or
warrants, in each case as applicable to one share of Common Stock, and of which
the denominator shall be the Current Market Price per share (as defined in
Section 6.6 below) of the Common Stock on such record date. Such adjustment
shall become effective immediately after the record date for the determination
of shareholders entitled to receive such distribution. Notwithstanding the
foregoing, in the event that the Company shall distribute rights or warrants
(other than those referred to in Section 6.4 below) ("Rights") pro rata to
holders of Common Stock, the Company may, in lieu of making any adjustment
pursuant to this Section 6.3, make proper provision so that if the Holder
converts this Note (or any portion thereof) after the record date for such
distribution and prior to the expiration or redemption of the Rights, the
Holder shall be entitled to receive upon such conversion, in addition to the
Conversion Shares, a number of Rights to be determined as follows: (x) if such
conversion occurs on or prior to the date for the distribution to the holders
of Rights of separate certificates evidencing such Rights (the "Distribution
Date"), the same number of Rights to which a holder of a number of shares of
Common Stock equal to the number of Conversion Shares is entitled at the time
of such conversion in accordance with the terms and provisions of and
applicable to the Rights; and (y) if such conversion occurs after the
Distribution Date, the same number of Rights to which a holder of the number of
shares of Common Stock into which the principal amount of the Security so
converted was convertible immediately prior to the Distribution Date would have
been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights.
6.4 Adjustments for Below Market Options or Rights. In case
the Company shall issue rights or warrants to all or substantially all holders
of its Common Stock entitling them (for a period commencing no earlier than the
record date described below and expiring not more than 45 days after such
record date) to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share less than the Current
Market Price per share of Common Stock (as determined in accordance with
Section 6.6 below) at the record date for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the same shall
9.
<PAGE> 10
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding on such record date,
plus the number of shares which the aggregate subscription or purchase price
for the total number of shares of Common Stock offered by the rights or
warrants so issued (or the aggregate conversion price of the convertible
securities offered by such rights or warrants) would purchase at such current
market price, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered by such rights or warrants (or into which the
convertible securities so offered by such rights or warrants are convertible).
Such adjustment shall be made successively whenever any such rights or warrants
are issued, and shall become effective immediately after such record date. If
at the end of the period during which such rights or warrants are exercisable
not all rights or warrants shall have been exercised, the adjusted Conversion
Price shall be immediately readjusted to what it would have been upon
application of the foregoing adjustment substituting the number of additional
shares of Common Stock actually issued (or the number of shares of Common Stock
issuable upon conversion of convertible securities actually issued) for the
total number of shares of Common Stock offered (or the convertible securities
offered).
6.5 Adjustment for Tender Offers or Exchange Offers. In case
the Company or any Company Benefit Plan shall repurchase (including by way of
tender offer) shares of Common Stock and the price per share of Common Stock
paid by the Company or Company Benefits Plan, as the case may be, exceeds the
Current Market Price determined as of the date such purchase is consummated (as
defined in Section 6.6 below), and the fair market value of the sum of (i) the
aggregate consideration paid for such Common Stock in excess of the current
market price, (ii) the aggregate fair market value of cash dividends and
distributions of the type described in clause (iii) of Section 6.3 paid within
the twelve (12) months preceding the date of purchase of such shares of Common
Stock in respect of which no adjustment pursuant to this Section 6.5 previously
has been made, and (iii) the aggregate fair market value of any amounts
previously paid for the repurchase of Common Stock in excess of the applicable
current market price of a type described in this Section 6.5 within the twelve
(12) months preceding the date of purchase of such shares of Common Stock in
respect of which no adjustment pursuant to this Section 6.5 previously has been
made, exceeds 20% of the Company's market capitalization on the date of, and
after giving effect to, such repurchase, then the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such distribution
or purchase by a fraction of which the numerator shall be the Current Market
Price per share (as defined in Section 6.6 below) of the Common Stock on the
date of such repurchase, less the product of (A) the excess of the sum of
clauses (i), (ii) and (iii) of this Section 6.5 over 20% of the Company's
market capitalization on the date of such repurchase, divided by (B) the number
of shares of Common Stock outstanding on such date and of which the denominator
shall be the Current Market Price per share (as defined in Section 6.6 below)
of the Common Stock on the date of such repurchase. Such adjustment shall
become effective immediately after the date of such repurchase.
6.6 Certain Definitions. For the purpose of any computation
under Sections 6.3, 6.4 and 6.5 above, the Current Market Price per share of
Common Stock on any date shall be
10.
<PAGE> 11
deemed to be the average of the Closing Prices for 20 consecutive Trading Days
commencing 30 Trading Days before the record date with respect to any
distribution, issuance or other event requiring such computation. The Closing
Price for each day shall be the last sale price, or the closing bid price if no
sale occurred, of such class of stock on the New York Stock Exchange, Inc. (the
"NYSE") or such other principal securities exchange on which such class of
stock is listed. If none of the conditions set forth above is met, the Closing
Price of Common Stock on any day or the average of such last reported sale
prices for any period shall be the fair market value of such class of stock as
determined by a member firm of the NYSE selected by the Company. As used
herein the term "Trading Days" with respect to Common Stock means (i) if the
Common Stock is quoted on the NYSE or admitted for trading on any other
national securities exchange, days on which such national securities exchange
is open for business.
6.7 Notices of Record Date, etc. In the event of (i) any
taking by the Company of a record of the holders of any class of securities of
the Company for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend payable out of earned
surplus at the same rate as that of the last such cash dividend theretofore
paid) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; (ii) any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all of the assets of the
Company to any other person or any consolidation or merger of the Company; or
(iii) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company, the Company will mail to the holder of this Note at least ten (10)
days prior to the earliest date specified therein, a notice specifying:
6.7.1 The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and,
6.7.2 The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
shareholders entitled to vote thereon.
6.8 Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the Note such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of the Note; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the entire outstanding principal amount
of this Note, in addition to such other remedies as shall be available to the
holder of this Note, the Company will use its reasonable best efforts to take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
11.
<PAGE> 12
6.9 Effect of Reclassification, Consolidation, Merger or Sale
on Conversion Privilege. If any of the following shall occur, namely: (i) any
reclassification or change of outstanding shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); (ii) any
consolidation, combination or merger to which the Company is a party other than
a merger in which the Company is the continuing corporation and which does not
result in any reclassification of, or change (other than a change in name, or
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination) in, outstanding shares
of Common Stock; or (iii) any sale or conveyance of all or substantially all of
the property or business of the Company, then the Company, or such successor or
purchasing corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale or conveyance,
provide the Holder of this Note with the right to convert this Note into the
kind and amount of shares of stock and other securities and property (including
cash) receivable upon such reclassification, change, consolidation, merger,
sale or conveyance by a holder of the number of shares of Common Stock
deliverable upon conversion of this Note immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. The
provision of this Section 6.9 shall similarly apply to successive
consolidations, mergers, sales or conveyances.
7. Representations and Warranties of Holder.
7.1 Purchase for Investment. Holder acknowledges that it is
acquiring the Conversion Shares for its own account and not with a view to, or
present intention of, distribution in violation of the Securities Act of 1933,
as amended (the "1933 Act"), or any state securities law, and the Conversion
Shares will not be disposed of in contravention of the 1933 Act or state
securities laws.
7.2 Stock Not Registered. Holder acknowledges that the
Conversion Shares have not been registered under the 1933 Act or any state
securities laws and, therefore, cannot be sold, and must be held indefinitely,
unless subsequently registered under the 1933 Act and state securities laws or
unless an exemption from such registration is available.
8. Repurchase of Note at Option of the Holder upon Change in
Control.
8.1 Repurchase Right. If at any time this Note remains
outstanding there shall have occurred a Change in Control (as defined in
Section 8.2), this Note shall be repurchased by the Company at the option of
the Holder thereof, at a purchase price (the "Repurchase Price") equal to the
principal amount thereof plus accrued interest up to and including the
Repurchase Date (as hereinafter defined), on the date (the "Repurchase Date")
fixed by the Company that is not less than 45 days nor more than 60 days after
the date of the Company Notice (as hereinafter defined), subject to
satisfaction by or on behalf of the Holder of the requirements set forth in
Section 8.4.
8.1.1 Any rights of the Holder, contractual or
otherwise, arising under or pursuant to any offer to repurchase this Note made
by the Company under this Section 8 shall
12.
<PAGE> 13
be subordinated in right of payment to all Senior Indebtedness to the same
extent as this Note is subordinated to Senior Indebtedness under the provisions
of Section 3. Notwithstanding the foregoing, any failure by the Company to
comply with this Section 8 to offer to repurchase, or to repurchase, this Note
shall be a default in the performance by the Company hereunder.
8.2 Change in Control. A "Change in Control" shall be deemed
to have occurred at such time after the Issuance Date of this Note if:
8.2.1 Any person (including any syndicate or group
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended, or any successor provision to either of the foregoing)
is or becomes the beneficial owner, directly or indirectly, of shares of
capital stock of the Company entitling such person to exercise more than 50% of
the total voting power of all voting securities of the Company; or
8.2.2 There shall occur any consolidation of the Company
with, or merger of the Company into, any other person, any merger of another
person into the Company, or any sale or transfer of all or substantially all of
the assets of the Company to another person (other than (a) a consolidation or
merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock other than shares of
capital stock owned by any of the parties to the consolidation or merger and in
which the consolidated net worth of the surviving corporation immediately after
the transaction equals or exceeds the consolidated net worth of the Company
immediately prior to such transaction or (b) a merger which is effected solely
to change the jurisdiction of incorporation of the Company or (c) any
consolidation with or merger of the Company into a wholly owned subsidiary or
of a wholly owned subsidiary into the Company, or any sale or transfer by the
Company of all or substantially all of its assets to one or more of its wholly
owned subsidiaries in any one transaction or a series of transactions; provided
in each case that the resulting corporation (if not the Company) or each such
subsidiary assumes or guarantees the obligations of the Company under this Note
and the consolidated net worth of the surviving or acquiring corporation in any
such consolidation, merger or sale of assets immediately after the consummation
of such transaction equals or exceeds the consolidated net worth of the Company
immediately prior to such transaction); or
8.2.3 There shall occur a change in the Board of
Directors of the Company in which the individuals who constituted the Board of
Directors of the Company at the beginning of the two-year period immediately
preceding such change (together with any other director whose election by the
Board of Directors of the Company or whose nomination for election by the
stockholders of the Company was approved by a vote of at least a majority of
the directors then in office either who were directors at the beginning of such
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the directors then in office.
8.3 Company Notice. Within 30 days after the occurrence of a
Change in Control, the Company shall mail a written notice (the "Company
Notice") by first-class mail to the Holder. The notice shall state: (i) the
date of such Change in Control; (ii) the date by which
13.
<PAGE> 14
the Repurchase Notice pursuant to this Section 8 must be given; (iii) the
Repurchase Date; (iv) the Repurchase Price; (v) the Conversion Price of this
Note and any adjustments thereto; (vi) whether the holders of the Senior
Indebtedness will permit the payment of the Repurchase Price; (vii) that once a
Repurchase Notice has been given, this Note may be converted into Common Stock
only to the extent that the Repurchase Notice has been withdrawn; (viii) the
procedures that the Holder must follow to exercise rights under this Section 8;
and (ix) the procedures for withdrawing a Repurchase Notice, including a form
of notice of withdrawal.
8.4 Effect of Repurchase Notice. Holder may exercise its
rights specified in Section 8.1 upon delivery of a written notice of the
exercise of such rights (a "Repurchase Notice") to the Company at any time
prior to the close of business on the Repurchase Date, stating: (i) the portion
of the principal amount of this Note that Holder will deliver to be
repurchased; and (ii) the Company shall repurchase from the Holder thereof,
pursuant to this Section 8, such portion of this Note. Notwithstanding
anything herein to the contrary, the Holder shall have the right to withdraw
such Repurchase Notice in whole or in a portion thereof at any time prior to
the close of business on the Repurchase Date by delivery of a written notice of
withdrawal to the Company. Upon receipt by the Company of the Repurchase
Notice, the Holder of this Note shall (unless such Repurchase Notice is
withdrawn as specified below) thereafter be entitled to receive solely the
Repurchase Price with respect to this Note. Such Repurchase Price shall be
paid to such Holder promptly following the later of (i) the Repurchase Date
with respect to this Note (provided the conditions in this Section 8.4 have
been satisfied) and (ii) the time of delivery of this Note to the Company by
the Holder thereof in the manner required by this Section 8.4. To the extent
that a Repurchase Notice has been given by Holder, this Note may not be
converted into shares of Common Stock on or after the date of the delivery of
such Repurchase Notice unless such Repurchase Notice has first been validly
withdrawn. A Repurchase Notice may be withdrawn by means of a written notice
of withdrawal delivered by Holder to the Company at any time prior to the close
of business on the Repurchase Date to which it relates, specifying (i) the
principal amount of this Note or portion thereof with respect to which such
notice of withdrawal is being submitted; and (ii) the principal amount, if any,
of this Note that remains subject to the original Repurchase Notice and that
has been or will be delivered for purchase by the Company. There shall be no
purchase of this Note pursuant to Section 8 if there has occurred (prior to, on
or after, as the case may be, the giving, by the Holders of this Note, of the
required Repurchase Notice) and is continuing an Event of Default (other than a
default in the payment of the Repurchase Price with respect to this Note).
8.5 Note Repurchased in Part. If this Note is to be
repurchased only in part, it shall be surrendered at the office of the Company
(with, if the Company so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company duly executed by, the Holder),
and the Company shall execute and deliver to the Holder, without service
charge, a new Note, in aggregate principal amount equal to, and in exchange
for, the portion of the principal amount of this Note so surrendered that is
not purchased.
8.6 Certain Conditions. No later than 90 days after a Change
of Control and prior to complying with the provisions of Section 8.3, the
Company will either repay all obligations under the Senior Indebtedness or
obtain the requisite consents, if any, under all agreements
14.
<PAGE> 15
governing outstanding Senior Indebtedness to permit the repurchase of the Notes
required by this Section.
9. Registration.
9.1 Initial Registration.
9.1.1 The Company will prepare and file, upon being
furnished with the requisite information for such purpose, and use its best
efforts to make effective a registration statement (but only one) with respect
to all of the Conversion Shares (the "Registrable Shares") on or before the
first anniversary of the Issuance Date as would permit or facilitate the sale
and distribution of all or any portion of such Registrable Shares on a
continuous basis pursuant to Rule 415 under the 1933 Act, or any successor
provision (the "Initial Shelf Registration"), subsequent to the first
anniversary of the Issuance Date. The Company shall use its best efforts to
cause the Initial Shelf Registration to be declared effective under the 1933
Act and to keep the Initial Shelf Registration continuously effective under the
1933 Act until the date that is three years from the date that the Initial
Shelf Registration is declared effective, or such shorter period ending when
all Registrable Shares covered by the Initial Shelf Registration have been sold
or could have been sold under Rule 144 under the 1933 Act during any three
month period (the "Effectiveness Period").
9.1.2 If the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below) ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered hereunder), the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness hereof, and in any event shall within 30 days of such cessation
of effectiveness amend the registration statement in a manner reasonably
expected to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" registration statement pursuant to Rule
415 under the 1933 Act covering all of the Registrable Shares (a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company
shall use its best efforts to cause the Subsequent Shelf Registration to be
declared effective as soon as practicable after such filing and to keep such
registration statement continuously effective until the end of the
Effectiveness Period.
9.1.3 The Company shall supplement and amend the Initial
Shelf Registration or Subsequent Shelf Registration, as the case may be, if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such registration statement, if
required by the 1933 Act, or if reasonably requested by the Holder of the
Registrable Shares covered by such registration statement.
9.1.4 Notwithstanding the provisions of Sections 9.1.1,
9.1.2 and 9.1.3 hereof:
(i) Holder agrees by acquisition of the
Registrable Shares that, upon receipt of any notice from the Company of the
happening of any event of the kind described in
15.
<PAGE> 16
Section 9.2.4(ii), 9.2.4(iii), 9.2.4(iv), 9.2.4(v) or 9.2.4(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Shares
covered by the applicable registration statement or prospectus until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 9.2.8 hereof, or until it is advised in writing by the
Company that the use of the applicable prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such prospectus; and
(ii) The Company may postpone for up to one
hundred eighty (180) days the effectiveness of a registration statement
required to be filed pursuant to this Section 9.1 if the Board of Directors of
the Company in good faith determines that the effectiveness of such
registration could reasonably be expected to have a material adverse effect on
the Company.
9.2 Registration Procedures. In connection with the filing of
a registration statement pursuant to Section 9.1 hereof, the Company shall:
9.2.1 Notify Holder as to the filing thereof and of all
amendments thereto filed prior to the effective date of said registration
statement;
9.2.2 Notify Holder promptly after it shall have
received notice of the time when the registration statement becomes effective
or any supplement to any prospectus forming a part of the registration
statement has been filed;
9.2.3 Prepare and file with the Securities and Exchange
Commission (the "Commission") such amendments and post-effective amendments to
the registration statement as may be necessary to keep such registration
statement continuously effective for the applicable period specified in Section
9.1.1; cause the related prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the 1933 Act; and comply with
the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during the applicable period
in accordance with the intended methods of disposition by Holder thereof set
forth in such registration statement as so amended or to such prospectus as so
supplemented;
9.2.4 Notify Holder promptly, and confirm such notice in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and, with respect to a registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other Federal or state governmental authority
during the period of effectiveness of the registration statement for amendments
or supplements to a registration statement or related prospectus or for
additional information, (iii) of the issuance by the Commission or any other
Federal or state governmental authority of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Shares for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, (v) of the happening of any
event which makes any statement made in such registration
16.
<PAGE> 17
statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or which
requires the making of any changes in such registration statement, prospectus
or documents so that, in the case of the registration statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and (vi) of
the Company's reasonable determination that a post-effective amendment to a
registration statement would be appropriate;
9.2.5 Take all reasonable steps to qualify the
Registrable Shares for sale under the securities or blue sky laws of such
jurisdictions within the United States as Holder reasonably requests in
writing; keep each such registration or qualification (or exemption therefrom)
effective during the period such registration statement is required to be kept
effective and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Shares covered
by the applicable registration statement; provided, that the Company will not
be required to (i) qualify generally to do business in any jurisdiction where
it is not then so qualified or (ii) take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject;
9.2.6 Cause the Registrable Shares to be listed for
trading on the NYSE or such other national securities exchange on which the
Common Stock is then listed for trading;
9.2.7 Cause the Registrable Shares covered by the
applicable registration statement to be registered with or approved by such
other governmental agencies or authorities within the United States, except as
may be required solely as a consequence of the nature of such selling Holder,
in which case the Company will cooperate in all reasonable respects with the
filing of such registration statement and the granting of such approvals, as
may be necessary to enable the Holder hereof to consummate the disposition of
such Registrable Shares;
9.2.8 Upon the occurrence of any event contemplated by
Section 9.2.4(v) or 9.2.4(vi) above, prepare a supplement or post-effective
amendment to each registration statement or a supplement to the related
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Shares being sold thereunder, such prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
9.2.9 Use its best efforts to remove any stop order
suspending the effectiveness of the registration statement;
9.2.10 Furnish to Holder as soon as available, copies of
any such registration statement and each preliminary or final prospectus and
any supplement or amendment required
17.
<PAGE> 18
to be prepared pursuant to the foregoing provisions of this Section 9, all in
such quantities as Holder may from time to time reasonably request; and
9.2.11 The Company may require Holder as to which the
registration is being effected to furnish to the Company such information
regarding the distribution of the Registrable Shares as the Company may, from
time to time, reasonably request in writing and the Company may exclude from
such registration the Registrable Shares if Holder unreasonably fails to
furnish such information within a reasonable time after receiving such request.
9.3 Registration Expenses. Holder agrees to pay all of the
underwriting discounts and commissions and its own counsel fees with respect to
the securities being registered. The Company will pay all other costs and
expenses in connection with the registration statement to be filed pursuant to
Section 9.1 hereof including, without limitation, the fees and expenses of
counsel for the Company, the fees and expenses of its accountants and all other
costs and expenses incident to the preparation, printing and filing under the
1933 Act of such registration statement, each prospectus and all amendments and
supplements thereto, the costs incurred in connection with the qualification of
such securities for sale in such states as Holder has designated, including
fees and disbursements of counsel for the Company, and the costs of supplying a
reasonable number of copies of the registration statement, each preliminary
prospectus, final prospectus and any supplements or amendments thereto to
Holder.
9.4 Indemnification.
9.4.1 The Company agrees to enter into an appropriate
cross-indemnity agreement with any underwriter (as defined in the 1933 Act) for
Holder in connection with the filing of a registration statement pursuant to
Section 9.1 hereof.
9.4.2 If the Company shall file any registration
statement including therein all or any part of the Registrable Shares, the
Company and Holder shall, if requested in writing by such other party, enter
into an appropriate cross-indemnity agreement whereby the Company shall
indemnify and hold harmless Holder against any losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
statements therein not misleading unless such statement or omission was made in
reliance upon and in conformity with written information furnished or required
to be furnished by Holder, and Holder shall indemnify and hold harmless the
Company, each of its directors and officers who have signed the registration
statement and each person, if any, who controls the Company, within the meaning
of the 1933 Act against any losses, claims, damages or liabilities (or actions
in respect thereof) arising out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make statements therein not
misleading, if the statement or omission was made in reliance upon and in
conformity with written information furnished or required to be furnished by
Holder
18.
<PAGE> 19
expressly for use in such registration statement and provided that Holder's
liability shall be limited to the amount of proceeds derived from the sale of
the Registrable Shares.
9.5 Miscellaneous.
9.5.1 Notwithstanding the provisions of Section 9.1
hereof, if all of the Conversion Shares held by Holder may be sold by the
Holder thereof in a transaction pursuant to Rule 144 promulgated under the 1933
Act in any three month period, Holder shall not be entitled to require the
Company to register such securities pursuant to any registration statement
filed under the 1933 Act.
9.5.2 Nothing herein shall be construed to require
Holder to include any of the Conversion Shares in any registration statement
referred to in Section 9.1 hereof.
10. [Reserved]
11. Assignment. Subject to the restrictions on transfer
described in Section 13 below, the rights and obligations of the Company and
the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators, and transferees of the parties.
12. Waiver and Amendment. Any provision of this Note may be
amended, waived, or modified upon the written consent of the Company and
Holder.
13. Transfer of this Note or Securities on Conversion Thereof.
With respect to any offer, sale or other disposition of this Note or securities
into which such Note may be converted, the Holder will give written notice to
the Company prior thereto, describing briefly the manner thereof, together with
a written opinion of such Holder's counsel, to the effect that such offer, sale
or other distribution may be effected without registration or qualification
(under any federal or state law then in effect). Promptly upon receiving such
written notice and reasonably satisfactory opinion, if so requested, the
Company, as promptly as practicable, shall notify such Holder that such Holder
may sell or otherwise dispose of this Note or such securities, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 13 that the opinion of
counsel for the Holder is not reasonably satisfactory to the Company, the
Company shall so notify the Holder promptly after such determination has been
made. Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the 1933
Act, unless in the opinion of counsel for the Company such legend is not
required in order to ensure compliance with the 1933 Act. The Company may
issue stop transfer instructions to its transfer agent in connection with such
restrictions. Upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or his attorney duly authorized in writing, a new
Note for a like principal amount will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered
19.
<PAGE> 20
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
14. Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if telegraphed or mailed by
registered or certified mail, postage prepaid, at the respective addresses of
the parties as set forth in the Purchase Agreement. Any party hereto may by
notice so given change its address for future notice hereunder Notice shall
conclusively be deemed to have been given when personally delivered or when
deposited in the mail or telegraphed in the manner set forth above and shall be
deemed to have been received when delivered.
15. No Stockholder Rights. Nothing contained in this Note
shall be construed as conferring upon the Holder or any other person the right
to vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the Company; and no
dividends or interest shall be payable or accrued in respect of this Note or
the interest represented hereby or the Conversion Shares obtainable hereunder
until, and only to the extent that, this Note shall have been converted.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, excluding that
body of law relating to conflict of laws.
17. Heading; References. All headings used herein are used
for convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
18. Merger, Etc. The Company shall not consolidate with or
merge into, or sell or transfer all or substantially all of its properties or
assets to any person unless such person expressly assumes all of the
obligations of the Company under this Note (in which case all such obligations
of the Company shall terminate). Any successor corporation formed by such
consolidation or into which the Company is merged, or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right
and power of the Company under this Note.
20.
<PAGE> 21
IN WITNESS WHEREOF, the Company has caused this Note to be issued
this 1st day of April 1995.
CORAM HEALTHCARE CORPORATION
By:______________________________
Its:_____________________________
Holder: CAREMARK INC.
Address: 2215 Sanders Road, Suite 400
Northbrook, IL 60062
Attn: C.A. Lance Piccolo
Chairman of the Board and
Chief Executive Officer
Facsimile: (708) 559-4603
21.
<PAGE> 22
THIS NON-CONVERTIBLE SUBORDINATED NOTE ("NOTE") HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.
CORAM HEALTHCARE CORPORATION
12% NON-CONVERTIBLE SUBORDINATED NOTE
DUE OCTOBER 1, 2005
$25,000,000 APRIL 1, 1995
CORAM HEALTHCARE CORPORATION, a Delaware corporation (the
"Company"), for value received hereby promises to pay to CAREMARK INC., or its
registered assigns (the "Holder"), the principal sum of Twenty-Five Million
Dollars ($25,000,000), or such lesser amount as shall then equal the
outstanding principal amount hereof on the terms and conditions set forth
hereinafter. The principal hereof and any unpaid accrued interest hereon, as
set forth below, shall be due and payable on September 30, 2005. Payment for
all amounts due hereunder shall be made by mail to the registered address of
the Holder. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts (or pursuant to Section 1.2 hereof, in PIK Notes). If a payment
would otherwise be due on a legal holiday, payment may be made on the next
succeeding day that is not a legal holiday, and no interest shall accrue for
such intervening period. This Note is issued pursuant to Section 2.1(a) of
that certain Asset Sale and Note Purchase Agreement between the Company and
Holder dated as of January 29, 1995 (the "Purchase Agreement").
1. Interest.
1.1 Payment of Interest. Commencing on October 1, 1995, and
semi-annually on each April 1 and October 1 thereafter (each, an "Interest
Payment Date") until the outstanding principal of and interest on this Note
shall have been paid in full, the Company shall pay interest at the rate of
twelve percent (12%) per annum (computed on the basis of a 360-day year, 30-day
month) on the principal of this Note outstanding during the period beginning on
the date of issuance of this Note (the "Issuance Date") and ending on the date
that the principal amount of this Note becomes due and payable (the "Maturity
Date"). In the event that the principal amount of this Note is not paid in
full on the Maturity Date, interest at the rate of thirteen percent (13%) per
annum (computed on the basis of a 360-day year, 30-day month) shall continue to
accrue on the balance of any unpaid principal until such balance is paid.
<PAGE> 23
1.2 PIK Payments.
1.2.1 The Company may, in its sole discretion, issue
additional notes (the "PIK Notes") in lieu of cash payment of any and all
interest due on any Interest Payment Date occurring:
(i) On or prior to the second anniversary of
the Issuance Date;
(ii) Prior to the date that is five years and
six months from the Issuance Date, if cash dividends are not then permitted to
be paid under the performance tests (the "Performance Tests") set forth in
Schedule 6.01(d) to the Credit Agreement dated as of April 6, 1995 among the
Company, Coram, Inc., Chemical Bank and the other parties named therein (along
with any refinancing or amendment thereof, the "Credit Agreement") as in effect
on the Issuance Date (the applicable provisions of the Credit Agreement are
attached hereto as Exhibit A); provided, however, that in no event shall the
Company issue PIK Notes in lieu of cash payments of interest pursuant to this
clause (ii), in whole or in part, on any Interest Payment Date occurring on or
after the earlier of: (X) 91 days after the date upon which all amounts owing
under the Credit Agreement have been repaid in full in cash; and (Y) the date
that is five years and six months from the Issuance Date;
(iii) Prior to the date that is five years and
six months from the Issuance Date, to the extent that cash dividends are not
then permitted to be paid under the financial tests set forth in the covenant
entitled "Restricted Payments" in the Indenture (along with any amendment or
supplement, the "Senior Note Indenture") to be entered into by Coram, Inc. and
the Company, as Guarantor, in connection with the issuance by Coram, Inc. of a
Senior Subordinated Note due 2005 (the "Senior Note"); as in effect on the date
of the Senior Note Indenture (the "Restricted Payments Tests") (the terms of
the Restricted Payments Tests are attached hereto as Exhibit B); provided,
however, that in no event shall the Company issue PIK Notes in lieu of cash
payments of interest pursuant to this clause (iii), in whole or in part, on any
Interest Payment Date occurring on or after the earlier of: (X) 91 days after
the date upon which all amounts owing under the Senior Note have been repaid in
full in cash; and (Y) the date which is five years and six months from the
Issuance Date; or
(iv) Prior to the date that is six years from
the Issuance Date, if on such date any Senior Subordinated Increasing Rate
Notes or Senior Subordinated Increasing Rate Rollover Notes (either or both,
the "Bridge Securities") issued pursuant to that certain Securities Purchase
Agreement dated as of April 6, 1995, among the Company, Coram, Inc. and Coram
Funding, Inc. are outstanding provided, however, that in no event shall the
Company issue PIK Notes in lieu of cash payments of interest pursuant to this
clause (iv) on any Interest Payment Date occurring on or after the date that is
six years from the Issuance Date.
1.2.2 If the Company issues PIK Notes in lieu of cash
payments of interest, in whole or in part, pursuant to this section, it shall
issue the PIK Notes dated as of such Interest Payment Date in a principal
amount equal to the amount of interest not paid in cash on such Interest
Payment Date. Each issuance of PIK Notes in lieu of cash payments of interest
shall
2.
<PAGE> 24
be made pro rata with respect to any outstanding Notes prior to such issuance.
Any such PIK Notes shall be subject to the same terms (including the rate of
interest from time to time payable thereon) as this Note (except, as the case
may be, with respect to the Issuance Date and aggregate principal amount).
2. Events of Default. If any of the events specified in this
Section 2 shall occur (herein individually referred to as an "Event of
Default"), the Holder of this Note may, so long as such condition exists,
declare the entire principal and unpaid accrued interest hereon immediately due
and payable:
(i) Default in the payment of the principal
and unpaid accrued interest of this Note when due and payable if such default
is not cured by the Company within ten (10) days (whether or not such payment
is prohibited by the subordination provisions hereof);
(ii) The institution by the Company of
proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or the filing by
it of a petition or answer or consent seeking reorganization or release under
the federal Bankruptcy Act, or any other applicable federal or state law, or
the consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee, or other similar official, of the
Company, or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate action by
the Company in furtherance of any such action;
(iii) If, within sixty (60) days after the
commencement of an action against the Company (and service of process in
connection therewith on the Company) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under any present
or future statute, law or regulation, such action shall not have been resolved
in favor of the Company or all orders or proceedings thereunder affecting the
operations or the business of the Company stayed, or if the stay of any such
order or proceeding shall thereafter be set aside, or if, within sixty (60)
days after the appointment without the consent or acquiescence of the Company
of any trustee, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company, such appointment shall not
have been vacated;
(iv) Any declared default of the Company under
any Senior Indebtedness (as defined below) that gives the holder thereof the
right to accelerate such Senior Indebtedness, and such Senior Indebtedness is
in fact accelerated by the holder;
(v) If the Company fails to comply in all
material respects with any covenants contained herein, and such material
noncompliance is continued for sixty (60) days following the receipt of written
notice (which must specify the nature of the default, demand that it be
remedied and state that the notice is a "Notice of Default") of such
noncompliance;
provided, however, that no such acceleration may occur pursuant to
clauses (i), (iv) or (v) above unless and until all amounts outstanding under
the Credit Agreement, the Senior Notes and the Bridge Securities shall have
been declared immediately due and payable.
3.
<PAGE> 25
3. Subordination. The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all the Company's
Senior Indebtedness, as hereinafter defined.
3.1 Senior Indebtedness. As used in this Note, the term
"Senior Indebtedness" means the principal of (and premium, if any) and interest
(including, without limitation, interest accruing after the filing of a
petition under any bankruptcy law at the rate provided for in the documents
governing such Senior Indebtedness, whether or not allowable as a claim under
such bankruptcy law) on the following and any other payment due pursuant to any
agreement or instrument creating or evidencing the following, whether
outstanding at the date of execution of this Note or thereafter incurred or
created: (a) indebtedness of the Company for money borrowed, other than from a
subsidiary of the Company, or in respect of letters of credit issued for its
own account; (b) guarantees by the Company of indebtedness for money borrowed
by, payment or performance obligations due from, or reimbursement obligations
under letters of credit of any person or entity, including money borrowed and
reimbursement obligations under the Credit Agreement, the Senior Note
Indenture, the Senior Notes and the Bridge Securities; (c) purchase money
indebtedness evidenced by notes, lease purchase agreements, purchase contracts
or agreements, or similar instruments for the payment of which the Company is
responsible or liable, by guarantee or otherwise; (d) obligations of the
Company under any agreement to lease or any lease of, any real or personal
property which are required to be capitalized in accordance with generally
accepted accounting principles, or any other agreement to lease, or any lease
of, any real or personal property which, by the terms thereof, are expressly
designated as Senior Indebtedness; and (e) modifications, renewals, extensions,
refinancings and refundings of any such indebtedness, guarantees or
obligations, including any increases in principal amount; unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that such indebtedness, guarantees or
obligations, or such modifications, renewals, extensions, refinancings or
refundings thereof, or the obligations of the Company pursuant to such a
guarantee, are either (i) not superior in right of payment to this Note or (ii)
subordinate in right of payment to this Note.
3.2 Default on Senior Indebtedness. If this Note shall be
declared due and payable upon the occurrence of an event of default with
respect to any Senior Indebtedness, then (i) no amount shall be paid by the
Company in respect of the principal of or interest on this Note at the time
outstanding, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full in cash, and (ii) no claim
or proof of claim shall be filed with the Company and no other remedy shall be
exercised, by or on behalf of the Holder of this Note that shall assert any
right to receive any payments in respect of the principal of and interest on
this Note, except subject to the payment in full in cash of the principal of
and interest on all of the Senior Indebtedness then outstanding. If there
occurs an event of default that has been declared in writing with respect to
any Senior Indebtedness, or in the instrument under which any Senior
Indebtedness is outstanding, permitting the holder of such Senior Indebtedness
to accelerate the maturity thereof, then, unless and until such event of
default shall have been cured or waived or shall have ceased to exist, or all
Senior Indebtedness shall have been paid in full in cash, no payment shall be
made in respect of the principal of or interest on this Note. If,
4.
<PAGE> 26
notwithstanding the foregoing, any payment shall be received by the Holder of
this Note when such payment is prohibited by this section, such payment shall
be held in trust for the benefit of, and shall be paid over or delivered to,
the holders of Senior Indebtedness (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness then held by such holders).
3.3 Effect of Subordination. Subject to the rights, if any,
of the holders of Senior Indebtedness under this Section 3 to receive cash,
securities or other property otherwise payable or deliverable to the holder of
this Note, nothing contained in this Section 3 shall impair, as between the
Company and the Holder, the obligation of the Company, subject to the terms and
conditions hereof, to pay to the Holder the principal hereof and interest
hereon as and when the same become due and payable, or shall prevent the Holder
of this Note, upon default hereunder, from exercising all rights, powers and
remedies otherwise provided herein or by applicable law.
3.4 Subrogation. Subject to the prior payment in full in cash
of all Senior Indebtedness and until this Note shall be paid in full, the
Holder shall be subrogated to the rights of the holders of Senior Indebtedness
(to the extent of payments or distributions previously made to such holders of
Senior Indebtedness pursuant to the provisions of Section 3.2 above) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the Holder, be deemed to be a payment by the
Company to or on account of this Note; and for the purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
to which the Holder would be entitled except for the provisions of this Section
3 shall, as between the Company and its creditors, other than the holders of
Senior Indebtedness and the Holder, be deemed to be a payment by the Company to
or on account of the Senior Indebtedness.
3.5 Payment Over of Proceeds Upon Dissolution, Etc.
3.5.1 Upon any distribution of assets of, or payments
by, the Company of any kind or character (whether in cash, property or
securities) to creditors upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Company (whether voluntary or involuntary
or in bankruptcy, insolvency, receivership, composition, marshalling of assets
or other proceedings), all amounts due or to become due upon all Senior
Indebtedness (including, without limitation, interest accruing after the filing
of a petition under any bankruptcy law at the rate provided for in the
documents governing such Senior Indebtedness, whether or not allowable as a
claim under such bankruptcy law) shall first be paid in full in cash, or duly
provided for, before any payment or distribution is made on account of any
amount owing under this Note and before the Company shall, directly or
indirectly, prepay, repay, redeem, purchase, exchange or acquire this Note.
Upon any such dissolution, winding-up, liquidation or reorganization, any
payment or distribution of assets of, or payments by, the Company or any kind
or character (whether in cash, property or securities) to which the Holder of
this Note would be entitled except for the provisions hereof, shall be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, or by the Holder of
this Note if received by it, directly to the holders of Senior Indebtedness
(pro rata to such holders on the basis of the respective amounts of Senior
Indebtedness then held by
5.
<PAGE> 27
such holders) for application to the payment of Senior Indebtedness remaining
unpaid until all such Senior Indebtedness has been paid in full in cash after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
3.5.2 If, notwithstanding the foregoing, any
distribution of assets of, or payments by, the Company of any kind or character
(whether in cash, property or securities) shall be received by the Holder of
this Note when such payment or distribution is prohibited by Section 3.5.1,
such payment or distribution shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness then held by such holders), for applications to the payment of
Senior Indebtedness remaining unpaid until all such Senior Indebtedness has
been paid in full in cash, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior
Indebtedness.
3.6 Limitation on Exercise of Remedies. The Holder of this
Note agrees that it will not at any time (i) commence any suit or action to
enforce or collect on this Note (provided, however, that the Holder of this
Note shall be entitled to declare the indebtedness represented by this Note to
be due and payable if any indebtedness under the Credit Agreement, the Senior
Notes or the Bridge Securities shall have been declared to be due and payable)
or (ii) commence, or join with any other creditor in commencing, any
bankruptcy, reorganization or insolvency proceedings with respect to the
Company (provided, however, that the Holder of this Note shall be entitled to
file a proof of claim in respect of this Note in any such proceeding so long as
such proof of claim shall state that this Note is subordinated to the extent
and in the manner set forth in this Section 3).
3.7 Undertaking; Benefit. By its acceptance of this Note, the
Holder agrees to execute and deliver such documents as may be reasonably
requested from time to time by the Company or the lender of any Senior
Indebtedness in order to implement the foregoing provisions of this Section 3.
The provisions of this Section 3 are intended to be for the benefit of, and
shall be enforceable directly by, the holders of the Senior Indebtedness,
without any act or notice of acceptance hereof by such holders.
4. Prepayment/Redemption. At any time following the initial
date of issuance of this Note, upon twenty (20) days prior written notice to
the Holder (which shall identify the principal amount to be redeemed, the
redemption date and the manner in which the redemption will be conducted), the
Company may at any time redeem this Note, in whole or in part, for a redemption
price equal to the unpaid principal amount thereof, plus all accrued and unpaid
interest thereon to the redemption date. Once notice of redemption is mailed,
the redemption price shall become due and payable on the redemption date stated
in the notice, and interest shall cease to accrue on the principal amount of
this Note or portion thereof called for redemption unless the Company defaults
in making the redemption payment.
5. Exchange.
6.
<PAGE> 28
5.1 Exchange. In the event that the Company issues senior
subordinated indebtedness in connection with the transactions contemplated by
the Purchase Agreement (the "Subordinated Indebtedness"), the Holder shall
have the right, at Holder's option, at any time during the 90 day period
following the second anniversary of the Issuance Date, to exchange this Note in
accordance with the provisions of Section 5.2 hereof, into securities of the
same class (except that such securities will in any event bear interest at the
same rate as this Note) as the Subordinated Indebtedness (the "Conversion
Securities"), under an indenture having substantially the same terms and
conditions as the indenture pursuant to which the Subordinated Indebtedness was
issued, although not issued pursuant to such indenture. The aggregate
principal amount of the Conversion Securities into which this Note may be
exchanged shall be equivalent to the aggregate principal amount of this Note.
This Section 5.1 shall not be construed so as to impose any obligation on the
Company to issue Conversion Securities, and Holder shall have no exchange
rights hereunder if no Subordinated Indebtedness is issued by the Company.
5.2 Mechanics and Effect of Exchange. Before Holder shall be
entitled to exchange this Note into Conversion Securities, it shall surrender
this Note, duly endorsed, at the office of the Company and shall give written
notice by mail, postage prepaid, to the Company at its principal corporate
office, of the election to exchange the same and shall state therein the name
or names in which the certificate or certificates for Conversion Securities are
to be issued. At its expense, the Company shall, as soon as practicable
thereafter, issue and deliver to Holder at such principal office a certificate
or certificates for the Conversion Securities to which Holder shall be entitled
upon such exchange (bearing such legends as may be required by applicable state
and federal securities laws in the opinion of counsel to the Company). In the
event of any exchange of this Note for Conversion Securities, such exchange
shall be deemed to have been made immediately prior to the closing of the
issuance and sale of such Conversion Securities and on and after such date the
Holder of this Note entitled to receive such Conversion Securities issuable
upon such exchange shall be treated for all purpose as the record Holder of
such Conversion Securities. Upon exchange of this Note in full, the Company
shall be forever released from all its obligations and liabilities under this
Note, except that the Company shall be obligated to pay Holder, within ten (10)
days after the date of such exchange, any interest accrued and unpaid or
unconverted to and including the date of such exchange, and no more. If this
Note is exchanged in part, the Company shall execute, reissue and deliver to
the Holder a new Note equal in principal amount to the unexchanged portion of
the Note surrendered.
5.3 Delivery of Certificates. As promptly as practicable
after the exchange of this Note, the Company at its expense will issue and
deliver to the Holder a certificate or certificates for the Conversion
Securities issuable upon such exchange.
6. Repurchase of Note at Option of the Holder upon Change in
Control.
6.1 Repurchase Right. If at any time this Note remains
outstanding there shall have occurred a Change in Control (as defined in
Section 6.2), this Note shall be repurchased by the Company at the option of
the Holder thereof, at a purchase price (the "Repurchase Price") equal to the
principal amount thereof plus accrued interest up to and including the
Repurchase Date (as hereinafter defined), on the date (the "Repurchase Date")
fixed by the
7.
<PAGE> 29
Company that is not less than 45 days nor more than 60 days after the date of
the Company Notice (as hereinafter defined), subject to satisfaction by or on
behalf of the Holder of the requirements set forth in Section 6.4.
6.1.1 Any rights of the Holder, contractual or
otherwise, arising under or pursuant to any offer to repurchase this Note made
by the Company under this Section 6 shall be subordinated in right of payment
to all Senior Indebtedness to the same extent as this Note is subordinated to
Senior Indebtedness under the provisions of Section 3. Notwithstanding the
foregoing, any failure by the Company to comply with this Section 6 to offer to
repurchase, or to repurchase, this Note shall be a default in the performance
by the Company hereunder.
6.2 Change in Control. A "Change in Control" shall be deemed
to have occurred at such time after the Issuance Date of this Note if:
6.2.1 Any person (including any syndicate or group
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended, or any successor provision to either of the foregoing)
is or becomes the beneficial owner, directly or indirectly, of shares of
capital stock of the Company entitling such person to exercise more than 50% of
the total voting power of all voting securities of the Company; or
6.2.2 There shall occur any consolidation of the Company
with, or merger of the Company into, any other person, any merger of another
person into the Company, or any sale or transfer of all or substantially all of
the assets of the Company to another person (other than (a) a consolidation or
merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock other than shares of
capital stock owned by any of the parties to the consolidation or merger and in
which the consolidated net worth of the surviving corporation immediately after
the transaction equals or exceeds the consolidated net worth of the Company
immediately prior to such transaction or (b) a merger which is effected solely
to change the jurisdiction of incorporation of the Company or (c) any
consolidation with or merger of the Company into a wholly owned subsidiary or
of a wholly owned subsidiary into the Company, or any sale or transfer by the
Company of all or substantially all of its assets to one or more of its wholly
owned subsidiaries in any one transaction or a series of transactions; provided
in each case that the resulting corporation (if not the Company) or each such
subsidiary assumes or guarantees the obligations of the Company under this Note
and the consolidated net worth of the surviving or acquiring corporation in any
such consolidation, merger or sale of assets immediately after the consummation
of such transaction equals or exceeds the consolidated net worth of the Company
immediately prior to such transaction); or
6.2.3 There shall occur a change in the Board of
Directors of the Company in which the individuals who constituted the Board of
Directors of the Company at the beginning of the two-year period immediately
preceding such change (together with any other director whose election by the
Board of Directors of the Company or whose nomination for election by the
stockholders of the Company was approved by a vote of at least a majority of
the directors then in office either who were directors at the beginning of such
period or whose election or
8.
<PAGE> 30
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors then in office.
6.3 Company Notice. Within 30 days after the occurrence of a
Change in Control, the Company shall mail a written notice (the "Company
Notice") by first-class mail to the Holder. The notice shall state: (i) the
date of such Change in Control; (ii) the date by which the Repurchase Notice
pursuant to this Section 6 must be given; (iii) the Repurchase Date; (iv) the
Repurchase Price; (v) whether the holders of the Senior Indebtedness will
permit the payment of the Repurchase Price; (vi) the procedures that the Holder
must follow to exercise rights under this Section 6; and (vii) the procedures
for withdrawing a Repurchase Notice, including a form of notice of withdrawal.
6.4 Effect of Repurchase Notice. Holder may exercise its
rights specified in Section 6.1 upon delivery of a written notice of the
exercise of such rights (a "Repurchase Notice") to the Company at any time
prior to the close of business on the Repurchase Date, stating: (i) the portion
of the principal amount of this Note that Holder will deliver to be
repurchased; and (ii) the Company shall repurchase from the Holder thereof,
pursuant to this Section 6, such portion of this Note. Notwithstanding
anything herein to the contrary, the Holder shall have the right to withdraw
such Repurchase Notice in whole or in a portion thereof at any time prior to
the close of business on the Repurchase Date by delivery of a written notice of
withdrawal to the Company. Upon receipt by the Company of the Repurchase
Notice, the Holder of this Note shall (unless such Repurchase Notice is
withdrawn as specified below) thereafter be entitled to receive solely the
Repurchase Price with respect to this Note. Such Repurchase Price shall be
paid to such Holder promptly following the later of (i) the Repurchase Date
with respect to this Note (provided the conditions in this Section 6.4 have
been satisfied) and (ii) the time of delivery of this Note to the Company by
the Holder thereof in the manner required by this Section 6.4. A Repurchase
Notice may be withdrawn by means of a written notice of withdrawal delivered by
Holder to the Company at any time prior to the close of business on the
Repurchase Date to which it relates, specifying (i) the principal amount of
this Note or portion thereof with respect to which such notice of withdrawal is
being submitted; and (ii) the principal amount, if any, of this Note that
remains subject to the original Repurchase Notice and that has been or will be
delivered for purchase by the Company. There shall be no purchase of this Note
pursuant to Section 6 if there has occurred (prior to, on or after, as the case
may be, the giving, by the Holders of this Note, of the required Repurchase
Notice) and is continuing an Event of Default (other than a default in the
payment of the Repurchase Price with respect to this Note).
6.5 Note Repurchased in Part. If this Note is to be
repurchased only in part, it shall be surrendered at the office of the Company
(with, if the Company so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company duly executed by, the Holder),
and the Company shall execute and deliver to the Holder, without service
charge, a new Note, in aggregate principal amount equal to, and in exchange
for, the portion of the principal amount of this Note so surrendered that is
not purchased.
9.
<PAGE> 31
6.6 Certain Conditions. No later than 90 days after a Change
of Control and prior to complying with the provisions of Section 8.3, the
Company will either repay all obligations under the Senior Indebtedness or
obtain the requisite consents, if any, under all agreements governing
outstanding Senior Indebtedness to permit the repurchase of the Notes required
by this Section.
7. Assumption by Coram, Inc. As promptly as practicable
after the second anniversary of the Issuance Date, but in no event later than
90 days after the date following such anniversary on which the Company first
satisfies the Performance Tests and provided, that the Borrower Junior PIK Note
Exchange Transaction (as defined in the Credit Agreement) is not prohibited
under the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" in the Senior Notes Indenture (the material terms of which are
attached hereto as Exhibit C), the Company will cause Coram, Inc. to issue
Junior PIK Refinancing Notes (as defined in the Credit Agreement) in the
Borrower Junior PIK Note Exchange Transaction.
8. Assignment. Subject to the restrictions on transfer
described in Section 10 below, the rights and obligations of the Company and
the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators, and transferees of the parties.
9. Waiver and Amendment. Any provision of this Note may be
amended, waived, or modified upon the written consent of the Company and
Holder.
10. Transfer of this Note or Securities on Exchange Thereof.
With respect to any offer, sale or other disposition of this Note or Conversion
Securities, the Holder will give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
Holder's counsel, to the effect that such offer, sale or other distribution may
be effected without registration or qualification (under any federal or state
law then in effect). Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such Holder that such Holder may sell or otherwise
dispose of this Note or such Conversion Securities, all in accordance with the
terms of the notice delivered to the Company. If a determination has been made
pursuant to this Section 10 that the opinion of counsel for the Holder is not
reasonably satisfactory to the Company, the Company shall so notify the Holder
promptly after such determination has been made. Each Note thus transferred
and each certificate representing the Conversion Securities thus transferred
shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with the 1933 Act, unless in the opinion of counsel
for the Company such legend is not required in order to ensure compliance with
the 1933 Act. The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions. Upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or his attorney duly
authorized in writing, a new Note for a like principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
10.
<PAGE> 32
11. Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if telegraphed or mailed by
registered or certified mail, postage prepaid, at the respective addresses of
the parties as set forth in the Purchase Agreement. Any party hereto may by
notice so given change its address for future notice hereunder Notice shall
conclusively be deemed to have been given when personally delivered or when
deposited in the mail or telegraphed in the manner set forth above and shall be
deemed to have been received when delivered.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, excluding that
body of law relating to conflict of laws.
13. Heading; References. All headings used herein are used
for convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof. Terms used but not defined herein shall have the meanings
assigned to them in the Purchase Agreement.
14. Merger, Etc. The Company shall not consolidate with or
merge into, or sell or transfer all or substantially all of its properties or
assets to any person unless such person expressly assumes all of the
obligations of the Company under this Note (in which case all such obligations
of the Company shall terminate). Any successor corporation formed by such
consolidation or into which the Company is merged, or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right
and power of the Company under this Note.
11.
<PAGE> 33
IN WITNESS WHEREOF, the Company has caused this Note to be issued
this 1st day of April 1995.
CORAM HEALTHCARE CORPORATION
By:______________________________
Its:_____________________________
Holder: CAREMARK INC.
Address: 2215 Sanders Road, Suite 400
Northbrook, IL 60062
Attn: C.A. Lance Piccolo
Chairman of the Board and
Chief Executive Officer
Facsimile: (708) 559-4603
12.
